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"Planned Chaos" - Why Fiat Money Is "A Large-Scale Fraud System"

Tyler Durden's picture




 

Submitted by Ryan McMaken of Mises Economic blog,

The Center for Financial Studies in Frankfurt reports on a recent talk given by Thorsten Polleit:  

Thorsten Polleit on the “planned chaos” of money

What are the reasons for economic booms and busts and which reforms are necessary to create an economically viable monetary order? On 2 April, Thorsten Polleit addressed these questions in his lecture “Boom & Bust, or: Planned Chaos” referring to the Austrian school of economics. Polleit is Chief Economist of Degussa Goldhandel, President of the Ludwig von Mises Institut Deutschland and Honorary Professor at the Frankfurt School of Finance & Management.

Polleit identified the state-controlled fiat money system as a main cause of the international financial and economic crisis. This system, he said, is based on the ability of banks to create money literally out of nothing. It is, in principle, a “large-scale fraud system” because today’s money is “intrinsically worthless and not redeemable”. This has damaging consequences for the overall economic development.

Circulation credit reason for economic fluctuations

To prove this fundamental critique, Polleit referred to the theoretical principles of the Austrian School of Economics, in particular to Ludwig von Mises. According to Mises, the circulation credit is the cause of economic fluctuations. Circulation credit means that banks lend money, and thereby expand money supply, without backing them by real savings (or reduction of consumption). This circulation credit is creation of money “ex nihilo”. Booms as well as busts are damaging because they slow down long-term investments with the consequence that resources in fluctuating economies are lacking. According to Mises, the problem is not low consumption but low savings. This means that the countercyclical policy in the manner of Keynes is based on a wrong diagnosis. This policy prevents an early market-driven correction with the result of an even bigger bust.

Fiat money system creates failures

Polleit explained, on the basis of the interest theory of Mises, that the market interest rate in a fiat money system was chronically below the natural interest rate. The consequence of adherence to such a system with its too low interest rates is that economic and political mistakes during the bust phase are not completely corrected – and, thus, new failures will arise. One current example for the failure of the low interest rate policy in the industrial countries is the flow of foreign capital into the emerging markets with all its harming effects. Especially since the US Federal Reserve has announced to reduce bond purchases, many investors have withdrawn their money from the emerging markets. As a result, the exchange rates of the emerging market currencies strongly depreciated – with negative consequences for their previously booming economies.

This destabilization in emerging markets will, according to Polleit, result in an even closer cooperation among national central banks – with the objective to counteract the remaining currency competition. Central banks of emerging economies could be forced to join the network of liquidity-swap-agreements in order to receive credits from other central banks more easily. Thereby, they would basically give up their sovereignty over the national money supply. The result would be a world cartel of central banks led by the US Fed. This cartel would extend the boom phases, which are caused by the credit money system, and, as a consequence, amplify the inevitably following busts.

Against the background of this grim scenario, Polleit demanded a reform of the monetary system towards a market-oriented monetary order. This should include, inter alia, disempowering central banks and privatizing money supply.

 

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Fri, 07/11/2014 - 18:26 | 4948538 Cattender
Cattender's picture

NOOOOOO!!!!! (one more time) It's a Recovery!!!! go out and SPEND that Green Paper Baby!!!!!

Fri, 07/11/2014 - 18:44 | 4948591 The Alarmist
The Alarmist's picture

It's a new and improved form of slavery ... you work all your life to accumulate savings that represent the value of your years of work, and they take their share through taxes, inflation, bank services charges, and interest on the debt they make so easy for you to get the things you can't afford today but could next year but for the interest you paid in prior years, and, when all of that still isn't enough, they first take a hair-cut of what you have left, and they will ultimately come back to take the rest.

Fri, 07/11/2014 - 18:48 | 4948597 Pladizow
Pladizow's picture

“The process by which banks create money is so simple that the mind is repelled.” - John Kenneth Galbraith

Fri, 07/11/2014 - 19:32 | 4948723 negative rates
negative rates's picture

Gold standard bitches!

Sat, 07/12/2014 - 08:49 | 4949646 Death and Gravity
Death and Gravity's picture

Mises institute joins the lunatic fringe.

Sat, 07/12/2014 - 10:16 | 4949732 Antifaschistische
Antifaschistische's picture

But there are two points here.   Through history, there has been "fiat".   Meaning, some "thing" that represents some "thing" that may be exchanged for something of value.

There is nothing intrisically wrong or immoral with an IOU (gift cards, or gift certificates are a modern form of an IOU).   This is invented FIAT.

If you tell your neighbor you'll owe him 100 oranges if he mows your lawn, you are in essence inventing credit.   This form of credit invention has and will exist forever.

So we have FIAT in it's purest form, and we have credit that is invented in exchange for something of value.  Both of these are moral.

What is immoral is the FED's invention of credit in exchange for absolutely nothing.  The FED offers nothing of value, yet extends credit and collects interest on it's invented-non-value-added service.   This parasitic phenomena built Manhattan and continues to enrich the 1% at the expense of the 99%.

Sat, 07/12/2014 - 16:37 | 4950651 quadratic_equation
quadratic_equation's picture

In the example you made at least the credit you created can be redeemed for 100 oranges; on the other hand, the fiat credit (currency) the bank created can not be redeemed for anything except for the next sucker to take it in exchange for his goods and services thinking he can redeem it at a later date to some other sucker but the last sucker will be left holding the bag when the musical ends.

Fri, 07/11/2014 - 18:27 | 4948542 goldsansstandard
goldsansstandard's picture

Bit Coin, Bitches?

Fri, 07/11/2014 - 18:42 | 4948584 Escrava Isaura
Escrava Isaura's picture

goldsansstandard ... Which part of "Fiat money [bit coin] is a large-scale fraud system" are you having problem to grasp.... Bitch?


Fri, 07/11/2014 - 19:13 | 4948675 BigJim
BigJim's picture

Bitchcoin.

Fri, 07/11/2014 - 19:22 | 4948690 jaxville
jaxville's picture

"Polleit identified the state-controlled fiat money system as a main cause of the international financial and economic crisis. This system, he said, is based on the ability of banks to create money literally out of nothing. It is, in principle, a “large-scale fraud system” because today’s money is “intrinsically worthless and not redeemable”. This has damaging consequences for the overall economic development."

 

  Some serious errors here. The fiat money system is always state protected but only state controlled in a few nations.The money is controlled by banks as well as central banks, most of whom are independant of the state.

  No mention that the bank created money is loaned into existence with both an interest obligation and a claim on real property. That is the fraudulent nature of credit based money. That is also the key factor by which using/allowing credit based fiat will lead to economic "chaos" at some point.

  I get the impression that he is OK with privately issued fiat and just opposed to a national or central fiat system. No mention of fractional reserve banking? Something disingenuous about this though I tend to agree with most his argument.

Fri, 07/11/2014 - 19:29 | 4948714 Tall Tom
Tall Tom's picture

Although I do not like BitCON...AT ALL...(As I do believe that it is a Fraudulent Scheme in that the system is unsustainable because of the architecture...)

 

But BitCON is NOT a FIAT Currency. It is a PRIVATIZED Currency. There is no Government in the World who has demanded payment in it. It is not a Currency by declaration of ANY GOVERNMENT.

 

What part of the Latin word, FIAT, which means roughly "So be it", are you not grasping?

Fri, 07/11/2014 - 20:38 | 4948883 CheapBastard
CheapBastard's picture

I still get a chuckle when I think about that cute Canadian female news reporter [on live tv] saying “well, gold isn’t back by anything either” that zh posted awhile back.

 

 

Makes me think all those Indians and Chinese flooding into Canada might actually improve their gene pool IQ.

Fri, 07/11/2014 - 21:06 | 4948967 SAT 800
SAT 800's picture

T he key to understanding Canada is that once you get the Hockey and the Breweries up and running, you can kind of let everything else slide for a hundred years or so; and voila--Canada.

Sat, 07/12/2014 - 01:01 | 4949361 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

They are seriously sensitive about this shit.  You probably just made two Canadian dudes cry.

Fri, 07/11/2014 - 21:57 | 4949086 robertocarlos
robertocarlos's picture

OK but our average dick size will take a beating.

Sat, 07/12/2014 - 16:49 | 4950670 quadratic_equation
quadratic_equation's picture

Real money is value and to have value it has to be tangible.  So what's tangible with bitcoin?  Thus, bitcoin is nothing but fiat...although it may not be created by government but when government begins to recornize it as form of payment then it becomes just like any paper currency but worst because it will only be in digital ledger of the banks.

Fri, 07/11/2014 - 18:28 | 4948544 world_debt_slave
world_debt_slave's picture

and under pain of prison, forced to transact with it daily

Fri, 07/11/2014 - 19:30 | 4948719 Tall Tom
Tall Tom's picture

That is what makes a currency a Fiat Currency.

 

+1

Fri, 07/11/2014 - 18:29 | 4948549 NOTaREALmerican
NOTaREALmerican's picture

Survival of the fittest sociopaths, BITCHEZZZZZ!!!

Fri, 07/11/2014 - 18:32 | 4948556 XRAYD
XRAYD's picture

" privatizing money supply" ...

 

Like putting new foxes in charge of the hen house!  These could easily be some of the eminences from finanace, investment, etc. now in retirement (instead of jail)!

Fri, 07/11/2014 - 18:37 | 4948571 Seize Mars
Seize Mars's picture

xrayd
I don't think you understand. All it means is that we would be free ( you and I) to determine what we trade with. Nobody forces us to use their favorite money. No force. Freedom. Get it? No foxes because no henhouse.

Fri, 07/11/2014 - 18:51 | 4948608 disabledvet
disabledvet's picture

NO BAILOUTS or "moral hazard."

"CNTL P" isn't part of a plan...it's just easy to do.

I do find it interesting that the Fed stopped it though.

Fri, 07/11/2014 - 18:35 | 4948558 CaptainSpaulding
CaptainSpaulding's picture

My bartender/ therapist begs to differ. No money, No drinky.

Fri, 07/11/2014 - 18:34 | 4948560 VWAndy
VWAndy's picture

Energy backed for a host of really good reasons.

Fri, 07/11/2014 - 18:42 | 4948568 Chuck Knoblauch
Chuck Knoblauch's picture

The Queen wants a $4 Billion stimulus package.

It's being sold as humanitarian aid.

A planned invasion from South America.

All for the sake of the children.

We must be in some economic trouble?

The Queen will be on vacation in August.

From Aug. 9th to Aug. 24th.

Golfing with his pimps on the Vineyard.

Fri, 07/11/2014 - 19:06 | 4948654 The Alarmist
The Alarmist's picture

I'm a bit slow these days ... I spent the first 5 lines wondering what the hell this had to do with the broad in Buckingham Palace.  She, at least, travels by and in far more conservative and less costly means and venues.  Whodathunk a "first citizen" would be more expensive to maintain than a divine-right royal?

Fri, 07/11/2014 - 18:38 | 4948574 Billy Shears
Billy Shears's picture

Behold, I was shapen in iniquity; and in sin did my mother conceive me.

Fri, 07/11/2014 - 18:38 | 4948575 yogibear
yogibear's picture

If we could just print them up legally like the Federal Reserve.

Fri, 07/11/2014 - 18:40 | 4948580 AdvancingTime
AdvancingTime's picture

We  are all interconnected for better or worse. A bad apple can spoil the whole basket. Welcome to the world our leaders have designed or allowed to form. Whether by design or merely as a byproduct of globalization we have weaved a web of financial transactions that circle the globe. Over the last several years as money was printed by the central Banks it was not contained in the countries where in was printed. This money flowed across borders influencing and distorting markets and prices across the world.  

Some people have been calling for a "world currency" for years. the saying "one should never let a good crisis go to waste" means that a meltdown with high levels of fear would present a perfect opportunity and catalyst to advance this agenda down the field. Remember many people with agendas have a lot to gain when a major shift in the currency markets takes place. More on this subject in the article below.

http://brucewilds.blogspot.com/2014/02/contagion-may-lead-to-new-world-c...


Fri, 07/11/2014 - 18:41 | 4948582 Reaper
Reaper's picture

Who trusts government or government created central banks, or political leaders or their printed promises? All government promises or fiats eventually are distrusted.

And on the pedestal these words appear:
'My name is Ozymandias, king of kings:
Look on my works, ye Mighty, and despair!'
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare
The lone and level sands stretch far away

Fri, 07/11/2014 - 18:44 | 4948586 NOTaREALmerican
NOTaREALmerican's picture

Golly,  we could have a really FAIR economic system is ONLY we didn't have all these asshole and sociopaths manipulating the dumbasses with bullshit !   If ONLY the assholes and sociopaths would follow the rules set forth by my favorite economist THEN we'd have a free and fair economic system and the nice people would FINALLY get to win.

Fri, 07/11/2014 - 18:48 | 4948595 disabledvet
disabledvet's picture

Yep.

Fri, 07/11/2014 - 18:47 | 4948590 Chuck Knoblauch
Chuck Knoblauch's picture

$4 Billion in new stimulus will buy a lot of Tocos and Underwear.

Have to get GDP into positive territory - ASAP!!!

This was all planned.

More lies.

hahaha .................

Fri, 07/11/2014 - 18:46 | 4948593 disabledvet
disabledvet's picture

"Gold is money." Simple as that. Setting up "new cartels" to "combat the dollar imperium" does nothing to change the said imperium. Unless and until someone is willing to offer up their gold as collateral everyone is under the same(bad)set of rules.

DOLARES.
"It's what's for dinner."

Sat, 07/12/2014 - 09:00 | 4949659 withglee
withglee's picture

If gold is money, then we need something else to do trade and accumulate wealth. There is only one ounce of the stuff per person on Earth ... and that's not enough. Plus, the amount available must exactly equal all the ongoing trades and all the profits from trade for all time ... or we will have non-zero inflation. And "inflation must be zero" at all times everywhere.

Sat, 07/12/2014 - 17:04 | 4950719 quadratic_equation
quadratic_equation's picture

You still do trade with credit except that credit is redeemable in gold.  No inflation is good for the people it's bad for the the banks.  All these credits already created in dollar (unbacked currency) can not be repaid anyway.

Sun, 07/13/2014 - 10:30 | 4952092 withglee
withglee's picture

And if the credit is redeemable in gold ... and everyone redeems at once, then what? I thought the Mises monks were against fractional reserve! In a new system all credit is new. The dollar plays no role. Why are you mentioning the dollar?

Fri, 07/11/2014 - 19:03 | 4948638 Joebloinvestor
Joebloinvestor's picture

Fiat money funds failures & frauds easier.

Fri, 07/11/2014 - 20:40 | 4948891 TruthBeTold
TruthBeTold's picture

I can't help but think this orchestrated flood of illegals is part of the calculated catalyst to crash the US monetary system.  Once our back is broken, government will come along to save the day by installing marshal law and removing what is left of our constitutional rights.  Yes? 

Fri, 07/11/2014 - 21:30 | 4948928 Againstthelie
Againstthelie's picture

This should include, inter alia, disempowering central banks and privatizing money supply.

Far over 90% of money supply IS privately created: it is created by the private buisness banks through credit creation!

The Austrian school of economics is nothing but smoke and mirrors to distract from the core problem: any monetary system that is built on exponential growth on our limited planet with limited resources, due to compound interest is a ponzi scheme and not stable. Because compound interest is an exponentially growing mathematical function.

It can easily be proven, that the Austrian School does not touch the fundamental problem, but in fact distracts from it, by suggesting gold per se would be the solution:

If I take the first loan at a bank of 10 fiat dollars, and the interest rate is 10%, I must pay back 11 dollars 12 months later. But only 10 dollars do exist. The missing dollar must be created by a new credit from a bank by someone else becoming a debtor, who also must pay interest on this money.

If fiat debt money is exchanged with gold and compound interest stays untouched (like the "Austrians" want):

If I take the very first loan at a bank of 10 gold-dollars, and the interest is 10%, I must pay back 11 gold dollars, although I only received 10 dollars. The 1 dollar is not there!

The trick is the same: the money lender must be payed back more than he lent out! The force to create this missing money, leads in both systems to enforced exponential growth and is unsustainable over a longer period of time (a gold standard with compound interest historically never worked, too).

The money lenders only exchange fiat money as debt with gold as debt, while all others, that have no gold, need a credit in gold and become the same debt slaves as today and all the productive people are running to find the missing money and the fruits of their slave labour is delivered to the money lenders.

The mechanism of value transfer to the money lenders for doing nothing stays the same and in that case the gold backed money is accumulated at exponential speed at the money lenders, instead of fiat money.

Austrian School is only smoke and mirrors to keep interest slavery going.

Compound interest is the problem. And the money lenders will do everything to keep the sheeple distracted from this fact, when the fiat debt ponzi will come crashing down (for example by propagating the "Austrian School").

Fri, 07/11/2014 - 21:30 | 4949029 Vidar
Vidar's picture

One of the main points of the Austrian school is opposition to fractional reserve banking, which is the root cause of the problems that you describe. You need to do some more reading and give up the Greenbacker Kool-Aid. The problem with money is the same as the problem everywhere else: the legitimization of force and fraud by the Big Lie known as the State. It allows the criminal class (politicians, bureaucrats, etc) to hide their actions from the people. This is the real smoke and mirrors.

In a commodity money system, money would not be loaned into existence, it would be mined and minted (or produced in some other way) just like all other commodities. Banks would only be able to loan out money that had been previously deposited. Customers would be able to choose between a demand deposit, where they would pay the bank a fee for the service of money storage, or a time deposit where they would be paid interest and the bank would loan the money out at a higher rate and make the spread. This is the real Austrian solution. Read Rothbard's Man, Economy, and State and What Has Government Done to Our Money if you want to really understand what is going on.

The Greenbacker nonsense is the distraction, just another way to keep the people fighting among themselves instead of turning against the rulers.

Fri, 07/11/2014 - 21:56 | 4949057 Againstthelie
Againstthelie's picture

Sure the state is evil and compound interest is good, if it must be payed on gold. Mission accomplished. :D

You must be really glad about the New World Order, the dissolution of the nation states, which is so good for the market and the profits with cheap slave labor. Do you enjoy drinking water with fracking chemicals? Not yet? Then there can't be a problem, since your beloved ruthless market doesn't care about the costs for future generations!

Oh wait: free market? Instead of suggesting others they should read, how about educating yourself about Capitalism, where "competition is sin"?

Why do you suggest others they should inform themselfes, if you don't even recognize that above your post is the explanation why a 100% reserve ratio of a commodity backed currency changes nothing if compound interest is not abandoned?

Instead of suggesting others they should inform themselfes, maybe you should inform yourself, that lending money against interest is NOT a law of nature? That there are many other ways to bring money into circulation - without interest. But that will the supporters of the Jewish "Austrian School" never tell you...

 

Sat, 07/12/2014 - 00:57 | 4949355 yrad
yrad's picture

Easy guy!! Even if you disagree, read his book recommendations!! Knowledge is power and diversification is helpful...

Sat, 07/12/2014 - 08:56 | 4949652 withglee
withglee's picture

How about he tells us what he knows from his reading. I played that "here's your reading list game". Total waste of time doing the reading and the one who gave the assignment was nowhere to be found when I disputed what I read.

Sat, 07/12/2014 - 08:52 | 4949649 withglee
withglee's picture

So, are the Mises monks back to recommending a "commodity money system"? Is there no other way?

I visualize the end of the world where the last Carnival cruise ship lands on the last inhabitable island with it's 2000 passengers and crew.

They're all standing there on the beach and the unspoken question is ... what do we do first. The Mises monks all volunteer ... first, we must all dig for gold so we can have money.

Do you see the problem?

Sat, 07/12/2014 - 08:47 | 4949643 withglee
withglee's picture

Compound interest is the problem. And the money lenders will do everything to keep the sheeple distracted from this fact, when the fiat debt ponzi will come crashing down (for example by propagating the "Austrian School").

Interest collections that exceed or are less than defaults incurred "is" the problem. Interest collections must exactly equal defaults experienced for any medium of exchange to function properly.

What you describe is Ellen Brown's "Web of Debt" nonsense. She ignores defaults as a source of that extra dollar for interest.

Sat, 07/12/2014 - 09:27 | 4949690 TNTARG
TNTARG's picture

"This should include, inter alia, disempowering central banks and privatizing money supply. "

 

Far over 90% of money supply IS privately created: it is created by the private buisness banks through credit creation!

 

Exactly.

The article is crap.

Sat, 07/12/2014 - 11:50 | 4949854 Cthonic
Cthonic's picture

Quasi-private fiat currency; monopoly on the issuance is granted by the state.  You wouldn't have to employ federal reserve notes if the state didn't demand you use them as the unit of account for tax calculation purposes, as well as the legal tender for all debts public and private.  See also 31 U.S. Code § 5118.

The state regularly borrows electronic fiat into existence by auctioning bonds (indirectly to the Fed via the primary dealers) and expends the proceeds therefrom while they have maximum purchasing power, the spent currency pools into deposit accounts and forms the base 'money' supply where the oligarchy of licensed lending institutions multiply it (via fractional reserve lending and duration transformation) into the higher order 'money' supply measures.  With the QE programs more base 'money' was emitted, basically in the form of rentenmarks as they are backed by the Fed's mortgage bond holdings.  The velocity of transfer of this currency is so low, it ends up back on deposit with the Fed in the form of excess bank reserves.  The Fed then emits more base 'money' as interest on these deposits.  This charade can continue until either a) loan demand by qualified borrowers picks up, drawing out the excess reserves, increasing the velocity of money, and accelerating the expansion of higher order monetary measures or b) foreign holders of u.s. currency decide to spend them back into the domestic economy on non-financial assets, forcing devaluation in the process, or c) demand for reform by those being reduced to penury by these monetary experiments.

Sat, 07/12/2014 - 18:36 | 4950921 TNTARG
TNTARG's picture

Please.

I don't thinl I need to explain the whole mechanism. FED, ECB and so on.

Is not that I'm standing for fiat money. I'm not statist either. But you, me and some other people (/S) are perfectly aware of what's going on and who runs the show.

 

Fri, 07/11/2014 - 21:19 | 4948999 Deer Hunter
Deer Hunter's picture

Washington will have to be a smoldering ruin for anything to change. All is well in my part of Texas. Go have some fun this weekend, all this shit can wait.

Fri, 07/11/2014 - 21:39 | 4949009 essence
essence's picture

Why should governments have absolute say in regards to currency.

Since governments are proven to be corrupt and subject to cronyism, why oh why should they be in control of public tender.

 

The very foundation to neutering government is to cut it's ties to issuing "money".

Secondary to that would be to limit its ability to tax (or implement tax deductions for cronies)

 

It's really that simple.

STARVE THE BEAST. That inhibits its warmongering abilities, its spying abilities, its evil doing abilities.

Deny government food till it has shrunk to a manageable size.

ESPECIALLY at a central, federal level.

 

Sat, 07/12/2014 - 08:41 | 4949637 withglee
withglee's picture

Why should governments have absolute say in regards to currency.

Why should they have any say? Presume they don't. Does something need to take their place? What is it?

Since governments are proven to be corrupt and subject to cronyism, why oh why should they be in control of public tender.

 They shouldn't. But I need something to trade with at the grocery store. What is it?

The very foundation to neutering government is to cut it's ties to issuing "money".

Fine. Consider it done. Now what? How do I buy my groceries?

Secondary to that would be to limit its ability to tax (or implement tax deductions for cronies)

Fine. Make government go away entirely. I still need a way to trade with my grocer. And he needs a way to trade with his suppliers. And that needs to be generally universal because I'm not capable of knowing and using a different way for all my trading partners. What is the way?

It's really that simple.

But not so simple as to go without saying ... so say what things look like after we get rid of government. That doesn't suggest I think we need government. It suggest we need something.

STARVE THE BEAST. That inhibits its warmongering abilities, its spying abilities, its evil doing abilities.

Agreed.

Deny government food till it has shrunk to a manageable size.

Agreed. Now, what is manageable size. What system automatically contains it to this size? Be specific. You have us jumping out of the frying pan ... what are we jumping into?

ESPECIALLY at a central, federal level.

Fine. Is a federal level needed at all? Is a state level? Is a county level? Is a municipal level? Tell me how the Mises monks see the world as they would have it work. After you're done tearing everything down, do things just work? Does something not need to be substituted? The government solution is always taken (usually as the first resort). Why is that if other ways are better?

Fri, 07/11/2014 - 21:46 | 4949056 withglee
withglee's picture

Against the background of this grim scenario, Polleit demanded a reform of the monetary system towards a market-oriented monetary order. This should include, inter alia, disempowering central banks and privatizing money supply.

Has any ever seen one of these Mises monks actually describe the system that solves these issues ... so someone could go out and build it?

Fri, 07/11/2014 - 22:00 | 4949092 voluntari
voluntari's picture

It seems you don't understand the concept of "freedom".  There does not need to be "Someone to go out and build it", in fact, that's the problem we have today - central planning.

The concept is to free people from coercion so that they can voluntarily interact and solve problems in ways that no central planner could ever devise.  Money is no exception.  Let the people work with eachother peacefully, voluntarily.  Discard your hubris in thinking that we need to solve the problem and force our "solution" on everyone.

Sat, 07/12/2014 - 08:26 | 4949624 withglee
withglee's picture

It seems you don't understand the concept of "freedom".  

I asked "what is the Mises monk solution". Use freedom if that is it. How does it work?

There does not need to be "Someone to go out and build it", in fact, that's the problem we have today - central planning.

When I go to work I need something in return that I can take to the grocery store and the gas station to trade. When I want to buy a house I need something to give the seller in exchange for 360 monthly payments. What is it?

The concept is to free people from coercion so that they can voluntarily interact and solve problems in ways that no central planner could ever devise.  Money is no exception.  Let the people work with each other peacefully, voluntarily.  Discard your hubris in thinking that we need to solve the problem and force our "solution" on everyone.

I just asked the question. Choose your own solution. Describe it to me. You don't need to force your solution but your solution must be very widely embraced or it is not a solution.

Now quit your avoiding and answer the question. What solution would you embrace? Don't tell me what it is "not". Tell me what it "is".

Fri, 07/11/2014 - 22:07 | 4949108 essence
essence's picture

I don't think you quite grasp it.
Remove government and let free market alternatives spring up.

(and yes, the real market interferences come when some wealthy asshole bribes congress to implement a law meant to "protect the public" via regulating markets)

Should you feel compelled to embrace a Goldman Sachs new currency, rest assured I won't attempt to dissuade you.
Instead I'll choose the best alternatives according to my own standards (and I don't want or need government guidance)

In other words, caveat emptor.
No need for a hijacked government interjecting itself between real life and personal growth.

 

 

 

Sat, 07/12/2014 - 08:21 | 4949621 withglee
withglee's picture

 

I don't think you quite grasp it.

No. I don't. Enlighten me.

Remove government and let free market alternatives spring up.

Fine. You're part of the free market. When the government no longer clears checks, prints exchange media, protects against counterfeits (and of course no longer is the biggest counterfeiter) ... then what takes its place. When I go to the grocery store, how do I trade for my groceries? Asking this question doesn't suggest we need government. It just suggests something needs to take its place. What is that? How does it work? How is it guaranteed not to have the problems we now have with government? How does it become the universally accepted solution?

(and yes, the real market interferences come when some wealthy asshole bribes congress to implement a law meant to "protect the public" via regulating markets)

If you read history (I chose early Illinois), there was little government ... it was a frontier. But they had banks ... private local and regional banks. And those banks printed and loaned money ... privately. It was a real large mess. What were they doing wrong then without government. I agree, government should always be the last resort ... preferably no resort at all. But the solution "must" also be better than any government solution.

Should you feel compelled to embrace a Goldman Sachs new currency, rest assured I won't attempt to dissuade you.
 

Who said anything about Godman Sachs new currency? I sure didn't. I don't even know about it .. and neither does my next door neighbor.

Instead I'll choose the best alternatives according to my own standards (and I don't want or need government guidance)

Fine. What's the best alternative you see right now (Mises or otherwise). How will it be accepted by a large enough majority to prevail?

In other words, caveat emptor.

I agree. And seller beware as well. The government won't be protecting them when they cheat. That notwithstanding ... what is your process?

No need for a hijacked government interjecting itself between real life and personal growth.

But there is a need for something to trade at the grocery store and gas station and on the internet. What is it?

Fri, 07/11/2014 - 22:58 | 4949208 malek
malek's picture

No need to respond to this clown. (I reclassified him from "troll" to "clown" as in "bring in the clowns", similar to Krugman.)

http://www.zerohedge.com/news/2014-07-05/austrian-economics-vs-clueless-...

Sat, 07/12/2014 - 08:07 | 4949613 withglee
withglee's picture

Thanks for the reclassification. Now ... how about answering the question. What do the Mises monks have as an alternative to the totally corrupt, convoluted, and unfair financial system we now tolerate? It's a pretty simple question.

How about starting with the five most important bullet ponts ... in order of importance.

These replies are so typical of these Mises worshipping gernade lobbers.

Sat, 07/12/2014 - 15:23 | 4950450 malek
malek's picture

I'm not letting you get off framing the whole thing wrongly, so here is the correct question:

How do you ensure that the number and amounts of promises do not exceed what can ever be fulfilled, today or under reasonable assumptions in the future?

The only thing I hear from you is "but there is too little gold to back all promises", which is a weasel's argument in the style of "It can't be done" (see Atlas Shrugged.)

All  "counter-proposals" I ever heard from you (previous thread) are utter bullshit:
- certification: yeah sure, now you only have the unsolvable problem to find non-corruptible certifiers
- accept that interest is purely an insurance premium: this actually fully supports socializing any [major] losses, so you're fully in the Greenspan/Bernanke/Yellen camp and accountability/responsibility be damned
- actuarial's fault: this is a mirror image of the Greenspan/Rubin/Summers "derivatives spread the risk over more shoulders" which is a convenient lie to distract from the fact that "derivatives spread the risk onto shoulders which are least able to access the risk, and least able to bear the negative outcome." So you're in the Greenspan/Rubin/Summers camp and just pull a new strawman out of the hat: every investor/creditor/money-holder just has to be a perfect actuarial and then the system would work fine!

You're so full of shit it's beyond words, clown.

Sun, 07/13/2014 - 10:51 | 4952150 withglee
withglee's picture

I'm not letting you get off framing the whole thing wrongly, so here is the correct question:

How do you ensure that the number and amounts of promises do not exceed what can ever be fulfilled, today or under reasonable assumptions in the future?

You don't. You merely monitor defaults and collect like amount of interest. Every trading promise has an amount, a delivery schedule, and a time frame. All are finite. All are clearly documented. Failure in any aspect is a default. And just like in insurance where some risks are greater than others, in credit, some traders have a higher propensity to default than others. Responsible traders don't default. Irresponsible traders do. Responsible traders pay no interest. Irresponsible traders pay interest according to their propensity to default. It's and actuarial classification issue. And AAA is the discipline: A - Authentication; A - Authorization; A - Accounting. Those are the fundamental mechanisms needed.

The only thing I hear from you is "but there is too little gold to back all promises", which is a weasel's argument in the style of "It can't be done" (see Atlas Shrugged.)

And I hear nothing from you in return. It's not a weasel's argument ... it is the very real problem with your proposal to back trading promises with a commodity. Further, it, like BitCoin and the current management of the dollar and every other currency on earth, totally fails to understand what money is ... "a promise to complete a trade" ... and that money is created by traders ... not by money managers.

All  "counter-proposals" I ever heard from you (previous thread) are utter bullshit:
- certification: yeah sure, now you only have the unsolvable problem to find non-corruptible certifiers

Certification is done in the open. It is totally mechanical. It could be easily done by robots. It is public record. Once the certificates are in circulation they are private. But the traders who create them are in public view as long as their trading promise is in process of delivery. If they default, that is public knowledge ... immediately. And interest collections on new trading promises go up immediately (using actuarial techniques to assure fairness).

- accept that interest is purely an insurance premium: this actually fully supports socializing any [major] losses, so you're fully in the Greenspan/Bernanke/Yellen camp and accountability/responsibility be damned

As I have said many times, it is the "marketplace" that backs trades. The marketplace does this by collecting interest in like amount to defaults it must make good. Interest is not some abstract number that the "market will bear". It comes from defaults. In those monority cases where traders are too irresponsible for the marketplace, pawn shops and payday loan sharks are deadbeats only alternative.

- actuarial's fault: this is a mirror image of the Greenspan/Rubin/Summers "derivatives spread the risk over more shoulders" which is a convenient lie to distract from the fact that "derivatives spread the risk onto shoulders which are least able to access the risk, and least able to bear the negative outcome." So you're in the Greenspan/Rubin/Summers camp and just pull a new strawman out of the hat: every investor/creditor/money-holder just has to be a perfect actuarial and then the system would work fine!

Now what is all that nonsense about?

You're so full of shit it's beyond words, clown.

Fine. I've made my case. Now you make yours. What is you "workable" system?

Mon, 07/14/2014 - 00:22 | 4954538 malek
malek's picture

You made nothing, case or otherwise argument.

All [trading promise attributes] are finite.
Bullshit and you carefully avoid answering me:
You ignore that the number of promises is unlimited, which allows indefinite rollover, which allows evading detection of non-fulfillment until the whole system collapses at the same time into a heap.
As there might be cases where a rollover is warranted, you have no exact measuring stick to tell the traders doing "monitor defaults" when fulfillment has truly failed.

It's not a weasel's argument ... it is the very real problem with your proposal to back trading promises with a commodity.
I am awaiting you to offer a different option first, or declare once and for all that in your opinion promises can only be unbacked.
I don't need to prove anything, as we have a lot of commodities to choose from, the law of "demand and supply" sets its price (against unbacked promises that it is then used to back as collateral) so there can never be any too little here.
On the contrary, even though you sometimes sprinkle in that you believe that the financial system is FUBAR, all your argumentation is completely in line with what Greenspan/Bernanke/Yellen are/were doing so what exactly do you even dislike?

The marketplace does this by collecting interest in like amount to defaults it must make good.
I find you haven't even tried to refute the socialism [socializing losses, a/k/a the non-guilty pay for all defaults too] baked into that approach.
You might have heard that insurance never works if the insurance buyer hasn't a massive self-interest to not let the insured event happen. See also "Tragedy of the Commons."

every investor/creditor/money-holder just has to be a perfect actuarial
Now what is all that nonsense about?
Ohhh, the intellectual who knows all about money cannot follow my reasoning, which shows that your approach of redefining everything to just an "actuarial problem" doesn't magically make all problems go away, you only renamed it!

Sat, 07/12/2014 - 15:17 | 4949390 Radical Marijuana
Radical Marijuana's picture

I agreed with the comments above posted by jaxville and Againstthelie.

While this article was correct, as far as its analysis of the ways that the current monetary systems are enforced frauds, however, since it is written by a classical Austrian school proponent, its suggested solution is a non sequitur, because it never dealt with the deeper reasons how and why the established monetary systems became governments enforcing private bank frauds in the first place. My definition: money is measurement backed by murder. That is the only definition that includes enough of the features of how the real world actually operates to be an adequately comprehensive definition.

In my view, the people who are talking about "voluntary" or "free market" money are promoting impossible ideals. Indeed, almost all the people who proposed idealized "solutions" to having a better monetary system tend to deliberately ignore how there could be a better murder system to back up that better money system.

That governments are the biggest form of organized crime, controlled by the best organized gangs of criminals, did not happen by accident! Any realistic solutions should be based on addressing that central fact. Magical ideals about "voluntary contracts" and "free markets" tend to be goofy ways to avoid the paradoxical problems presented by any enforcement of some rule of law. But nevertheless, several other comments above promoted those notions that the "solutions" should be a series of political miracles, despite that they thereby simply side-step the ways that the production of destruction controls production.

Well, I too indulge in my own irrational hopes for a series of miracles. My wish is that human beings would develop better death control systems to back up better debt control systems. Of course, since the established systems are based on the maximum possible deceits and frauds, what I am proposing currently sounds just as silly as all the other notions promoted in the last paragraph of the article above, as well as in several previous comments.

However, what I am saying is the only theoretically sufficient solution, which actually stays consistent with its analysis of the nature of the problem: SINCE MONEY IS MEASUREMENT BACKED BY MURDER, THERE CAN BE NO BETTER MONETARY SYSTEMS WITHOUT BETTER MURDER SYSTEMS TO BACK THEM UP. Anything else is based on deliberately ignoring the deeper nature of the problems how and why we ended up with globalized electronic fiat money frauds, backed up by the threat of force of governments that have atomic bombs.

Simple human history, in a nutshell:

Successful war was based on deceit.

War Kings created sovereign states.

Fraud Kings captured state powers.

I think that a realistic view of money being necessarily backed by murder then also is more realistically able to address the limits to growth on a finite planet, which was another of the good points made above. Money made out of nothing, and which can disappear back to nothing, can not be reconciled in any straightforward ways with how natural systems operate. Money based on energy is a good idea. (As recommended by VWAndy above.) However, deeper understanding of general energy systems, including a radical critique of the concept of entropy, are necessary before money backed by energy becomes good enough to work, because after one does that, then it becomes clearer how and why the ways that human civilizations operate as general energy systems is best described as operating according to the methods and principles of organized crime.

War was organized crime on a larger scale, and that is what created governments, with their assertions of sovereign powers. Then, the best organized gang of criminals, the biggest gangsters, the banksters, were able to apply the methods of organized crime to effectively control governments, so that systems of legalized lies, backed by legalized violence were created, with the enforced frauds of the monetary system as the most obvious of those, as was correctly presented in the article above's analysis.

Warfare was the oldest and best developed social science, but that was a paradoxical science because its social success depended upon deceits. Economics is a science like warfare, which is demonstrated by how financial affairs became fundamentally based on enforced frauds. Taking the perspective of a radical critique of how general energy systems manifest through human beings, it is seen that all human realities are always organized lies, operating robberies. The only things which exist are dynamic equilibria between the different systems of those organized lies operating robberies. All private property exists in that way, as claims backed by coercions, as well as does money, as the most abstract form of private property, which is measurement backed by murder.

The combined murder/money systems that exist today have a long history regarding how those enforced frauds developed, and why. The debt controls depend upon the death controls. The fiat money, primarily created out of nothing as debts, by a variety of mostly private banks, only has value because governments use their power to force people to pay their taxes with that form of money, as well as generally enforce legal tender laws.

The international banksters were able to capture control over governments, resulting in the established systems of legalized lies, backed by legalized violence, because those banksters were applying the methods of organized crime, such as bribery, intimidation, as well as assassination of those who could not otherwise be bribed or intimidated. The private banks are allowed to issue the public money supply made out of nothing as debts because those private banksters were collectively a gang of trillionaire mass murderers, able to operate as the pyramidion people, at the top of a social pyramid system, based on backing up lies with violence that evolved throughout the history of Neolithic Civilization, whereby there was the history of warfare, and economics, to make the real world systems that surround us today.

The value of the fiat money flows from its measurements being backed by murder, with the pyramidion people in the social pyramid systems being the ones who were best at applying the methods of organized crime, in order to dominate those pyramid systems, with the most important of murders being the assassination of politicians that could not otherwise be bribed or intimidated. The banksters are the SOURCE of the public money supply because they were the actual SOURCE of the murders, and other methods of organized crime, that actually controlled governments, which were thereby dominated and directed to apply the rest of the public murder systems' "rule of law," as overall (legalized) organized crimes, against the People. While the People are supposed to be able to control "their" government, in fact, the best organized criminals have captured control over governments, so much, for so long, that the sovereign powers over the public money supply have been almost 99% privatized.

Since the real history of money is the history of measurements backed by murders, the future of the monetary system can not get outside of that situation. The best approach is to understand how money operates inside of general energy systems, which become, in human terms, the manifestation of the methods of organized crime. Given that the established systems, and their controlled opposition groups, are used to operating through the maximum possible deceits and frauds about those facts, what I am suggesting does not have much practical political possibility, but nevertheless, there is theoretically nothing less that is sufficient to comprehend how and why the current fiat money systems are enforced frauds that fantastically benefit the biggest banks and their buddies.

Thereafter, it follows that any genuinely better resolutions to the ways that established monetary systems are fundamentally fraudulent, yet enforced by governments, SHOULD remain consistent with more realistic ideas about the nature of that problem, as I have outlined above. A better monetary system SHOULD be integrated into an expression of how natural selection becomes artificial selection, when energy flows through human beings. The goals of such better systems are to develop better evolutionary ecologies, for human beings, industry, and the natural world. The impending limits to growth on a finite planet are making that become more imperative every day, because the old-fashioned systems of organized lies, operating robberies, are being driven grossly out of balance!

Sat, 07/12/2014 - 05:05 | 4949541 Aussiekiwi
Aussiekiwi's picture

I don't buy it, how could printing unlimited cash cause a problem, everyone just gets richer right?

Sat, 07/12/2014 - 09:27 | 4949691 Obamanism
Obamanism's picture

Do you feel richer? If you do I have this beach front property in Arizona I am selling.

Sat, 07/12/2014 - 09:33 | 4949696 Obamanism
Obamanism's picture

Money printing is the Feds way of  a distraction. It is all about low interest rates. Low interest rates makes it impossible for your savings to earn. Then when you control the inflation figures and lie about inflation being low, this is done to make people comfortable with the said low interest rates. So you figure out it is no good having savings and it is better to buy stuff, the Keynesian trap is sprung.

Sat, 07/12/2014 - 13:25 | 4950079 VWAndy
VWAndy's picture

One feature of energy backed coin is the ability to be accuratly measured. A true value brings accountability to the monetary system. All fiat is simply a means to avoid true values of anything. Thus masking the fraud.

 Now that said. We are going to have to make some assumptions about an energy backed coin because its never been done. The idea of a fixed value should bring stability in not only price but actual value. Any way you slice it energy has a value. Entropy could be one of the better features of an energy coin. Energy does not go away it changes state with some loss. This should keep the real values of goods more stable because these thing are not changing what they are. An anvil will still be an anvil next year. Thus protecting the real value of the things we posses over the longer time frame.

 The trick as I see it is going to be in how the trading coin is created. Production based seams the best way. 

 Another aspect that energy coin does better is scale. Its the only thing that scales well up or down over time.

Sat, 07/12/2014 - 15:31 | 4950475 Radical Marijuana
Radical Marijuana's picture

Energy backed money is a better idea than commodity backed money, because matter is a form of energy. However, the deeper problems with energy backed money are that those take understanding how general energy systems operate through human beings. Energy backed money is the best theoretical way to try to connect money to the natural world. However, the "truth standard" inherent in such a form of money, due to the principle of the conservation of energy, would also have to understand the concept of entropy in radically different ways, in order to become more workable. (As I outlined in my comment above.)

Sat, 07/12/2014 - 17:46 | 4950806 VWAndy
VWAndy's picture

Dont get me wrong. Any medium of exchange is going to have issues. So far as I can tell the energy coin fits with the real world most closely.

The ability to be measured. Thats big because money is a measurement.

The scaleability is not an issue. That also matters.

Decentralized should tend to balance? As its real value is discovered.

Anyone can collect energy. Infinitly without upsetting anything.

When put next to a commodity its value is real and fairly stable.

Backing money by murder assures there will be lots of murders. Take that need away, who knows?

Mon, 07/14/2014 - 03:41 | 4954685 GoldIsMoney
GoldIsMoney's picture

It's very unfortunate that most to not understand the core problem. The core problem is not interest, the core problem is that states and banks can and do generate "money" out of nothing and second that states to allow banks to lend sight-deposits and that banks to not even have to have the money they land but just "fractions".

It would help if you really would understand the massive defraud. It would really help if you understand that one can not have the money on one's account and that this is lended the same time. It's so simply, but to many here are too blind to see.

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