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Austrian Economics Vs Clueless Trolls

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Submitted by Pater Tenebrarum of Acting-Man blog,

First they ignore you, then they ridicule you, then they fight you, and then you win.”  Mahatma Gandhi

Bloomberg Releases an Unqualified Smear – A Good Sign?


We have previously remarked on the extremely poor quality of Bloomberg's editing, mainly in the context of the site's ongoing rape of the English language in its headlines. However, the quality of its editing processes has reached a new low when an unqualified and in places truly vile smear of the Austrian School of Economics recently slipped past its editors. Initially we didn't plan to comment on it, simply because, as the Daily Bell has put it, “one doesn't even know where to begin”. However, so many people have in the meantime mailed us the piece or a link to it that we feel compelled to address the article in a blog post.

The contributions of the Austrian School to the science of economics are as numerous as they are profound. Carl Menger contributed the theory of marginal utility (Jevons and Walras developed the same idea independently around the same time, so Menger wasn't the sole originator), and a body of theory on value and prices that corrected many of the most glaring and profound errors of the classical economists. Incidentally, Menger also provided a sound explanation of the origin of money. Eugen von Böhm-Bawerk then followed in his footsteps with a highly advanced theory of interest and capital that inspired generations of successors.

In 1912, an at the time not yet widely known economist and pupil of Böhm-Bawerk by the name of Ludwig von Mises published “Die Theorie des Geldes und der Umlaufsmittel” (The Theory of Money and Credit), which established him overnight as Europe's foremost monetary theorist. To this day Mises' book must be regarded as the definitive work on money and credit, a work that has stood the test of time. Mises then published his seminal monograph “Economic Calculation in the Socialist Commonwealth”, which sparked the socialist calculation debate that raged with great intensity until the mid 1940s. Remarkably, the debate is still ongoing, in spite of the fact that Mises' contentions were never refuted, and in spite of the fact that he has been proved right “in spades” by the economic disintegration of the Soviet command economies in the late 1980s. Two years later, Mises Published “Socialism – an Economic and Sociological Analysis”, which is one of the most profound and encompassing critiques of socialism ever written.

While working on his opus magnum “Nationalökonomie” (1938) – a treatise on economics that became better known in its revised English version as “Human Action” (1949), Mises published numerous articles in journals, many of which dealt with the systematization of the epistemological and methodological problems of economics. These remain a major bone of contention setting the Austrian school apart from other economic schools. Readers won't be surprised  that we are siding with the view that economics is not a science like physics and that the attempts to make it so have led the entire science astray.

Friedrich A. Hayek, building on the works of Mises, provided outstanding contributions to capital and production theory (e.g. “Prices and Production”, “The Pure Theory of Capital” and numerous articles in economic journals), and later expanded the scope of Austrian theorizing with his writings on the nature of knowledge and entrepreneurship (see e.g. his famous essay “The Use of Knowledge in Society”). Hayek even received a Nobel Prize in Economics in 1974, in one of the few nods the establishment has given to Austrian economics (not that this really matters, we only mention it for the sake of completeness: Hayek's Nobel lecture “The Pretense of Knowledge” in which he condemned the “scientism” of modern economics  is certainly worth reading though).

Richard von Strigl, one of the few economists who didn't flee Vienna (but certainly fell silent after the Nazi takeover) as a teacher not only greatly influenced Hayek, Machlup, Haberler,  Morgenstern and many others, but left us with a unique contribution to capital theory with his work “Capital and Production” (1934).

We could continue this list up to the present, but in the interest of brevity, want to only mention Rothbard's excellent sweeping economic treatise “Man, Economy and State” (1962; in Joseph Salerno's words “a milestone in the development of sound economic theory, […] that rescued the science from self-destruction”) which presented a systematic and complete theory of production, as well as a unique and important revision of the theory of monopoly.

Well, scratch all that. These people were “infested by alien brain worms” according to the smear published at Bloomberg. The author, one Noah Smith, evidently knows nothing about Austrian economics – and we actually doubt that he really knows anything about other economic schools either. He has certainly never read or understood a single work by an Austrian economist. The whole thing simply reads like an ad hominem attack on supporters of the theory penned by a politically motivated hack. What is especially bizarre is his insinuation that Austrian economics somehow has “antisemitic overtones” – never mind, he says, that Ludwig von Mises and Murray Rothbard, two of the preeminent Austrian scholars were themselves Jews (not the only ones by the way), they're antisemitic anyway!

We want to reprint the comment of Mr. Vincent Cook in this context (from the comments section at Bloomberg), who notes that an economic theory can hardly be refuted by mere name-calling, and addresses the above point in some detail:

“Mere name-calling doesn't amount to a refutation of any economic theory, nor does the "guilt-by-association" tactic of linking certain adherents of a given economic theory to their empirical predictions not warranted by the theory itself or to their non-economic views on politics, etc. and claiming that such predictions and views somehow invalidate the theory.


If Mr. Smith has any substantial objections to any element of Austrian economic theory that has been written over the past 140+ years, he should make the effort to cite the work in question and identify what specific premises or logical deductions he thinks the the Austrians got wrong. Characteristically Austrian ideas about the proper methodology of economics, about the nature of capital goods markets and interest rates, about the nature of boom/bust cycles, about the impossibility of economic calculation and coordination of decentralized information under central planning, etc. stand or fall on their own merits, not on what some fringe supporter of a political movement puts into a Youtube video.


The Austrian-oriented case for gold and for 100% reserve banking, for example, doesn't depend on any belief about secret banker plots or about any mechanistic link between money creation and price increases. Rather, it is based on the desirability of preventing destructive boom/bust cycles, of eliminating any long-run risk of hyperinflation, of preventing money and money-substitute creation from becoming a source of political rent-seeking and moral hazard, and of upholding the integrity of the payments system without counterproductive regulatory interventions and bailouts. Mr. Smith's misrepresentations of the case for gold and for 100% reserve banking are simply irrelevant to the issue at hand.


Mr. Smith's neo-Nazi baiting is particularly scurrilous, as it grossly misrepresents the attitudes that Austrian economists have always had about the Nazi movement. Ludwig von Mises wasn't simply a Jewish Austrian economist (and one had to flee Vienna ahead of the Anschluss), he also wrote books concerning the ideological development and political growth of militant German nationalism that are still in wide circulation among contemporary Austrian economists and that still strongly inform their understanding of the subject. Indeed, Mises's 1919 work Nation, State and Economy and his 1944 work Omnipotent Government are must-reads for anyone who wants to understand what went wrong in Germany.


I challenge Mr. Smith and anyone who takes Mr. Smith seriously to read these works and others concerning German history and the Nazis that circulate among Austrian economists (such as Günter Reimann's  The Vampire Economy). There is not the slightest trace of anti-Semitism in them, and anyone with any sense of honor and decency reviewing this literature will recognize that Mr. Smith owes the entire contemporary Austrian school an apology.”

We doubt that such an apology will be forthcoming, or that Mr. Smith will make the effort to actually read any Austrian economists. Obviously his article was never intended to be a serious critique – it is simply a hit piece. What is interesting about it is mainly that Bloomberg allowed it to be published. We have put Mahatma Gandhi's famous quote at the beginning of this article for a reason. Before the advent of the internet, it was easy for the establishment to “bury” the Austrian School's causal-realist approach to economics by simply ignoring it.  Evidently, we have now progressed to somewhere between point 2 and 3 of Gandhi's list – the 'ridiculing and fighting' stage. We can take this as a sign of progress. Ignoring the Austrians is no longer deemed sufficient.



Carl Menger, the founder of the Austrian School

(Photo via Wikimedia Commons)


A Few Remarks on Concepts Discussed by Smith

One of our readers who pointed the Bloomberg article out to us remarked that such attacks often occur close to economic and financial turning points. Readers may recall that practically the entire mainstream economic profession woke to a considerable amount of egg on its face after the 2008 crisis, as the vast majority of economists had neither predicted it, nor provided even the slightest warning of the growing imbalances in the economy that eventually led to the bust. One quite prominent economist who got it completely wrong was of course Ben Bernanke, the former Fed chairman. To state that he merely “didn't see it coming” doesn't fully describe the enormity of his forecasting errors (see this video). The public not unreasonably began to wonder what economists are actually good for. 

In the two years prior to the crisis is was however highly fashionable to ridicule and attack supporters of the Austrian School, who were indeed among the very few economists who actually did predict the crisis – in spite of the fact that they do not regard “prediction” to be among the tasks of economic theory. Prediction is akin to the study of history, a thymological task. Correct economic theory and praxeological reasoning can be helpful with respect to forecasting, in that they help with delineating the constraints of such forecasts. But forecasting as such is basically the job of entrepreneurs and speculators, not that of economists.

An entrepreneur who evinces a sound understanding of Austrian theory is Peter Schiff, who was featured prominently in televised debates on financial markets and the economy as the “token bear” in 2005 to 2007, as a foil for all the other debaters who kept insisting that everything was fine until it could no longer be denied that catastrophe had struck. Again, to say that Schiff was “ridiculed and attacked” in his appearances in those years does not fully convey the viciousness and arrogance some of his opponents displayed (there are two videos on you-tube documenting this – one 'general video' covering a range of appearances and the 'CNBC edition').

This fits with our reader's observation that such attacks tend to become especially pronounced near turning points. It took the establishment-approved defenders of the central planning statist quo a little while to get their courage up after the collapse of the tech bubble, and when they finally felt confident enough to declare that the printing press had triumphed, the next denouement wasn't far away. In that sense, the Smith article can be seen as a hint that the current inflationary boom may also be close to meeting its inevitable fate.


Professional economic forecasting in a nutshell


This brings us to several points raised by Smith which deserve some additional comment. Smith inter alia mentions that Austrian economist Robert Murphy “lost a bet on inflation” with someone. However, economics is not about winning bets, and as noted above, it is not about making predictions either. This is in spite of the fact that the Econometric Society's original motto was “Science is Prediction”.  As Rothbard points out in Man, Economy and State:

“Praxeology and economics deal with any given ends and with the formal implications of the fact that men have ends and employ means to attain them”

In short, economics is the study of the purposive employment of (scarce) means to attain ends. The formal implications thereof form the basis of economic laws, which have universal, time- and place-invariant validity.

The debate over inflation is apparently Smith's biggest bug-bear, as he devotes large parts of his screed to the topic. This is perhaps no surprise, as his main concern appears to be the defense of central banking, or putting it in more general terms, the defense of central economic planning by organs of the State.

In the process, he gets all sorts of things wrong. For instance, he alleges that the absence of a sharp rise in consumer prices to date in spite of the Federal Reserve's relentless money printing caused Austrians to “redefine inflation”. Here is the relevant passage from his article:

“The Austrians’ next defense was to redefine reality. Inflation doesn’t mean a rise in prices, they said – it means an increase in the monetary base. QE wasn’t causing inflation, it was inflation itself. Duh! Now the Austrians were safe — after all, you can define inflation as anything you want. It’s a free country, ain’t it? You can define inflation to be a rare poisonous South American tree frog if you want, and the only consequence will be that people think you’re off your rocker. And so when Austrians tried to redefine the word “inflation” to mean something other than “a rise in prices,” people duly recognized that Austrians were off their rockers.”

We haven't heard from all those people who allegedly “duly recognized that Austrian's were off their rockers”, so we are guessing that by “people”, Smith mainly refers to himself. First of all, it should be pointed out that there is a formal mistake in this paragraph, as no Austrian has ever asserted that “increases in the monetary base” constitute inflation. The monetary base consists of two major components, only one of which, namely currency, is part of the money supply. The far greater part of the monetary base nowadays consists of bank reserves, which are explicitly excluded from definitions of the money supply. While they provide the basis for the inflationary pyramiding of credit, they are themselves not “money” (although they can become part of the money supply when they are transformed into currency upon customer withdrawals from demand deposits).

More importantly though, Austrians did not suddenly “redefine the meaning of inflation”. The redefining was done by others, as inflation had always denoted an increase in the supply of money, before its meaning was deliberately changed to mask the chain of cause and effect. In his essay “Inflation and Price Control”, published in 1945, Ludwig von Mises remarked that this redefinition of the term inflation was by no means harmless:

Inflation must result in a general tendency towards rising prices. Those into whose pockets the additional quantity of currency flows are in a position to expand their demand for vendable goods and services. An additional demand must, other things being equal, raise prices. No sophistry and no syllogisms can conjure away this inevitable consequence of inflation.


The semantic revolution which is one of the characteristic features of our day has obscured and confused this fact. The term inflation is used with a new connotation. What people today call inflation is not inflation, i.e., the increase in the quantity of money and money substitutes, but the general rise in commodity prices and wage rates which is the inevitable consequence of inflation. This semantic innovation is by no means harmless.


First of all there is no longer any term available to signify what inflation used to signify. It is impossible to fight an evil which you cannot name. Statesmen and politicians no longer have the opportunity to resort to a terminology accepted and understood by the public when they want to describe the financial policy they are opposed to. They must enter into a detailed analysis and description of this policy with full particulars and minute accounts whenever they want to refer to it, and they must repeat this bothersome procedure in every sentence in which they deal with this subject. As you cannot name the policy increasing the quantity of the circulating medium, it goes on luxuriantly.


The second mischief is that those engaged in futile and hopeless attempts to fight the inevitable consequences of inflation-the rise in prices-are masquerading their endeavors as a fight against inflation. While fighting the symptoms, they pretend to fight the root causes of the evil. And because they do not comprehend the causal relation-between the increase in money in circulation and credit expansion on the one hand and the rise in prices on the other, they practically make things worse.”

(emphasis added)

In addition, it should be mentioned than no Austrian economist has ever asserted that an increase in the supply of money must instantly and definitely lead to rising consumer prices (even if some have said they expected it to happen, there is nothing apodictic about it). In fact, as Mises pointed out in 1912 already, it is futile to even pretend that something like the “general level of prices” can be measured, as the exchange value of money depends on altogether four factors: the supply of money, the demand for money, and the supply of and demand for goods and services.

This is inter alia why the former correct usage of the term inflation is so important. The effects of vast increases in the money supply can be masked by a concomitant increase in productivity and the supply of goods. This is what happened e.g. in the boom of the 1920s – and it seriously misled many economists as well as the central bank at the time, as they were convinced that because consumer prices had not increased, nothing was amiss. As we know today, the boom eventually turned into the Great Depression, so this was a rather  grave error in retrospect. One must surely agree with Mises that the semantic confusion regarding the term inflation is anything but harmless. However, to return to Smith, it wasn't the Austrians who redefined the term inflation, and they most certainly didn't do so recently because they are allegedly miffed that CPI has not yet risen much in the face of a 95% increase of the broad US money supply since 2008.



Ludwig von Mises. It just might be that he knew a little bit more about inflation than Noah Smith

(Photo via Wikimedia Commons)


As an aside, Mises was inter alia concerned about the long term effect of monetary inflation on money's general purchasing power, because he had experienced several destructive hyper-inflation episodes in his lifetime, and had seen firsthand what enormous economic, social, and political damage the breakdown of monetary systems can cause. However, as Mises and other Austrian economists have never tired to point out, monetary inflation causes a “price revolution” in that it most definitely alters relative prices in the economy, even if consumer prices fail to increase much. This is in fact  the most pernicious effect of inflation, as it is the root cause of the boom-bust cycle, by dint of falsifying economic calculation.

Moreover, contrary to what Smith appears to think, Austrian economists are not particularly concerned about short term fluctuations in the gold price. They would undoubtedly regard a rising gold price as one of inflation's possible effects, and a warning signal indicating that economic confidence is waning. The Austrian support for employing gold as money is also a bit more differentiated than Smith makes it out to be. The main point Austrians are making is that money should be left to the market. Whether market participants will choose gold or something else is not of central importance, although history certainly suggests that gold would play an important  role in a free market money system.

Lastly, we want to briefly address the 5 points Smith lists at the beginning of his article as the 'Austrian beliefs' he intends to denigrate. These are:

1) Federal Reserve money-printing is a government plot to boost big banks,


2) prices are rising much faster than anyone thinks,


3) real “inflation” means money-printing, not an increase in prices,


4) printing money can never boost the economy,


5) academic economics is a plot to use mathematical mumbo-jumbo to cover up government giveaways to big banks, etc., etc.

We're not sure what is meant by “etc., etc”, so we can only address the five points explicitly mentioned.

1. As to the first point, well, check, what else does Smith think Federal Reserve money printing since 2008 was about? Rescuing dairy farmers in Kansas? As Bob Murphy adds - Does Noah deny that the Fed’s activities have helped big banks far more than the little guy? For example, did the Maiden Lane LLCs buy up underwater homes from struggling middle-class families? Did the Fed’s “extraordinary lending facilities” give loans to self-employed plumbers and dry cleaners to help them get through the crisis? No, all of the Fed’s activities directly shored up the balance sheets of huge banks.

2. As to point two, he doesn't mention which prices, but as noted above, a 'general price level' can actually not be calculated, so while measures like CPI may serve as a rough approximation of consumer price trends, they certainly don't tell the whole story. Since March of 2009, the prices of titles to capital have for instance increased by an average of 190%. This is one of the signs that the above mentioned distortion in relative prices is well underway.

3. We have addressed point three extensively above, as it seems to us it is an especially important one. Just one more remark that has to do both with the second and the third point: there is no way to predict with certainty whether and at what point an increase in the money supply will lead to large and broad-based losses in money's purchasing power. This depends largely on contingent circumstances. For instance, if the monetary authority abandons the inflationary policy in time, i.e., before the public's inflation expectations change, it may never happen. We may merely get a sizable economic bust instead. On the other hand, the progression from “lots of money printing” to “inflationary breakdown of the underlying currency system” could be observed several times in history, and what all these historical examples have in common is that there were large time lags between the money supply expansion and the point when the public came to realize that the inflationary policy wouldn't be stopped and lost confidence in the currency. As Mises wrote on this:

“This first stage of the inflationary process may last for many years. While it lasts, the prices of many goods and services are not yet adjusted to the altered money relation. There are still people in the country who have not yet become aw-are of the fact that they are confronted with a price revolution which will finally result in a considerable rise of all prices, although the extent of this rise will not be the same in the various commodities and services. These people still believe that prices one day will drop. Waiting for this day, they restrict their purchases and concomitantly increase their cash holdings. As long as such ideas are still held by public opinion, it is not yet too late for the government to abandon its inflationary policy. But then finally the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against "real" goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them.”

(emphasis added)

Note that we are not saying that this is what will necessarily happen this time. We merely wish to point out that firstly, it is bound to happen if the inflationary policy is not abandoned in time, and we secondly want to stress the point that there can be very large time lags before the effects of an expansion of the money supply become noticeable in the prices of consumer goods. In short, there is currently no proof whatsoever that these effects won't appear.


something good

Ben Bernanke's ideas about monetary policy summarized

(Cartoon by Lewis)


4. Point four is one we have discussed extensively in these pages on many previous occasions. Austrians have never said that money printing cannot “boost the economy”, since obviously, money printing is what causes economic booms. Hence, “economic activity” may well increase statistically when the central bank expands the money supply (note that this is not always the case). What we are saying is something entirely different: namely that money printing cannot possibly increase society's wealth; rather, it tends to achieve the exact opposite. The supply of capital goods cannot be increased by printing money; if it could, Zimbabwe and Venezuela would be rich instead of being economic basket cases. Money printing leads to a false prosperity, as the boom is characterized by malinvestment and consumption of capital. A boom either collapses at some point, or -  if the authorities continue to inflate – the entire underlying currency system will collapse as described above. These are the alternatives – there is no “good outcome”.

5. As to point five, quite a lot of economics nowadays indeed consists of mathematical mumbo-jumbo (mathematics should be banished from economic theorizing in our opinion; it cannot express anything that could not be better expressed verbally. It is merely an attempt to make economics look more “scientific”, but in reality it obfuscates rather than illuminates the topics discussed). As to the idea that many economists are statists, well, what can one say, except: guilty as charged! A free, unhampered market economy would have very little use for the great majority of today's macro-economists. Many of them are directly or indirectly in the government's employ and are paid wages far above their market value. It goes without saying that they will never bite the hand that feeds them.



In fact, with regard to the latter point, Austrians are inter alia clearly set apart from other economic schools in one crucial respect, and that is in their unstinting support of the free market. It matters little if this support is solely based on  utilitarian reasoning or if it is also supported by ethical considerations. Clearly though, Austrians are saying that the market economy cannot possibly be improved by government intervention. Their views are also different from those of establishment-approved “free market supporters” such as Milton Friedman, whom Smith mentions approvingly. Friedman supported free markets, except in the context of central banking and money; for some reason, he considered the free market to be inferior in providing a sound monetary system. Given the absolutely central role interest rates and the money and credit supply play in the market economy, one may be excused for harboring doubts about Mr. Friedman's free market credentials.

Austrian economists are therefore far less likely to find employ in state-supported institutions or to receive research grants from the central bank or similar agencies. One could say that they are actually diminishing their own career prospects in favor of standing up for the truth and their convictions. We can assure readers though that their failure to fall in line with the statism Smith evidently supports is not a sign of alien brain worm infection.

In fact, we are continually surprised by the eagerness with which people like Smith argue that freedom and support of freedom are somehow bad, and that being lorded over by the State is preferable. It is not as if Mr. Smith were a member of the ruling elite (at least we have never heard about him before), so one wonders what he gets out of his statolatry.



Murray Rothbard dispensing sound advice which Mr. Smith should take to heart.


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Sat, 07/05/2014 - 12:50 | 4926677 Newsboy
Newsboy's picture

You neoliberal boys get back to me in 5 years, whydontcha...

Sat, 07/05/2014 - 14:20 | 4926938 Greenskeeper_Carl
Greenskeeper_Carl's picture

The problem is that it's easy for them to just shut people like Peter schiff out. If he isn't invited on TV anymore, and all you get is the usual 'no one could have seen this coming' blather from the usual suspects, most people won't be aware there is another school of thought who have been hammering away at the status quo for many years. The Keynesian nonsense is front and center everywhere, you have to be curious and actually look for places like ZH or mises or lew Rockwell that tell the other side of the story, and most people aren't willing to do that

Sat, 07/05/2014 - 15:05 | 4927041 SofaPapa
SofaPapa's picture

I have repeated this enough times people are probably getting sick of it, but:

Media, Media, Media

To my mind this is not a byproduct of change.  This is where the change has to be.  Until people have exposure to accurate information, nothing else can be accomplished.   

There is this myth that the MSM (including NPR and FOX as the endpoints of the spectrum) is "balanced" news.  Until that myth can be shown for the BS that it is, we are stuck with the power in the hands of those currently wielding it.

Media, Media, Media.

Sat, 07/05/2014 - 16:22 | 4927202 Anusocracy
Anusocracy's picture

"it is impossible to fight an evil which you cannot name."


"While fighting the symptoms, they pretend to fight the root causes of the evil."


This is also true of the apologists who are fully capable of blaming anything but government for the problems government creates. Dozens and dozens of things to blame, but never the cause.

Sat, 07/05/2014 - 18:57 | 4927490 Thomas
Thomas's picture

Here's the good part: Noahpinion is gonna have Noahchance at tenure time. A Gary North article noted that Noahcommonsense's 2011 resume (when he was in grad school) had noahpapers. I did a little sifting and updated his resume for him, which was easy because there were Noahchanges. His colleagues in academia, although embroiled in complex math of questionable (or Noah) merit on occasion, will demand intellectual rigor; Noahclue appears to have none. His bio says he returns to Stony Brook from Japan "occasionally" for his research. Oops. Noah ad hoc committee will give a shit about his cameo appearances. The boy is gonna become a full time blogger (or possibly a Fed governor given his Noahknowledge.) 

For me, the minor heartbreak is that I railed on the editor about the BloombergView and the editor said he would publish a rebuttal. So I did it. Now it sits in the editor's mailbox getting old and Noahttention: noahbody will give a shit about Noahbrain in about 24 hrs. Oh well. At the end of the year I will spill a little ink on him at Zerohedge as I summarize the year's follies, of which this one certainly registers as a hall of fame candidate. Until then, I will sleep tonight Noahing that Noahbrain's days in academia are numbered. (Ya Noahwhat I mean?)

Sat, 07/05/2014 - 21:29 | 4927870 economics9698
economics9698's picture

“Intellectual rigor” lmao.  Sitting around for hours writing up shit and checking the grammar four times.

Sun, 07/06/2014 - 04:03 | 4928436 All Risk No Reward
All Risk No Reward's picture

Media = Money Power propaganda.

They went to court to sue for their unalienable right to lie to the masses under the guise of news...

Unsettling Accounts

Lots of people piled into this lawsuit because they wanted to make sure they won it.

If you tell some semblance of an important truth that really goes to the heart of a Money Power Agenda, you get throttled back or eliminated from the media.

Dylan Ratigan is just example.  Most people learn never to bite the hand that "feeds them" with exorbitant pay before that hand slaps them down.

It really is elementary cost / benefit economics at play.

Nobody hires people to rat them out.

Money is Our God! Tom Simmons Comedy

Debt is not a Choice

How to be a Crook

Renaissance 2.0 Full

The Secret of Oz


Sat, 07/05/2014 - 14:28 | 4926957 Democratic koolaid
Democratic koolaid's picture

The group is wanting/needing things like food, water, wifi connections etc. There is alot of wanting/needing going on in this world with what 25 billion? Things are getting more expensive.


Economists are less lickely to be pro-life? They can perhaps see the picture clearer then another?  But then the provurbial "ow no"  and those same economists are interpreting bad information from inside cooked books. They have been drinking that koolaid.


but it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance." - Murray Rothbard   

     This comment smells of totalitarianism and semantics.

Sat, 07/05/2014 - 18:51 | 4927486 NidStyles
NidStyles's picture

You trolls aren't even entertaining anymore.

Sat, 07/05/2014 - 22:01 | 4927948 Democratic koolaid
Democratic koolaid's picture

I shot the sherrif not the deputy.

fucker out.

Sun, 07/06/2014 - 06:39 | 4928523 Death and Gravity
Death and Gravity's picture

The Austrains can get back to me when they understand that most of the money supply comes from private bank credit, not the central bank.

Sat, 07/05/2014 - 12:54 | 4926691 DOGGONE
DOGGONE's picture

Date rape drugging.

The Public Be Suckered

Sat, 07/05/2014 - 12:55 | 4926698 kchrisc
kchrisc's picture

In a time of universal deceit - telling the truth is a revolutionary act.

George Orwell

Sun, 07/06/2014 - 04:15 | 4928439 All Risk No Reward
All Risk No Reward's picture

The Austrians need to take a step back to understand the fraudulent nature of debt based money AND EXPLAIN TO THE CLUELESS MASSES, WHICH INCLUDES FAR TOO MANY LIBERTARIANS.

Debt Money Tyranny

It isn't that a policy here or there is wrong, THE WHOLE STINKIN' SYSTEM IS A PRIMA FACIE FRAUD!

Ron Paul embarrasses himself when he acts as thought the criminals running the fraud are somehow innocent of their crimes.

Perhaps he doesn't understand the criminality that underlies Debt Money Tyranny...  which would underline my original point.

I'd hate to think of the top "Mises elite" as controlled opposition for the Rockefeller interests that funded Mises' move to America and his schooling institution.

Was Mises Bankrolled by the Financial Elite?

Actually, an obvious interpretation is that the Rockefeller interests valued their ability to spin the "let privat ebusiness (dominmated by the Rockefeller interests) rule the world, not government (also dominated by the government)."

In that sense, they would view libertarianism as controlled opposition... or managed opposition.  This isn't to say that they wanted to promote him, but it is to say that they didn't want someone in Mises' place posting charts proving that the very foundation of the monetary system is a prima fascie criminal enterprise fraudulent scheme to do great damage to the average person...  and their historian admits as much in Tragedy and Hope.

Debt Money Tyranny

The Money Power Seeks to Create a World System of Financial

Control in Private Hands Able to Dominate Every Nation on Earth

     In addition to these pragmatic goals, the powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank, in the hands of men like Montagu Norman of the Bank of England, Benjamin Strong of the New York Federal Reserve Bank, Charles Rist of the Bank of France, and Hjalmar Schacht of the Reichsbank, sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world.

Read that as many times as you need to in order to understand it.

Also, pretending like the Fed Chairman is some kind of "shot caller" instead of a kept puppet minion is also pretty out of touch with reality...

Norman and Strong Were Mere Agents of the Powerful Bankers

Who Remained Behind the Scenes and Operated in Secret

     It must not be felt that these heads of the world's chief central banks were themselves substantive powers in world finance. They were not. Rather, they were the technicians and agents of the dominant investment bankers of their own countries, who had raised them up and were perfectly capable of throwing them down. The substantive financial powers of the world were in the hands of these investment bankers (also called "international" or "merchant" bankers) who remained largely behind the scenes in their own unincorporated private banks. These formed a system of international cooperation and national dominance which was more private, more powerful, and more secret than that of their agents in the central banks. This dominance of investment bankers was based on their control over the flows of credit and investment funds in their own countries and throughout the world. They could dominate the financial and industrial systems of their own countries by their influence over the flow of current funds through bank loans, the discount rate, and the re-discounting of commercial debts; they could dominate governments by their control over current government loans and the play of the international exchanges. Almost all of this power was exercised by the personal influence and prestige of men who had demonstrated their ability in the past to bring off successful financial coupe, to keep their word, to remain cool in a crisis, and to share their winning opportunities with their associates. In this system the Rothschilds had been preeminent during much of the nineteenth century, but, at the end of that century, they were being replaced by J. P. Morgan whose central office was in New York, although it was always operated as if it were in London (where it had, indeed, originated as George Peabody and Company in 1838).

Sat, 07/05/2014 - 12:56 | 4926704 Flakmeister
Flakmeister's picture

Tyler throwing out a little red meat for a holiday weekend for the denizens of the Hedge...

Just remember, there ain't no ism or school of economics that is going to fix this mess....

Sat, 07/05/2014 - 13:06 | 4926725 SilverIsMoney
SilverIsMoney's picture

If what you're implying is the entire thing has to be leveled first then fine but after it's been leveled we're going to need an idea of how to rebuild it. That's when people need to drive towards the Austrian school's belief on markets and money.

Sat, 07/05/2014 - 13:53 | 4926847 FreedomGuy
FreedomGuy's picture

Silver, I think you hit the nail on the head. What would come after a meltdown? Were there any meaninful reforms after the Great Depression? No. In fact, there were things instituted which arguably made it worse.

After a meltdown who and what is likely to come to power? Statistically it is a 90% chance that people will vote the "strong man" into power and give him more power and authority because he will assert that he can fix the problems. It is a 1% chance this person will be an Austrian School fan. It is the weakness of a pluralistic society where government power is essentially unlimited.

However, the levelling is going to occur at some point and it will most definitely be a worldwide phenomenon. The question is when it will occur and what will spark it. I doubt we know the answer.

Sat, 07/05/2014 - 15:10 | 4927050 TeethVillage88s
TeethVillage88s's picture

Yes, no guarantee that there will be a full reform, or a rebuilding of government & banking.

More likely, the Narrative will be spun as a narrow problem and which they have a narrow solution that wastes more money and puts more people on welfare.

But there are different levels of collapse as you know. Could be just devaluation of the US Dollar which hits us hard since we import so much. Can't see Congress doing anything unless they are forced to. Eventually you might see this become what Jim Rickards and Jim Willie are talking about with 2nd currency, SDR, or new world currency.

Here is a scary video on Collapse of Complexity you might have seen

And I think the fix will look like the collapse of 2008, the members in congress at the time end up working it with the current president and they are all HOODWINKED By the big bankers who have infiltrated US Government.

So, like the Illegal immigration going on now, change the narrative to something narrow, then provide a narrow solution to avoid a full Reform of Government & Banking.

Americans (US) don't like Reforms since there is a lot of cloudy history.

In 1929-1944 we had lots of problems. And farmers had problems with money way back in 1800s as banks didn't like the Silver certificates and money was focused on cities (lending)

But you still had civil rights problems, worker rights problems, and banks that didn't lend, and factories that paid very little. Farm, work in the factory, or work in the city.

Balkanization is talked about. And maybe if debt is too big it should be broken down into regions or states with more power over their loan creation (not from big banks), and their own taxes and their own jobs.

Guys that want to work in the city with the inflation, taxes, and those kinds of jobs are culturally different.

Guys that are conservative Mid-Westerners, Westerners, or Southerner are different.

Southern California is different.

Steady State Economy is an option. Zones. Regions. States. Why does our money have to come from the Fed & Big banks with big interest rates. Be responsible for your Zone's Exponential Debt rather than Washington DCs big handouts and Feds currency pumping. Seems like a conservative Idea, but you have to agree to limited funding for Military and Empire.

Sat, 07/05/2014 - 13:11 | 4926739 smacker
smacker's picture

Maybe not.

But my bountiful supply of rope-ism and piano.wire-ism should go some way to help solve the problem :-)

Sat, 07/05/2014 - 13:12 | 4926740 nmewn
nmewn's picture

Oh I don't know, perhaps we have a clue as to a rabid troll identity.

One Noah Smith, appearing here as Top Gear ;-)

Sat, 07/05/2014 - 13:20 | 4926757 SilverIsMoney
SilverIsMoney's picture

Top Gear is clearly a algo poster. No way is he real.

Sat, 07/05/2014 - 13:26 | 4926778 nmewn
nmewn's picture

A lot of people seemed to think so, I'm just not one of them.

He wanted to "be my friend" toward the last of our exchanges...bots don't have emotions ;-)

Sat, 07/05/2014 - 13:44 | 4926819 Skateboarder
Skateboarder's picture

[    0.000000] program TopGear loaded.
[    0.000001] running emotion module.
[    0.000002] running friend submodule.
[    0.000006] requesting friendship to enemy combatant nmewn
[    0.000008] waiting for response. meanwhile, trolling other threads.

Sat, 07/05/2014 - 13:55 | 4926849 nmewn
nmewn's picture response was...and I quote: "Sure, Il bacio della morte."

Maybe he got tied up on other threads, he never responded to me ;-)

Sat, 07/05/2014 - 14:07 | 4926895 Greenskeeper_Carl
Greenskeeper_Carl's picture

Don't give up just yet, it's a pretty fresh article, maybe he will show. My first thought when I read the title and started on the article was that this is sure to bring out some of those 'clueless trolls' the author mentions. In sure 'international Jew' will make an appearance as well. These kinds of articles or ones that mention Sarah palin or mark levin or their ilk always bring em out of the woodwork.

Sat, 07/05/2014 - 15:35 | 4927104 mkhs
mkhs's picture

No, 'international Jew' bought the farm yesterday.

Sat, 07/05/2014 - 13:32 | 4926792 Escrava Isaura
Escrava Isaura's picture

Ohh Boy!!!

Let me show you somebody that has a clue: disabledvet” – Last Wednesday:

Top shelf. What has always been interesting to me since I was a student in Taiwan studying Mandarin of all things (they speak Taiwanese in Taiwan...not Mandarin) was the truly stupendous amount of capital flowing from the USA to East Asia in general and ultimately China in particular.

The profits from this "Great Downsizing" were truly stupendous...starting in the 80's...and right on through even to today. One need look no further than the successful monetization of the entire US auto industry since 2008 to the present day and the latest iteration of "liar loans."

In a term "you don't just create bubbles like this" (and no, nothing like this exists in Europe or Britain.). This type of competition entering onto the world stage has had a massive and material impact on both "real" capital (plant and equipment) and financial capital (money from the USA to the Far East.) this made Wall Street in the 90's the most liquid asset class probably in human history...and this spilled over into the "ultimate in liar loans" namely securitized debt in he form of MBS, second lien mortages and credit receivable. These "Triple Towers" at their peak in 2007 EACH reached to one TRILLION in market size...backed by ABSOLUTELY NOTHING...not even an OWNERSHIP STAKE in the underlying asset!!!

That's the basis of the book "Chimerica" and it is indeed a must read as it's creation (I was studying international affairs in Washington DC from 1991-1993 when, after the US had simply annihilated Saddam Hussein's Army and then watched as Soviet Russia collapsed "hatched the scheme."

It was a REALLY devious and TRULY diabolical plan...but while it worked it paid...well, for pretty much everything.

Since the collapse of 2008 (and lest we forget Japan saved Morgan Stanley...not the Federal Government) simply put "THE DEAL IS OFF!"

Everyone is trying to put Humpty Dumpty back on the wall...and simply put "that ain't happening." So while everything said here is spot on...both sides are still trying to recreate "the monster" that the elites in DC hatched in the 90's. It's just not gonna work because the dollar is phucking SHIT PAPER and the largesse our hapless greenback has to support (25 NUCLEAR AIRCRAFT CARRIERS ALONE!) really is "putting theory itself to the test.

In short....assets...AND THE TAX BASE TO SUPPORT THESE INFLATED ASSETS...still have to be created here. Unless and until that matter how many billions "Hitlery" blows on her "zio/nazi bitchface brigade" We the People are still confronted with the terrifying specter of a HUGE blow up in the muni market.

The obligations alone are in the trillions...let alone the maintenance costs.

Simply put "this isn't going to work." Americans are flat broke, debt servicing costs are absolutely stupendous...and the only Hitlery and Co are asking for here is "to push that thing into total oblivion."

They're rich already. They're not gonna even bother showing up in Detroit trying to figure out a solution.

So the dollar is is flooding into the USA to buy up an enormity and physical assets at fire sale prices...and the folks who are can be assured of one thing...that dollar will be sucking wind for at least a decade or more...if not forever.

My personal view is the China is simply gonna crack into various factions and start "armoring up" as the fraud of twin "real estate ponzis" (Vhina and the USA) come home to roost.

Simply put "there is no demand left." Even a modest price decline in the USA (oil to fifty bucks) would have devastating consequences to the "debt monster" created as a result of 2008. This has in fact already happened...we'll see if Puerto Rico (of all places) is the harbinger of "the Great Reset of 2014" as confidence in those incapable of monetizing is shattered sending the whole "order" spinning out of control.

I think the PTB's have pushed the absolute limit of "automobile as pay for everything" to do absolute limit...and beyond.

Sat, 07/05/2014 - 16:31 | 4927220 Anusocracy
Anusocracy's picture

So in your opinion, the problem is?

Sat, 07/05/2014 - 13:04 | 4926721 SilverIsMoney
SilverIsMoney's picture

What an idiot... Everything that's been happening since the US markets closed July 3rd have been marking a sea change.

This is indeed a peak stupidity moment...

Sat, 07/05/2014 - 13:11 | 4926738 Jabotinsky_USA
Jabotinsky_USA's picture

About time something is written about Mises and others being Jewish.  

Sat, 07/05/2014 - 13:13 | 4926743 smacker
smacker's picture

What would you like to say about them??

Sat, 07/05/2014 - 13:22 | 4926762 Tulpa
Tulpa's picture

It might cause some of our Jew-baiting fellow commenters' heads to explode.

Sat, 07/05/2014 - 13:38 | 4926806 nmewn
nmewn's picture


And Keynes being a socialist ;-)

Sat, 07/05/2014 - 20:31 | 4927693 MontgomeryScott
MontgomeryScott's picture

This article (and the comments thread) is definetely entertaining.

I see that you are referring to 'socialism' and 'Keynes' in one sentence (undoubtedly and absolutely true).

I decided to find out who this punk 'Noah Smith' is, and find out his background. A few clicks later, and, VIOLA!

NOW, I KNOW that Detroit is about 20 miles from Ann Arbor, where the U. of M. is located; and that The Atlantic is quite a 'left-leaning' publication, and I have NO IDEA what 'Stonybrook University' is (I've heard of it, and it seems that there are a lot of 'socialist tendencies' there, but that's all).

The kid's all of 26, and he already has the beginnings of a 'double chin', and he looks soft and probably fat and unfit (in terms of being what a MAN should be). He's writing an op-ed piece in BLOOMBERG (yes, BLOOMBERG; that bans soda and guns and tells the police to beat people and films everyone in that city with CCTV).

It's a damned shame. Ann Arbor was such a nice town, and the U. of M. used to be quite good academically (but that was back when cars were made of steel and men were made of iron, and people could sit on their porches and light fireworks and leave their doors and cars unlocked).

Post Script:

Those frackers at Stonybrook 'University' are in the middle of murdering the English language. They introduce this person by stating his 'Specialization' as 'economics'. What the fuck is THAT? Is that like an 'intellectual' version of 'SPECIALTY' (but with some 'secret' meaning)?


Sat, 07/05/2014 - 13:42 | 4926815 Tulpa
Tulpa's picture

Smith does actually mention this, though in a very doublethink way.

"Austrianism’s antiSemitic overtones are conveniently papered over by the fact that two of its founding figures (von Mises and Murray Rothbard) were Jewish."

Sat, 07/05/2014 - 17:29 | 4927319 NidStyles
NidStyles's picture

How anyone pulls anti-semitism from NAP I will never understand. You idiots certainly like to reach though.

Sat, 07/05/2014 - 13:19 | 4926754 Tulpa
Tulpa's picture

Gandhi was an emptyheaded turd who was very fortunate to have a relatively benevolent world power as his enemy.  It would have been funny to see how well his passive resistance strategy would have worked in contemporary Kazakhstan or Tibet against real oppressors.

The fact is, most people who are ignored, ridiculed, or fought wind up losing.  So you have to be smart about what you do.

Sat, 07/05/2014 - 13:38 | 4926807 Skateboarder
Skateboarder's picture

Different age, different people. Can't compare it to the stewing shitfest that is today.

Sat, 07/05/2014 - 13:23 | 4926766 world_debt_slave
world_debt_slave's picture

big government doesn't want to be challenged

Sat, 07/05/2014 - 13:24 | 4926771 Oldrepublic
Oldrepublic's picture

First they ignore you, then they ridicule you, then they fight you, and then you win.”  Mahatma Gandhi

Gandhi was very lucky to have done his protesting in the 1930s, today the Americans would have declared Gandhi  a terrorist and droned him!

Sat, 07/05/2014 - 13:45 | 4926826 Polymarkos
Polymarkos's picture

Ghandi was a nutter. And his tactics rely upon a free press that will generate public sentiment in his favor.


Take that away, and how far would he have gone? Imagine were he under Hitler in Germany, instead of under the Raj in India?

Sat, 07/05/2014 - 15:07 | 4927046 SumTing Wong
SumTing Wong's picture

Did Bonhoeffer "win"? He lived under Hitler...and died under Hitler, too.

Sat, 07/05/2014 - 16:36 | 4927225 Anusocracy
Anusocracy's picture

He also had a clearly defined and large ingroup and a clearly defined and small outgroup to deal with.

Sat, 07/05/2014 - 19:36 | 4927571 tolivian
tolivian's picture

When I first glanced at your comment I read ". .. declared Gandhi a tourist and droned him." 

That seemed to be a bit harsh on tourists, then came to my senses. They don't even

arest them if they're coming from the South of the border!

Sat, 07/05/2014 - 15:10 | 4926776 ToNYC
ToNYC's picture

Bloomberg asks you to assume the position on the Upper East Side; Murdoch prefers the Upper West Side, please be bending at the waist while absorbing their minion's massages.

Sat, 07/05/2014 - 13:44 | 4926820 Polymarkos
Polymarkos's picture

I tend to view all economists as moder analogs of the medieval alchemists....always promising to turn lead to gold, lots of gee whizzery and chicanery and fraud, and not much solid progress. But the Austrians ARE much closer to being chemists than alchemists.

Sat, 07/05/2014 - 13:56 | 4926852 FreedomGuy
FreedomGuy's picture

I call it about the same thing. What I think sets the Austrians apart is that they essentially say that you cannot turn lead into gold and stop trying. They Keynesians and others who advocate intervention are the opposit.

Sat, 07/05/2014 - 18:10 | 4927392 Vendetta
Vendetta's picture

agree.  By decreeing awards such as phds's and nobel prizes and various other accolades the overlords of monetary fraud confuse people as to the legitimacy of mainstream and 'highly regarded' economists.

Just the fact that William Black has NOT been asked to head any federal justice task force to investigate and prosecute, where warranted, financial fraud is testimony the system is a travesty of justice.  in my humble opinion of course.

Sat, 07/05/2014 - 13:44 | 4926822 PeeramidIdeologies
PeeramidIdeologies's picture


Where does one begin with the systemic levelling of anything posted at Bloomberg? lol I often stop by there to check up on the "message" but have found over time almost everything posted there isn't worth the download. I do recall not so long ago, I wanted to post a BB article here that succinctly demonstrated the sheer hypocrisy of the global elitist agenda. Much to my surprise I found the article completely rewritten from the day before, the damning details omitted.
I like to think of myself as considerate person, not one to jump on bandwagons, but to find my own path through this maze. Articles and actions like those displayed at BB show the indignant attitude towards the general population, and is one of the many reasons I will never be able to trust the establishment. They truly believe the people can be brow beaten into intellectual submission. Despicable, and a sure sign of a failing foundation.
I enjoyed this article very much Tyler's. Thank you.

Sat, 07/05/2014 - 13:48 | 4926831 withglee
withglee's picture

Would a believer in Austian economics please confirm that this is one of their axioms: Money (they like to call it "sound" money as opposed to "fiat" money) must be backed by something of the exact value it represents and redeemable in same (ideally gold) on demand without exception.

Assuming this is confirmed: How do you back money with gold when there is only one ounce per person on earth and it takes about an ounce in equivalent resourses to create a new ounce?

Sat, 07/05/2014 - 14:16 | 4926859 honestann
honestann's picture



This is CRUCIAL.  Always distinguish "money" from "currency".

When you buy some good with money, you have engaged in a special case of barter.  You understand barter, correct?  In barter, I give you some goods that have real value to you, and you give me some goods that have real value to me.

NO subsequent actions are involved or required, and NO indirection.  You DO NOT get a piece of paper that you need to go elsewhere and hope to be able to convert into something valuable, YOU GET THE VALUE YOU TRADED FOR.

Even when a [paper] curreny exists that is supposedly 100% backed by some real good (like gold or silver), THAT IS NOT MONEY.  That is a piece of paper.  That is currency.  Your transaction is not complete.

A transaction with money is OVER, DONE, FINISHED the instant you exchange goods (one good being a material very common for trades, and thereby commonly designated as "money").

I hope this clarifies what money is.


PS:  It does not matter how much gold exists.  That is irrelevant for many reasons.  The first reason being... you can divide gold into very tiny pieces (even coat it onto a piece of paper if you really want to get extreme about this).  But also, note that silver is perfectly good "money" for smaller transactions.

Also note that when we say "gold == money", we don't mean "nothing else can be money".  Absolutely NOT.  Just as "silver == money" can co-exist with "gold == money", any number of other real, physical goods that humans value can be "money".

Remember, "money" just means "any real, physical valuable good that becomes common in barter transactions".  Any number of real, physical, valuable goods can be money simultaneously.

So if you want to really, really, really stretch the question you're asking to some impossible limit, that doesn't create a problem.  The value of gold in your imagined case would become so high that at the very least silver would also be considered money.  As might a number of other metals.

However, if there is one form of money that is extremely dominant, life is easier and more convenient.  Why?  Because then you only need to "price" the goods you buy and sell in terms of one other good... namely gold (or whatever good is your "money").

If you have several goods that function as money, you might need to perform a simple calculation to figure the price in terms of silver or platinum or palladium or rhodium or whatever good is the alternate money... if and when you run into a situation where the buyer or seller wants to trade something other than the primary "money" (which historically is gold for very good reasons).

Sat, 07/05/2014 - 14:16 | 4926922 FreedomGuy
FreedomGuy's picture

I started a debate in my economics group with a similar idea. I posited that "Money in essence is a receipt for work." Currencies are simply yardsticks or ways to quantify the value.

The point is that at the core of it I trade x number of gallons/pounds/dollars/yards (pick any measurement) of my work for the same amount of your work. Now an hour of a doctor's work will produce more value than an hour of a barista's work but the trades are always even. It may cost the doctor two minutes of his work to buy the barista's coffee and conversely it may cost the barista a full day's work to see the doctor for a 15 minute appointment but the value trade is equal. I would also add the element of honor and private contract in the transaction, as well. We agree between ourselves without coercion what the trade will be.

The shenanigans begin when government starts to play games with the currency and even valuations of the exchanges. Inflation is essentially publishing paper receipts (FRN's) for work that has not occured but trading them for your labor. It is in fact, deception and theft and therefore immoral.

Sat, 07/05/2014 - 14:29 | 4926959 honestann
honestann's picture

I understand the logic, but resist any attempt to make the issue more complicated or indirect or vague than it really is.  Every time any complication or indirection or vague aspect intrudes, opportunity for nefarious dealings multiply.

Plus, I tend to assume that my formulation is what happened historically.  Some "good" that a great many people in some population values becomes the common item traded in barter.  This would naturally happen as every individual recognized what items were considered acceptable by "almost everyone" in their community, plus were small enough to carry around in their pockets or pouch, and did not degrade (so they could accumulate over a long period of time to get enough to trade for something expensive), and so forth.

And gold fit that bill perfectly, since it never degrades even in horrible conditions (including even long periods in salt water), plus it was just so extremely fascinating and beautiful in its own right (which is why people love to adorn themselves with gold).

What you're talking about certainly is logical and make sense, but... I wouldn't call that money.  I might call that currency... but I'd have to think about how to formalize the whole scheme.

I forgot to say in my message that real money must be measured in grams of "the material chosen to be money", not with some fictitious term like "dollar" or "peso"... even if there is a supposedly "fixed" relationship (like 1oz gold == $20 dollars).  The reason should be clear... some authoritarian scumbag thief will just mandate a new and different "fixed relationship"... thereby stealing enormous quantities of wealth from millions or billions of people.  Gotta keep everything real, otherwise the predators-that-be WILL steal you blind... every time without fail (only a question of when, not if).

Sat, 07/05/2014 - 14:56 | 4927019 FreedomGuy
FreedomGuy's picture

I do not disagree with PM's being currency. They have an elegant simplicity that has not been paralleled by printed currency. You could parachute me into most any country on earth and without even being able to speak the language I could flash a gold coin and trade could begin. It does not matter if an eagle, panda or human face is stamped on it. It also makes impossible the currency manipulation schemes where China fixes the trade at 6 or 8 or whatever RMB they like per dollar. No one will give you six ounces of gold for your ounce of gold. What will happen is that an ounce of gold will buy more stuff in China than the USA which is a proper trade.

If you pulled up a sunken ship from the Civil War and it had both currency and gold which one would still hold value today? Yep, gold and it would have kept up with government inflation.

PM's are not without their own difficulties like the intrinsic value of the metal and ability to carry it, but they are easily understood. And you nail it. FDR inflated the currency from $20/ounce to $35/ounce and then proceeded to confiscate all gold at the old price. It was theft...but of course for our own good.

Sat, 07/05/2014 - 14:58 | 4927024 FreedomGuy
FreedomGuy's picture

I forgot to add that even though I do not object to PM's my theory of "Money as a receipt for labor" asked the deeper question of why we are even using PM's, clam shells or anything to trade. It is because we need to value and trade our labor. PM's have intrinsic value which makes them a good hedge and storer of value but the reason is our need to account for the value of our work and products.

Sat, 07/05/2014 - 15:28 | 4927087 Pheonyte
Pheonyte's picture

I know I'm going to get mega-junked for this, but so be it ...

Gold doesn't have intrinsic value. Something has intrinsic value when it has value apart from anything that may be obtained from it (apart, that is, from whatever instrumental value it may have). The way to determine whether something has intrinsic value is to use G.E. Moore's "isolation test": imagine a possible world in which the only thing that exists is the thing in question. Is the state of affairs of that thing existing good? If yes, then that thing has intrinsic value. For example, a pencil has no intrinsic value, because the state of affairs of a pencil existing all by itself, without anything else in existence, has no value whatsoever. On the other hand, consider the state of affairs of a person experiencing happiness or contentment. Imagine a possible world in which the only thing in existence is that person experiencing happiness for a certain duration. Is that state of affairs good? I think the answer is pretty obviously 'yes', which is why those people who think there is such a thing as intrinsic value would consider happiness to be a prime candidate for something that has it.

So, put gold to the isolation test: consider a possible world in which the only thing that exists is a gold bar. Is that state of affairs good? No, it has no value whatsoever. So gold does not have intrinsic value.

However, I do think that gold is supremely suited to serve as money, for all the reasons that Austrian economists will give. But that's only to say that it has extrinsic or instrumental value: it's value is that it is better suited than most anything else to serve as money. That's what it provides, and when the value of something is in what it provides (what it "gets" you), then you're talking about extrinsic value.

Sat, 07/05/2014 - 16:53 | 4927255 Anusocracy
Anusocracy's picture

Moore's "isolation test" is silly and vague.


Sat, 07/05/2014 - 17:28 | 4927316 Pheonyte
Pheonyte's picture

Then use another test. Ask yourself the question: "Why do I want X?" If the answer is, "Because it's X," then X has intrinsic value. If the answer is "Because X gets me Y," then X has extrinsic value.

So, ask yourself, "Why do I want to be happy?" I think your answer will be, "Well, I just want to be happy, no other reason." I.e., happiness has intrinsic value.

Now ask yourself, "Why do I want gold?" Is your answer, "Because it's gold, no other reason"? I doubt it. You want it because it's a store of wealth, a universally accepted medium of exchange, a hedge against currency inflation, etc. I.e., you want it for what it gets you; for its extrinsic value

Sat, 07/05/2014 - 17:12 | 4927286 SofaPapa
SofaPapa's picture

I give you +1 for digging very deeply into the concept of utility, but...

I think you've gone one step too far.  By defining a world of "only one thing", you've gone beyond the analysis of the real world and into abstraction.  Given that in the real world, there are both the means for survival (in the end what we are tied to as the most basic units of value: food, shelter, social stimulation), and various representations for those means (money, credit, currency), it is more useful to examine which system within this real world has the best track record.  And within the historical record of our real world, we human monkeys are seemingly universally fascinated with precious metals.  People consistently trade for them, in their own right.  People arguing against the use of metals say there is no reason for this fascination.  That is true.  But often, it is not important to know why something is true; it is true regardless of reason.  We are an emotional animal.  That is a fact.  No more analysis needed.  People love metals for themselves, and as such, that emotional attachment "creates" the value.  There are not many objects that share the combination of that emotional attachment and the limited supply in the way the precious metals do.

Let's not overthink this.

Sat, 07/05/2014 - 17:36 | 4927330 Pheonyte
Pheonyte's picture

I agree with almost everything you wrote except this:

"People love metals for themselves."

That's just not true. Nobody wants metals for themselves. Even if they want them for no other reason than that they're shiny and beautiful, then it's the aesthetic pleasure they derive from the metals' shine and beauty that they want for itself, and the metals are a means to that end. It's still extrinsic value.

To be clear, I'm not arguing that gold and silver aren't ideally suited to function as money. I wouldn't have put a significant portion of my savings into them if I believed that (too bad I lost it all in an unfortunate boating accident). I'm simply arguing that it's a mistake to say they have intrinsic value. I could have simplified the argument to this: 1. Gold = money. 2. Money has only extrinsic value (you want money because of what it gets you). 3. Therefore, gold has only extrinsic value.

Sun, 07/06/2014 - 05:15 | 4928458 honestann
honestann's picture

I don't know who thought up those crazy ideas, but you'll need to abandon them to understand anything about this issue.

First, note what "value" is and what "value" means.  You can't have "value" without a "valuer".  A fly may value a piece of crap highly.  A few men (gardeners) might value a piece of crap slightly as fertilizer.  But most men purposely discard crap because it stinks, and has little or no or negative value to them.

In other words, you can't have value without a valuer (which means a human in this context).  For anything to have value, it must also have utility.

And gold certainly has utility.

For one thing, gold is highly conductive, almost as conductive as silver.  But unlike silver, gold does not corrode.  Which is why the wires that connect integrated circuit die to pins or pads on electronic packages (ICs) are usually solid gold.  That is utility.  Also the card edge connectors on PCBs (printed circuit boards) are typically gold, for the exact same reasons.  And in my case (and also many other people), I chose to have all the traces on my PCBs coated with gold to assure tarnish will never occur.  I have specified gold coatings on mirrors in optical systems I have designed to optimize reflectivity over certain wavelength ranges.

But these are purely technical values.  To adorn oneself with gold doesn't turn me on (meaning gold isn't much of a value to me for that purpose), most females, and a fair number of males value gold highly for personal decoration.  That is perfectly legitimate utility, even though it doesn't turn me on (though I still do consider gold to "look pretty").

One way to look at this issue is to say that every material has certain properties (electric conductivity, thermal conductivity, thermal expansion coefficient, rigidity, malleability, reflectivity [over various wavelength ranges], absorption and dozens of other characteristics).  A high or low value of any of these can be valuable (and utilitarian) in certain applications.  And often a certain combination of characteristics are desirable for specific applications.

These are ALL examples of utility and value.

Sun, 07/06/2014 - 04:58 | 4928468 honestann
honestann's picture

I don't deny that "labor" can be valuable to you in some cases, for example when someone gives you a fantastic massage, or a great haircut.

However, you seem to want to focus entirely on services (labor), and pretend that the endless physical objects we buy and accumulate have no value to us.  Nothing could be further from the truth.  The fact is, humans tend to value real physical goods more (and more often) than labor (services).  And in fact, many services simply serve to improve physical goods (your body or your car), or keep them in good condition (wax your car).  The value of that service is... the continued utility of your car, not the labor expended to smear the wax on your car.

Sat, 07/05/2014 - 16:01 | 4927159 withglee
withglee's picture

If you pulled up a sunken ship from the Civil War and it had both currency and gold which one would still hold value today? Yep, gold and it would have kept up with government inflation.

With a properly managed medium of exchange, INFLATION is guaranteed to be zero all the time everywhere. Thus, the currency would be valued exactly as when the traders created it.

The key is "proper management of the medium of exchange". And this is simple and transparent: Record and certifiy trading promises; extinguish the certificates on delivery; recover DEFAULTs with like INTEREST collections. This assures INFLATION is zero all the time everywhere by the relation: INFLATION = DEFAULT - INTEREST.

It's not rocket science. It's just plain and simple "obvious".

There is no "government inflation" in a properly managed MOE (and there is no necessity for the MOE to be managed by government ... or for only one MOE to exist ... any more than there is a requirement that a government run an insurance operation and that only one insurance operation can exist.

Anyone who properly manages a MOE (i.e. guarantees and delivers INFLATION at zero all the time everywhere ... and the MOE is in free supply) is doing as well as can be done.

Sat, 07/05/2014 - 15:46 | 4927133 withglee
withglee's picture

What you're talking about certainly is logical and make sense, but... I wouldn't call that money.  I might call that currency... but I'd have to think about how to formalize the whole scheme.

It's obvous. Money is "a promise to complete a trade". It is created (and valued ... priced) by traders themselves. It is extinguished when the trader delivers on his promise and returns the money (certified in a form of paper or numbers in a register). It has nothing to do with how people generally relate it to things. The only thing that matters is how two traders related it to that which they are exchanging. It is backed by the marketplace as a whole. The marketplace is protected by monitoring DEFAULTs and collecting a like amount of INTEREST such that INFLATION is zero at all times everywhere by the relation: INFLATION = DEFAULT - INTEREST. 

What could be simpler or more obvious? And regardless of how it has been manipulated and mismanaged over the eons, money is, always has been, and always bill be "a promise to complete a trade"; is created by traders; is extinguished on delivery; and exists to make trading efficient and possible over time and space.

Sat, 07/05/2014 - 16:29 | 4927214 honestann
honestann's picture


Look, go ahead and make up some other name if you want, but don't try to destroy the most important concept possible in the context of trade.


When you have a transaction with MONEY, the transaction is complete.  Both sides have the value they traded for.  No promise to do something later is involved.


Now, all you people who want to create complex interactions full of risk and opportunity for disaster... go right ahead.

However, DO NOT attempt to eliminate the simple, honest, complete transaction that takes place when MONEY (a valuable good) is exchanged for other valuable goods.

You may just be misguided, but most people who attempt nonsense like you are trying are PURPOSELY trying to eliminate the possibility of simple, honest, complete transactions.

Why are you so anxious to NOT pay for what you receive?

What you are talking about is SOMETHING ELSE.  And indeed, individuals can create ANY kind of terms they want for fancy transactions.


Why is doing that so important to you?

You ask, "what could be simpler?".  EVERYTHING I STATED WAS SIMPLER.

What can possibly be simpler than exchange one good for another?

What you describe is both less simple, and FULL of opportunities for disaster and corruption.  Why do you want to create and promote opportunities for disaster and corruption?  Either you are just misguided, or you are someone who wants to take advantage of others by PROMISING something... that you do not deliver, or is not what you promised.  Give me a hamburger today and I'll do something for you next Tuesday.  Maybe.  Or maybe not.




If you are not intentionally being corrupt, ask yourself this.  Why do you so vehemently resist exchanging value for value?  Why are you so intent upon paying promises for goods.  Or stated in reverse, why would you rather receive a PROMISE in exchange for your goods than VALUABLE GOODS?  Makes no sense, and is asking for nothing but trouble.  For validation of my view, look at the history of mankind.

Sat, 07/05/2014 - 17:18 | 4927251 withglee
withglee's picture


When you have a transaction with MONEY, the transaction is complete.  Both sides have the value they traded for.  No promise to do something later is involved.

Wrong wrong wrong wrong wrong. When you buy a candy bar with money you are barting a coin or a piece of paper for the candy. You have negotiated; promised to deliver; and delivered all in one step. Plain simple barter (and the money is an item of barter). The money is "not" created in that trade.

But, when you buy a house with 100 monthly installments, you create money in the form of a promise to complete the trade in 100 separate payments. The seller doesn't want 100 payments ... he wants full payment here and now. So you "create" money by getting your promise recorded and "certified". You deliver the certificates to the seller. He happily accepts them knowing they will barter for things he needs and wants ... and will hold their value. The seller has completed his trade. You, the buyer have not.

You the buyer still have to deliver on your promise. Each month you return 1% of the certificates you had created and they are extinguished. At the end of 100 months, you have finally completed your promise and all the certificates have been extinguished. In the meantime, the money you created circulates as objects of simple barter.

And thoughout this period the marketplace has the exact right amount of exchange media. It's the nature of a trade.

It's all very very very simple.

As I read your full comments you are clearly in a rut. You are not thinking. You are regurgitating. You have been taught wrong. History has forever handled money wrong. But one thing is certain. Even under improper management, money is a promise to complete a trade. And it is created by traders. The fact that the government creates money with no intention of ever delivering on their trading promise does not change that.

One thing is glaringly absent in "your" simple explanation. Where did "your" money come from?

I ask you this question: How is this money you are talking about created? I am very clear on how real money is created. I see nothing in your comments or anything you have written so far that tells me where your money originates ... and by whom ... and by what mechanism. And remember, I'm not talking about items of barter like gold, sea shells or bartered certificates (money created by other traders for delivery over time and space but used in barter in the mean time).

Or maybe you are just naive:
Give me a hamburger today and I'll do something for you next Tuesday.  Maybe.  Or maybe not.

Anyone who has worked for a wage ... which is almost all of us, gives our employer labor against his promise to give us money on payday.

Sat, 07/05/2014 - 17:58 | 4927366 FreedomGuy
FreedomGuy's picture

 ?The fact that the government creates money with no intention of ever delivering on their trading promise does not change that.?

My favorite line in your post. This is the essence of inflation and it is why inflation, purposeful inflation is theft. Frankly, all government currenice are actually a "Maybe I wlil. Maybe I won't" pay proposition. Ask anyone who uses S. American currencies. Even the U.S. dollar is the same but the world is betting that we are in the higher probability of payment category so we get a premium rating.

A Federal Reserve Note is essentially the U.S.government's ability to shake down it's citizens for payment. The annual deficits are the difference between what we can shake down the citizenry for and what the government actually wants to spend. Over time they are supposed to balance but I doubt that is ever going to happen again, at least not on purpose.

Sat, 07/05/2014 - 19:56 | 4927630 withglee
withglee's picture

You are right!

Number one: Know that the government is just another trader ... and the worst deadbeat in the marketplace.

Number two: Don't give the government ... the most dishonorable trader ... freedom to counterfeit.

Number three: When you go to educate the masses, have an alternative that is right when you show the people that the government "is" the problem.

I have described the obvious right way to manage any medium of exchange.

If you disagree with it, and I assume you do as does this deluge of Mises monkery we have here, what is your alternative?

How is money created? How is it properly managed? What is the right amount of interest collection and who pays it? What is the right amount of inflation?

Sun, 07/06/2014 - 04:32 | 4928419 honestann
honestann's picture

You don't know how gold is created?


In the literal sense, gold seems to be created by stars as part of the fusion process, and when stars nova or eventually "go out" and break up, the gold gets blasted out into space along with other elements and becomes part of the mass of planets.

But perhaps what you mean by "how is gold created" is... "how do humans create gold?".  The answer to that is... well...  they take a huge chunk of rock, grind it up, perform a series of several chemical processes upon the pulverized rock to discard everything except the gold.

Then they melt the gold down and pour into forms (bars) or punch into wafers or disks (coins).

That is where my money came from, and that is where almost all money that has ever existed came from.  Comprendo?

Of course, there have been times when other valuable materials were money.  Perhaps "arrow heads" were money for ancient peoples living in the american continents.  I'm sure you can figure out how that "money" was created.

For practical purposes, humans do not create atoms (physical material).  All the atoms already existed long before humans came to exist.  So in the literal sense, the materials that are real money have existed for billions of years or eternity (depending on whether you believe the BigBangTheory).  So what people do to create money out of those materials is... purify and shape.

Money is a physical material, not some abstract pile of nonsense, and not even some abstract notion like "n hours of work by an average doofus".  Real money must be a specific quantity of a specific material.  Otherwise, it is fraud, and not money.


As for your other comment about buying candy, my answer is simple, and the same as everything else I said.

If you paid for the candy with silver dimes, you paid with money.  Why?  Because the silver in the coin is at least as valuable as the candy you received.  Transaction complete.  Value exchanged for value.

If you paid for the candy with a piece of paper, you paid with fiat currency, not money.  Why?  Because the candy is worth more than the piece of paper you exchanged for the candy.  Perhaps the moron who gave you the candy can find some sucker to give him something valuable for that piece of paper.  That certainly can and does happen, because most human beings are morons and are trained to be stupid.  However, no matter how you spin this, that paper has no intrinsic value, and is not payment for the candy.  Further risk is involved (just ask people in Weimar Germany or Zimbabwe), and additional steps must be taken by the fool who accepted your worthless paper to hopefully get something of value for that paper.

Stop calling paper money.  Call paper "currency" if you wish, but that paper is absolutely, positively NOT money.  And nothing you can say or do will make it money, so give up and get real.


But yes... you almost finally get it in your last paragraph.

What you receive BEFORE payday is a PROMISE, but NOT MONEY.

If you receive gold on payday, you then receive MONEY, and not a promise.

If you receive currency on payday, you did NOT receive money, just paper.

Got that?

Which means, in your final example, YOU EXPLICITLY MADE MY CASE.

No way, no how was that PROMISE to pay you on payday MONEY.  MONEY is the gold you receive on payday.

Sun, 07/06/2014 - 11:03 | 4928814 withglee
withglee's picture

honestann, some day I would love to debate you personally. For now, taking your misrepresentations point by point is the best I can do. From what I have written I obviously know money is "a promise to complete a trade". And I obviously know when properly managed guaranteeing inflation is zero it is a perfect medium of exchange and store of value.

Now you think "stuff" is money ... and your preferred stuff is "gold". I'll now take your points and prove you are dead wrong ... and your behavior exposes your misunderstanding.

First, understand trade: 1) Negotiation; 2) Promise to deliver; 3) Delivery. We must both agree that in simple barter 1 thru 3 take place on the spot simultaneously. What we don't seem if 3 is to take place over time and space, the introduction of money makes that possible. I choose to offer this as proof that until delivery, what is being exchanged is a certified promise to complete a trade and that is called money. What you want to do is force "stuff", like gold to be the intermediate exchange media. That means the trader must first acquire gold (which is of no use or value to him personally) before he can trade for what he wants. In the olden days that was one workable system. There have been lots of workable and unworkable systems over time. The tally stick is another example of a long used workable system that employed record keeping ... not stuff.

Now, you in your condescending fashion have declared "stuff" to be the only viable medium of exchange. I am purposely not limiting your belief to gold (which you yourself seem to be doing but other Mises monks are not), because it is obvious there is not enough gold to serve as a medium of exchange. Well, lets see how your actions serve your writing.

You don't know how gold is created?

No, I don't. And from what you write, you (as you try to depict yourself as a scientist) don't either. But how gold is extracted and refined or reclaimed is well known, even by me regardless of your condescension. So I'll skip all your noise about how gold comes into being as an item of barter. You call it money. But by your very example, you yourself then don't deal in money and likely never have.

Then they melt the gold down and pour into forms (bars) or punch into wafers or disks (coins).

That is where my money came from, and that is where almost all money that has ever existed came from.  Comprendo?

Oh really? Did you go to the gas station this week? Did you exchange gold for the gas or did you exchange numbers in a ledger? Same for the grocery store? Same for your candy bar? In fact, did you exchange anything for gold in your life? The answer being an obvious "no!", then do you "comprendo?" By your very discourse you reveal you don't think money is a medium of exchange. You think only gold is money. And you obviously have never exchanged gold for anything. 

Again here I'll [snip] your subterfuge. It's just more of the "money is stuff" nonsense. I'll simply state the obvious: objects of simple barter are stuff. Objects of trade exchanged over time and space are money.


Money is a physical material, not some abstract pile of nonsense, and not even some abstract notion like "n hours of work by an average doofus".  Real money must be a specific quantity of a specific material.  

That being the case, you are saying you, yourself have never entered into a money transaction ... unless maybe your traded you dolly for a necklace as a child.

Otherwise, it is fraud, and not money.

Money is "never" fraud. Default is "always" fraud.


As for your other comment about buying candy, my answer is simple, and the same as everything else I said.

If you paid for the candy with silver dimes, you paid with money.  Why?  Because the silver in the coin is at least as valuable as the candy you received.  Transaction complete.  Value exchanged for value.

Here's where it gets good little girl. You yourself (if that is a picture of you) have never exchanged a silver dime for candy. They stopped making silver dimes in 1964. If you exchanged one for candy after that you were a fool. More likely you weren't even born then. But I was in high school. I was able to buy a gallon of gas for a 25 cent piece. Today, I can still by a gallon of gas for that very 25 cent piece, but before I do, I have to exchange it for 13 of the tokens we now call quarters ... and then turn over those 13 quarters for the gallon of gas. The 13 quarters are money. The 25 cent silver piece is stuff. The 13 quarters were created by someone making a trading promise. The one silver piece was created by someone wasting their time digging up and refining silver. The process we use today is much less wasteful and serves the very same purpose. Further, if the MOE it represents is properly managed, it forever hold its value. It's all about proper management.

If you paid for the candy with a piece of paper, you paid with fiat currency, not money.  Why?  Because the candy is worth more than the piece of paper you exchanged for the candy.  Perhaps the moron who gave you the candy can find some sucker to give him something valuable for that piece of paper.  

If you bought the candy honestann, you are that very moron then. As I illustrated earlier with my gas purchase ... if I gave the attendant my silver quarter, he would still demand 12 more, silver or otherwise, before he would trade his gallon of gas to me.

That certainly can and does happen, because most human beings are morons and are trained to be stupid.  

You, who can't write two paragraphs in a row without contradicting yourself, being the notable exception.

However, no matter how you spin this, that paper has no intrinsic value, and is not payment for the candy.  

It's not about "intrinsic value". It's about being acceptable for simple barter trade. Right now FRNs are far more acceptable in simple barter trade than gold, silver, or any other kind of stuff.

Further risk is involved (just ask people in Weimar Germany or Zimbabwe), and additional steps must be taken by the fool who accepted your worthless paper to hopefully get something of value for that paper.

And if you read "When money dies" by Ferguson you will get a pretty good play by play of what really went down in Weimar Germany. You will see the obvious and purposeful mismanagement of the MOE.

Stop calling paper money.  Call paper "currency" if you wish, but that paper is absolutely, positively NOT money.  And nothing you can say or do will make it money, so give up and get real.

As I have illustrated by dissecting trade and showing money allows deliver over time and space rather than on the spot, that which is being trades "is" money and not "stuff". It is absolutely, positively money. It was created absolutely and positively by someone making a promise to complete a trade. It works far more efficiently and is more widely accepted than some stuff you dig out of the ground, refine, and divide with precision. No effort is unnecessarily expended to record that promise that is widely accepted as an item of simple barter because ... well, because it is widely accepted as an item of simple barter ... and holds its value over the time frame and the majority of trades. Unfortunately, because it is purposely mismanaged and widely counterfeited by government yielding non-zero inflation, it's not quite as useful over long periods or for very large trades.


But yes... you almost finally get it in your last paragraph.

What you receive BEFORE payday is a PROMISE, but NOT MONEY.

By your definition, what I receive on payday is not money either. It is numbers in an accounting ledger or it is pieces of paper. I'm happy to accept them. If it was gold, and I wanted a candy bar, it would be useless to me.

If you receive gold on payday, you then receive MONEY, and not a promise.

No. I don't receive money. I receive gold ... which I would then have to exchange for money, because none of my trading partners accept gold in trade. It's too inefficient and difficult to handle. They like my credit card or my FRNs or my worthless tokens much more. You've got it just backwards little girl. And if you were running the system people would be wasting huge amounts of time and energy with picks and shovels.

If you receive currency on payday, you did NOT receive money, just paper.

Got that?

And next you'll tell me black is white; up is down; cold is hot.

Which means, in your final example, YOU EXPLICITLY MADE MY CASE.

And you call yourself a scientist and engineer? We're in deep peanut butter (but GM would probably welcome you in their organization).

No way, no how was that PROMISE to pay you on payday MONEY.  MONEY is the gold you receive on payday.

I have had thousands of paydays in my career. On none of them did I receive gold. I never even received silver when it was widely being used as a token of exchange.

This would appear to be just a semantic argument where you or I have reversed terms. But with closer examination we can see that yours is the less efficient system. You have people digging around for stuff before a trade can take place. Proper MOE management allows the trade to take place without wasting time digging around for useless stuff ... just because historically that's how it's been done.

Oh how I wish we were having this debate face to face. It's getting too long. I am going to end it here but if you think you really have something to teach me you are welcome to reach me at todd at withglee dot com. 

PS: I haven't taken the time to proof read this even once ... it's just too painful. Thus, I apologize for any typos.

Tue, 07/08/2014 - 23:27 | 4929922 honestann
honestann's picture

Sheesh!  Negotiation is... negotiation.  Negotiation is not part of trade, and any moron can easily see that.  You can negotiate, then never trade/transact.  Also, you can just look at a price tag and purchase/trade without negotiation.  Where you get your completely delusional ideas is beyond me, but they are clearly WACKO.

You simply ASSERT that your meaning for "money" is the correct one.  You can tell yourself anything, and delude yourself all you want.  I proved you wrong with the payday example, which demonstrated clearly that the PROMISE to pay you on payday cannot possibly be money (or even currency for that matter).

You are completely delusional, and all I can conclude is that you just want to dig in your heels and defend a corrupt notion, or your real name is Janet Yellen, and you are trying to defend yourself and the rest of your predator co-conspirator who have almost completely destroyed mankind by means of these kinds of Sith Mind Tricks.

You cannot define away facts.  I laid out the facts.  You want to delude yourself... or just lie and spin endlessly, there's nothing I can do to stop you.

But you fool nobody but yourself.

PS:  You have NEVER received money on payday.  You probably have not even received currency on payday.  What you probably have received are:

#1:  fiat currency (which is a debt note).

#2:  a configuration of computer memory bits in your bank account.

And the fact that you have never received money for your labor means... you have never been party to a legitimate complete transaction in your entire life.  But at the very least, you have never had a transaction that involved money.

Money is the one (or a few) real, phyiscal valuable goods that are the most common goods exchanged for other goods.  The reason money is important is... to establish prices for goods that everyone can easily understand, evaluate and compare.

Fiat currency does satisfy the second criteria (you can set prices in dollars).  However, it does not satisfy the first criteria, which is the most important --- that you are exchanging real, physical, valuable goods for other real, physical, valuable goods.  Pieces of paper have no value.  They are fraud.  And one simple way to demonstrate this is... any microscopic value a $100 or $1000 dollar bill has (to light a cigar for example) can be done just as well with the piece of paper called a $1 dollar bill.

Sat, 07/05/2014 - 15:36 | 4927108 withglee
withglee's picture

I started a debate in my economics group with a similar idea. I posited that "Money in essence is a receipt for work." Currencies are simply yardsticks or ways to quantify the value.

Try this on your "economics group". Money is "obviously" a "promise to complete a trade". This is obvious from examining trade: 1) Negotiation; 2) Promise to deliver; 3) Delivery. In simple barter 2 and 3 happen simultaneously on the spot. Money allows 3 to happen over time and space.

Thus "money" is created by traders making "trading promises" and getting them "certified". These certificates are "guaranteed" to hold their original value over all time and space and so they trade as items of simple barter.

When the trader delivers, the money (certificates) are returned and extinguished. If the trader does not deliver (DEFAULTs), the certificates are reclaimed through INTEREST collections. The operative relation is INFLATION = DEFAULT - INTEREST, and through proper managment (monitor DEFAULTs; collect a like amount of INTEREST), INFLATION will always be zero.

And to directly address your reply: It is irrelevant how traders assess value. When they negotiate a trade and promise to deliver, that sets the value of the exchange in that instance ... and since the trader creating the money agrees to return it on delivery as promised, its value does not change. The manager of the medium of exchange is not concerned with how traders value their promises (i.e. value the money they create).

Sat, 07/05/2014 - 14:41 | 4926986 koncaswatch
koncaswatch's picture

Thank you for an excellent description of money and currency. And, the fact that real money can be traded in infinitesimal amounts. Good work honestann.

Sat, 07/05/2014 - 15:18 | 4927066 withglee
withglee's picture

And "real" money is created how ... in the opinion of the Austrians?

Sat, 07/05/2014 - 15:58 | 4927157 koncaswatch
koncaswatch's picture

Real money is determined at the time of the "trade". Some would call this barter. But if you lived in a community of traders that determine that someting like a PM is to be recognized as a trade money, then you have your answer.

Sat, 07/05/2014 - 16:09 | 4927175 withglee
withglee's picture

Money exchanged for something in trade "is" barter. Money created out of a "promise to complete a trade" is not barter ... it's a recorded and monitored trading promise.

If you buy a house for $100,000 and agree to pay for it in 100 monthly $1,000 installments, you have made a trading promise. You get it certified (promise recorded ... you get $100,000 in certificates) and give the certificates to the seller.

His trade is completed but yours is not. Every month you complete another 1% of your total trading promise (and the $1,000 you pay back is extinguished ... removed from circulation).

Sat, 07/05/2014 - 15:17 | 4927063 withglee
withglee's picture

Money is "a promise to complete a trade". Do Austrians agree with that statement? If not, how do they see money being created.

PS:  It does not matter how much gold exists.  That is irrelevant for many reasons.  The first reason being... you can divide gold into very tiny pieces.

It's not about how many tiny pieces you can divide an ounce of gold into. It's about how those tiny pieces come to have value. My claim (and it is obvious) is  that 1oz of gold is worth the resources employed in creating a new ounce of gold. This doesn't change by dividing that ounce by say 1000. To create a new 1/1000th ounce of gold now takes about 1/1000th of an ounce in equivalent resources (in dollar terms, $1.30).

Remember, "money" just means "any real, physical valuable good that becomes common in barter transactions".  Any number of real, physical, valuable goods can be money simultaneously.

So what is this "unsound" "fiat" money the Austrians keep talking about?

Sun, 07/06/2014 - 04:22 | 4928434 honestann
honestann's picture

Fiat money is not money.  The phrase "fiat money" is a direct self-contradiction, purposely created and promoted by predators to steal from you via fraud (essentially, a sith mind trick).

The "unsound fiat currency" that Austrians talk about is usually pieces of paper (like "federal reserve notes" (which are some kind of debt, not payment, hence the term "note"))... or the computer-bit equivalent of "federal reserve notes" created by tapping keys on a computer keyboard at the bank or federal reserve.

That "fiat currency" is "unsound" because it is WORTH NOTHING in an of itself.  That paper and those computer bits have NO utility and NO value to anyone (in an of themselves).  In contrast, real physical gold or silver or platinum or palladium or rhodium has REAL utility (for many purposes), and therefore REAL value.

And it is because they have real value that when you exchange them for other goods... the transaction is complete.  That is "money", which is simply a synonym for "sound money".

Sat, 07/05/2014 - 14:17 | 4926860 Dick Buttkiss
Dick Buttkiss's picture

You're joking, right, withglee?

Sat, 07/05/2014 - 15:08 | 4927047 withglee
withglee's picture

No, I'm not joking. Answer my questions.

Sat, 07/05/2014 - 16:08 | 4927172 Dick Buttkiss
Dick Buttkiss's picture

Others are trying, but you are too lost in a fog of pseudo-knowledge to grasp how simple sound money is, why gold has been the people's choice of money for millennia, and why the Austrian School is the only rational, just, and non-coercive system of economic thought.

But for what it's worth:

Sat, 07/05/2014 - 16:29 | 4927211 withglee
withglee's picture

To anyone watching: Observe, no answer ... just a slur. I've been asking this same question for a dozen years. I have yet to get an answer. I always get the slurs. And notice the link to further reading ... as if I have not read. What an insult. If you can't encapsulate your concept in a paragraph as I lucidly do, you don't have a concept. If you have to refer to someone elses explanation, you don't have personal understanding.

Sat, 07/05/2014 - 17:37 | 4927333 NidStyles
NidStyles's picture

Your attitude is disgustingly dismissive and arrogant. Why reinvent the wheel when another person's explanation works fine. This is why you fools should not be listened to on something so smple as economic theory. You're too busy trying to rewrite history so that it's worded to fit your needs. 


That makes you a sophist.

Sat, 07/05/2014 - 20:41 | 4927730 withglee
withglee's picture

Show me an explanation other than my own that works fine? I started this by asking two simple questions. I have yet to get  an answer to either of them.

Would you have viewed Copernicus as a sophist? He was stating the obvious when everyone else was just confusing the issue because they started with the wrong answer to begin with.

Sun, 07/06/2014 - 18:39 | 4929943 honestann
honestann's picture

I probably gave you the most coherent and fundamental explanation of money you will ever read anywhere.  But you just ignore the valuable intellectual gems that I and others hand you, flush them down your toilet, and attempt to justify the destruction of mankind by the predators-DBA-banksters.

You are utterly disingenuous, and have made ZERO effort to understand what we are saying, or to understand why we say what we do, even though we clearly explain why.

You are either Janet Yellen or her apologist.

Virtually everyone else here can see you are disingenuous.  Why not relax, and at least learn to understand what our claims are, and the reality and sense behind them, before you attempt to jerks us off on yet another silly tangent.

Just because most people CALL fiat currency "money" does not make that fiat currency money.  You're just trying to convince us to become stupid.  That won't work.

Sat, 07/05/2014 - 14:13 | 4926912 SilverIsMoney
SilverIsMoney's picture

Austrians argue people should be able to pick their own money. They do not say gold has to be money or that money has to be backed they simply point out gold makes the most sense as the historical norm. Ultimately free people picking their own currency would find their way to gold or silver, we believe, but then again they could choose bitcoin (I think that idea is laughable but my point is people could pick their own currency and live with the consequences of that) the idea is people would not be forced to pay their taxes in one currency or be forced to get paid in one currency- They would have the option to pick what is best for them and live with the consequences of that.


Go look at Bernard von Not Hauss and what happened to the Liberty Dollar for WHAT NOT TO DO as it relates to freedom in currency...


Also to your Gold Point, we could have a gold/silver backed debit card system and transact with 100% gold and silver via debit cards to the .0000000001 OZ if we wanted or whatever it would take to make small purchases - imagine a bitcoin type delivery system for mirco amounts of gold. As long as the bank did not fractionally reserve the gold a debit system like this could work and leave the depositer free to withdraw his physical gold whenever he wanted.

In a truly free system you may even bank with someone who does fractionally reserve their gold/silver debit cards and you choose to deal with them because they offer a higher rate of interest due to the increased risk - if a run is made on their fractionally reserved physical and you get burned. TOUGH LUCK! Should have banked with someone who didn't!

In a system like this one banks could allow transactions as small as .0000001 OZ but they may only allow you to withdraw 1 gram at a time in physical from your account to discourage people from hoarding it - perhaps another bank would undercut them and make it .5 grams, someone else .1 grams, someone else any amount you can withdraw physically... Totally free markets as it relates to money and banking would produce new systems we cannot even begin to imagine and that's what makes talking about Austrain issues with people so difficult - they think only in today's terms ("how could we use a gold OZ") without thinking about how drastically different an Austrian world would be.

We are not promising a Utopia only a system where people, all people, reap the rewards and risks of their own actions as it relates to money and makes it so other persons are not FORCED to cover the loses, or collect the gains, of anyone else.

Sat, 07/05/2014 - 14:25 | 4926951 FreedomGuy
FreedomGuy's picture

Well said, Silver. I would add that there was not just one currency at the founding of our nation and we did quite well.

The other thing is that with economic freedom there is economic discovery. In essence, the market will experiment with many different models and in a system without coercion each model will have to make an argument to voluntarily attract investors. If you believe in bitcoin, go for it. Maybe I will hold back and watch. You are free to spend your labor as you see fit and suffer the rewards and consequences. This is how markets make products better over time and everyone benefits. Ultimately, currency is a product. Currently it is a government controlled product but the internet may change that with things like bitcoin and other exchanges.

Sat, 07/05/2014 - 15:04 | 4927038 withglee
withglee's picture

Also to your Gold Point, we could have a gold/silver backed debit card system and transact with 100% gold and silver via debit cards to the .0000000001 OZ

The issue is not "how small" a piece you can cut an ounce of into so there would be enough to go around. It's about how those pieces come to have the value they have. With 6 billion ounces of gold and 6 billion people on earth, that's about 1oz per person. Right now that's $1,300. Right now, miners (and computer grinders) spend about $1,300 per ounce to create a new ounce.That's sets its value. To value it otherwise creates an arbitrage opportunity (which would lead people to buy picks, shovels, and claims).

On average "all" people have more than $1,300 in savings or net receivables. Thus, if everyone asked for gold instead of dollars, the gold would quickly be used up and most people left without. Adding silver only adds about 1/5th the current value of gold to the mix so that doesn't fix the problem ... the problem being, there's not enough gold to back any (or all) medium of exchange.

Totally free markets as it relates to money and banking would produce new systems we cannot even begin to imagine and that's what makes talking about Austrain issues with people so difficult - they think only in today's terms ("how could we use a gold OZ") without thinking about how drastically different an Austrian world would be.

This has nothing to do with the freedom of the market or the system. The Austrians explicity claim money is "not" strong if it cannot be exchanged for something of equal value. They claim the dollar is "fiat". It is paper and paper has no value. Thus you can't demand something of value for it. The Austrians don't seem to know that money is "a promise to complete a trade". It's created by traders making promises (out of thin air) and delivering on those promises (by returning and extinguishing the money as originally promised).

Sat, 07/05/2014 - 14:35 | 4926971 malek
malek's picture

You must be either completely retarded or in troll mode to fail to grasp your shortcut

an ounce in equivalent resourses

is purely self-referential "reasoning"

Sat, 07/05/2014 - 14:48 | 4927001 withglee
withglee's picture

Is it any less self-referential to say an ounce of gold is "worth" $1,300 and it "costs" about $1,300 to create (or reclaim) an ounce of gold?

Every time I've posed this question to so-called Austrian economists, they either snub as you have ... or they suggest an ounce of gold could be said to be worth some orders of magnitude more than it is now ... and that would solve the problem of there not being enough of it to back any medium of exchange.

I'm neither retarded nor a troll. I'm poking one of the ridiculous axioms Austrians claim for "sound" money ... that being "back it with gold".


Sat, 07/05/2014 - 17:23 | 4927307 malek
malek's picture

And I keep poking back.

1. What else would you prefer: any other commodity, or the "full faith and credit of the XX government" instead?

2. If you state as a fact "there is not enough gold to satisfy all claims [first function of money] at a given time" then how do you know the opposite is true for the primarily traded goods?
Would you have a problem with that, if not? Do you believe accountability is a key part of a functioning society?

But you are a troll,
because you solely focus on the first of the 3 functions of money: "medium of exchange", "unit of accounting", "store of value."

And while downplaying or ignoring the risks to it (becoming suddenly worth less or worthless) is mostly acceptable on the first function, the effect for the third is much more undermining.
But you likely never understood that the game for the last 40+ years has been pushing the risk into the tails of the Gaussian distribution (as institutionalized in VaR), which ensures that a) the chance of smaller crashes which could serve as warning signs is reduced, while at the same time b) the chances and the severity of a major meltdown increase.

The only thing I hear from you is basically:
La la la, nothing has happened so far!
(or in the more insidious case: hey trading has always been who lies best!)


Sat, 07/05/2014 - 18:28 | 4927413 withglee
withglee's picture

And I keep poking back.
If you want to poke back: Is money not "a promise to complete a trade"? If not, what is it? How is it created?

1. What else would you prefer: any other commodity, or the "full faith and credit of the XX government" instead?
Frankly, every day I prefer the US dollar for all my trades. I have never bought anything with anything else. I have bought gold and silver. It's an insurance policy. As our money becames more and more irresponsibly managed and as more and more dead beat traders are tolerated, my silver purchases have been increasing. I purchase junk coins because they are a known denomination and will be most easily bartered when TSHTF. But until we have hyperinflation (which is inevitable), the US dollar is still what my trading partners want in exchange.

2. If you state as a fact "there is not enough gold to satisfy all claims [first function of money] at a given time" then how do you know the opposite is true for the primarily traded goods?
There is not enough primarily traded goods to satisfy all the gold claims? Is that the opposite? What am I to make of that foolishness?
Would you have a problem with that, if not? Do you believe accountability is a key part of a functioning society?
Of course I believe accountability is a key part of "the proper management of any medium of exchange (MOE)". And such proper management is a key part of any functioning marketplace (society or otherwise). I've shown this by stating the obvious:

1) traders create money by making delivery promises and getting them certified (such certificates become objects of simple barter called money ... they are accounted for).

2) On delivery, traders return the certificates and they are extinguished ... the accounting is reversed.

3) If the trader defaults the certificates are reclaimed through equal interest collections.

4) Inflation is guaranteed to be zero by the relation INFLATION = DEFAULT - INTEREST.

5) The MOE is always in free supply ... responsible traders paying zero interest.

6) Supply and demand for the MOE is always in perfect balance ... it's the nature of a trade.
That sir is proper management of the MOE and it does of course require transparent accountability. It has an automatic feedback loop. As traders default, interest collections increase, and fewer trades are viable.

The fact that you can find no time series for DEFAULTs proves that the MOE has never been properly managed.

But you are a troll,
That's like calling me an anti-semite. It is a childish substitue for debating what you are incapable of debating. No I am not a troll. But the Mises monks clearly "are" because they won't address simple obvious questions. How is money created?
because you solely focus on the first of the 3 functions of money: "medium of exchange", "unit of accounting", "store of value."
I focus on all three:
1) Traders create money as an efficiency over simple barter allowing trade over time and space.
2) All money created is accounted for and extinguished on completion of the trade. The traders set its value in every trade ... comfortable in the fact that their trade doesn't have to worry about deflation or inflation of the MOE itself. Defaults are monitored and recovered by equaling interest collections.
3) Value preservation is guaranteed over time and space by guaranteeing INFLATION to be zero by the relation INFLATION = DEFAULT - INTEREST.
Have you not been paying attention?

And while downplaying or ignoring the risks to it (becoming suddenly worth less or worthless) is mostly acceptable on the first function, the effect for the third is much more undermining.
You haven't been paying attention.
But you likely never understood that the game for the last 40+ years has been pushing the risk into the tails of the Gaussian distribution (as institutionalized in VaR), which ensures that a) the chance of smaller crashes which could serve as warning signs is reduced, while at the same time b) the chances and the severity of a major meltdown increase.
What do you mean the last 40+ years. Money has been gamed throughout all of history. If the money were being properly managed, DEFAULTs would be recognized as increasing alarmingly ... especially with governments where a rollover is a default. Under proper transparent objective management, INTEREST collections would have gone up in lockstep with DEFAULTs and would effectively throw cold water on deadbeat traders and speculative trades. But what do we have? QE to the tune of $85B/month and zero interest rates. INFLATION = $85B - zero .... i.e. hyper.
The only thing I hear from you is basically:
La la la, nothing has happened so far!
No. That's not what you hear from me. What you hear is we have a sorely mismanaged MOE. It guarantees inflation and collapse. The Mises monks are proposing a deflationary tonic which guarantees strangulation. Both are fatal. The only right number for inflation and deflation is zero ... and what you hear from me is how to guarantee it is just that ... zero.
(or in the more insidious case: hey trading has always been who lies best!)
No, that's not what trading has always been or even is now. You choose your trading partners ... except for governments ... where you have no choice. Properly managed MOE would give you smaller government because it would recognize them as deadbeat traders ... responsbile traders would not trade with them. Governments need inflation because they can't collect taxes for the services the producers of the society do no want.

If our MOE were properly managed interest collections would be sky high right now (and our government would collapse ... as it deserves to do). Under proper management, feedback happens much quicker, in smaller increments, and more objectively and the problems don't get out of hand as they have historically.

Interest is not a number picked out of the air by LIBOR. It is a direct and equal reaction to defaults which are "failure to deliver as promised."

Sat, 07/05/2014 - 21:07 | 4927793 malek
malek's picture

You are using elastic reasoning at many places, to defend a make-it-up-as-you-go-along model.

I suspect you are using ambiguous terms on purpose: "a promise to complete a trade" is misleading. If anything it's "completion of a trade by use of a promise [on at least one side of the trade]" and that is true for any kind of paper money, collateral-backed or fiat. Now continue to explain to us the distinction between collateral-backed and fiat monies -if any in your opinion-, and then the further problems that need to be taken care of with collateral-backed money.

All money created is accounted for and extinguished on completion of the trade.
Bogus argument, as the number of trades in existence at any spot in time is unlimited.
See also "re-rehypothecation", and ever growing government debt.

traders create money by making delivery promises and getting them certified
Certification is meaningless unless they are controlled and enforced by a reliable central authority, and information on all certificates is easily available to all interested parties.
When you buy a candy bar with money you are barting a coin or a piece of paper for the candy. [...] money is "not" created in that trade.
So where did that piece of money come from? Is it 0.0000001 of the mortgage of that other guy? I don't think so as the gov't created that coin or piece of paper.

Value preservation is guaranteed over time and space by guaranteeing INFLATION to be zero by the relation INFLATION = DEFAULT - INTEREST.
and from a different post of yours:
If the trader does not deliver (DEFAULTs), the certificates are reclaimed through INTEREST collections.
Here it get's really interesting.
So you effectively propose or at least accept SOCIALIZING the losses in your model, as defaults are aggregated and compensated by higher interest payments of everyone!
And there goes your claimed support for accountability - just lip service!!

(Also if my left foot is deep frozen [defaults] but my right one is boiling [inflation] on average the temperature is just right - value keeps preserved.)
And as said before you also simply defined away the time value of money which always exists, with or without defaults present or taken into account.

we have a sorely mismanaged MOE. It guarantees inflation and collapse. The Mises monks are proposing a deflationary tonic which guarantees strangulation. Both are fatal.
Bullshit argumentation, along the lines "because we cannot do it [Mises tonic] right now in a pain-free manner, therefore it is never a valid approach"
Also clearly puts you in the "meddlers" camp, as it presumes money needs to be managed by a few elect managers.

Remember government debt in your model is a at first a valid barter over time: give the government money and receive part of future tax receipts. And they can certify to you whatever they want. That you try only in most recent posts to wiggle out of it with  Governments are deadbeat traders ... they never deliver on their trading promises ... they just roll them over. They should be shuned by all traders  flies in the face of your own model: who decides if they already defaulted at rollover? The traders and they negated that so far. Who decides how high the risk is that the gov't wil default on some or all of their debts in the future? The traders and they would raise interest accordingly, at least at rollover time.
You are completely ignoring information arbitrage as a) many traders lack access or understanding of all major pieces of information and b) nobody in the game has an interest that all others have complete information.

The main points that the naysayers NEVER GET are:
- Austrian school economists do not request one specific kind of money. They only demand free choice of the type(s) of money the people use.
- Gold as money cannot stop the government (a/k/a rule making entity) from debasing it and never has. But is has the big advantage to give every interested amateur a measuring stick that can never be falsified by the government: is that gold coin still the expected ratio of weight and volume, i.e. fineness?


Sun, 07/06/2014 - 02:56 | 4928390 withglee
withglee's picture

Governments are deadbeat traders ... they never deliver on their trading promises ... they just roll them over. They should be shunned by all traders  flies in the face of your own model: who decides if they already defaulted at rollover? The traders and they negated that so far.

You are getting close to understanding the real issues. These are issues actuaries are well suited to address. It, like insurance risk and underwriting, is an actuarial problem. The object is to have high risk matched up with high premiums, and low risk with low premiums. With the MOE, the object is to have traders with a propensity to default be the ones who pay interest collections to reclaim those defaults.

Who decides how high the risk is that the gov't wil default on some or all of their debts in the future?

For an actuary that is an easy one. No government has ever kept a trading promise. All governments just roll over their defaulted trading promises. Thus, all governments should pay high interest which makes delivery on their promises nonviable on their face.

The traders and they would raise interest accordingly, at least at rollover time.

Here again you are beginning to swerve onto the real issues ... and they are actuarial in nature.Traders need to be classified according to their propensity to default ... before their trading promises are certified. The crucial point is that interest collections must always equal defaults on a running basis ... just like insurance where premiums must always equal claims on a running basis.

You are completely ignoring information arbitrage as a) many traders lack access or understanding of all major pieces of information and b) nobody in the game has an interest that all others have complete information.

No, I'm not ignoring that. That again is an actuarial issue. When conditions are murky risk is higher than when conditions are clear and predictable. Traders who involve themselves in "sure thing" trades will always pay less interest than wildcatters.

The main points that the naysayers NEVER GET are:
- Austrian school economists do not request one specific kind of money. They only demand free choice of the type(s) of money the people use.

This is like the global warming zealots changing their name to climate change.Ron Paul and Lew Rockwell, the darlings of the Mises monks have repeated tauted gold backed "sound money". Now, trapped by the impossibility of that, you are squirming out of your own trap ... saying everyone should be able to "choose" what is really "backing the trade". What you must come to learn is that the marketplace itself backs trades. And the marketplace protects itself from deadbeat traders by making them mop up their defaults with interest collections ... and shunning repeated offenders.

- Gold as money cannot stop the government (a/k/a rule making entity) from debasing it and never has.

Of course it can't but that's what the Mises monks have been claiming all along as the cure to the Keynesian ills. Both Mises and Keynes are both dead wrong ... on opposite ends of the spectrum.

But is has the big advantage to give every interested amateur a measuring stick that can never be falsified by the government: is that gold coin still the expected ratio of weight and volume, i.e. fineness?

Actually, the best measuring stick historically has probably been the "tally stick". It's an accounting problem. Make a trading promise, get it certified (i.e. recorded and non-counterfeitable media created to stand for it), deliver on the trade (collecting media in the process), and return the media as agreed (whereupon it is extinguished ... and that trade is complete).

And continue to notice: My original two questions still remain unanswered. Are you saying your answer the "too little gold" question is by saying traders get to choose what they're using as money? That being the case, you severely inhibit that choice's ability to be a universally accepted MOE in barter.

And I still have not heard anything about how you think money is created. If it's not created by traders making trading promises, what is it?

And regarding collateral ... in the beginning there was "no" collateral, but obviously in the beginning there was trade. Collateral is a clumbsy and ineffective way to discipline traders ... witness the bottom feeders ... the pawn shops. Efficient trading requires trust. You have pawn shops when trust is not possible. It is a very small portion of traders who use pawn shops. Most traders are reliable and those who are not are shunned by the marketplace and pay exhorbitant interest.

Sat, 07/05/2014 - 13:52 | 4926835 honestann
honestann's picture

Excellent article.


As to the idea that many economists are statists, well, what can one say, except: guilty as charged!  A free, unhampered market economy would have very little use for the great majority of today's macro-economists.  Many of them are directly or indirectly in the government's employ and are paid wages far above their market value.  It goes without saying that they will never bite the hand that feeds them.

Yes indeed.  And this is a huge, enormous, monstrous problem!

For the few ZH folks who don't already know this, let me be clear.

I've been a scientist and engineer all my life.  And sadly, this characterization is overwhelmingly true... that scientists don't bite the hand that feeds them.  In other words, they are little if any more honest, ethical or moral than humans in other professions.  If you're not a scientist, you might not find that remarkable.  But you should.  Because THE central characteristic of the practice of any science must be honesty.  And the same goes for engineering, which for practical purpose is the application of science to create tools, devices, machines.

Yet... today an overwhelming number of scientists are paid liars and frauds who predators-DBA-government and predators-DBA-corporation claim as proof their actions are practical and sensible.

As an individual who immediately and instinctively recoils whenever someone offers me [financial] favors in exchange for supporting their frauds... because that is an assault of every fiber of my being... I get a strong sick feeling in my gut when I encounter scientists who won't bite the hand that feeds them.  For me, this is overwhelming and visceral disgust and revulsion.

When scientists are "bought and paid-for" today, the payer is almost always predators-DBA-government or predators-DBA-corporation (usually large ones).  The most obvious modern frauds are AGW and economics (both of which are promoted by billions of dollars of propaganda).

In virtually every case, it is easy for an honest scientist to identify bought-and-paid-for frauds.  Simply start a scientific, technical conversation designed to get to the bottom of the issue at hand.  Do you get a careful, step-by-step statement of facts and their consequences... leading to the position claimed?  Or you do encounter argumentative responses peppered with a few technical terms here and there, but lacking many fundamental facts and incoherent in structure?

Almost always the difference between a disingenuous bought-and-paid-for agent of evil versus a diligent but mistaken proponent is clear.  And as a matter of style, the former digs in their heels at every statement of fact or coherence (or any attempt to logically or coherently investigate the issue intellectually), and the latter happily discusses facts and consequences carefully and without prejudice until... one or the other of us realizes we made a mistake.

All I'm saying is... don't trust scientists any more than anyone else.  Of course, if you manage to find a self-employed scientists, the chances are much greater they are honest and objective.  But individuals have agendas too, so sadly you can't even depend on that.

The bottom line is:  the modern notion of "authority" is completely bogus and unethical.  This is the notion that someone should impose requirements or prohibitions upon you.  And the original notion of "authority" is extremely unreliable in modern times (and probably always).  This is the notion that you can take the word of someone (anyone) else over your own observations and thoughts.  Sadly, we cannot reliably do so.  And "authority" in this sense clearly comes from the term "author", and just because someone writes about a topic, doesn't make what they write reliable.  Each of us must judge everything for ourselves, our we're asking for a lifetime of pain, agony, troubles and destruction.

Sat, 07/05/2014 - 14:08 | 4926856 Democratic koolaid
Democratic koolaid's picture

2/3's behind the eyes.

Sat, 07/05/2014 - 14:04 | 4926884 FreedomGuy
FreedomGuy's picture

Well written, honestann. The idea that any class of human is not susceptible to corruption, especially when the corruption profits them is dangerous. The problem with the Left is they fundamentally believe in the incorruptible nature of government along with it's imaginary wisdom and benificence. Once we cede authority and even judgement itself to others we invite abuse and disaster. This is actually part of the lesson of central economic planning along with power that comes with a state that has the power to control all of life. Hell, the State even claims to be able to change and control the temperature of the earth, now. I am looking for that big thermostat knob at the U.N. headquarters. It will cost a hundred trillion dollars to see if maybe it works.

Sun, 07/06/2014 - 05:03 | 4928471 honestann
honestann's picture

Well, I suppose I could be wrong (unlikely), but I suspect that "the left" as you call them know government is corrupt... and value corruption, because they expect to gain at the expense of others.

Here is an oversimplification to illustrate:

predators == government
parasites == the left / liberals
producers == honest productive workers

The government steals from the producers.

The government then gives a little of the stolen loot to the parasites to buy their sanction, support and votes.

Frankly, modern political conservatives are mostly parasites too.

Sat, 07/05/2014 - 17:28 | 4927318 malek
malek's picture

Fully agree.

The good thing in engineering is at some point the design will be put to a real-life test... while scientists can often hide in a corner of their theories for all their life.

Sat, 07/05/2014 - 18:57 | 4927472 Radical Marijuana
Radical Marijuana's picture

"Because THE central characteristic of the practice of any science must be honesty."

Except, honestann, the oldest and best developed social science was warfare, upon which foundation was built economics. Warfare was a paradoxical science whose success was based on deceits, backed by destruction, and economics is a social science similar to warfare.

Most of your points, honestann, deliberately ignore the realities about how human groups actually operate successfully as organized crime gangs because they MUST do so! That IS the way that general energy systems manifest through human systems. When general energy systems, as studied everywhere else, in every other domain of science, are expressed through human beings, those end up necessarily becoming the principles and methods of organized crime.

When human being develop their understanding of natural selection, which therefore becomes artificial selection, the death controls are central to every other kind of control. Since the death controls were operated most successfully through backing up deceits with destruction, of course, the "authorities" ended up being the best professional liars and immaculate hypocrites. More radical truth about human civilizations would require more radical truth about the death controls that back up the debt controls, because those must necessarily exist, as long as any human being survive. Denouncing how bad the currently established systems may well be should only be a first step towards organizing better systems.

There MUST necessarily be governments, because there WILL be organized crime gangs. That FACT is pumping up and up the Grand Paradox of progress in all other sciences, except in human sciences, because the core of human sciences is militarism, or the ideology of the murder system, which was always most successful by being most deceitful about itself. In that context, it remains to be seen whether or not the human species can survive understanding the laws of nature better, while it deliberately refuses to understand its own nature, but rather, the ways that it understands its own natural has paradoxically ended up being as backwards as it could possibly become!

My basic points are not only that the real world is controlled by lies backed by violence, but also that there must somehow be the same purposes achieved, i.e., death controls backing debt controls. No school of economics that deliberately ignores that essential problem could be anything else but another form of controlled opposition, still operating within the biggest bullies' bullshit world view. An intellectual scientific revolution would have to face the facts about natural selection becoming artificial selection systems, which includes everything that now operates through the combined money/murder systems.

Most people who desire or promise more honest, competent, accountable or transparent government, tend to simultaneously and almost universally NOT include the murder systems or death controls into that demand for honestly accountable government. Governments primarily DO control of taxes and death, wherein the death controls are what back up the taxation powers, which in turn back up the monetary system.

However, thousand of years of warfare being done through successful deceits, creating sovereign states which could operate their combined money/murder systems therefore were able to do so on the basis of getting away with promoting those systems like State Religions, which were almost totally bullshit that buried the social facts, not only as realities, but also as necessary realities. Better government is necessarily better organized crime. No government is as impossible as there being no organized crime.

Theoretically, I believe, what we need is a radical political movement that will state more radical truths about what governments are, and must necessarily be. However, the obstacles to doing that is pretty well the entire collection of current "authorities," who are who they are because they were the best professional liars and immaculate hypocrites, regarding what they were actually doing.

On Zero Hedge, the relative popularity of the alternative Austrian school of economics appears to flow from the degree to which that can provide a better critique of the Keynesian. However, it is still practically universal that those who reveal how bad the established systems are practically never addressing the deeper reasons for how and why that had to happen. I tend to find your kinds of comments, honestann, to typically do that in your own fashion. Of course, the human predator/parasites are feeding on their more productive prey. However, a better human ecology and economic system could not exist unless the deeper reasons for that were perceived as purposes which must be achieved somehow.

Sat, 07/05/2014 - 14:26 | 4926839 Democratic koolaid
Democratic koolaid's picture

Ghandi was a Pacifist.

Sat, 07/05/2014 - 14:01 | 4926872 kurt
kurt's picture

Looks like the Austrian Schoolboys are a might sensitive.

Reminds me of the fanatical nuts who worship Ayn Rand

Sat, 07/05/2014 - 14:19 | 4926929 SilverIsMoney
SilverIsMoney's picture

Being IGNORED in favor of KENYESIAN RETARDS for 8 decades will do that to you!

Sat, 07/05/2014 - 17:04 | 4927268 pauhana
pauhana's picture

Aw, shoot, you guys!  Everyone knows that debt is money!  Right?  (/sarc)

Sun, 07/06/2014 - 09:45 | 4928721 kurt
kurt's picture

Thanks for the down votes, Randtards!

Can't you see the cold empty shark-like glare that horrible smoking monster has?

I think you dorks had cold dissapproving mothers, "please love me momma!" Oh yeah, you also are afraid of your own minds. Why else would you allow your entire world view be dictated by such a limited, brittle, defective philosophy? It's like those pin heads who think a ship in a bottle is real or play with choo choo's. 


Sat, 07/05/2014 - 14:17 | 4926924 TeethVillage88s
TeethVillage88s's picture

Not an Economist

All I can say is

1) Get Term Limits for Congress
2) Get Money out of Congress
3) Corporations are not People
4) Never start Fiscal Stimulus before Full Reform of Congress

OR you get

-Lifers like the Bill & Hillery Dynasty
-People that behave like they have Hereditary right to serve in Congress
-John McCain & Lindsey Graham, John Kerry, Bob Corker, David Rockefeller, Henry Kissinger, Zbignew Brezinski, Paul Wolfewitz, Don Rumsfeld, Llyod Blankfein, Jamie Diamond, John Paulson, Timothy Geithner, Bernanke, Liberman, Peter King

Sat, 07/05/2014 - 14:25 | 4926950 SilverIsMoney
SilverIsMoney's picture

Like Ron Paul points out in End the Fed and Liberty Defined:


1) Term limits work both ways - the good guys would be forced out as well. Ron Paul would have been done in the 70s. Do you want Term limits on people like Rand Paul or Justin Amash? I sure don't...

2) The money is flooding Congress because of the way the monetary system works - it's a sympton of the disease not the disease itself - this is why the people need to be able to pick which currency they want to use. Right now the Fed prints dollars that go to the largest Corporations first who in turn use it to influence the world markets and world governments.

3) Corporations only get special treatment because of the money they flood into Congress - see point #2 about the monetary system.

4) Never start Fiscal Stimulus period. Never allow one generation to steal from the next. The biggest issue with our monetary system is we force future generations into systems and contracts they had no say in. People who have yet to be born will be forced to live in the world we've created for them now that we're desperately borrowing from the future to pay for the present - again, made possible by the FED and the monetary system we have.


It all boils back to the Fed and the monopoly power they have over the currency supply. They are like Middle Age Doctors with Leaches all they know is they need MOAR! I suspect history will look back on them in the same way...

Sat, 07/05/2014 - 14:54 | 4927015 malek
malek's picture

Furthermore on 1)

Term limits rely on the naive assumption that manipulation can only occur from the politicians themselves.
That TPTB might pull the strings from behind the scenes and in case of term limits are guaranteed to have the next batch of groomed clowns lined up on time, completely escapes them.

Sat, 07/05/2014 - 15:32 | 4927095 TeethVillage88s
TeethVillage88s's picture

Revolving door to industry from government and vice a versa

Regulation Capture is another one. Gift giving has to be prohibited. Conflict of Interest Rules made tougher. Financial Conflict of Interest more transparent & tougher rules.

More auditing, more inspections. MORE Integrity in the USA. The Culture of Corruption has reached the level of Latin American and Greece and China. Except China made Derivative Illegal.

Sat, 07/05/2014 - 20:16 | 4927674 tolivian
tolivian's picture

If history has taught us anything, it is that rules, laws, Constitutions can and will be bent to benefit the rich and powerful. The very idea that new rules, more audits, etc would change a thing is charming in its naivete. I wish it were so easy.

Case in point: who would ever have thought that the "general welfare" clause in the Constitution could be so broadly interpreted as to usher in a staggering maze of regulations in virtually every sector and particular in the economy.

Our current police state began with nonsense regulations, upheld by the Supreme Court, that individual farmers, growing and consuming their own products, were still subject to interstate commerce regulations on what, how much, and at what price they could produce and sell the proudcts of their own labor. Gigantic corporate farmers now take advantage of these laws intended to "level the playing field" and rake in the majority of the hundreds of millions paid out ub agricultural subsidies. 

A small relatively little noted event that opened the doors to our current police state. 

Sun, 07/06/2014 - 01:06 | 4928302 r00t61
r00t61's picture

"Laws exist, to protect the lawmakers from the law-abiding."

Sat, 07/05/2014 - 14:56 | 4927018 RaceToTheBottom
RaceToTheBottom's picture

As much as I hate to say it, putting in term limits without removing the power of influence by companies, rich individuals and political parties, would only lock that power in.  

They would just promote "their guy" every time there is an opening.  

Then when somebody gets in by accident, their goal will be to immobilize him/her so that nothing is accomplished until their term finishes and they get their guy in on the next "buyout"

Sat, 07/05/2014 - 15:29 | 4927088 TeethVillage88s
TeethVillage88s's picture

Good point. Where to start?

Sat, 07/05/2014 - 15:27 | 4927084 TeethVillage88s
TeethVillage88s's picture

I agree with you on the Fed.

Since 2008 it looks like an Evil Plot.

But I am more cynical than you I think. We have a system of systems. We would have to lay down all the systems that we think are involved and look at them. Congress has stopped working. I don't know when we become an Empire, but spending $10 Trillion on Military from 2002-2014. The Monroe Doctrine is still alive today and I think it represents Empire. So I am with Ron Paul. We don't want to be Hacienda owners in Latin America.

1) End the Fed, yeah
2) Stop the Usury of Private banks, Time to Start Public Banks like Bank of North Dakota (who will continue to loan money in a Recession and has a local interest in the success of the people)
3) Bank Reforms would make them smaller, return to Glass Steagal, protect citizens deposits
4) End the Meme that Privatization in wartime is good, I'm sure we pay for perks & benefits for executives & Bankers right out of Uncle Sugar's Federal Budget, we should pay for services, not pay for perks from monopolies or Huge Corporations, best way to prevent big government grown is to recognize that utilities are low priced services and that low wages and benefits of government temporary jobs programs can employ people for 1/5 of a big construction firm, plus there are thousands of service contracts in federal government some associated with services for NSA mechanisms that go to big corporations (huge funding), military fraud is on the same level as banking fraud
5) What kind of subsidies do corporations get: Tax Abatements, Federal Assistance, Federal Loan Guarantees, Pork Barrel, federal contracts, federal supply of material and parts and office stuff, computer server management, think tanks, consulting, public affairs contracts, contract for US Treasury Bonds, SNAP EBT Cards....

Term limits might be one to take for the team. We'll hold off till after we get money out of politics, end lobbying, take power from those that get in the way.

Sat, 07/05/2014 - 14:21 | 4926933 Oscar Mayer
Oscar Mayer's picture


Sat, 07/05/2014 - 14:20 | 4926934 Oscar Mayer
Oscar Mayer's picture

Economics is not science, it is ideology.

Just like Capitalism; it is not an economic system, it is an ideology.

The sooner people figure this out, the better off they'll be.

Sat, 07/05/2014 - 15:41 | 4927118 TeethVillage88s
TeethVillage88s's picture

Conservative Business Practices are an Ethic Right.

So maybe Economics should be seen as part of Conservative Banking, Accounting, Ratings, Auditing, Practices.

Business should start on Conservative Principals.

All Governments and Officials should be Based in Conservative Ideals. This means Standard Accounting Practices (GAP), Standard Financial Instruments, and Standard Ratings based on assessments not paid for by the entity requiring the rating, and there should be some standard Usury Guidelines, and there should be limits to administrative costs for perks, benefits, compensation as this comes off the official revenue/profit.

-I mean why charge students more than 4% on tuition loans. They are the future. Why charge more than a 1%.

-If the government creates money why allow European Banking System charge the Government Interest. Conservative principals. Well let's form public state banks and cut the Wall Street Banks out of the business (they aren't investing in Capital formation or stimulating the economy anyway). That is what I call a monopoly,

Sat, 07/05/2014 - 17:44 | 4927339 NidStyles
NidStyles's picture

Hate to tell you, anything based on an idea is an ideal. Even your idea about somethings being idealism.

Sat, 07/05/2014 - 22:02 | 4927950 Oscar Mayer
Oscar Mayer's picture

OK, stupid.

Sat, 07/05/2014 - 14:29 | 4926958 falak pema
falak pema's picture

with a beard like that he could hide all of Hungary. 

Austro-hungaria becomes apple strudel land.

Sat, 07/05/2014 - 14:32 | 4926968 Australian Economist
Australian Economist's picture

I can't wait for the Bloomberg artical on Australian Economics.


Whats next, they'll tell us is Christmas is in summer?

Sat, 07/05/2014 - 15:26 | 4927080 Chief Wonder Bread
Chief Wonder Bread's picture

Ha ha, I get it.

Sat, 07/05/2014 - 14:46 | 4926993 bbq on whitehou...
bbq on whitehouse lawn's picture

The problem as always is not money but credit. Credit can not be allowed ever in a money system. Credit has no useful purpose in a money system.
Cash on the barrel or no sale. Harsh but humans are tough and its the only why to keep malinvestment at bay.
Otherwise "give me a lever and a place to stand and i shall move the world." Newton
No lever, no power, no slavery.

Sat, 07/05/2014 - 16:25 | 4927206 withglee
withglee's picture

Credit has no useful purpose in a money system.

Dead wrong. Money is "a promise to complete a trade". Purchase of a house is a useful credit transaction. It is foolish to go without shelter until you save enough to purchase the shelter. A better system allows you to have the shelter now and to pay for it over some time span. Taking it to the ridiculous, say you need shelter at age 20 and die at age 60. Saving 40 years for your shelter would bring it to you on your death bed.

The crucial issue with the "creation of money by traders" is the delivery on their trading promises and the "return of the created money". Failing that you have DEFAULT. And DEFAULTs must be balanced with INTEREST collections in like amount such that INFLATION is always zero everywhere. The relation is INFLATION = DEFAULT - INTEREST.

Note this: Governments are deadbeat traders ... they never deliver on their trading promises ... they just roll them over. They should be shuned by all traders.

Note also: Proper managment of the medium of exchange is not interested in prices or levels of employment. It is only interested in keeping the MOE in free supply; monitoring DEFAULTs; and collecting a like amount of INTEREST. It is traders who set the value of the money ... and they do it on a trade by trade basis with the comfort of knowing INFLATION of the MOE is guaranteed to be zero.

Sat, 07/05/2014 - 17:49 | 4927353 NidStyles
NidStyles's picture

Hyperbole, fallacy, nonsense, and more delusional reasoning... 

Sat, 07/05/2014 - 18:00 | 4927370 malek
malek's picture

You are getting hilarious.

So according to your theories Bernanke had to push the interest rate to zero because the percentage of defaults had dropped precipitously, threatening to pull inflation into negative territory?

And the thing called time-value of money doesn't exist (you know, $100 today is better [worth more] than $100 in a month) anymore, because we have so much money floating around that I am guaranteed to find someone else give me the $100 today and let me pay him back in a month, only adding a small premium for my default risk?

(And all of that are good things, and are self-organization tendencies of valid money systems?)

Sat, 07/05/2014 - 20:34 | 4927714 withglee
withglee's picture

You are getting hilarious.
You are not paying attention.

So according to your theories Bernanke had to push the interest rate to zero because the percentage of defaults had dropped precipitously, threatening to pull inflation into negative territory?
Bernanke and Paulson were faced with default. Worse, the default was not continuously mitigated by like interest collections ... which would have been a natural feedback system to stop the problem. Thus, they were way out of wack ... way behing the curve ... like an engine with a sticky governor running away and destroying itself.

The right thing for Paulson and Bernanke to do would have been recognize the default and put the deadbeats in a class of very high interest payers to recover the defaulted money. That would have effectively taken them out of the marketplace and raised interest collections on traders making new trading promises.

But the government was and is the biggest defaulter of all (rollover of a trading promise is a default). That means they should be paying enormous interest ... and thus, none of their trading promises would be viable. Not the way they look at it. They see the government as the most reliable trading counterparty ... they get the lowest interest charges. It's just backwards. Under a properly managed MOE, government would have to operate on taxes alone. As it is, the operate on inflation alone ... taxes just pay interest.

And the thing called time-value of money doesn't exist (you know, $100 today is better [worth more] than $100 in a month) anymore, because we have so much money floating around that I am guaranteed to find someone else give me the $100 today and let me pay him back in a month, only adding a small premium for my default risk?
If you had a properly managed medium of exchange and perfectly reliable traders (they don't default), interest would be zero. Even with some defaults, it's not the reliable traders that are defaulters ... it is, by definition, unreliable traders. They need to pay interest to recover the defaults and thus guarantee inflation to be zero all the times everywhere.

I have never missed a house payment. I have never missed a loan payment. I have never defaulted on anything. I pay way higher interest than the government ... and way higher interest than the banks ... both of which are very very bad actors. Yet, when I buy a house I pay four times: 1) I pay for the house as agreed; 2) I pay total interest equal to the cost of the house, as if I was actually certain to default; 3) I pay total insurance equal to the cost of the house, as if my house  had a 100% probability of being destroyed; 4) I pay total property taxes equal to the cost of the house as if the services I was getting for those taxes were worth anything to me at all.

(And all of that are good things, and are self-organization tendencies of valid money systems?)
I know of no proper management of a medium of exchange at any time in history. I present as evidence of this the number of time series we have for inflation and interest ... but none ... absolutely none for defaults (the most important measure to properly manage any MOE).

Sat, 07/05/2014 - 20:44 | 4927398 Radical Marijuana
Radical Marijuana's picture

withglee, I again point out my criticism of your theory of money, that: Money is "a promise to complete a trade". That may well be true, up until the point where your theory starts to deliberately ignore WHAT ENFORCES "promises to complete a trade?" All theories about "money" being a "medium of exchange" (MOE) tend to deliberately ignore the larger overall context of robbery. Robbery is the fundamental "exchange!" All other forms of exchange only can exist inside of some system where there is a rule of law, to enable that MOE to be enforced. However, any such "rule of law" raises the paradoxes of enforcement.

All theories of money regarding what it should be, for instance as presented by Maloney's baloney:

which are otherwise an excellent series of videos on the history of money, and apparently what went "wrong," which recite the typical lists about what money ideally should be (as your MOE theory also quite typically also does, withglee), take for granted that there will be some sane and stable sovereign, that will enforce the rule of law, so that promises to pay will be respected.

My theory of money is that it is measurement backed by murder. In that context, gold or silver, etc., can only be "money" when there is some means that the measurement of gold or sliver, etc., can be backed by murder, in which context murder is the most extreme form of robbery. The fundamental realities are robberies. There may be dynamic equilibria that develop through different systems of robberies, so that the biggest and best organized gangs of robbers then establish their rule of law, which they can enforce against everyone else, with the limit case being that they can kill anyone who resists their rule of law.

Clearly, there is a serious problem with the rise and fall of sovereign powers, who are able to operate their own rule of law, as their own systems of organized lies operating robberies. The rise and fall of those sovereign powers tends to repeatedly drive them through spirals where by they eventually become unstable, and insane, to then be destroyed, which created a situation of chaotic civil war, or larger scale wars, until some new best organized gang of criminals were able to assert themselves as the new sovereign power, that could enforce their rule of law. However, ALWAYS, that "rule of law" was operating through the paradoxes of enforcement, because nobody guarded the guardians.

Rather, the best organized gangs of criminals were able to dominate the governments, as the biggest form of organized crime, in ways which finally destroyed the abilityof the rule of law to continue to operate in any sufficiently sane and stable fashion. Inside that REAL context of human history, all theories about money as a means of exchange, that ideally should have certain properties, are non-starters, unless there is some better resolutions of the double-bind paradoxes, or Catch 22 situations, that money must be measurement backed by murder.

Those who tend to propose better theories of what idealized money should be, such as MOE, tend to continue to delibetately ignore what money has actually become, because of the background realities, which were always organized lies, operating robberies, in which context it was possible, from time to time, in place to place, temporarily develop some rule of law that would enforce promises to pay, or voluntary contacts, in relatively more ideal ways.

However, those who prefer to promote those idealized ways that human beings should cooperate, and only engage in voluntary contracts, so that their money system exemplifies that idealized situation, are basically RIDICULOUS, when regarded more realistically. Better theories about money are impossible to implement without better theories regarding the murder systems to back that money up. Of course, the vast majority of people have deliberately ignored that the debt controls were backed by the death controls, despite that being plainly obvious to anyone who looked at human history with an open mind.

Your theories about MOE, withglee, are typical manifestations of the superficial ways that you refer to money as a promise to pay, without any indications about how those promises will be enforced. As soon as one demands some enforcement, to resolve conflicts, then one is lost inside of the dilemmas of militarism, where success is based on deceits, and spies are the most important soldiers. The sovereign powers that are able to enforce volundary contracts do so through imposing involuntary contacts.

However, I expect that guys like you, withglee, will continue to deliberately ignore that, as do almost everyone else that publishes main articles on Zero Hedge, such as the one above about Austrian economics, that, like you, deliberately ignores or denies the deeper realities, which are always necessarily behind the economic systems. As my comment below pointed out in greater detail, guys like you, withglee, as well as most of the others who publish on Zero Hedge, are eager to promote their preferred false fundamental dichotomies, and related impossible ideals, regarding what money "should" be, and therefore, how economics "should" be operated.

Given that the world was made by the history of warfare, to develop fundamentally fraudulent financial systems, our problems are trillions of times worse, due to advancing science and technologies now than ever before in human history. In that context, anyone promoting idealized theories about what money should be are utterly out of touch with reality! Our problems now are how could runaway globalized electronic frauds actually be enforced with the atomic bombs that are supposed to be backing that up?

Somehow, we are still cruising on the autopilot of habits, which manage to repeat themselves like senseless parrots. The basic problem with a realistic alternative money system is the alternative murder system to back that up. Sure, the goals of such a system may well be to develop better dynamic equilibria, that approach achieving more of the ideals about what money should be. However, simply stating what money should be, without recognizing that money could not actually become that, unless there were murder systems to back that up, is a useless exercise.

Money as a means of exchange is actually always only possible when the basic exchange is robbery, while those forces of robbery have somehow been better balanced out. Better balancing of the forces of robbery amounts in the extreme form to better balancing of the forces of murder. My definition that money is measurement backed by murder is the only one that includes all of the relevant features. Any other lesser definition of money is some subset of that, which tends to deliberately ignore or deny some aspect of the real facts that surround the entire situation.

Of course, the paradox of history has been successful warfare based on deceits, backing up a political economy which became based on successful frauds. People were actually successful by operating systems of lies and robberies. Therefore, almost all of economics has been utterly dominated by the biggest bullies' world view, wherein the realities were always buried under bullshit, while those where the best at lying about what they were really doing ended up becoming the most successful, because the real systems were always actually organized lies, operating robberies.

It is one hell of intense paradox that civilization has developed, and painted itself into a corner with, after developing electronics, and atomic energy, et alia, to amplified the historically developed systems of lies operating robberies to astronomical sizes. It would take prodigious political miracles, and profound paradigm shifts, to MAYBE resolve those difficulties any better. Those kinds of theoretical solutions can never be achieved by going back to some kind of goofy superficial theory of what money should be, which continues to have no way to cope with the actual murder systems, or death controls, that would actually have to back that form of money up.

Anyway, again, as before, I expect that you, withglee, will deliberately ignore, or side-step, the issues of who is going to enforce any "promise to complete a trade" and how they are going to do that. Of course, in my view, that is what Austrian economics also tends to do, as well as every other idealized theory of economics which has a significant public presence, because they are all forms of controlled opposition, or somewhat integrated into the established systems of money/murder systems, which are most successfully operated by those who are the best professional liars and immaculate hypocrites regarding what they are really doing. ... Due to that overall situation, our civilization looks like it is terminally screwed!

Sat, 07/05/2014 - 21:10 | 4927771 withglee
withglee's picture

Your reply is way too long to respond to so I'll just take the first paragraph.

withglee, I again point out my criticism of your theory of money, that: Money is "a promise to complete a trade". That may well be true, up until the point where your theory starts to deliberately ignore WHAT ENFORCES

"promises to complete a trade?" All theories about "money" being a "medium of exchange" (MOE) tend to deliberately ignore the larger overall context of robbery. Robbery is the fundamental "exchange!" All other forms of exchange only can exist inside of some system where there is a rule of law, to enable that MOE to be enforced. However, any such "rule of law" raises the paradoxes of enforcement.

It's an actuarial problem ... not at all unlike figuring premiums for casualty insurance. There, the risk is assessed and the premium is determined that just exactly matches the risk (i.e. CLAIMS = INCOME). Insurance companies theoretically make their money on investment income. With a properly managed MOE, DEFAULTS = INTEREST COLLECTIONS. There is no INFLATION.

So you're a trader who wants to trade 100 equal payments for a house. If you're a reliable trader (never default), your payments are exactly 1/100th the cost of the house. If you're in a class of traders with a 10% propensity to default, then you and everyone in that class would pay interest totaling 10% of the cost of the house. The 90% paying 10% interest would recover the money left in circulation by the 10% who defaulted.

There are many ways to obtain discipline without laws. In fact, most laws allow the undisciplined and irresponsible to get away with bad behavior.

Do you view all exchange as robbery, or just exchanges beyond simple barter where each party is giving up something he doesn't want and receiving something he wants? All money does is allow that exchange to happen over time and space using a well respected (a respect duly earned in a disciplined marketplace) intermediate object ... the promise to complete a trade ... a promise enforced through interest collections equal to defaults. If defaults get out of hand, interest is charged on defaulters making their trading promises unviable. The responsible traders are protected.

Continually wreck your car or burn your house and watch what happens to your insurance premiums ... even with no laws whatever.

Sat, 07/05/2014 - 14:48 | 4927000 Civilization
Civilization's picture

The worms in Bloomberg editor-in-chief Matthew Winkler's brain have escaped the skull case, causing meta-DTs in the minds of the writers and editors and overcoming natural inhibitions.

Sat, 07/05/2014 - 14:52 | 4927010 Batman11
Batman11's picture

The use of complex mathematics in Economics does give the impression that it is scientific and if the maths stacks up then it must be right.

Unfortunately, the complex maths is just a smoke screen for the problems in the underlying assumptions.

What was 2008 really?

Wall Street operating on the fundamental assumption that house prices always go up.

Lots of lovely Complex financial instruments were put together on the basis of this fatally flawed fundamental assumption.

The top layers, like the complex maths, are just a smoke screen, it is the fundamental assumptions that are usually the problem.




Sat, 07/05/2014 - 16:05 | 4927170 Midnight Rider
Midnight Rider's picture

And I guess the current market is assuming the world central banks will be able to continue printing forever into the future without end and without consequence. Anyone get the feeling this will be the next fundamentally flawed assumption?

Sat, 07/05/2014 - 18:21 | 4927403 Batman11
Batman11's picture

Einstein's definition of madness "Doing the same thing again and again and expecting to get a different result".

After the crash and 9/11, Alan Greenspan used cheap money policies (low interest rates) to get the economy going again

In doing so he stoked up an almighty asset bubble in housing.

The economy then started to overheat and he raised interest rates.

In dong so he popped the asset bubble in housing and this led to 2008.


We are doing the same again after 2008 and Einstein, I am sure would tell you, all bubbles pop (even asset bubbles).


Sat, 07/05/2014 - 18:23 | 4927423 Batman11
Batman11's picture

I was told many years ago that throwing money at a problem does not constitute a solution.

But, it is the only solution Central Banks have to all problems.


Sat, 07/05/2014 - 15:15 | 4927059 disabledvet
disabledvet's picture

"Money" is not a theory. The idea that Wall Street isn't working on "problems with the economy" is ridiculous...the question therefore isn't theoretical at all but a simple matter of explanation: "how did Wall Street's problem become America's problem?"

One can look at a formulaic approach to a "restructuring and reordering" of things. On the other hand you can look at things as they actually are...exclaim "this is total bullshit!" and start boning up on your Karl Marx.

This isn't complicated folks: Too Big to Fail means both State and Bank are at risk! way they both are prima facie at risk is do to their excessive CONSERVATISM when deploying capital.

This is known as an "opportunity cost" or "the cost of not playing the game to begin with." Not to put too fine a point on it but "this is called buy low/sell high"...and simply put "when executed properly there is no finer theory."

Sat, 07/05/2014 - 18:31 | 4927444 Batman11
Batman11's picture

Wall Street isn't just Americas problem.

Two global recessions - 1930s, now

Two Wall Street Crashes - 1929, 2008

Trace the time line of global recesions back to the first big event and you get to wall Street.

They are a global menace and the weakest link in the global economy.

The weakest link always fails first.


Sat, 07/05/2014 - 15:23 | 4927075 Excursionist
Excursionist's picture

Out of more curiosity than he warrants, I poked around to learn about Mr. Smith, his qualifications and ultimately the value of his voice on topics such as monetary theory.

The two jumping off points were:  Stony Brook page and his 2011 C.V.

I didn't find anything in his background that would give him any more (or less) credence on the subject than an average bloke who read a Macro 101 text book.  His body of research, as narrow as it is for someone just getting started, pertains primarily to financial markets.

He taught Macro Econ 102 when he was TA'ing at the University of Michigan. 

He writes for Bloomberg, The Atlantic and other outlets presumably to supplement the pittance of a salary he receives as an assistant professor at Stony Brook - something like $85k if the numbers at Glassdoor are to be believed.  His modus operandi appears to be: step 1 stir a hornets' nest by authoring something absurd about a topic people care about and step 2 watch the Internet traffic roll in.  His media outlet bosses are happy.  He's happy.  Rinse and repeat.

This is the Austrian School's boogeyman?  Come on people.. let's get back to the Kardashians.  Much more interesting and enlightening.

Sat, 07/05/2014 - 17:53 | 4927357 NidStyles
NidStyles's picture

You say that as if policy choices in the future will not be based on the work of those fools in the future.


I find your posting shortsighted.

Sat, 07/05/2014 - 16:48 | 4927189 Radical Marijuana
Radical Marijuana's picture

This article ironically confirmed my view that human civilizations are controlled by lies backed by violence. I maintain that as universal, that human realities are necessarily always organized lies operating robberies. Therefore, economics is a science in the same way that warfare is a science. It is perversely amusing to watch people promote false fundamental dichotomies, and their related ideals, about what how the world should operate, when it actually operates as general energy systems. Of course, with perfectly appropriate perversity, human beings are taught to understand general energy systems backwards, because the biggest bullies' bullshit social stories dominated the philosophy of science, through the same overall realities of lies backed by violence as was everything else within the human realms.

I have never yet heard of any significant school of economics that does not deliberately deny and/or ignore the basic realities being controlled by lies backed by violence. Of course, that includes the Austrian school: "In fact, with regard to the latter point, Austrians are inter alia clearly set apart from other economic schools in one crucial respect, and that is in their unstinting support of the free market."

"Unstinting support of the free market," as an ideal, is based on deliberately ignoring that there was a "free market" in murder, which then backed up fraud. That was the history of warfare, which was organized crime on a larger scale, which enabled the War Kings, that survived through those selection processes, to create the powers of sovereign states, which powers were then covertly captured by the Fraud Kings, the bankers, that continued to apply the same principles and methods of organized crime in order to turn the surviving successful politicians into their puppets, while simultaneously turning the vast majority of the people into their muppets.

Those who begin to recognize some of that, and provide some good historical analysis of how that happened, STILL tend to continue to rely upon false fundamental dichotomies, and their related impossible ideals, when they turn to "solutions," which of course the Austrian school does too. There is almost nobody that continues to be consistent with the basic facts that ALL private property ONLY exists inside of some system of public violence, whereby claims are backed by coercions. In that context, money is merely the most abstract form of that, since money IS measurement backed by murder, because the debt controls depend upon death controls. All other theories about what money should be tend to be some degree of silly, shallow bullshit, which promote what money should be to the degree that they deliberately ignore or deny what "money" has actually become. Such theories tend to promote the notions that human beings should voluntarily cooperate, when, in fact, any possible voluntary contracts are always inside of involuntary contracts, which were imposed by being born into the flow of human history, (and even more so by being born as animals into the flow of biological evolution.)

Those views are the ONLY ones which are consistent with regarding human ecology and political economy as general energy systems, which can therefore be understood as being already that, and therefore, already actually integrated into all the other existing energy systems, in the form of nested toroidal vortices. However, those views are ONLY thoroughly consistent after one goes through a radical critique of the concept of entropy, because that concept had its meaning inverted during the history of the development of the sciences of thermodynamics and information theory, because the biggest bullies' bullshit stories were always dominating society, and therefore, continued to dominate the development of the philosophy of science. Hence, an arbitrary minus sign was inserted into the entropy equations, so that the measurements of power and information would have positive values, rather than negative values, which is what the mathematics itself demonstrated was the case.

Everything we "know" is based on relative SUBTRACTIONS. After we define any living being as separated from its environment, then it must necessarily operate through ROBBERY, as it takes energy from its environment in order to keep itself going as an entropic pump. There are no genuine ways to fix the problems any better without going to their SOURCE, which tends to have been misunderstanding SUBTRACTION.

Austrian economics, and every other significant school of economics, continues to operate inside of the biggest bullies' distortions of the philosophy of science. They deliberately refuse to understand that any "free market" is necessarily surrounded and supported by some history of the "free market" in murder, which then enabled frauds to dominate economics. Austrian economics, like all other mainstream moron schools of economics, are run by reactionary revolutionaries, because they continue to promote the same old-fashioned false fundamental dichotomies, and therefore, promote "solutions" based on impossible ideals, which deliberately ignore the basic political problems regarding the paradoxes in the enforcement of the rule of law, or that nobody guards the guardians.

The only things which actually exist are different systems of organized lies, operating robberies, in dynamic equilibria with each other. What has happened is that the biggest form of organized crime became the government, which was controlled by the biggest gangsters, which are currently the banksters. Those banksters' successful frauds were then enabled to use their wealth to dominate the school systems, as well as acquire control over the mass media. Obviously, in that context, Bloomberg media are systems of organized lies, promoting robberies. Of course, they are attacking Austrian economics. However, Austian economics, in that context, is still a form of controlled opposition, which is becoming significant enough to bother to attack, because the established systems have driven their debt slavery to generate numbers which have more blatantly become debt insanities, whose degrees of over-leverage have become dangerously absurd!

However, in my opinion, there is absolutely no publicly significant radical truth about real economics being presented and debated, because all the established systems have been so totally dominated by the biggest bullies' bullshit, so much, for so long, that there is barely anything in the public space except for forms of controlled opposition, like Austrian economics, and every other school of economics such as those which were reviewed recently in a table republished in Zero Hedge:

The Pocket Guide To Understanding The Different Schools Of Economics

We actually have fundamentally fraudulent financial accounting systems, which almost totally dominate our political economy, because of the long history whereby deceitful death controls dominated our human ecology. Militarism is the supreme ideology, because it concerns the operations of the murder systems. Those who were best at doing that were also the best at deceits about what they were doing, and they were able to control their opposition to agree to operate inside of that system of deceits and frauds. There is no significant school of economics which does not deliberately ignore and/or deny the absolutely central role of the murder systems in making and maintaining the monetary systems. They all shy away from understanding SUBTRACTION, especially since they almost all understand that BACKWARDS.

Instead, what usually happens, as one can find throughout the articles on Zero Hedge, as well as in the comments upon those articles, are the standard patterns of about 90% good analysis of the facts, which then collapse back to bullshit "solutions" in the last 10%, which continue to be based upon impossible ideals, which are not rigorous enough about appreciating the degree to which the biggest bullies' bullshit has reversed the meaning of almost everything. For example, what we now call "money" has gradually become the opposite of what money used to mean. However, most of those who somewhat understand that tend to continue to spout the same old-fashioned bullshit, that there should not be any death controls, which notion is just another absurd deceit about the death controls.

I repeat, money is merely the most abstract form of private property. ALL private property ONLY exists as some form of organized lies, operating robberies. All human knowledge about anything is necessarily based on the process of relative SUBTRACTIONS, which process has had its meaning inverted by the triumphs of the biggest bullies' bullshit dominating society, including dominating the history of the philosophy of science. In the real world, the only way to have a better economy would be to have better death controls, to back up better debt controls. However, that runs into a head-on collision with the history of warfare, where success was based on deceits, and spies were the most important soldiers. There is no way to better understand "economics" outside of general energy systems. However, there is no way to better understand general energy systems without understanding how the concept of entropy became inverted. All private property, and all money, actually have relative negative values, NOT relative positive values.

We are rushing through greater and greater grand paradoxes of civilization being operated through social pyramid systems based on backing up lies with violence, which merely have become more sophisticated systems of legalized lies, backed by legalized violence, since the biggest form of organized crime was government, which was controlled by the best organized gangs of criminals, which currently happen to be the banksters, which were, due their successful frauds, able to drive schools and mass media to promote their bullshit generally, and especially their bullshit about "economics."

None of the established schools of economics that I am aware of are even barely scratching the surface of the kinds of intellectual scientific revolutions which are necessary to better comprehend what is really going on, which are that human realities are always necessarily organized lies, operating robberies. Almost all of the few people who somewhat face those social facts then still tend to proposed impossible "solutions" that should be stopped somehow.

Since our society generally refuses to face social facts, or those facts are only recognized and admitted by controlled opposition groups who state how bad that is, but then propose impossible "solutions" about somehow stopping that, we are stuck in the same ruts of huge lies, backed up by lots of violence, automatically getting worse, faster. We could try to develop better dynamic equilibria between those different systems of organized lies, operating robberies, however, instead, we have controlled opposition groups, such a Austrian economics, which continues to operate inside the same bullshit world view, and continues to promote impossible ideals that always backfire badly in the real world.

Although I find lots of useful ideas, and more correct analysis in the Austrian school than most others, and certainly way more so than in the Keynesian, the Austrian school is still being promoted by silly goofballs, with an admiration for nostalgic nonsense, about "free markets," that does not deal with the real history of warfare, being the actual free market in murder, that made and maintained the current economic systems, which are now almost totally based on triumphant runaway frauds.

The underlying problem is that the human ability to name things, assign them properties, and then tell stories about them, ALWAYS must necessarily be based upon relative SUBTRACTIONS, which therefore MUST make every possible story be some system of relative lies or illusions. Furthermore, every such human story MUST then basically be describing some processes of ROBBERIES, due to the way that all such stories depended upon original relative subtractions in order to be told at all. Since we understood the concept of entropy backwards, we pretty well understand everything backwards, and so, almost totally live inside of Bizarro Mirror World Fun House.

Our common natural languages are based on understanding the concept of time and space in profoundly wrong ways, which nevertheless almost everyone continues to take for granted.  I repeat: the paradoxes are growing and growing that progress in sciences which have gone through a series of profound paradigm shifts has nothing like that happening in the human sciences. The main reasons are that would take bulldozing the biggest bullies' bullshit social stories out of the way, which bullshit currently almost totally dominates the established combined money/murder systems.

Of course, that view extends to include almost all articles on Zero Hedge, as well as through most of its comments as well. Meanwhile, I continue to promote intellectual scientific revolutions, as the necessary perquisites for economics to be better understood as manifesting the general laws and principles of energy systems. Of course, the problem with attempting to do such a transformation is that perspective perceives all human systems as being best described by the principles and methods of organized crime, i.e., organized lies, operating robberies, and simultaneously perceives any deliberate ignorance and/or denial of that as being merely more of the biggest bullies' bullshit, which was made and maintained by thousands of years of successful warfare based on deceits, and, more recently, hundreds of years of successful economics being based on frauds about themselves, whose degree of success by those means has enable them to almost totally dominate the controlled opposition groups found in all old-fashioned religions and ideologies.

The grand paradoxes are constantly getting bigger and bigger, that progress in physical sciences has NOT been matched by progress in political sciences, because doing that would take revolutionizing the philosophy of science in many profound ways, including reversing the meaning of entropy, so that we could then understand human energy systems in the opposite ways to how they are understood now! Despite the established systems of lies backed by violence having become globalized electronic frauds, backed by the threat of the force of atomic bombs, NONE of the basic ideas and ways of thinking in quantum mechanics or the special theory of relatively, etc., have, so far, found any significant roles in changing the ways that people think about economics.

Sat, 07/05/2014 - 17:55 | 4927361 NidStyles
NidStyles's picture

Lay off the pipe or learn how to make a point please.

Sat, 07/05/2014 - 18:19 | 4927406 Radical Marijuana
Radical Marijuana's picture

NidStyles, you "clueless troll," make a point beyond an ad hominem, or shut up! 

Sat, 07/05/2014 - 19:34 | 4927570 patb
patb's picture

Gold has a intrinsic industrial value, making wire, connectors, chemical plate as well as

having a desirable art value (Jewelry, art, )


but then again so does Rhodium, Platinum, neodynium, osmium.


I've seen some beautiful metal work in those too.



Sat, 07/05/2014 - 19:36 | 4927574 ToNYC
ToNYC's picture

An illustration of how they teach the youth to appear socially smart and cleverly snarky without real experience, rather than teaching them how to learn and keep learning, by observing what little has shown to be enduring and sustainable. The triumph of immediacy brings mediOcracy and instant approval for the truly needy of it.

Sat, 07/05/2014 - 20:35 | 4927720 tolivian
tolivian's picture

Say doesn't Menger bear a remarkable resemblance to Trotsky? Image the conspiracy possibilities!

While I am not sure what a typically idiotic Bloomberg economics article will have on the market, I have been encouraged with its writers increasing hostility to gold. They frame mentions of drops in gold as signaling even further problems for the metal, but when gold rises it's usually a succinct mention. Of course they spin every economic report in the best possible light. I have even posted here a few of the more ridiculous ones. Contrary opinion anyone or is it just that everyone in their right mind is contrary to Bloomberg??

Sun, 07/06/2014 - 01:24 | 4928322 aquarian1
aquarian1's picture

Good reply Tyler.


On anotherr note, I just get sad. It doesn't matter what we (the readership of ZH) think, or know, or post.

Sadly the FEd is not and was not ever concerned about the economy. They are owned by the banks and work for the banks. All the speeches by the chairmen are just covering fluff for the theft. No one will be able to sue them for the theft and the damage and the misery. They get paid and then get speaking tours and there is no downside for them.

At the first bailout - way back in  2008 - I wrote a solution which for the same amount would have turned things around (posted and marketwatch - yes I know home of morons - but that was then.)

My sad feeling it that we are powerless pawns and if our posting to each other helps us with the pain well nice. But no of it makes any different to those in control. There is no democrary there is a 4 year placebo pill - but that's it.

some videos
The banking cartel, its supporter (the Fed), and money creation:

Fiat money illegal:

The creation of the American worldwide empire with bribery and CIA:
(The first part is good - his "solution" the second part I didn't bother with)




Sun, 07/06/2014 - 04:21 | 4928442 eishund
eishund's picture

The first Noah must now be turning over in his grave. Sigh.

Sun, 07/06/2014 - 19:04 | 4930006 Ewtman
Ewtman's picture

Inflation vs Deflation? My money is on deflation...

Mon, 07/07/2014 - 15:21 | 4932657 Vin
Vin's picture

Let's just print more "money" until everyone's rich!!

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