By being the first to reach top in a profession and exploiting it until the server has no money? Then buying top level mats at a deep discount and doing the same thing with the next profession?
Instead... (and it's just an idea) create a system for ranking doctors based on their overall effectiveness of treatment. Yes, it's a subjective criterion. But so is "will this guy pay". I am sure this type of service would have been invented long ago (by oh, say... Consumer Report) if providing it didn't carry a huge risk of litigation. So how about making rating agencies immune from litigation and letting them compete in who can provide better information on who's a better doctor? But, oh, wait, this will never happen -- it's bad for both lawyers (Democrats) and many doctors (Republicans).
C'mon. If a large part of the process can be automated, why not let the computer do the automation? Because you can? Yes, you'll get a better idea of what's going on your way. But do you always want to? Not all code base is a mission in life. Sometimes it's just a problem that needs to be solved. "I am thinking that all these tables (pointing to the logarithms) might be calculated by machinery" -- Babbage
The guy asked about a large code base. I am assuming that means on the order of at least half a million lines. Stepping through the code won't even get you into most modules of something that big. Never mind that it will do nothing to help you understand that a certain chunk of the code is a module that gets used only under certain extraordinary conditions. To be sure, what you suggest is what you do on day 1. The post was essentially asking what do you do three weeks into it after you've understood what the loop in main does and yet you still don't know what's tied to what and how.
The best justification for faith that I encountered was in Al Gore's "Assault on Reason": reason stops faith, fear stops reason, faith stops fear. But then again, there is something to be said for stopping fear through hope which results from the choice of treating the unknown with optimism.
Your entire argument is basically one of semantics. I hate to bring it to that level. But he started it. He started arguing how his definition of faith implied something which didn't match a different definition. Well, even if his definition is assumed, when you look at the progression of starting with reason and then arriving at faith, you still come to the point where doubt is no longer necessary. Without doubt and constant re-examination, there is is no reasonable examination. So there is no reason. So, even if his definition is assumed, faith still starts where reason ends.
The faith does not grow from resentment and the rejection of rationality, but from its fundamental affirmation, and from being rooted in a still greater form of reason. The very definition of "faith" is believing without having a need for reason. He claims that it results from a great deal of reasoning? Well, at the point that all this great deal of reasoning has occurred and things began to be taken on faith, the reason was suspended. So faith still began (and will always begin) where reason stops.
Warms my heart. We might finally have organizations that will let people rise and fall based on their ability to create rather than based on their ability to be slick.
The cars that Ford sells have protective cover. The cover was removed. The car looks completely different. Not to mention that it has visible scratches that Ford did not produce. Or are they claiming that all those scratches are also part of their brand?
and then provide the basic-feature part of the service with ad-supported revenue while charging for custom in-house solutions. After making in-house solutions and getting paid for them, release the software open source. They paid you to write the solutions -- not to own them. This way the project goals will be set by customers (and necessity is the mother of invention) and at the same time the software will remain available to those who want to tweak it.
1 court decision. If they can't provide the service and cut you off it's one thing. But to have police-enforced power to tell you what the temperature of your home should be? Ok, seriously, why doesn't California secede first? Home of the brave... right. Here's an idea: (let's see how that flies in California) give utilities the power to stop television broadcasting and cable transmission to force people to save power on TV usage. How is it even conceivable that in THESE UNITED STATES a state is even considering a vote on this? The whole appeal of the electric power was that it provided a universal supply that could be used for any device without having to report to anyone what these devices were. If utilities have the power to regulate how you use your devices, the game is over. You might as well have every electric utility require its own kind of power socket and its own type of power supply. I mean, why would anyone care if the devices they buy are regulated after the purchase by an entity A (power company) or an entity B (the device manufacturer)? At least in the 2nd case there will be constant pressure to improve quality (just like there is with cell phones). Wow! Just Wow! I just can't wait for all the shills telling me how I ignore community needs and how I lack empathy for the poor people. C'mon. I dare you. I double dare you. I am not even going to mention the myriad of alternative generation methods that are coming about right now. This is the beginning of the end of this bankrupt philosophy: "we plan for your own good and if can't figure out how to plan your good, the things which you can do in your life will be cut and you will not be able to provide them for yourself because we are the ones who plan".
in fact, the promises are enforceable in law, as the provisions of the UCC article you waved vaguely at to defend the contrary position show I disagree with that assertion. The paragraph to which you pointed did not establish that a check created a promise.
an invitation which you have ignored UCC says what checks are. It doesn't says what they are not. I am going to keep ignoring invitations to prove negatives.
Since trust in a representational or fiat currency requires only trust in the institution standing behind it (either to redeem representational currency or manage fiat currency until you have a chance to exchange it for goods of intrinsic value for fiat currency), rather than such an institution plus the person drawing a draft, there really is nothing, in terms of reliance on trust or promise, to recommend a system based on commodity currency where most practical transactions require some trust-based alternative medium to one in which you just use a representational or fiat currency. (emboldened emphasis mine)
I disagree with the word "nothing" as used in this assertion.
I was using the example of checks as examples of what can be used to handle extraordinary transactions. Usual every-day transactions could be just as easily handled with commodity cache.
All your arguments for supporting the claim that a check creates a promise are based on presupposition that a liability has already existed at the time of the writing of the check. But if a liability had already existed, the check would not create a new liability. It would as you put it "suspend it". Any instrument which does not create a liability does not create a promise. For example, if one were to write a bad check against bank A and try to deposit it in bank B, the check would bounce. But bank B would not be able to sue the writer of the check. If the check itself created a promise, then bank B would be able to sue the writer of the check for not fulfilling the promise. The original argument was that checks do not create new liabilities. They may be used to satisfy old ones, yes. But they do not create any obligations on behalf of the writer. Only the banks against which the checks are written have obligations that must be satisfied after a check was written. Perhaps the word I am missing is a "contract". A check does not comit the writer to a contract. And without a contract, no promise is made. The bank against which the check is drawn, however, does have to to satisfy the contract it has with the depositor. Part of that contract is to pay out on all orders as long as funds are available. This is how checks are different from promise-based currency. Everything we've said so far does not change the fact that a check is an order to pay -- not a promise (in the sense of "a contract") to be able to pay. So resorting to checks in the cases of transfering large amounts of gold instead of physically carrying the stuff would be a perfectly acceptable and reasonable alternative.
Wow, really? That's curious. How did they manage to avoid it? The Constitution give the power to regulate interstate commerce to the Congress. Again, I am not a lawyer. So I must not be understanding something here. Is UCC optional for states?
No, actually, a single-commodity system faces greater volatility than modern first-world fiat money systems. That intense volatility may be fluctuation around under a long-run average that doesn't have the kind of gradual downward trend that fiat money tends to have, which is better for institutions which hold large stocks of cash (and act as creditors) for generations, and similarly bad for institutions whose assets are physical capital rather than money and tend to have, over an extended period, more debt than cash, but its still intense volatility. First of all, you don't know that. Gold standard has not been tried under the modern information system. And, yes, I am claiming that wider availability of information reduces volatility. And second, if gold standard would reduce institutional holding of assets, sign me up. Third, I've tried to be patient. I prefer to view this discussion as an analytic exercise. But apparently the economics geeks have not yet gone through the same metamorphism as the technology geeks -- the metamorphism of realizing that interacting with non-experts involves having to occasionally explain things to people who are not experts in your field. Going through this metamorphism is the price geeks pay for being able to communicate with people who have other main life pursuits than they do. I'll say it one more time. Please, drop the invective. If you think you get something better than I do because you know more, quote your source. Don't add a "you don't know shit" expletive. Cool it, guy.
But it is elitist to claim that "people are stupid". And it is inaccurate to claim that it is the only reason that they go out and make bad investments even though they don't have to. Their lack of education on the subject is not the only reason they do that. Calling an argument elitist is not an ad hominem. Calling a person elitist and claiming that his/her elitism is the sole reason for an argument would be an ad hominem. But I made no such claim.
Ok, I realize that my mental picture is not yours, so I won't get upset that it is getting hard to communicate this. First, my assumptions. I view all commodities (including money and gold) as liquid... literally. I view them as flowing in an out of possession. I guess that's a digression.
To the point then. You keep insisting on blaming things on the gold standard when the reality of the situation is that having a fixed or slowly increasing supply of money treats prices as relative shares of the total amount of the purchasing power of money. Ie., if there is $1mil ounces of gold available and I have 1 ounce, then I should expect to be able to buy 1/1mil of the total things that can be bought. The thing is that with improved efficiency (which is what's expected in an industrial society) more goods become available. The reason farmers went bankrupt is that some of them had to. As farming became more efficient, less farmers would be needed to produce the same amount of food. But that's the effect of increased efficiency on all industries. Which farmers went bankrupt was determined by the fact of which of them made better economic choices than others. In a climate of increasing efficiency (since the prices are expected to fall), it must be expected that long term loans are a really bad idea unless they are made with zero interest. Why would a bank make such a loan? I'll get to that in a second. But first, a modern example. Despite inflation, the advances in computers have been so rapid that computer power per dollar spent still increases. So if a large computation (let's say that it would theoretically take years to make) has to be performed, it is a bad idea to take out a loan and start computing. A better idea is to use the money to gradually buy up computing power with the money that would otherwise be spent on mortgage payments. How is that example relevant to farmers? They would be better off buying things as they need them instead of planning ahead. It seems counterintuitive, but people have gotten used to doing that with computers. So I am confident farmers would have gotten used to doing it with their equipment.
Why would banks lend at zero interest? Because storage of gold is a service. Today banks that provide that service (and there are some that provide it to consumers) charge a nominal negative interest (on the order of.5%-1%). It is viewed as a storage fee. Which is a natural way of things, btw. I mean, why do we expect banks to pay us for providing us a service? Anyway, by lending out the gold at zero interest, the banks would pass the cost of storing the gold to the borrowers. They could, also lend it out at lower interest (1% or so), but then again, their added profit there would come from the fact that they would not go through the expense of storing the gold even though they would be charging depositors for that expense.
Lastly, before you disagree again, all the examples you give seem to come from meneytarists. That's why you make statements such as
If you shrink the supply of money, what -must- happen for equilibrium to return is that overall prices must decline to the level where the nominal supply of money is sufficient to clear the markets.
But this ignores the reason why the economy grows. Moneytarist view is that it just does... possibly due to increased population. While the reality is that it grows because of increased efficiency of production. In the environment of increased efficiency, all prices should be expected to fall. And all jobs should be expected to be in jeopardy of disappearing (because same work will be accomplished at some point with less people). You keep saying that it is insufficient supply of gold that caused problems. But you don't actually show how that causality can be established. I suspect you won't be able to. Short term fluctuations notwithstanding, the trend of all prices must be expected to go down. This is the nature of the creative-destructive
To the recipient, it is a promise that there are sufficient funds in the account to cover the draft (and, on top of that, that the order will not be cancelled before the draft is presented through a separate communication with the bank), a promise which is, all too frequently, false; While such promise maybe implied by the fact of writing the check, it most certainly is not made so legally. Ie, writing a bad check to a store for $1000 does not make one liable for $1000 dollars until the bank delivers the funds to the presenter of the check. If the check bounces, then the fact that it was written can be used as proof that a different liability had existed -- the one that resulted from the purchase. But if writing the check created a promise, then a bounced check would make the writer liable both $1000 for the purchase and $1000 for the amount written on the check. This is simply not the case. The order to pay is in this sense the opposite of a promise to pay. The only party that is liable is the bank. They have an obligation to deliver the funds upon presentment of the draft if the depositor has sufficient funds in his account to cover the amount written on the check.
You can't be sued for issuing an IOU either. You can be sued for not paying on an IOU, just as you can be sued for not having the funds for a check. The first part is true, the second part is not true. The act of writing an IOU creates a liability. So not making good on the promise can result in a law suit. The act of writing a check does not constitute a legally-binding promise. It creates written evidence of the fact that one acknowledged owing a certain amount. But it, in itself, does not create a liability for the writer. Again, UCC article 3. And again, I am not a lawyer.
That is pretty much the reason that checks have fallen out of favor. Unlike payment by a credit card, a payment by check is accepted based on trust (rather than legally-binding obligation) that the writer has the funds. Since commerce has become much more impersonal and occurs between buyers and agents of merchants (ie cashiers) rather than merchants themself, the trust can rarely be established. Of course, it might be a chicken and egg argument. Did the commerce become impersonal because it is obligation rather than trust based? Or did the impersonal nature of modern commerce create a market-place need for obligation-backed payment methods?
You're failing to learn from history, so you're doomed to repeat it.
I don't believe I am. But I can't address the same points with everyone who decides to comment. I am sorry. This takes too long.
The example of Spain has not been addressed yet. So I'll comment. The only reason Spain was ever a super power was because it was supplying the currency to the British Industrial revolution. Technological discoveries of that era most likely would have happened without the "Spanish" gold -- they were driven by individuals rather than by organizations. Without the extra "things to do" and "things to spend money on" the Spanish gold would have done nothing but provide a one-time inflation event in Europe. Well, a number of one-time inflation events -- one with every ship.
As for all the arguments/counterarguments about fiat vs commodity-backed vs commodity-based currencies, I think it's been exhausted for tonight.
I have a few questions (possibly problems) with the scenario you paint. I understand that what you say is based in facts. It is their interpretation that I am not sure about.
If your money supply is fixed, which is what a gold standard does, the overall price level, for all goods consumed, becomes a function of the size of the money supply.
Why would this be the case? Assuming the diets stay the same (probably a safe assumption for the time period we are talking about), the level of consumption of food would stay the same too. So the amount of food that needs to be purchased stays the same as well. You claim that the food prices fell. The only way that can happen in the conditions of constant demand is if the production costs fell. Given that population was actually rapidly expanding at that time, it is plausible to assume that the demand went up. I don't see how the amount of all other goods consumed would effect the price of food. Everyone still had to buy food. Why would they start offering less money for it? Perhaps the technology for producing food improved? Perhaps it was the train system that became more advanced and made the food supply more fungible and thus more efficient? I don't know enough about farming to suggest other possible improvements.
Food prices can't rise without reducing the purchases of something else, because people simply don't have the currency.
But they don't need to rise. You said they fell. They just have to stay the same. And you say they didn't.
If your money supply is fixed, which is what a gold standard does, the overall price level, for all goods consumed, becomes a function of the size of the money supply.
Not so with essentials. Essentials still take up the same percentage of overall expenditures.... unless their production cost falls. It is the discretionary income that can buy more.
This was a very real experience in the late 1800's
Again, are you confident that it was not a result of blanking of the country with trains (which commoditized food) or of other food-production advances? For example, fertilizers began being industrially produced 1850-1870. Certainly, this reduced the price of food. So I guess I have my answer. All industries (including farming) end up needing to increase levels of production in order to maintain the same lifestyle levels when efficiency increases. If the level on consumption stays the same, that means that less people will be employed by the industry. Phew. Now it makes sense. So the food prices fell and allowed for larger level of population through less starvation.
The only way that the overall price level of a basket of goods can equalize with gold is if the size of the basket declines. That is, the size of the economy has to decline, either through emmigration or mass poverty.
Well, no. If everything gets cheaper (as it does with deflation), then there is extra gold left for research and development. The basket increases because of the increase in efficiency. And that's how economy grows anyway -- with or without the gold standard.
As for the farmers' gripe, I imagine they griped quite a bit because all of a sudden some of them were producing more food and reducing everyone's income per unit produced. Had they gotten their way though (with silver standard) it would have created a bubble. For a while there would be more (silver) money to spend, but it would drive all prices up rather quickly and they would be getting essentially the same share of the economy as before... since people wouldn't eat more. But everyone else would go through a bubble and a burst. In other words, there would be a great deal of discretionary income which would get wasted or get spent on some really risky investments.
Where this relates to fiat money is that if your central banker doesn't understand what is happening here, it is easy to screw this up by goin
McCusker has historical price indexes till 1913. The fact that you never even looked at such things while arguing about the subject says very sad and ill things about you, your knowledge of the subject and your intelligence. Thanks for the source though. I'll be curious to read it. Do ease on the rhetoric though.
Unlike you we are capable of rational and logical thought as well as reading comprehension. Of course if you;d like to continue randomly pulling statements out of your ass and claiming someoen else said then then please go on, after all there is a reason every town wanted an idiot to be amused by. Thanks. I'll let my signature speak for itself.
Changing to commodity or representational money will not change that (if anything, it will be a symptom that that problem has gotten worse.)
That's elitist and more importantly inaccurate. It's because people don't have a choice. If they don't invest, they lose their savings. That's what will change. It will remove the NEED to invest. So the only time that people will invest will be when they are sure.
Given that the most damaging bubble (and its subsequent bursting) in the history of the US economy occurred while the US was on the gold standard with free convertibility -- and gold/silver currency is the only part here that isn't part of the current system, free exchange of property is not, contrary to your misinformation, illegal -- I see no reason to believe this. I assume you are referring to the crash of 1929. That is an interesting argument. But it only goes to prove that 1913-1933 we were on gold standard in name only. The largest effect on the general public from the crash was not loss of investment (most people didn't invest then). It was the collapse of banks. Had the fed not issued credit which was not trully backed by gold, the banks wouldn't be able to lend out so much money and wouldn't have collapsed. On a personal note, please, stay away from ad hominems such as "your misinformation".
I wasn't aware you were advocating compelling people to retain their earnings as cash. But, feel free to make the case for that if you wish. eeehh... ad hominem. skip.
People are arrested for no valid reason whatsoever. So what? I'll leave that one alone.
By your own claim, this didn't happen until sometime after the 1980s, while the US dropped convertibility of gold in the 1930s. Something is out of whack here. The changes that have encouraged speculation as the main route of retirement savings have little to do with the monetary system. It is the confluence of trends that causes singularities. Had people kept their savings in gold, the trend of having to invest when everyone else is wouldn't be there -- people would be perfectly happy with moderate rate of savings their gold provided them. I don't know why you keep insisting that we were still on a gold standard until 1930s. Can you outline the exact procedure one would have to go through to get the gold equivalent of their money in 1925 from the federal reserve? Or at least provide a link to it? Because I haven't been able to find out if it was practically possible to actually get your dollar's worth in gold. To me that's an indication of zero trust.
Slashdot Mirror
By being the first to reach top in a profession and exploiting it until the server has no money? Then buying top level mats at a deep discount and doing the same thing with the next profession?
Otherwise known as "reason stops where faith begins"? I'll just link to a previous discussion, before it repeats.
http://slashdot.org/comments.pl?sid=420680&cid=22073210Instead... (and it's just an idea) create a system for ranking doctors based on their overall effectiveness of treatment. Yes, it's a subjective criterion. But so is "will this guy pay". I am sure this type of service would have been invented long ago (by oh, say... Consumer Report) if providing it didn't carry a huge risk of litigation. So how about making rating agencies immune from litigation and letting them compete in who can provide better information on who's a better doctor? But, oh, wait, this will never happen -- it's bad for both lawyers (Democrats) and many doctors (Republicans).
C'mon. If a large part of the process can be automated, why not let the computer do the automation? Because you can? Yes, you'll get a better idea of what's going on your way. But do you always want to? Not all code base is a mission in life. Sometimes it's just a problem that needs to be solved. "I am thinking that all these tables (pointing to the logarithms) might be calculated by machinery" -- Babbage
The guy asked about a large code base. I am assuming that means on the order of at least half a million lines. Stepping through the code won't even get you into most modules of something that big. Never mind that it will do nothing to help you understand that a certain chunk of the code is a module that gets used only under certain extraordinary conditions. To be sure, what you suggest is what you do on day 1. The post was essentially asking what do you do three weeks into it after you've understood what the loop in main does and yet you still don't know what's tied to what and how.
The best justification for faith that I encountered was in Al Gore's "Assault on Reason": reason stops faith, fear stops reason, faith stops fear. But then again, there is something to be said for stopping fear through hope which results from the choice of treating the unknown with optimism.
On a green/red plasma-display Toshiba laptop.
Warms my heart. We might finally have organizations that will let people rise and fall based on their ability to create rather than based on their ability to be slick.
The cars that Ford sells have protective cover. The cover was removed. The car looks completely different. Not to mention that it has visible scratches that Ford did not produce. Or are they claiming that all those scratches are also part of their brand?
and then provide the basic-feature part of the service with ad-supported revenue while charging for custom in-house solutions. After making in-house solutions and getting paid for them, release the software open source. They paid you to write the solutions -- not to own them. This way the project goals will be set by customers (and necessity is the mother of invention) and at the same time the software will remain available to those who want to tweak it.
1 court decision. If they can't provide the service and cut you off it's one thing. But to have police-enforced power to tell you what the temperature of your home should be? Ok, seriously, why doesn't California secede first? Home of the brave... right. Here's an idea: (let's see how that flies in California) give utilities the power to stop television broadcasting and cable transmission to force people to save power on TV usage. How is it even conceivable that in THESE UNITED STATES a state is even considering a vote on this? The whole appeal of the electric power was that it provided a universal supply that could be used for any device without having to report to anyone what these devices were. If utilities have the power to regulate how you use your devices, the game is over. You might as well have every electric utility require its own kind of power socket and its own type of power supply. I mean, why would anyone care if the devices they buy are regulated after the purchase by an entity A (power company) or an entity B (the device manufacturer)? At least in the 2nd case there will be constant pressure to improve quality (just like there is with cell phones). Wow! Just Wow! I just can't wait for all the shills telling me how I ignore community needs and how I lack empathy for the poor people. C'mon. I dare you. I double dare you. I am not even going to mention the myriad of alternative generation methods that are coming about right now. This is the beginning of the end of this bankrupt philosophy: "we plan for your own good and if can't figure out how to plan your good, the things which you can do in your life will be cut and you will not be able to provide them for yourself because we are the ones who plan".
I disagree with the word "nothing" as used in this assertion.
I was using the example of checks as examples of what can be used to handle extraordinary transactions. Usual every-day transactions could be just as easily handled with commodity cache.All your arguments for supporting the claim that a check creates a promise are based on presupposition that a liability has already existed at the time of the writing of the check. But if a liability had already existed, the check would not create a new liability. It would as you put it "suspend it". Any instrument which does not create a liability does not create a promise. For example, if one were to write a bad check against bank A and try to deposit it in bank B, the check would bounce. But bank B would not be able to sue the writer of the check. If the check itself created a promise, then bank B would be able to sue the writer of the check for not fulfilling the promise. The original argument was that checks do not create new liabilities. They may be used to satisfy old ones, yes. But they do not create any obligations on behalf of the writer. Only the banks against which the checks are written have obligations that must be satisfied after a check was written. Perhaps the word I am missing is a "contract". A check does not comit the writer to a contract. And without a contract, no promise is made. The bank against which the check is drawn, however, does have to to satisfy the contract it has with the depositor. Part of that contract is to pay out on all orders as long as funds are available. This is how checks are different from promise-based currency. Everything we've said so far does not change the fact that a check is an order to pay -- not a promise (in the sense of "a contract") to be able to pay. So resorting to checks in the cases of transfering large amounts of gold instead of physically carrying the stuff would be a perfectly acceptable and reasonable alternative.
Wow, really? That's curious. How did they manage to avoid it? The Constitution give the power to regulate interstate commerce to the Congress. Again, I am not a lawyer. So I must not be understanding something here. Is UCC optional for states?
But it is elitist to claim that "people are stupid". And it is inaccurate to claim that it is the only reason that they go out and make bad investments even though they don't have to. Their lack of education on the subject is not the only reason they do that. Calling an argument elitist is not an ad hominem. Calling a person elitist and claiming that his/her elitism is the sole reason for an argument would be an ad hominem. But I made no such claim.
Ok, I realize that my mental picture is not yours, so I won't get upset that it is getting hard to communicate this. First, my assumptions. I view all commodities (including money and gold) as liquid... literally. I view them as flowing in an out of possession. I guess that's a digression.
To the point then. You keep insisting on blaming things on the gold standard when the reality of the situation is that having a fixed or slowly increasing supply of money treats prices as relative shares of the total amount of the purchasing power of money. Ie., if there is $1mil ounces of gold available and I have 1 ounce, then I should expect to be able to buy 1/1mil of the total things that can be bought. The thing is that with improved efficiency (which is what's expected in an industrial society) more goods become available. The reason farmers went bankrupt is that some of them had to. As farming became more efficient, less farmers would be needed to produce the same amount of food. But that's the effect of increased efficiency on all industries. Which farmers went bankrupt was determined by the fact of which of them made better economic choices than others. In a climate of increasing efficiency (since the prices are expected to fall), it must be expected that long term loans are a really bad idea unless they are made with zero interest. Why would a bank make such a loan? I'll get to that in a second. But first, a modern example. Despite inflation, the advances in computers have been so rapid that computer power per dollar spent still increases. So if a large computation (let's say that it would theoretically take years to make) has to be performed, it is a bad idea to take out a loan and start computing. A better idea is to use the money to gradually buy up computing power with the money that would otherwise be spent on mortgage payments. How is that example relevant to farmers? They would be better off buying things as they need them instead of planning ahead. It seems counterintuitive, but people have gotten used to doing that with computers. So I am confident farmers would have gotten used to doing it with their equipment.
Why would banks lend at zero interest? Because storage of gold is a service. Today banks that provide that service (and there are some that provide it to consumers) charge a nominal negative interest (on the order of .5%-1%). It is viewed as a storage fee. Which is a natural way of things, btw. I mean, why do we expect banks to pay us for providing us a service? Anyway, by lending out the gold at zero interest, the banks would pass the cost of storing the gold to the borrowers. They could, also lend it out at lower interest (1% or so), but then again, their added profit there would come from the fact that they would not go through the expense of storing the gold even though they would be charging depositors for that expense.
Lastly, before you disagree again, all the examples you give seem to come from meneytarists. That's why you make statements such as
If you shrink the supply of money, what -must- happen for equilibrium to return is that overall prices must decline to the level where the nominal supply of money is sufficient to clear the markets.
But this ignores the reason why the economy grows. Moneytarist view is that it just does... possibly due to increased population. While the reality is that it grows because of increased efficiency of production. In the environment of increased efficiency, all prices should be expected to fall. And all jobs should be expected to be in jeopardy of disappearing (because same work will be accomplished at some point with less people). You keep saying that it is insufficient supply of gold that caused problems. But you don't actually show how that causality can be established. I suspect you won't be able to. Short term fluctuations notwithstanding, the trend of all prices must be expected to go down. This is the nature of the creative-destructive
That is pretty much the reason that checks have fallen out of favor. Unlike payment by a credit card, a payment by check is accepted based on trust (rather than legally-binding obligation) that the writer has the funds. Since commerce has become much more impersonal and occurs between buyers and agents of merchants (ie cashiers) rather than merchants themself, the trust can rarely be established. Of course, it might be a chicken and egg argument. Did the commerce become impersonal because it is obligation rather than trust based? Or did the impersonal nature of modern commerce create a market-place need for obligation-backed payment methods?
I don't believe I am. But I can't address the same points with everyone who decides to comment. I am sorry. This takes too long.
The example of Spain has not been addressed yet. So I'll comment. The only reason Spain was ever a super power was because it was supplying the currency to the British Industrial revolution. Technological discoveries of that era most likely would have happened without the "Spanish" gold -- they were driven by individuals rather than by organizations. Without the extra "things to do" and "things to spend money on" the Spanish gold would have done nothing but provide a one-time inflation event in Europe. Well, a number of one-time inflation events -- one with every ship.
As for all the arguments/counterarguments about fiat vs commodity-backed vs commodity-based currencies, I think it's been exhausted for tonight.
If your money supply is fixed, which is what a gold standard does, the overall price level, for all goods consumed, becomes a function of the size of the money supply.
Why would this be the case? Assuming the diets stay the same (probably a safe assumption for the time period we are talking about), the level of consumption of food would stay the same too. So the amount of food that needs to be purchased stays the same as well. You claim that the food prices fell. The only way that can happen in the conditions of constant demand is if the production costs fell. Given that population was actually rapidly expanding at that time, it is plausible to assume that the demand went up. I don't see how the amount of all other goods consumed would effect the price of food. Everyone still had to buy food. Why would they start offering less money for it? Perhaps the technology for producing food improved? Perhaps it was the train system that became more advanced and made the food supply more fungible and thus more efficient? I don't know enough about farming to suggest other possible improvements.
Food prices can't rise without reducing the purchases of something else, because people simply don't have the currency.
But they don't need to rise. You said they fell. They just have to stay the same. And you say they didn't.
If your money supply is fixed, which is what a gold standard does, the overall price level, for all goods consumed, becomes a function of the size of the money supply.
Not so with essentials. Essentials still take up the same percentage of overall expenditures.... unless their production cost falls. It is the discretionary income that can buy more.
This was a very real experience in the late 1800's
Again, are you confident that it was not a result of blanking of the country with trains (which commoditized food) or of other food-production advances? For example, fertilizers began being industrially produced 1850-1870. Certainly, this reduced the price of food. So I guess I have my answer. All industries (including farming) end up needing to increase levels of production in order to maintain the same lifestyle levels when efficiency increases. If the level on consumption stays the same, that means that less people will be employed by the industry. Phew. Now it makes sense. So the food prices fell and allowed for larger level of population through less starvation.
The only way that the overall price level of a basket of goods can equalize with gold is if the size of the basket declines. That is, the size of the economy has to decline, either through emmigration or mass poverty.
Well, no. If everything gets cheaper (as it does with deflation), then there is extra gold left for research and development. The basket increases because of the increase in efficiency. And that's how economy grows anyway -- with or without the gold standard.
As for the farmers' gripe, I imagine they griped quite a bit because all of a sudden some of them were producing more food and reducing everyone's income per unit produced. Had they gotten their way though (with silver standard) it would have created a bubble. For a while there would be more (silver) money to spend, but it would drive all prices up rather quickly and they would be getting essentially the same share of the economy as before... since people wouldn't eat more. But everyone else would go through a bubble and a burst. In other words, there would be a great deal of discretionary income which would get wasted or get spent on some really risky investments.
Where this relates to fiat money is that if your central banker doesn't understand what is happening here, it is easy to screw this up by goin
That's because people are stupid.
Changing to commodity or representational money will not change that (if anything, it will be a symptom that that problem has gotten worse.)
That's elitist and more importantly inaccurate. It's because people don't have a choice. If they don't invest, they lose their savings. That's what will change. It will remove the NEED to invest. So the only time that people will invest will be when they are sure. Given that the most damaging bubble (and its subsequent bursting) in the history of the US economy occurred while the US was on the gold standard with free convertibility -- and gold/silver currency is the only part here that isn't part of the current system, free exchange of property is not, contrary to your misinformation, illegal -- I see no reason to believe this. I assume you are referring to the crash of 1929. That is an interesting argument. But it only goes to prove that 1913-1933 we were on gold standard in name only. The largest effect on the general public from the crash was not loss of investment (most people didn't invest then). It was the collapse of banks. Had the fed not issued credit which was not trully backed by gold, the banks wouldn't be able to lend out so much money and wouldn't have collapsed. On a personal note, please, stay away from ad hominems such as "your misinformation". I wasn't aware you were advocating compelling people to retain their earnings as cash. But, feel free to make the case for that if you wish. eeehh... ad hominem. skip. People are arrested for no valid reason whatsoever. So what? I'll leave that one alone. By your own claim, this didn't happen until sometime after the 1980s, while the US dropped convertibility of gold in the 1930s. Something is out of whack here. The changes that have encouraged speculation as the main route of retirement savings have little to do with the monetary system. It is the confluence of trends that causes singularities. Had people kept their savings in gold, the trend of having to invest when everyone else is wouldn't be there -- people would be perfectly happy with moderate rate of savings their gold provided them. I don't know why you keep insisting that we were still on a gold standard until 1930s. Can you outline the exact procedure one would have to go through to get the gold equivalent of their money in 1925 from the federal reserve? Or at least provide a link to it? Because I haven't been able to find out if it was practically possible to actually get your dollar's worth in gold. To me that's an indication of zero trust.