Okay. We are running into terminology problems here. When most people say "internet", they are referring to the WWW. I used that as the definition only because most other people do.
Technically, the internet itself was developed by DARPA. But the WWW was "invented" by Tim Berners-Lee.
"I guess your argument would make sense to me if I accepted that there was such a thing as objective value."
And again you missed the boat. Not once did I say anything about "objective" value. I am referring to market value only.
"I guess your argument would make sense to me if I accepted that there was such a thing as objective value."
And again, you aren't getting it. It has nothing to do with "objective" value. Here... I'll try to use your own comments to make it clear to you, one more time. If that fails, I give up.
"All market actors have a different value for an ounce of gold -- it's worthless to me in use, it's worth a lot to a dentist, to a miner it's worth their labor in exchange -- it cannot be made equally valuable to all by fiat."
Precisely. Gold has a "market" value. That's an aggregate value based on its average worth to a large number of people. Right? There is no kind of "objective" anything there, or any weird or unusual "theory" involved. We're just talking market value. Which can change, as we all know.
If the value of dollars are based on gold, then the market value of money will go up and down as the value of gold in the market goes up and down? Yes? I never claimed that it was an absolutely fixed value. Of course it varies. The value I am referring to here is simply the amount of gold it would take to directly trade for other things.
But if the value of gold is based on dollars, then the market value of gold will go up and down as dollars go up and down in value. Just like in the other situation, except that in one situation you are using gold as the standard, and in the other situation you are using dollars as the standard. Okay? The standard means that the value of all other things will be based on the value of that thing.
Where the difference comes in, is that fiat dollars are not even remotely as stable as gold in their market value. So when you have a gold standard, the value of your money is defined by something that usually remains rock-solid in real market value (the amount it takes to trade for other goods).
But when you set a fixed price in dollars, the only thing you are tying to market value is the market value of dollars, which varies wildly, sometimes from one day to the next. Your standard (the dollar) remains as volatile as ever. Nothing has changed, except that now you have defined the price of gold. At a fixed dollar price, when dollars go up and down in value, then the gold would go up and down in value to match. It no longer reflects the market value of the gold, instead you are forcing an artificial value on it because of the changing value of the dollar.
Which is unrealistic. Which is why nobody does it.
So in the one situation your monetary standard is something that tends to change very little in value over time. In the other situation your monetary standard is something that can change (has at times changed drastically), overnight.
The very fact that nobody fixes gold prices anymore is tacit admission that a gold standard is better than fiat money.
"Private industry prior to the late 90's had very little or no interest in sharing information."
As I have already explained that is simply not true. Numerous companies by then already had nationwide data networks. They just didn't interoperate. My company had nationwide email (with attachments) long before "the internet" went public. It just wasn't an "open" standard.
You missed the whole point. There was no government research involved in "inventing" the Internet. It was invented by an academic, on his own time, for his own purposes. The government just "borrowed" it later.
I think you meant toll roads, but that is true at least in part. But the "excuse" of natural monopoly is hardly a myth: it allowed the US to build the greatest telephone system in the world, with fingers in every part of the nation, all of it interoperable. While the European countries that instead left it up to "competition", ended up with a variety of telephone systems, none of which worked with each other. They ran on different voltages, they used different signalling schemes. If your neighbor was on a different telephone system, you couldn't call across the street. Some of them didn't even get that horrendous situation fixed until relatively recently.
There is such a thing as a "natural monopoly", and if properly managed, in some situations -- in those rare situations where "natural monopoly" actually applies -- (and I don't think roads is one of those), it can be of more benefit to society than competition. It depends on many things. But a "myth"? Hardly. The internet would not exist today if it were not for our early "natural monopoly" telephone system.
Really? Ever heard of IBM? The Thomas J. Watson Research Center?
There are a great many things that came out of private industry, rather than government research. Among them: the transistor itself (without which there would be none of your vaunted microchips in the first place), and the laser.
GP is correct, Rockefeller did in fact improve the efficiency of the market and drive prices down. You can't say that it was the oil by itself that reduced prices, because without Rockefeller virtually creating the industry in the first place, there would have been no demand. So actually that's kind of a ridiculous point to try to make.
But I don't think anyone is claiming he was a great philanthropist. The benefits he brought to society stemmed entirely from his own profit motive. It wasn't a monopoly market: others did compete with Rockefeller. He outcompeted them. THAT is what brought about oligopoly in the oil markets: successful businessmen.
And as you can learn in history books by Thomas Woods: during that period it was actually the private businessman who tended to do better than those who were government-subsidized. There are a great many examples.
Actually, they did. They did not invent it, but they built it.
The Internet was invented (with a bit of help from his friends) by an academic, for use by other academics. He did it more-or-less in his "spare time", in response to a perceived need to transmit free-form information over a network. It wasn't like he was some engineer on the government payroll told to "go build an internet".
The reason private industry did not invent it is because there was no perceived need at the time. IBM, banks, and other companies already had nationwide data networks. The company I worked for already had email, and that alone was a "good enough" improvement over sending paper on airplanes all over the place. Even with the outrageous cost, at the time, of a dedicated T1 line that stretched across the United States, the dedicated email system saved them more than $4000 a month over the FedEx costs that it replaced. They had no need for web browsing.
When things finally got to the point that elements of the internet were finally perceived to fill business needs, private industry did jump on board. In droves.
So while private industry did not invent it, that is no surprise because they saw no need for it at the time. But while the government might have set it up to begin with, make no mistake. The internet you use and enjoy now was built by private industry. These electrons are going over private wires.
Mod up. This is pretty much what I would have said if this person had not stated it first.
As for California emissions, that has been so different from the rest of the country anyway, that many automakers actually found it more profitable to make a specific California package for their cars. In less extreme cases, I agree that the companies would probably adopt the strictest standard, as making their overall manufacturing and distribution cheaper than having multiple different versions.
"f the government will exchange a unit of currency for a fixed amount of gold, the currency is a representative money and the price has been fixed."
Again, you have 100% missed the point. Do you know what a dependent variable is? An independent variable?
"Representative money is price-fixing of a commodity."
No, it isn't. It is defining money in terms of that commodity. They are not the same. You are confusing price and value.
These are opposite situations. In the situation you describe, gold is "fixed in price", and defined in terms of dollars. With a gold standard, dollars are fixed in value and defined in terms of gold. They are not even remotely similar.
"Rural voters wanted bimetalism, they voted for it and got it. Bankers hated silver barons, so they demanded it be stopped and it was stopped."
Yes, that is true, but has absolutely nothing to do with the subject at hand, which is the definition of a hard monetary standard versus "price fixing". Don't you understand that even with a fixed price, the value of the commodity can change?
But apparently you don't. I'm not going to spend yet more time trying to explain it to you. I suggest you go pick up a high-school level book on economics.
"... anybody that thinks there's such a thing as a multiplier or aggregate demand is a doody head, and Keynesians are always wrong. I don't have to explain why because I have cherry-picked quotes from one Keynesian 10 years ago."
You can mischaracterize my comments all you like, but it doesn't make any kind of real argument. I did neither of those things. Really. "doody head"? Who denied multipliers or aggregate demands? Where did this stuff come from? It certainly has nothing to do with anything I actually wrote.
As for Krugman, I was not the one who brought him up. The reason comments from years ago were chosen was because it was about how accurate his predictions have been; it would be useless to try to either prove or disprove something he said yesterday. If you don't understand that, I am not the one being an idiot here.
And that was just a one example, easily found in about 30 seconds on the internet. Do you REALLY want me to spend some time and actually go into depth about how wrong Krugman has been over the years? I would not want to embarrass you.
As for "Keynesians are always wrong", that is pretty much what I wrote. Not always. But almost. If you feel so strongly about it, show me where Keynesian (or Keynesian-style) economists accurately predicted even ONE major economic event ahead of time. Just one. Name calling and phrases like "doody head" are just infantile. If you want to win an argument, then credibly refute my claim that they haven't predicted a damned thing.
"We're trying to talk about a particular problem, but you turn it into a huge argument ad hominem and appeal to your authorities."
Yes, I was discussing a particular "problem". It is one you stated, and my reply was to a direct quote. Here, since your memory seems so short I will quote it for you again:
""And I would add that most Austrian responses to the Co-Op problem involve just as much prediction and guessing as the Keynesian account.""
And I replied with specific, verifiable examples of predictions that each made. No appeal to authority, no ad hominem. They are facts that you can look up yourself. Even my comments about Krugman were not ad hominem. They were not about him as a person, they were about demonstrably false statements that he made, which are in the public record. Please, if you want to make a decent argument, learn what "ad hominem" means.
"Particularly hilarious is your drafting of Friedman(!), a monetarist who would disagree with you on just about every position you've taken on hard money -- if you're going to quote monetarists I see your Krugman and raise you an Alan Greenspan. Friedman also didn't particularly agree with Austrians."
I mentioned Friedman because he was the first one to give Keynesians what they considered to be a plausible explanation for stagflation. I did not say he was right, only that the Keynesians thought he might be. The whole point there was that the Keynesians were provably wrong, and even after the fact could not find a way to modify their own theory to conform to reality. Somebody else had to do it for them. I don't give a damn whether Friedman was a monetarist. As far as I am concerned, that is a point in his favor. Monetarists have been right a hell of a lot more often than Keynesians have, too.
"Also the fact of the Great Moderation simply flies in the face of the Austrian account of how a macroeconomy works. It generally can't explain stickiness in prices or wages"
Not enough is known about "Great Moderation" to draw many conclusions from it. Certainly government and policy makers have claimed credit for it, but both 2001 and 2008 put the lie to THAT idea. In fact one school of thought is that the so-called Great Moderation lulled people into a false sense of security, and directly led them to engage in risky practices that CAUSED bubbles. Thos
They're still not line or version numbers. Names are great, but when they're changed at the drop of a hat, they don't add anything, they get confusing.
Still waiting for Ubuntu's Obstreperous Ostrich.
Intel is the company that has taken it to ridiculous extremes. They have so many variants of their CPUs, with such bizarre and inconsistent designations, I (who used to be a computer tech) no longer even bother to keep track of most of them. I just look it up.
Knowing that the $10,000 you put away for your grandson's college education will still buy about a year at school twenty years from now is good, but not when it means you don't know if next year's grocery costs will be $1500 or $2500.
If you had enough savings or equity to get you through about a year, though, you were pretty safe. Sure, there were some high short-term fluctuations, but (a) they tended to return to their former value over any period of about a year or more, and (b) the fluctuations affected markets a lot more than they did the more rural economy. Keep in mind that the investors and bigwigs owned a lot lower percentage of the total wealth then than they do now.
As I mentioned, there were some little bubbles right around the wars, but the price indexes went right back to where they were before, afterward.
The distinction I was making was between a gold standard and "price fixing". They are essentially opposites. In each case, one is the independent variable, and the other is the dependent variable. And which is which, matters a lot.
To illustrate: let's say you set gold at a fixed $300 per ounce. (That's a price fix.) If your money inflates, and becomes worth less, then so does the $300, and therefore so does that amount of gold. By law. (If it didn't, it wouldn't actually be a price fix.) And vice versa if it deflates, of course. And it will fluctuate under a fiat money system, because by definition the value of the money floats and is dependent on interest rates and the money supply. Of course nobody fixes the price of gold like that, because it's unrealistic. Our monetary system floats. If gold itself varied in absolute value as much as the dollar, it would not be any good as a standard anyway.
In contrast, a hard money standard sets the value of money in terms of a commodity, like gold. The whole purpose here is to use a commodity that is relatively stable in value in the first place. (It is of relatively stable supply; the amount available to the market does not change that much from year to year.) Note that I stated value, not price. In our fiat money system people are used to gold fluctuating in price. But with a gold standard it cannot, by definition.
The difference is that now a dollar is guaranteed to be worth a certain amount of gold. Period. More dollars cannot be inflationarily printed, because then there would not be enough gold to pay off the holders of the dollars, and make good on that promise. The money supply remains much more stable. And as history has very clearly shown, it is in fact much more stable when there is hard currency versus fiat money. As I have explained elsewhere; even during recessions and brief depressions up to the early 20th Century, the money supply remained very stable and money value nearly constant, on any frame of reference of more than a year or so.
Other things besides gold and silver have been used as monetary standards of course; the idea is that it should be (a) relatively precious, so that it is not necessary to transport large amounts of it, and (b) of relatively stable supply.
"I suppose we just have different ideas of what 'saving for a rainy day' means. I interpreted it as hedging against unexpected expenses by means of saving, I contrasted with insurance which hedges against unexpected expenses by paying someone to take the risk for you."
Yes, apparently a misunderstanding. But I meant savings in the classical sense: money in the bank or under the mattress.
"As mentioned you can most of the time trivially out-save inflation by investing the money. This might lower the liquidity of your money but if you plan on actually saving that's usually not much of a problem."
No, to an economist savings and investments are two different things. Investments, are, by definition, money that has been invested. Savings is interest-free money that is available for investment.
"It does. There's literally zero difference between putting money in a vault and burning the money. And there's no difference between taking the money out of the vault and printing money."
There is a huge difference. Savings are nearly 100% liquid capital (or would be, if it weren't for our fractional-reserve banking system). Burned money is not only not liquid, it doesn't exist anymore. If you don't understand that difference, I strongly urge you to get an entry-level book on economics.
"What the heck are you on about? Index funds are tied to the market as a whole, which means that as long as the market exists, your money is fine."
Nonsense. An index fund follows the market. On average, when the market does well, so does the index fund. And when the market does not do well, neither does the index fund.
In case nobody has told you: the market hasn't been doing that well. If you weren't one of those bailed out a couple of years ago, if you had a lot invested, index fund or not, you could easily be one of the many who were financially ruined.
Obviously, over time, the market has trended upward. But even a short-term dip can bring ruin to many investors. Index funds were designed to take the risks out of picking individual winners and losers in the market; they don't hedge against market-wide problems. They are only slightly more immune to depressions and market crashes than other funds.
"... the market as a whole can be counted on to steadily expand... "
No, it can't. Have you forgotten 2008 already? *IF* you have the savings or discretionary capital to weather slumps like that, you can come out ahead in the long run. But not everybody does, and there are a great many losers.
"... most accounts of purchasing power based on a fixed basket of commodities or classes of expenditure are unreliable and don't reflect gains in productivity and the increase in value of the items. Houses cost more than they should if you account for inflation, but they're also much more luxurious, and often much more favorably located due to urban growth. Most durable goods you buy today are simply not comparable with durable goods available even 10 years ago in terms of energy efficiency and features."
Yes, a typo. So what? I have the book right here next to me; if you don't believe me, just ask for a number from one of the tables.
A fixed basket of commodities is the only reliable way to measure relative purchasing power over generations. Anything else is wholly subjective. McCusker uses up a good deal of space in his book explaining exactly why.
"More luxurious" is self-contradictory in this context. In order for it to be more luxurious, one has to spend money on more goods, which in turn have to be measured against comparison baskets of goods. It was possible for people in the past to live in relative luxury too, you know. Obviously it is impossible to directly compare a donkey cart with a Chevy, but one CAN compare the cost of comfortable transportation from New York to Boston.
But where the major differences have actually occurred are more comparable. People (if fewer of them) had electric and gasoline cars 80 years ago. Electric lights were available. And so on. But most especially, when inflation has been most rampant, has been in just the last 40 years. I can compare directly because I was there.
"There are good arguments as to how his completely historical and non-prognositcating account are wrong, but you have none of them here."
Sure there are. At that link are at least a couple of instances of Krugman exclaiming about how good it was to have housing available at (what we now know to be) artificially low interest rates. However, in hindsight we can see that the artificially low interest rates and resulting malinvestment were major contributors to, if not the primary cause of, the "housing bubble". Krugman was prognisticating about how good it was to have the low interest rates, and he was simply wrong. If I had a lot more time, I would dig up more examples for you.
"And I would add that most Austrian responses to the Co-Op problem involve just as much prediction and guessing as the Keynesian account."
Of course. The major difference being that the Austrians were usually right, and the Keynesians almost always wrong.
Starting clear back before the crash of '29... Friedrich Von Hayek predicted in Feb. of 29 that government monetary policy was going to cause a crash. But proto-Keynesian (Keynes had not yet formulated his theory but some mainstream economists were already using many of the concepts he adopted) Irving Fisher was on the radio proclaiming just how fine the economy was doing, the day before the market crash.
The Keynesians were predicting absolute economic disaster when the government brought all the troops home at once from WWII, claiming (via their sacred Phillips curve) that it would be impossible for the economy to absorb so many unemployed at once. The Austrians did not. Lo and behold, the US economy the very next year entered one of the most productive periods of its entire history.
Keynesians claimed that what we now call "stagflation" was economically impossible. When it actually happened, not just a dip but for a prolonged period in the late 70s-early 80s, they struggled to modify their theory to account for it. In fact it was Milton Friedman, a non-Keynesian, who first proposed a plausible explanation.
Before the recession of 2001, Keynesians again were proclaiming from the rooftops how great the economy was: "Come on in! The market's fine! It's never been higher!" Austrians were talking abo
By the way: a hard money standard is a value definition for the dollar, not the other way around. A gold standard, and "price controls on gold", are not even remotely the same things. In fact that is exactly backward.
"But the purchasing power of wages has been steadily increasing or remaining constant."
No, it hasn't. Not even close. Get yourself a copy of "How Much Is That In Real Money?", by John McClusker. It has hard figures about purchasing power of the dollar over about 300 years. It ends in the late 1990s, but you can easily find figures for more recent years.
Chart that against wages. You will find that in recent decades, ever since the boom after WWII in fact, wages have not kept pace with real inflation.
Keep in mind that many economists will tell you that the government's official numbers for inflation are not realistic.
The fact is that Krugman, over the years, has ended up with egg all over his face time, and time, and time again. If the Times weren't constantly printing him, I doubt many people would take him seriously.
The whole worth of a theory is its ability to predict. The whole worth of a prognosticator is HIS ability to predict. Which means that Keynesian economics and Paul Krugman are both failures.
"Saving for a rainy day is why insurance exists and saving through investment doesn't really require any notable amount of money."
"Saving for a rainy day" is NOT why insurance exists. Insurance is, by definition, a hedge against disasters. Two different things. Further, insurance does not pay out as much as it takes in (simple elementary-school math), so it doesn't even come close to meeting the definition of "savings". Nor does it address inflation.
"Saving through investment" is a contradiction in terms. Investment, by definition, does require available money, whether that money is surplus or borrowed. In neither case does it, either, meet the definition of "savings". Savings represent a pool of capital that can be invested, but they are two different things.
"Talking about inflation as if it was horrible is hard when economists consider it a non-issue unless it goes hyper."
You completely missed two of my points: (1) that only Keynesian economists (well, Chartalists, too, but nobody takes them seriously) consider inflation to be a good thing; other schools of economics disagree, and (2) despite Keynesian theory, history does not show inflation to be a good thing.
"What exactly is the benefit of allowing people to bury money in their backyard and have it retain their value?"
This is the third point you missed (as I already mentioned above): inflation erodes the value of savings. Even Keynesian economists admit this. If you don't understand why erosion of savings is a bad thing, try being a retired person on a fixed income for a while. It will become very clear to you.
"Having people physically remove value from the economy is objectively bad, it's much healthier to have them invest it in a index fund and leave it there for 100 years instead."
Savings does not "remove money from the economy"! It represents accumulation of capital that can be invested. The alternative is investing only borrowed money. Again, even Keynesians admit that the amount of savings in an economy is a valid indicator of health, as a pool of interest-free, investable capita. But Keynesians tend to give it less weight than other economists do.
As for investing in an index fund: as we clearly saw in 2008, with a fiat currency system, money invested in the market can literally disappear overnight. Hardly what I would consider to be a "secure" investment to leave around for posterity.
That's their theory. Shared by nobody else. And there's good reason for that: history proves it false. (Actually it's pretty amazing to most people when they learn just how often Keynesian economic theory contradicts the actual history of events.)
It's also skewed, because even if it is true that inflation promotes investment (debatable), it erodes the savings (irrefutable) that are necessary for a robust economy. So the relatively affluent (who have money to invest) benefit, the relatively poor (who are merely trying to put away some money for a rainy day) suffer.
As I mentioned before, there are horror stories about the "swings" in U.S. (and colony) economies in the past. But those swings were fundamentally different than the booms and busts we see today, because the money supply remained virtually constant over time, and purchasing power always returned to its former value after any inflationary bubble (which primarily occurred when government borrowed money to finance wars). You could bury money in your back yard, and your great-great-great-grandson could dig it up 100 years later and buy as much flour with it as you could.
Whereas for the last 80 years (it's true, you can chart it... it makes for a very alarming chart), the purchasing power of our money has been on a steady decline. It has never, even once, gone back to its former value.
The graph of purchasing power over the last 300+ years has three major kinks in it, each one representing an acceleration of inflation. They correspond EXACTLY to three events in our economic history, down to the precise year: (1) the creation of the Fed, (2) the removal of the gold standard, (3) the abolition of the last vestiges of a monetary standard by Nixon, in 1971.
I have to agree with responder "authalic", and (in this rare instance) Keynes:
When a major portion of the nation's economy becomes dependent on market speculation, you might as well just throw your money away.
However, I disagree with Keynes, in part, about the reason that is so.
Keynesian economics is firmly entrenched in the idea that the money "created" by market and money speculation, and fractional-reserve banking, is real money. But the problem with that idea is that this "created" money can disappear just as fast as it is created, or even faster as we clearly saw back in 2008.
That is only possible with a fiat currency. With a hard money standard (such as gold), the supply of money is not dependent on the Fed's whim, nor is it nearly as dependent on the market as it is today. Real money cannot be either created or destroyed by irresponsible speculation or monetary policy.
After nearly 300 years of robust stability and almost completely flat value (and please don't start with horror stories about history; I have seen them before but I have the hard figures to prove it), in the 80 years since we have had Keynesian-style monetary policy, and subsequent fiat currency, the value of our money has depreciated over 96%.
It is time to end the Fed, and fractional-reserve banking. We have 80 years of proof that it doesn't work. Time to get back on track.
"Sending out tracking information to any web server that requests it is more like putting a big pile of your business cards outside your house with a sign saying "take one". Can you then be annoyed if someone actually uses the information on those business cards?"
Again, I disagree. *I* am not actively, intentionally sending out tracking information at all. My intent, when visiting a website, is to interact only with that website. Tracking bugs actively request my information, in most cases without my knowledge.
You are confusing two different things: whether it is ETHICAL for them to do that, and whether it is SMART of me to allow them to do it. (I am not doing it, they are.)
Those are two completely different issues. I am not claiming it is smart to allow them to do that. But at the same time, I assert that it is unethical for them to do that. Ethically, I am not responsible for their actions.
In the same way, as the saying goes: it might be stupid to leave my door unlocked, but that is not at all the same as giving permission to be burglarized. The burglar is still committing the crime, and whether I am being dumb or not, I am under no obligation to lock my door.
Slashdot Mirror
Okay. We are running into terminology problems here. When most people say "internet", they are referring to the WWW. I used that as the definition only because most other people do.
Technically, the internet itself was developed by DARPA. But the WWW was "invented" by Tim Berners-Lee.
"I guess your argument would make sense to me if I accepted that there was such a thing as objective value."
And again you missed the boat. Not once did I say anything about "objective" value. I am referring to market value only.
"I guess your argument would make sense to me if I accepted that there was such a thing as objective value."
And again, you aren't getting it. It has nothing to do with "objective" value. Here... I'll try to use your own comments to make it clear to you, one more time. If that fails, I give up.
"All market actors have a different value for an ounce of gold -- it's worthless to me in use, it's worth a lot to a dentist, to a miner it's worth their labor in exchange -- it cannot be made equally valuable to all by fiat."
Precisely. Gold has a "market" value. That's an aggregate value based on its average worth to a large number of people. Right? There is no kind of "objective" anything there, or any weird or unusual "theory" involved. We're just talking market value. Which can change, as we all know.
If the value of dollars are based on gold, then the market value of money will go up and down as the value of gold in the market goes up and down? Yes? I never claimed that it was an absolutely fixed value. Of course it varies. The value I am referring to here is simply the amount of gold it would take to directly trade for other things.
But if the value of gold is based on dollars, then the market value of gold will go up and down as dollars go up and down in value. Just like in the other situation, except that in one situation you are using gold as the standard, and in the other situation you are using dollars as the standard. Okay? The standard means that the value of all other things will be based on the value of that thing.
Where the difference comes in, is that fiat dollars are not even remotely as stable as gold in their market value. So when you have a gold standard, the value of your money is defined by something that usually remains rock-solid in real market value (the amount it takes to trade for other goods).
But when you set a fixed price in dollars, the only thing you are tying to market value is the market value of dollars, which varies wildly, sometimes from one day to the next. Your standard (the dollar) remains as volatile as ever. Nothing has changed, except that now you have defined the price of gold. At a fixed dollar price, when dollars go up and down in value, then the gold would go up and down in value to match. It no longer reflects the market value of the gold, instead you are forcing an artificial value on it because of the changing value of the dollar.
Which is unrealistic. Which is why nobody does it.
So in the one situation your monetary standard is something that tends to change very little in value over time. In the other situation your monetary standard is something that can change (has at times changed drastically), overnight.
The very fact that nobody fixes gold prices anymore is tacit admission that a gold standard is better than fiat money.
"Private industry prior to the late 90's had very little or no interest in sharing information."
As I have already explained that is simply not true. Numerous companies by then already had nationwide data networks. They just didn't interoperate. My company had nationwide email (with attachments) long before "the internet" went public. It just wasn't an "open" standard.
You missed the whole point. There was no government research involved in "inventing" the Internet. It was invented by an academic, on his own time, for his own purposes. The government just "borrowed" it later.
I use Growl but it doesn't do that much for me anymore anyway. In fact it is usually more annoying than anything else.
If they do actually go closed source, and my existing copy stops working, I'll just stop using it. Growl loses, not me.
Really? Tell that to the Texas board that approves high-school textbooks.
I think you meant toll roads, but that is true at least in part. But the "excuse" of natural monopoly is hardly a myth: it allowed the US to build the greatest telephone system in the world, with fingers in every part of the nation, all of it interoperable. While the European countries that instead left it up to "competition", ended up with a variety of telephone systems, none of which worked with each other. They ran on different voltages, they used different signalling schemes. If your neighbor was on a different telephone system, you couldn't call across the street. Some of them didn't even get that horrendous situation fixed until relatively recently.
There is such a thing as a "natural monopoly", and if properly managed, in some situations -- in those rare situations where "natural monopoly" actually applies -- (and I don't think roads is one of those), it can be of more benefit to society than competition. It depends on many things. But a "myth"? Hardly. The internet would not exist today if it were not for our early "natural monopoly" telephone system.
Really? Ever heard of IBM? The Thomas J. Watson Research Center?
There are a great many things that came out of private industry, rather than government research. Among them: the transistor itself (without which there would be none of your vaunted microchips in the first place), and the laser.
GP is correct, Rockefeller did in fact improve the efficiency of the market and drive prices down. You can't say that it was the oil by itself that reduced prices, because without Rockefeller virtually creating the industry in the first place, there would have been no demand. So actually that's kind of a ridiculous point to try to make.
But I don't think anyone is claiming he was a great philanthropist. The benefits he brought to society stemmed entirely from his own profit motive. It wasn't a monopoly market: others did compete with Rockefeller. He outcompeted them. THAT is what brought about oligopoly in the oil markets: successful businessmen.
And as you can learn in history books by Thomas Woods: during that period it was actually the private businessman who tended to do better than those who were government-subsidized. There are a great many examples.
Actually, they did. They did not invent it, but they built it.
The Internet was invented (with a bit of help from his friends) by an academic, for use by other academics. He did it more-or-less in his "spare time", in response to a perceived need to transmit free-form information over a network. It wasn't like he was some engineer on the government payroll told to "go build an internet".
The reason private industry did not invent it is because there was no perceived need at the time. IBM, banks, and other companies already had nationwide data networks. The company I worked for already had email, and that alone was a "good enough" improvement over sending paper on airplanes all over the place. Even with the outrageous cost, at the time, of a dedicated T1 line that stretched across the United States, the dedicated email system saved them more than $4000 a month over the FedEx costs that it replaced. They had no need for web browsing.
When things finally got to the point that elements of the internet were finally perceived to fill business needs, private industry did jump on board. In droves.
So while private industry did not invent it, that is no surprise because they saw no need for it at the time. But while the government might have set it up to begin with, make no mistake. The internet you use and enjoy now was built by private industry. These electrons are going over private wires.
Mod up. This is pretty much what I would have said if this person had not stated it first.
As for California emissions, that has been so different from the rest of the country anyway, that many automakers actually found it more profitable to make a specific California package for their cars. In less extreme cases, I agree that the companies would probably adopt the strictest standard, as making their overall manufacturing and distribution cheaper than having multiple different versions.
"f the government will exchange a unit of currency for a fixed amount of gold, the currency is a representative money and the price has been fixed."
Again, you have 100% missed the point. Do you know what a dependent variable is? An independent variable?
"Representative money is price-fixing of a commodity."
No, it isn't. It is defining money in terms of that commodity. They are not the same. You are confusing price and value.
These are opposite situations. In the situation you describe, gold is "fixed in price", and defined in terms of dollars. With a gold standard, dollars are fixed in value and defined in terms of gold. They are not even remotely similar.
"Rural voters wanted bimetalism, they voted for it and got it. Bankers hated silver barons, so they demanded it be stopped and it was stopped."
Yes, that is true, but has absolutely nothing to do with the subject at hand, which is the definition of a hard monetary standard versus "price fixing". Don't you understand that even with a fixed price, the value of the commodity can change?
But apparently you don't. I'm not going to spend yet more time trying to explain it to you. I suggest you go pick up a high-school level book on economics.
"... anybody that thinks there's such a thing as a multiplier or aggregate demand is a doody head, and Keynesians are always wrong. I don't have to explain why because I have cherry-picked quotes from one Keynesian 10 years ago."
You can mischaracterize my comments all you like, but it doesn't make any kind of real argument. I did neither of those things. Really. "doody head"? Who denied multipliers or aggregate demands? Where did this stuff come from? It certainly has nothing to do with anything I actually wrote.
As for Krugman, I was not the one who brought him up. The reason comments from years ago were chosen was because it was about how accurate his predictions have been; it would be useless to try to either prove or disprove something he said yesterday. If you don't understand that, I am not the one being an idiot here.
And that was just a one example, easily found in about 30 seconds on the internet. Do you REALLY want me to spend some time and actually go into depth about how wrong Krugman has been over the years? I would not want to embarrass you.
As for "Keynesians are always wrong", that is pretty much what I wrote. Not always. But almost. If you feel so strongly about it, show me where Keynesian (or Keynesian-style) economists accurately predicted even ONE major economic event ahead of time. Just one. Name calling and phrases like "doody head" are just infantile. If you want to win an argument, then credibly refute my claim that they haven't predicted a damned thing.
"We're trying to talk about a particular problem, but you turn it into a huge argument ad hominem and appeal to your authorities."
Yes, I was discussing a particular "problem". It is one you stated, and my reply was to a direct quote. Here, since your memory seems so short I will quote it for you again:
""And I would add that most Austrian responses to the Co-Op problem involve just as much prediction and guessing as the Keynesian account.""
And I replied with specific, verifiable examples of predictions that each made. No appeal to authority, no ad hominem. They are facts that you can look up yourself. Even my comments about Krugman were not ad hominem. They were not about him as a person, they were about demonstrably false statements that he made, which are in the public record. Please, if you want to make a decent argument, learn what "ad hominem" means.
"Particularly hilarious is your drafting of Friedman(!), a monetarist who would disagree with you on just about every position you've taken on hard money -- if you're going to quote monetarists I see your Krugman and raise you an Alan Greenspan. Friedman also didn't particularly agree with Austrians."
I mentioned Friedman because he was the first one to give Keynesians what they considered to be a plausible explanation for stagflation. I did not say he was right, only that the Keynesians thought he might be. The whole point there was that the Keynesians were provably wrong, and even after the fact could not find a way to modify their own theory to conform to reality. Somebody else had to do it for them. I don't give a damn whether Friedman was a monetarist. As far as I am concerned, that is a point in his favor. Monetarists have been right a hell of a lot more often than Keynesians have, too.
"Also the fact of the Great Moderation simply flies in the face of the Austrian account of how a macroeconomy works. It generally can't explain stickiness in prices or wages"
Not enough is known about "Great Moderation" to draw many conclusions from it. Certainly government and policy makers have claimed credit for it, but both 2001 and 2008 put the lie to THAT idea. In fact one school of thought is that the so-called Great Moderation lulled people into a false sense of security, and directly led them to engage in risky practices that CAUSED bubbles. Thos
They're still not line or version numbers. Names are great, but when they're changed at the drop of a hat, they don't add anything, they get confusing.
Still waiting for Ubuntu's Obstreperous Ostrich.
Intel is the company that has taken it to ridiculous extremes. They have so many variants of their CPUs, with such bizarre and inconsistent designations, I (who used to be a computer tech) no longer even bother to keep track of most of them. I just look it up.
Knowing that the $10,000 you put away for your grandson's college education will still buy about a year at school twenty years from now is good, but not when it means you don't know if next year's grocery costs will be $1500 or $2500.
If you had enough savings or equity to get you through about a year, though, you were pretty safe. Sure, there were some high short-term fluctuations, but (a) they tended to return to their former value over any period of about a year or more, and (b) the fluctuations affected markets a lot more than they did the more rural economy. Keep in mind that the investors and bigwigs owned a lot lower percentage of the total wealth then than they do now.
As I mentioned, there were some little bubbles right around the wars, but the price indexes went right back to where they were before, afterward.
The distinction I was making was between a gold standard and "price fixing". They are essentially opposites. In each case, one is the independent variable, and the other is the dependent variable. And which is which, matters a lot.
To illustrate: let's say you set gold at a fixed $300 per ounce. (That's a price fix.) If your money inflates, and becomes worth less, then so does the $300, and therefore so does that amount of gold. By law. (If it didn't, it wouldn't actually be a price fix.) And vice versa if it deflates, of course. And it will fluctuate under a fiat money system, because by definition the value of the money floats and is dependent on interest rates and the money supply. Of course nobody fixes the price of gold like that, because it's unrealistic. Our monetary system floats. If gold itself varied in absolute value as much as the dollar, it would not be any good as a standard anyway.
In contrast, a hard money standard sets the value of money in terms of a commodity, like gold. The whole purpose here is to use a commodity that is relatively stable in value in the first place. (It is of relatively stable supply; the amount available to the market does not change that much from year to year.) Note that I stated value, not price. In our fiat money system people are used to gold fluctuating in price. But with a gold standard it cannot, by definition.
The difference is that now a dollar is guaranteed to be worth a certain amount of gold. Period. More dollars cannot be inflationarily printed, because then there would not be enough gold to pay off the holders of the dollars, and make good on that promise. The money supply remains much more stable. And as history has very clearly shown, it is in fact much more stable when there is hard currency versus fiat money. As I have explained elsewhere; even during recessions and brief depressions up to the early 20th Century, the money supply remained very stable and money value nearly constant, on any frame of reference of more than a year or so.
Other things besides gold and silver have been used as monetary standards of course; the idea is that it should be (a) relatively precious, so that it is not necessary to transport large amounts of it, and (b) of relatively stable supply.
"I suppose we just have different ideas of what 'saving for a rainy day' means. I interpreted it as hedging against unexpected expenses by means of saving, I contrasted with insurance which hedges against unexpected expenses by paying someone to take the risk for you."
Yes, apparently a misunderstanding. But I meant savings in the classical sense: money in the bank or under the mattress.
"As mentioned you can most of the time trivially out-save inflation by investing the money. This might lower the liquidity of your money but if you plan on actually saving that's usually not much of a problem."
No, to an economist savings and investments are two different things. Investments, are, by definition, money that has been invested. Savings is interest-free money that is available for investment.
"It does. There's literally zero difference between putting money in a vault and burning the money. And there's no difference between taking the money out of the vault and printing money."
There is a huge difference. Savings are nearly 100% liquid capital (or would be, if it weren't for our fractional-reserve banking system). Burned money is not only not liquid, it doesn't exist anymore. If you don't understand that difference, I strongly urge you to get an entry-level book on economics.
"What the heck are you on about? Index funds are tied to the market as a whole, which means that as long as the market exists, your money is fine."
Nonsense. An index fund follows the market. On average, when the market does well, so does the index fund. And when the market does not do well, neither does the index fund.
In case nobody has told you: the market hasn't been doing that well. If you weren't one of those bailed out a couple of years ago, if you had a lot invested, index fund or not, you could easily be one of the many who were financially ruined.
Obviously, over time, the market has trended upward. But even a short-term dip can bring ruin to many investors. Index funds were designed to take the risks out of picking individual winners and losers in the market; they don't hedge against market-wide problems. They are only slightly more immune to depressions and market crashes than other funds.
"... the market as a whole can be counted on to steadily expand... "
No, it can't. Have you forgotten 2008 already? *IF* you have the savings or discretionary capital to weather slumps like that, you can come out ahead in the long run. But not everybody does, and there are a great many losers.
"... most accounts of purchasing power based on a fixed basket of commodities or classes of expenditure are unreliable and don't reflect gains in productivity and the increase in value of the items. Houses cost more than they should if you account for inflation, but they're also much more luxurious, and often much more favorably located due to urban growth. Most durable goods you buy today are simply not comparable with durable goods available even 10 years ago in terms of energy efficiency and features."
Yes, a typo. So what? I have the book right here next to me; if you don't believe me, just ask for a number from one of the tables.
A fixed basket of commodities is the only reliable way to measure relative purchasing power over generations. Anything else is wholly subjective. McCusker uses up a good deal of space in his book explaining exactly why.
"More luxurious" is self-contradictory in this context. In order for it to be more luxurious, one has to spend money on more goods, which in turn have to be measured against comparison baskets of goods. It was possible for people in the past to live in relative luxury too, you know. Obviously it is impossible to directly compare a donkey cart with a Chevy, but one CAN compare the cost of comfortable transportation from New York to Boston.
But where the major differences have actually occurred are more comparable. People (if fewer of them) had electric and gasoline cars 80 years ago. Electric lights were available. And so on. But most especially, when inflation has been most rampant, has been in just the last 40 years. I can compare directly because I was there.
"There are good arguments as to how his completely historical and non-prognositcating account are wrong, but you have none of them here."
Sure there are. At that link are at least a couple of instances of Krugman exclaiming about how good it was to have housing available at (what we now know to be) artificially low interest rates. However, in hindsight we can see that the artificially low interest rates and resulting malinvestment were major contributors to, if not the primary cause of, the "housing bubble". Krugman was prognisticating about how good it was to have the low interest rates, and he was simply wrong. If I had a lot more time, I would dig up more examples for you.
"And I would add that most Austrian responses to the Co-Op problem involve just as much prediction and guessing as the Keynesian account."
Of course. The major difference being that the Austrians were usually right, and the Keynesians almost always wrong.
Starting clear back before the crash of '29... Friedrich Von Hayek predicted in Feb. of 29 that government monetary policy was going to cause a crash. But proto-Keynesian (Keynes had not yet formulated his theory but some mainstream economists were already using many of the concepts he adopted) Irving Fisher was on the radio proclaiming just how fine the economy was doing, the day before the market crash.
The Keynesians were predicting absolute economic disaster when the government brought all the troops home at once from WWII, claiming (via their sacred Phillips curve) that it would be impossible for the economy to absorb so many unemployed at once. The Austrians did not. Lo and behold, the US economy the very next year entered one of the most productive periods of its entire history.
Keynesians claimed that what we now call "stagflation" was economically impossible. When it actually happened, not just a dip but for a prolonged period in the late 70s-early 80s, they struggled to modify their theory to account for it. In fact it was Milton Friedman, a non-Keynesian, who first proposed a plausible explanation.
Before the recession of 2001, Keynesians again were proclaiming from the rooftops how great the economy was: "Come on in! The market's fine! It's never been higher!" Austrians were talking abo
By the way: a hard money standard is a value definition for the dollar, not the other way around. A gold standard, and "price controls on gold", are not even remotely the same things. In fact that is exactly backward.
"But the purchasing power of wages has been steadily increasing or remaining constant."
No, it hasn't. Not even close. Get yourself a copy of "How Much Is That In Real Money?", by John McClusker. It has hard figures about purchasing power of the dollar over about 300 years. It ends in the late 1990s, but you can easily find figures for more recent years.
Chart that against wages. You will find that in recent decades, ever since the boom after WWII in fact, wages have not kept pace with real inflation.
Keep in mind that many economists will tell you that the government's official numbers for inflation are not realistic.
As far as I am concerned, anybody who takes Krugman seriously hasn't read their history. For years, Krugman has been tossing around economic theory that even very RECENT history (2008) proves wrong. Just one example: historian Thomas Woods easily refutes Krugman's statements from back around 2001.
The fact is that Krugman, over the years, has ended up with egg all over his face time, and time, and time again. If the Times weren't constantly printing him, I doubt many people would take him seriously.
The whole worth of a theory is its ability to predict. The whole worth of a prognosticator is HIS ability to predict. Which means that Keynesian economics and Paul Krugman are both failures.
"Saving for a rainy day is why insurance exists and saving through investment doesn't really require any notable amount of money."
"Saving for a rainy day" is NOT why insurance exists. Insurance is, by definition, a hedge against disasters. Two different things. Further, insurance does not pay out as much as it takes in (simple elementary-school math), so it doesn't even come close to meeting the definition of "savings". Nor does it address inflation.
"Saving through investment" is a contradiction in terms. Investment, by definition, does require available money, whether that money is surplus or borrowed. In neither case does it, either, meet the definition of "savings". Savings represent a pool of capital that can be invested, but they are two different things.
"Talking about inflation as if it was horrible is hard when economists consider it a non-issue unless it goes hyper."
You completely missed two of my points: (1) that only Keynesian economists (well, Chartalists, too, but nobody takes them seriously) consider inflation to be a good thing; other schools of economics disagree, and (2) despite Keynesian theory, history does not show inflation to be a good thing.
"What exactly is the benefit of allowing people to bury money in their backyard and have it retain their value?"
This is the third point you missed (as I already mentioned above): inflation erodes the value of savings. Even Keynesian economists admit this. If you don't understand why erosion of savings is a bad thing, try being a retired person on a fixed income for a while. It will become very clear to you.
"Having people physically remove value from the economy is objectively bad, it's much healthier to have them invest it in a index fund and leave it there for 100 years instead."
Savings does not "remove money from the economy"! It represents accumulation of capital that can be invested. The alternative is investing only borrowed money. Again, even Keynesians admit that the amount of savings in an economy is a valid indicator of health, as a pool of interest-free, investable capita. But Keynesians tend to give it less weight than other economists do.
As for investing in an index fund: as we clearly saw in 2008, with a fiat currency system, money invested in the market can literally disappear overnight. Hardly what I would consider to be a "secure" investment to leave around for posterity.
That's their theory. Shared by nobody else. And there's good reason for that: history proves it false. (Actually it's pretty amazing to most people when they learn just how often Keynesian economic theory contradicts the actual history of events.)
It's also skewed, because even if it is true that inflation promotes investment (debatable), it erodes the savings (irrefutable) that are necessary for a robust economy. So the relatively affluent (who have money to invest) benefit, the relatively poor (who are merely trying to put away some money for a rainy day) suffer.
As I mentioned before, there are horror stories about the "swings" in U.S. (and colony) economies in the past. But those swings were fundamentally different than the booms and busts we see today, because the money supply remained virtually constant over time, and purchasing power always returned to its former value after any inflationary bubble (which primarily occurred when government borrowed money to finance wars). You could bury money in your back yard, and your great-great-great-grandson could dig it up 100 years later and buy as much flour with it as you could.
Whereas for the last 80 years (it's true, you can chart it... it makes for a very alarming chart), the purchasing power of our money has been on a steady decline. It has never, even once, gone back to its former value.
The graph of purchasing power over the last 300+ years has three major kinks in it, each one representing an acceleration of inflation. They correspond EXACTLY to three events in our economic history, down to the precise year: (1) the creation of the Fed, (2) the removal of the gold standard, (3) the abolition of the last vestiges of a monetary standard by Nixon, in 1971.
I have to agree with responder "authalic", and (in this rare instance) Keynes:
When a major portion of the nation's economy becomes dependent on market speculation, you might as well just throw your money away.
However, I disagree with Keynes, in part, about the reason that is so.
Keynesian economics is firmly entrenched in the idea that the money "created" by market and money speculation, and fractional-reserve banking, is real money. But the problem with that idea is that this "created" money can disappear just as fast as it is created, or even faster as we clearly saw back in 2008.
That is only possible with a fiat currency. With a hard money standard (such as gold), the supply of money is not dependent on the Fed's whim, nor is it nearly as dependent on the market as it is today. Real money cannot be either created or destroyed by irresponsible speculation or monetary policy.
After nearly 300 years of robust stability and almost completely flat value (and please don't start with horror stories about history; I have seen them before but I have the hard figures to prove it), in the 80 years since we have had Keynesian-style monetary policy, and subsequent fiat currency, the value of our money has depreciated over 96%.
It is time to end the Fed, and fractional-reserve banking. We have 80 years of proof that it doesn't work. Time to get back on track.
"Sending out tracking information to any web server that requests it is more like putting a big pile of your business cards outside your house with a sign saying "take one". Can you then be annoyed if someone actually uses the information on those business cards?"
Again, I disagree. *I* am not actively, intentionally sending out tracking information at all. My intent, when visiting a website, is to interact only with that website. Tracking bugs actively request my information, in most cases without my knowledge.
You are confusing two different things: whether it is ETHICAL for them to do that, and whether it is SMART of me to allow them to do it. (I am not doing it, they are.)
Those are two completely different issues. I am not claiming it is smart to allow them to do that. But at the same time, I assert that it is unethical for them to do that. Ethically, I am not responsible for their actions.
In the same way, as the saying goes: it might be stupid to leave my door unlocked, but that is not at all the same as giving permission to be burglarized. The burglar is still committing the crime, and whether I am being dumb or not, I am under no obligation to lock my door.