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Snarky Sack
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Re: The Return to the Gold Standard
Reply #50 - Sep 7th, 2018 at 3:06pm
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Jeff wrote on Sep 5th, 2018 at 4:02pm:
If you have any real evidence of your claim that power hungry statists created and ratified the Constitution, please present it, thanks.

At least try to make a reasoned argument in support of your claim...


The word power appears seventeen times in the U.S. Constitution, not counting amendments.  I deduct one time when it referred to "foreign powers, but the other sixteen are about claiming power for the federal government.

The word state appears 219 times.  One time refers to "foreign states" so that 218 times the constitution strengthens the power of states or organizes the power of states. 

So, can you tell me why you don't think there should be a limit on the amount any one individual has to pay for taxes? Why do you favor unlimited taxes?

  

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Jeff
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Re: The Return to the Gold Standard
Reply #51 - Sep 7th, 2018 at 4:44pm
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Snarky Sack wrote on Sep 7th, 2018 at 3:06pm:
The word power appears seventeen times in the U.S. Constitution, not counting amendments.
Do you have a point, or not?

Do you object to every power that was granted by the Constitution?

Yes, you do.

You're in idiot anarchist who, like most of you, is incapable of making rational arguments to support your beliefs.

  
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Andrew_Armao
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Re: The Return to the Gold Standard
Reply #52 - Sep 9th, 2018 at 3:22am
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Snarky Sack wrote on Sep 7th, 2018 at 3:06pm:
The word power appears seventeen times in the U.S. Constitution, not counting amendments.  I deduct one time when it referred to "foreign powers, but the other sixteen are about claiming power for the federal government.

The word state appears 219 times.  One time refers to "foreign states" so that 218 times the constitution strengthens the power of states or organizes the power of states. 

So, can you tell me why you don't think there should be a limit on the amount any one individual has to pay for taxes? Why do you favor unlimited taxes?



I dont agree with everything, but excellent points SnarkySack. I believe people of a razor sharp intellect should be running this country. I have disagreements with Jeff, but I agree with him on the Gold Standard.

The government shouldn't dictate what our work value is to be determined by, but it should exist, I believe, as a supportive to protect small government ideas; it solidifies the currency for a country that defends Libertarian ideas.

In the future we want, I see it as a great thing. We shouldn't look at America as something that isn't ours, WE NEED TO TAKE IT!
  

Andrew J Armao
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Jeff
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Re: The Return to the Gold Standard
Reply #53 - Sep 9th, 2018 at 8:57am
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Andrew_Armao wrote on Sep 9th, 2018 at 3:22am:
I dont agree with everything, but excellent points SnarkySack. I believe people of a razor sharp intellect should be running this country.
I prefer the libertarian idea that a limited representative government with divided powers should be protecting people's rights and lives and property and leaving them otherwise alone to run their own lives and create the sorts of societies they prefer.

History is full of instances of really smart people tyrannizing and destroying nations, and there is lots of convincing scholarship in the field of political economy showing that it's simply not possible for any person or group of people to intentionally control and guide a national economy or "run a country" with any degree of success...

Sometimes there is an appearance of success in the short term, but there are always enough distortions and misallocations and mistakes from the "leaders" to make failure in the long term certain, and the failures are usually spectacular, like Venezuela or the Soviet Union.




  
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BobK71
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Re: The Return to the Gold Standard
Reply #54 - Sep 10th, 2018 at 10:45am
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Jeff wrote on Sep 4th, 2018 at 8:57am:
Notes that are actually redeemable in gold or silver don't earn any interest either if you hide them under you mattress, but if you deposit either with a bank, they will pay you interest, or if you use either of them to buy a CD, it will pay you interest, or if you buy preferred stocks that pay interest... You get it.

Banks use fractional reserve systems so they can earn money on deposits by loaning out part of what has been deposited with them. If a bank can't loan the money you deposit with them to earn money, they can't pay you any interest.

Governments are not banks and should not operate like banks, but an honest government can do good for people by printing redeemable gold and silver certificates for convenience.

Where the problems start is when dishonest governments start printing more notes than they can redeem in order to try to do good things (or bad things) under the discredited theories of Lord Keynes.

A dishonest or reckless bank can cause it's issued notes to lose value and become worthless, and the bank can (and should) fail because of that.

A dishonest or reckless government that starts operating like a bank and issuing more notes than it can redeem can cause a national currency to lose value and become worthless, and an entire national economy can fail because of it.

Honest government issued money (which to me means they can redeem all of it), free banks (which means unregulated and not protected by governments) and a free economy will produce the best results.

If a government wants to borrow money for a social engineering project like the New Deal or the Great Society, let them try to borrow the money from free private banks... The same for wars.

In the case of social engineering projects, it would be entirely better to require that taxes be raised to pay for them in real time with no borrowing allowed.

In time of a war that was an existential threat to the nation,  I'd be inclined to advocate raising taxes first, borrowing from private banks and citizens second,  and, if necessary, issuing more redeemable U.S. notes than could actually be redeemed (on a temporary basis), with the understanding that if the nation survived, taxes would be raised to redeem the extra notes as soon as possible.

People always want to redeem the notes they hold for gold and silver during economic corrections, which, under a good system of free banking, causes reckless and dishonest banks to go out of business, which is a necessary thing for the health of an economy, just as it's necessary to have poorly run or dishonest businesses go out of business.

That's what economic corrections do if Keynesians will let them, they punish speculators and bad businessmen with economic losses and divert the resources those speculators and bad businesspeople were using to better uses.


Thanks, I agree with a lot of your thinking.

The ultimate source of problems is the use of government power/credibility to distort or manipulate financial markets.  Public borrowing, in any form, does that by definition.

'Honest' government would be great.  The trouble is, who among voters have the time to study finance and determine what policies are honest?  Who can make sure governments stop indirectly backing banks with state power?

So I think a blanket prohibition for government to get into money or finance is best.  Alas, even a government promise to pay a supplier 2 weeks later is in effect creating a financial asset (ie the promise, in whatever form) and a market distortion, and such distortions can be expanded to benefit the elites, if allowed in principle.

What we need is a constitutional amendment saying the government MUST renege on all financial promises.  This will drive every private party to demand cash from the government in any transaction.  This is the only way that will align the incentives of all parties in the interest of financial health and real economic growth.
  
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BobK71
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Re: The Return to the Gold Standard
Reply #55 - Sep 10th, 2018 at 10:55am
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I wrote: "Under a gold standard, encouraging both physical gold (coins) and paper money (redeemable for physical gold at a fixed rate) to circulate allows the elites to receive extra power and wealth from issuing paper."

SkyChief wrote on Sep 4th, 2018 at 9:53am:
Gresham's Law...  Bad money always drives out good money.


Right, under 'normal' conditions, the paper is as good as the gold, as it's redeemable at the fixed rate for the same amount of gold.  As soon as confidence is shaken to any degree in the issuer's ability to redeem, the paper becomes 'bad money' and Gresham's Law is activated.  Gold coins disappear from circulation, as history books will tell us.

The entire system hinges on the ability of the elites to maintain what is effectively a bubble in the paper.
  
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BobK71
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Re: The Return to the Gold Standard
Reply #56 - Sep 11th, 2018 at 8:53am
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Snarky Sack wrote on Sep 4th, 2018 at 9:24am:
  Almost the same with government.  Government has the power to require that its worthless notes be accepted, so it isn't exactly the same. 

I guess no one sees this but me?  The reason that government would resist strongly the idea of giving actual gold coins and would prefer to issue gold-backed notes and keep the gold in storage is "just in case."

Just in case of what?

Just in case the government "needs" that gold for something else besides backing the currency.  During WWII, other countries sent a lot of gold to the U.S. in  exchange for war materials.  Why didn't the U.S. government just accept paper notes?  It knew better.

But it hopes that the citizens of the U.S. don't know better and clearly many of us don't.  Issuing gold-backed notes instead of gold still relies on our trusting the government that the notes really are gold-backed.  If the U.S. should provoke another country into attacking us, and needs to start buying weapons on the international market, gold will be the best way to get them.  So they will switch back to fiat money, institute severe penalties for "unpatriotic" Americans who question it and we'll be right back to where we are now.

I'm always amazed at how many libertarians trust government.  Especially that they trust government to not do exactly what they always have done:  debase currency to pay for government programs through the hidden tax of inflation.


There's also the imperial hierarchy.  During American hegemony, Europe sacrifices for America, not the other way round.  So if the US demanded payment in gold for weapons, it still remains to be seen if America will be able to pay in dollars if it needs to buy weapons.  (But I think the US elites need the US gold reserves for other, equally important contingencies.)

I totally agree with you with regard to inflation, but the system works through both inflation and deflation.  (Thomas Jefferson said as much -- there is a member of the elites you can almost trust!)  From the elites' point of view, crash-and-deflation is unavoidable, beneficial, and profitable in its own way, at the same time.

Unless you want to use so much state intervention that you permanently and severely weaken your cash cow, the real economy, you have to allow a crash to occur, at some point during the asset inflation.  It cleans out the bad debt and enables the economy to start afresh.  At the same time, you can benefit if you pick up real assets cheap when everyone is starved of cash.

The interaction between deflation and non-state monies is interesting but probably needs its own chapter.  The pure deflation after financial busts, that the elites were able to pull over the centuries, was not good for holders of non-state monies, at least in the UK and the US.  However, in the more modern West the public has bravely and wisely stood up for itself against this play, to some extent, by refusing to be the only victim of busts.  The first occurrence of this was the devaluation of the dollar against gold during the Great Depression, and this is now an established pattern.
  
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Jeff
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Re: The Return to the Gold Standard
Reply #57 - Sep 11th, 2018 at 10:23am
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BobK71 wrote on Sep 10th, 2018 at 10:55am:
I wrote: "Under a gold standard, encouraging both physical gold (coins) and paper money (redeemable for physical gold at a fixed rate) to circulate allows the elites to receive extra power and wealth from issuing paper."


Right, under 'normal' conditions, the paper is as good as the gold, as it's redeemable at the fixed rate for the same amount of gold.  As soon as confidence is shaken to any degree in the issuer's ability to redeem, the paper becomes 'bad money' and Gresham's Law is activated.  Gold coins disappear from circulation, as history books will tell us.

The entire system hinges on the ability of the elites to maintain what is effectively a bubble in the paper.
"Legal tender" laws are what allow bad money to drive out good money.
  
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Jeff
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Re: The Return to the Gold Standard
Reply #58 - Sep 11th, 2018 at 10:39am
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BobK71 wrote on Sep 11th, 2018 at 8:53am:
There's also the imperial hierarchy.  During American hegemony, Europe sacrifices for America, not the other way round.  So if the US demanded payment in gold for weapons, it still remains to be seen if America will be able to pay in dollars if it needs to buy weapons.  (But I think the US elites need the US gold reserves for other, equally important contingencies.)

I totally agree with you with regard to inflation, but the system works through both inflation and deflation.  (Thomas Jefferson said as much -- there is a member of the elites you can almost trust!)  From the elites' point of view, crash-and-deflation is unavoidable, beneficial, and profitable in its own way, at the same time.

Unless you want to use so much state intervention that you permanently and severely weaken your cash cow, the real economy, you have to allow a crash to occur, at some point during the asset inflation.  It cleans out the bad debt and enables the economy to start afresh.  At the same time, you can benefit if you pick up real assets cheap when everyone is starved of cash.

The interaction between deflation and non-state monies is interesting but probably needs its own chapter.  The pure deflation after financial busts, that the elites were able to pull over the centuries, was not good for holders of non-state monies, at least in the UK and the US.  However, in the more modern West the public has bravely and wisely stood up for itself against this play, to some extent, by refusing to be the only victim of busts.  The first occurrence of this was the devaluation of the dollar against gold during the Great Depression, and this is now an established pattern.
Has any government ever deflated the supply of it's fiat money?

Prices fall because of innovation and improved technology. That's a good thing. Prices fall because of increases in the supply of goods or services. That's a natural part of a free market, and the market adjusts, not painlessly or immediately, but naturally. Some farmers are bound to get in financial trouble if they plant all their acreage in one crop, and so do a lot of other farmers. Perhaps they are anticipating that the price of the particular crop will be high, but because lots of other farmers thought the same thing, the price goes down. That's a natural thing too. Speculating about future markets can be risky as well as highly profitable.

If the supply of money is constrained, a growing economy will cause prices in general to fall in the inverse of the way inflating the money supply causes prices to rise. That's just another natural thing that free markets will adjust for.

Since economies don't suddenly double in size, the process of generally falling prices due to a constrained supply of money is gradual, and people adjust. Some people will suffer financially, but some people will suffer financially no matter what happens.

Madison expressed the real problem of both "regulation" and government control of the supply of money and finance well.

Federalist No. 62: Madison
           "Another effect of public instability is the unreasonable advantage it gives to the sagacious, the enterprising, and the moneyed few over the industrious and uninformed mass of the people. Every new regulation concerning commerce or revenue, or in any manner affecting the value of the different species of property, presents a new harvest to those who watch the change, and can trace the consequences; a harvest, reared not by themselves, but by the toils and cares of the great body of their fellow-citizens. This is a state of things in which it may be said with some truth that laws are made for the few, not for the many."

           "What prudent merchant will hazard his fortunes in any new branch of commerce when he knows not but that his plans may be rendered unlawful before they can be executed? What farmer or manufacturer will lay himself out for the encouragement given to any particular cultivation or establishment, where he can have no assurance that his preparatory labors and advances will not render him a victim to an inconstant government?"



  
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BobK71
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Re: The Return to the Gold Standard
Reply #59 - Sep 12th, 2018 at 8:34am
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Jeff wrote on Sep 11th, 2018 at 10:23am:
"Legal tender" laws are what allow bad money to drive out good money.


In the context of Gresham's Law, there is a very specific definition of good and bad money.  Bad money is that which is overvalued by the state's intervention in the monetary market, and good money is what is undervalued.

Even when the state doesn't apply fixed state-money-units to precious metals like it did during the first few centuries of the modern period, 'good' vs 'bad' money is still a useful concept.  For example, gold is really a good money and dollars bad money when the central and bullion banks manipulate the dollar price of gold down.  It's just that many people get fooled into selling their gold for $1200/oz. because gold prices are now flexible and made to look like they always go down.

Legal tender laws are one of the tools to prop up bad money.  Another big one is having developing-country central banks peg their currencies cheap against the dollar, in effect if not explicitly.  The 'cheap' labor of the developing country effectively becomes the gold that backs the dollar.  (If you dollars can 'always' buy clothes/gold cheap, you have confidence in them.)

Now there's a reason why we must always have wars to keep all regimes in line!
  
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