DEFLATION: HOW TO SURVIVE IT
By Elliott Wave International
Telegraph.go.uk, May 26: “US money supply plunges at 1930s pace… The M3 money supply in the U.S. is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history.”
Deflation is suddenly in the news again. It’s a good moment to catch up on a few definitions, as well as strategies on how to beat this rare economic condition.
And who better to ask than EWI’s president Robert Prechter? He predicted the first wave of deflation in the 2007-2009 “credit crunch” and has written on this topic extensively.
We’ve put together a great free resource for our Club EWI members: a 63-page “Deflation Survival Guide eBook,” Prechter’s most important deflation essays. Enjoy this excerpt.
What Makes Deflation Likely Today?
Bob Prechter, Deflation Survival Guide, free Club EWI eBook
Following the Great Depression, the Fed and the U.S. government embarked on a program…both of increasing the creation of new money and credit and of fostering the confidence of lenders and borrowers so as to facilitate the expansion of credit. These policies both accommodated and encouraged the expansionary trend of the ’Teens and 1920s, which ended in bust, and the far larger expansionary trend that began in 1932 and which has accelerated over the past half-century. Other governments and central banks have followed similar policies. The International Monetary Fund, the World Bank and similar institutions, funded mostly by the U.S. taxpayer, have extended immense credit around the globe.
Their policies have supported nearly continuous worldwide inflation, particularly over the past thirty years. As a result, the global financial system is gorged with non-self-liquidating credit. Conventional economists excuse and praise this system under the erroneous belief that expanding money and credit promotes economic growth, which is terribly false. It appears to do so for a while, but in the long run, the swollen mass of debt collapses of its own weight, which is deflation, and destroys the economy. A devastated economy, moreover, encourages radical politics, which is even worse.
The value of credit that has been extended worldwide is unprecedented. Worse, most of this debt is the non-self-liquidating type. Much of it comprises loans to governments, investment loans for buying stock and real estate, and loans for everyday consumer items and services, none of which has any production tied to it. Even a lot of corporate debt is non-self-liquidating, since so much of corporate activity these days is related to finance rather than production.
Figure 11-5 is a stunning picture of the credit expansion of wave V of the 1920s (beginning the year that Congress authorized the Fed), which ended in a bust, and of wave V in the 1980s-1990s, which is even bigger.
…it has been the biggest credit expansion in history by a huge margin. Coextensively, not only is there a threat of deflation, but there is also the threat of the biggest deflation in history by a huge margin. …
“Conventional economists excuse and praise this system under the erroneous belief that expanding money and credit promotes economic growth, which is terribly false. It appears to do so for a while, but in the long run, the swollen mass of debt collapses of its own weight, which is deflation, and destroys the economy.” Robert Prechter
A priori moral arguments against counterfeiting should have been a big hint. I suggest that reform be based on moral principles such as liberty, equal protection under the law etc. rather than amoral economic arguments. We see where that has gotten US, don’t we?
Marxism? Socialism? Thats where you might be going though you don’t realize it.
Stick with buyer beware. That is the only true liberty. Liberty is about making mistakes, not trying to find a system to prevent them.
“That is the only true liberty. Liberty is about making mistakes, not trying to find a system to prevent them.” J Dukate
Please tell me wherein liberty lies in government backed fractional reserve banking in a government enforced monopoly money supply?
As for being a Marxist, I am a radical libertarian who seeks to be free from the government backed counterfeiting cartel, the warmongers, the busybodies and everyone else who seeks to use government to loot or control their fellow citizens.
“Please tell me wherein liberty lies in government backed fractional reserve banking in a government enforced monopoly money supply?”
Very simple the decision to lend or borrow is the Freedom of the individual. And despite the injection of money into the banking system this liberty to NOT lend and NOT borrow is what we are witnessing. Excess smacked down by Adam Smith’s invisible hand. The Fed CANNOT force the banks or the borrowers to do something they choose not. That is LIBERTY.
And when it comes to ‘debt’ forgiveness as you preach. Printing money is how it is done. You seem to be supporting something you oppose or else you truly don’t understand the monetary system. Logical?
“And when it comes to ‘debt’ forgiveness as you preach. Printing money is how it is done. You seem to be supporting something you oppose or else you truly don’t understand the monetary system. Logical?” J Dukate
I support a bailout of debtors and savers using newly created debt-free legal tender fiat. After that, then fundamental liberty in money creation. To summarize, justice then liberty.
“I support a bailout of debtors and savers using newly created debt-free legal tender fiat.”
There is no such thing as “debt” free legal tender. No matter what item you decide to use within a capitalistic(exchange of goods) system. Be it paper, shells, or gold. The item you choose as a tender within the sytem of exchange is given in exchange for an item produced. I produce a TV, you hand me a bar of gold. The item(tender) then acts as a mean to re-exchange back. You produce a bundle of corn and I give you the gold back. The only way you can create “debt” free tender is if you have a system of goods to goods exchange and that would be taking us back several 1000 years when a barter system was in place and would take us back to hunters and gathers. That system would total annilate techonological advancement in the human race.
You might be a radical libertarian at heart. You are obviously well grounded in moral principles. But the idealogy of a debt free legal tender, or a sytem that can prevent excess is a very utopianistic belief. Smith’s philosophy accepts the fact that any system involving the exchange of goods WILL eventually produce some form of excess. And that only regression can reset these excesses. Smith’s principles are infallible because the accept the excess fallacy.
It’s not ‘buyer don’t worry’ its ‘buyer beware’. To realize that the individual or governemnts decision to spend, go to war, promise services etc comes with an economic ‘risk’. That is the greatest econmic principle of all. Trying to eliminate ‘risk’ will only fail over time.
FYI: Smith’s economic principles were grounded on Biblical writings, but not the principles of ‘fairness’ but the effects and punisments of ‘excess’.
“There is no such thing as “debt” free legal tender. No matter what item you decide to use within a capitalistic(exchange of goods) system. ” J Dukate
The value of government money is its ability to be used to pay government taxes and fees. So if you insist, the “debt” is one’s tax obligations or desire to use government services. Also, debt is nominally denominated. It can thus be paid down with new legal tender fiat. Too bad for the banks in real terms but poetic justice, I say.
“But the idealogy of a debt free legal tender, or a sytem that can prevent excess is a very utopianistic belief. ”
Please don’t put words in my mouth. I propose a ONE-TIME reset of an obviously crooked and unstable system which has been empowered by government. A government bailout is thus justified.
But lets down to brass tacks, shall we?
A one-time distribution of legal tender fiat would:
1. bailout the debtors.
2. compensate savers for years of suppressed interest rates.
3. fix the banks in nominal terms.
4. fix state government revenue problems.
Can we keep bailing out the victims? Well, we must as long as we have a system that victimizes people. Allow true liberty and the need for compensation and bailout will disappear, morally speaking. I’d bet it would also disappear practically speaking since the current system not only loots wealth, it destroys it.
Outside the known fact that the Fed printed a larger than usual amount of money here are some fact to consider.
1) The idea that the US governement as a whole is continuing to expand fiscal stimulus is not totally correct and can actually be viewed as a irrational belief. Local government spending vs federal spending are running opposite!!
Chart of the Week:
http://voices.washingtonpost.com/ezra-klein/2010/06/america_does_not_have_an_expan.html
2) Despite the printing of money CREDIT is NOT expanding and is actually tightening. Just look at the rates on consumer credit cards. Rates aren’t going down to accomodate the consumer. Rates are going UP to punish the consumer!!
As far as needing a new form of moral principle with regards to monetary/credit expansion, I’m not sure I can forsee any principle that will make any difference and lead us to a utopian economic existence, Adam Smith’s economic theory that the ‘invisible hand’ will correct excess in my opinion still ranks as the #1 principle. Progression/Regression is te only principle we should live by. We are living in a era where Smith’s principle will be proven infallible. Why ‘attempt’ to change a principle under the guise that a new principle will make a difference? That would simply be a joke waiting for the next punchline.
“We are living in a era where Smith’s principle will be proven infallible. ” J Dukate
We are leaving in a era where debt forgiveness in nominal terms is the solution (Deuteronomy 15:1, Leviticus 25). Since you mention infallible, I’ll take Moses over Adam Smith any day.
Ahh yes, the pricinciples of Mose were soooo perfect that the Jews eventually evolved into money hoarding rabbis in cohort with the Roman Empire and ended up crucified this fellow named Jesus who opposed the inevidble evolution of those who believe in a ‘perfect’ system such as yourelf. Sorry Beard, Adam Smith’s principle can even be applied to Mose’s utopian principles and the results they eventually lead to.
Biblical lending standards eh Beard. Lets see how logical the Bible is when it comes to economics…
(0% interest rate)
Deuteronoomy 23:19 “Thou shall not upon ushry to thy brother”
(7 years release of reckless borrowing forgiven)
Deuteronomy 15:1-3 “At the end of every seven years you shall grant a release of debts. And this is the form of the release: Every creditor who has lent anything to his neighbor shall release it; he shall not require it of his neighbor or his brother, because it is called the LORD’S release. Of a foreigner you may require it; but you shall give up your claim to what is owed by your brother . . . ”
I’ll take Smith over Mose ANY DAY.
Let’s just have liberty in money creation, usage and acceptance and we’ll see who understands economics better, eh? Until the government backed counterfeiting cartel is abolished it is a mute point, however.
If you defend the current system, just say so.
Let’s just have liberty in money creation, usage and acceptance and we’ll see who understands economics better, eh?
Enough already. If you really believe that, then do something about it and go start your own currency. (And when it fails, perhaps you’ll figure out then why your panacea isn’t one.)
“Enough already. If you really believe that, then do something about it and go start your own currency. ” Angry MBA
Many would love to but there is the little matter of the IRS, legal tender laws, the capital gains tax on potential alternative monies including gold, silver and my favorite, common stock, the FDIC which back deposits of FRNs and probably some other barriers the banksters have erected.
“(And when it fails, perhaps you’ll figure out then why your panacea isn’t one.)” Angry MBA
Let’s have liberty and see, shall we? I doubt I have all the answers but I doubt even more that the government backed banking cartel does either.
You keep blaming the fractional reserve system, but that’s not the problem. A big part of the problem with the US economy today is that we have a banking system that is too large, steals our brightest minds and makes money by raping its customers. That can be fixed through regulation and allowing the capitalist market to let the losers lose. I still believe both will occur with time. But govt is obviously getting in the way.
The monetary system is not the problem here. Though the man running it (Bernanke) clearly doesn’t completely understand how it works so he implements solutions which result in a lackluster recovery….
The system works though. 75 years prove that. Most of the people who decry the system (most of whom have benefited from the system enormously) are essentially arguing that the west coast offense doesn’t work because the coach and the owner changed the way they implement it….That’s just not true.
“You keep blaming the fractional reserve system, but that’s not the problem” TPC
No, I blame government privilege for the banking cartel. Let bankers practice FRL all they want but not in a government backed cartel in a government enforced monopoly money supply. I believe in a free market with checks and balances. Where are those checks and balances with regard to banking and money? Is a world wide depression a check and balance? Sure, it might work if we avoid Great Depression II and WWIII. Then what? Peace and prosperity till GD III and WWIV?
“The system works though. 75 years prove that. Most of the people who decry the system (most of whom have benefited from the system enormously) are essentially arguing that the west coast offense doesn’t work because the coach and the owner changed the way they implement it….That’s just not true.” TPC
We’ve had the boom-bust cycle since central banking was invented. The last Great Depression led to WWII and 50-86 million killed. It is time to see if the free market can do better. I’d bet everything but my soul that it can.
Many would love to but there is the little matter of the IRS, legal tender laws, the capital gains tax on potential alternative monies including gold, silver and my favorite, common stock, the FDIC which back deposits of FRNs and probably some other barriers the banksters have erected.
Nothing is stopping you from bartering and using private exchange systems. All you are doing is making excuses for your failure to act, and your unwillingness to accept that almost no one in successful market economies would want this sort of thing.
Let’s have liberty and see, shall we?
You’re just whining for the sake of it. Stop acting as if the government is depriving you of something. If you haven’t figured out how to make money, then stop complaining about how it’s everyone else’s fault, and go figure out how to make it.
The root issue here isn’t about money, but one of personal responsibility and your failure to accept some for yourself. Go be productive, and stop praying for hoarding to be a salvation that can offset the fact that you aren’t as well rewarded for your output as you’d like. If you prefer assets to cash, then go make more cash and convert that cash into assets — voila, problem solved.
“Nothing is stopping you from bartering and using private exchange systems. All you are doing is making excuses for your failure to act, and your unwillingness to accept that almost no one in successful market economies would want this sort of thing.” Angry MBA
Oh, so people are to be reduced to bartering so you won’t have to give up your government backed monopoly on money? Now I’m getting angry.
“Let’s have liberty and see, shall we?” FB
“You’re just whining for the sake of it. Stop acting as if the government is depriving you of something. If you haven’t figured out how to make money, then stop complaining about how it’s everyone else’s fault, and go figure out how to make it.” Angry MBA
Oh, so I should stop complaining and join the looting squad? No thanks, I don’t blame others who do so since we all must eat but I have enough.
“The root issue here isn’t about money, but one of personal responsibility and your failure to accept some for yourself.”
Oh, so I caused a world wide depression? Sorry, maybe I should go mow lawns to fix the situation?
“Go be productive, and stop praying for hoarding to be a salvation that can offset the fact that you aren’t as well rewarded for your output as you’d like.”
So its all about me, eh? Actually, I am content enough but I see the world about to disintegrate. Should I care? You tell me.
“If you prefer assets to cash, then go make more cash and convert that cash into assets — voila, problem solved.” Angry MBA
Really? But don’t assets suffer in a deflating economy too?
What a load of crap. I am so tired of this libertarian crap. It all sounds great in theory but is totally impractical. We’ve had 80 years without a depression and yet these idiots want to revert back to a gold standard or change the current system just because we deregulated and caused this whole mess. The ironies here are thick.
Oh, so I should stop complaining and join the looting squad?
If that’s your attitude, then it’s no wonder that you feel deprived. The system has obviously passed you up and left you behind.
Again, if you believe that a private currency is the way to go, then go start one. Those who have been deprived of this fantastic opportunity will run to you, since you have so little competition. If your idea is sound and well executed, then you will be rewarded for it. If your idea sucks, then Mr. Market will show you the door.
For a guy who talks so much about liberty, you apparently don’t know what to do with the freedom that you’ve got. Go use your liberty to set up a private exchange system for those who want to participate in it.
But keep in mind that liberty is a two-way street. If many of us prefer to stick to the trusty, dependable dollar instead of switching to Beard Bucks, we will have that right, and you’ll have to accept that our liberty is not good for your business.
“But keep in mind that liberty is a two-way street. If many of us prefer to stick to the trusty, dependable dollar instead of switching to Beard Bucks, we will have that right, and you’ll have to accept that our liberty is not good for your business.” Angry MBA
Really? I had no idea that I could not just replace the current government backed monopoly on money with one of my own. You mean liberty is not about capturing the government for one’s own personal profit? How un-American!
Well look. If you guys can’t buy the idea of liberty then I suggest you at least buy yourselves 7 years of peace with debt forgiveness. Better yet, bailout the savers too. Let’s see how really pragmatic you guys are.
If you don’t like banks then don’t borrow from them. If you prefer real money then don’t use credit cards. If you don’t like inflation then keep your savings in TIPS or hard assets. You have full liberty with your money. You have options. Stop crying about how you are handcuffed by this government which has stolen your liberties. Jesus.
I had no idea that I could not just replace the current government backed monopoly on money with one of my own.
Then consider yourself fortunate that you now know otherwise.
Private exchanges exist today. They tend to come and go, as they don’t find many participants.
And the few participants who do get involved are pretty greedy and dreamy-eyed. You see, they want inflation when it comes to the value of the goods that they commit to the system, but deflation for the value of everyone else’s. In other words, they sound like internet Austrians.
Your core problem is that you have a fundamental ignorance of what “money” is and its purpose. You believe that it is supposed to be a store of value, when it is really an incentive to increase output.
Meanwhile, your desire for money competition is just an excuse to hide the fact that you don’t know how to, or are too scared to invest. If cash isn’t to your liking, then convert that cash into assets that you prefer, and be done with it.
“… Adam Smith’s principle can even be applied to Mose’s utopian principles and the results they eventually lead to. ” J Dukate
I am no utopian. I am engaged in a possibly quixotic attempt to defer WWIII and the End of Times by applying the principles of justice and liberty. At most, I figure the End can only be put off for 120 years or so based on Nineveh. It would be nice, though, to have a golden age of true capitalism for a while. Our current system is giving liberty a bad name.
1) If the Federal government is not providing enough stimulus to counteract the states’ drop in spending, then they need to provide more stimulus.
2) Credit is not expanding because households have taken on too much debt. Net government fiscal stimulus would help indebted consumers pay down that debt. But as you said, there is not enough stimulus and the little stimulus that has passed was misdirected.
There is no need for a “moral principle” to guide fiscal and monetary policy; that’s ridiculous.
“As far as needing a new form of moral principle with regards to monetary/credit expansion, I’m not sure I can forsee any principle that will make any difference and lead us to a utopian economic existence, …” J Dukate
Really? I’ll name you two old ones: “Thou shall not steal” which certainly applies to theft of purchasing power even if by government backed fractional reserve lending AND liberty which we do not currently have with regard to money creation, usage and acceptance.
We will learn to do capitalism correctly or we will lose what remains of it,IMO.
What a joke. What is all this anarcho-capitalist bull? The libertarians and extreme right need to wake up to reality. The last 10 years are a clear example of what happens when you de-regulate and take government out of the picture completely. The free market cannot regulate itself. Anarcho-capitalism does not work. This is the typical bull that is paraded around every day on websites like ZeroHedge. These people have never thought of the real world practical implications of such a system. The balls on these people. Tyler Durden has made millions from this country and yet he has the balls to bitch about everything. Oh whoa is me! I am too rich. I have made too much money. Typical right wing crap. Give me a friggin break.
“The free market cannot regulate itself.” MarkS
Please tell me what part of government backed banking cartel in a government enforced monopoly money supply sounds like the free market to you?
I am warning you lovers of the “free” market; unless we have genuinely have one we will soon lose what we think we have.
Or do you actually believe in a free market? I think not. You are happy enough, it seems, with the pseudo-capitalism we have had since 1913 except you wish to add some unprincipled regulation so the system won’t collapse before you die?
Come on now. Are you free market capitalists or fascists? Let’s decide before it is too late.
That’s the utopian fallacy. You think a truly free market can work. You think people can regulate themselves. You think this libertarian free market can work. Have you listened to the ideas of Rand Paul? They’re insane. It simply does not work. It is not realistic. To segregate public bathrooms and the like. It’s purely insane. It’s great in theory, but it is not realistic. There is no such thing as a purely free market. It would never work.
TPC– Is Prechter’s 63 page document worth reading? Does he actually make workable suggestions as to how to survive (prosper?) in deflation? Besides of course telling me to buy Treasuries or keep my money in cash?
Bob’s solution is to stay in cash since 1987. So you missed a little upside, it’s still a solution, NO?
Prechter’s made a ton of good calls in recent years. He certainly hasn’t been in cash. At least he’s better than the rest of these fools who keep calling for hyperinflation. Zero hedge and Peter Schiff have been dead wrong.
“If you don’t like banks then don’t borrow from them.”
I don’t.
“If you prefer real money then don’t use credit cards.”
I don’t.
“If you don’t like inflation then keep your savings in TIPS or hard assets.”
There is no store of value these days. I’m trying to advocate for a system that allows one, common stock as money. As long as stocks are traded in a government enforced monopoly money then they are unstable too. I’m trying to cut the real economy lose from an unstable, dishonest money and banking system.
“You have full liberty with your money. You have options. Stop crying about how you are handcuffed by this government which has stolen your liberties.”
Sure I do. I can park it in the bank and enjoy negative real interest rates. Or I can speculate with it. Or I can start a business and be taxed to death to payoff the counterfeiting cartel.
“Jesus.”
Yep, He is the Savior. Maybe you should heed His Word?
“Your core problem is that you have a fundamental ignorance of what “money” is and its purpose. You believe that it is supposed to be a store of value, when it is really an incentive to increase output. ” Angry MBA
Since we are getting personal, your core problem is that you support tyranny. You think you know what money is and what it isn’t. I don’t presume to do that but you do. Therefore know that the responsibility for the failures of the current system are on you shoulders, not mine. With tyranny comes responsibilities don’t you know?
In a truly free market, you could apply your ideas and others could apply theirs and may the best ideas win. But no, your ideas require government coercion and privilege, don’t they? Not good enough to survive in a competitive marketplace, eh?
“Meanwhile, your desire for money competition is just an excuse to hide the fact that you don’t know how to, or are too scared to invest. If cash isn’t to your liking, then convert that cash into assets that you prefer, and be done with it.” Angry MBA
“First they ignore you, then they laugh at you, then they fight you and then you win” Mahatma Gandhi
Your arguing style is called ad hominem:
“An ad hominem, also known as argumentum ad hominem (Latin: “to the man”), is an attempt to persuade which links the validity of a premise to a characteristic or belief of the person advocating the premise.[1] The ad hominem is a classic logical fallacy.[2] The argumentum ad hominem is not always fallacious, for in some instances questions of personal conduct, character, motives, etc., are legitimate and relevant to the issue.[3] ” from http://en.wikipedia.org/wiki/Ad_hominem
Since we are getting personal…
It isn’t “personal” to point out that you don’t understand the basics of the topic that you insist on discussing on every thread of this website. It isn’t possible to have a cogent discussion if you refuse to learn the fundamentals of the subjects that interest you.
…your core problem is that you support tyranny.
Actually, I pointed out that you are free to start up an exchange system if that really floats your boat — you wouldn’t be setting a precedent if you did. I’m telling you to get off your backside, stop making excuses, and go and do it.
Yet you refuse to take the ball and run with it, despite your claims of how important this allegedly is to you. It’s obvious that you enjoy feel oppressed, so much so that you are eagerly looking for excuses to feel oppressed. You don’t want freedom, you just want rationalizations to justify your failure.
But no, your ideas require government coercion and privilege, don’t they?
No, my idea is to get you to stop whining and start acting. Seriously – go start a private exchange if this is such a big deal to you.
For the amount of time that you devote to commenting about how fantastic it would be, I would think that you’d appreciate the encouragement. But it’s getting pretty obvious that you’re not serious about it, and that you are just pulling everyone’s chain (perhaps including your own), because you are clearly unwilling to put your, er, money where you mouth is. If you’re for real, then stop faulting others for your lack of motivation, and just get it done.
“For the amount of time that you devote to commenting about how fantastic it would be, I would think that you’d appreciate the encouragement. But it’s getting pretty obvious that you’re not serious about it, and that you are just pulling everyone’s chain (perhaps including your own), because you are clearly unwilling to put your, er, money where you mouth is. If you’re for real, then stop faulting others for your lack of motivation, and just get it done.” Angry MBA
No, I won’t even try under the current law. Even and especially if successful against the current government privileged FRNs, I would be risking an IRS SWAT team raid. It’s not worth it to me. The current system is going down because it is dishonest and unstable not because of my lack of motivation.
Why don’t you put that MBA to use and work for reform? Oh, you’re not interested? You’d rather just attack me since you can’t refute my ideas?
Attack away. This is the last time I’ll respond to your ad homenium. You’re not my father just an Angry MBA. BTW, why are you angry? Because the system you worked to get a degree in is bogus?
I won’t even try under the current law.
You’re always quick with the excuses, no doubt.
Why don’t you put that MBA to use and work for reform?
Your idea of “reform” would be a counterproductive, deflationary nightmare. No thanks.
“Your idea of “reform” would be a counterproductive, deflationary nightmare. No thanks.” Angry MBA
As opposed to the current deflationary nightmare? Actually, TPC warned that bailing out the debtors and compensating the savers would lead to hyper-inflation. As for allowing money alternatives to FRNs, that would increase the supply of moneys not decrease them.
“You’re always quick with the excuses, no doubt.” Angry MBA
I’ll not do all the work. If no one else is seriously interested in moving from pseudo-capitalism to the real thing, then too bad, I say. It’ll be little skin off my nose.
If no one else is seriously interested in moving from pseudo-capitalism to the real thing, then too bad, I say.
In other words, if the free market rejects your plan, then you want to sulk about the free market, instead of accepting the possibility that Mr. Market has given you the appropriate reward for being wrong. So much for taking responsibility.
In addition to not understanding the purpose that “money” serves in a modern economy, you also miss the benefits of network effects.
Life is simply much easier if we all use the same few currencies. The more widely that they are accepted, the more convenient and efficient that it is for us to transact business. Instead of tying up our resources with a wallet full of 50 different currencies that people may or may not understand, trying to find other parties who will accept them and devoting a lot of effort to determining what they are worth, we instead use a couple without needing to haggle over what their value allegedly is.
Bypassing that step gives us the, er, liberty to get on with the business of business, instead of dealing with tedious libertarian nonsense every time that we want a cup of coffee. A good currency will beat barter or barter substitutes most of the time because it redirects our energies toward stuff that matters.
It’s a bit like having everyone use Microsoft Word, instead of 100 different word processing programs. My life gets easier if everyone uses the same software that I do (and vice versa), as it simplifies the process of trading data. While it might seem liberating to you for us to have a gazillion different formats, it’s better for the rest of us to have a couple of standards and to focus on the substance of the content, rather than dwelling on the process of accessing the content.
The fact that MS Word may or may not be the “best” program really doesn’t matter, as it is good enough. The market invites a near-monopoly because we, the users, benefit from that monopoly. Common currencies allow to focus on production, which is far more worthwhile to us than is hoarding. Production gives the currency its value; your belief that the value is arbitrary or strictly determined by government is proof positive that you don’t know what money is.
“In other words, if the free market rejects your plan, then you want to sulk about the free market, instead of accepting the possibility that Mr. Market has given you the appropriate reward for being wrong. So much for taking responsibility.” Angry MBA
Yea that’s about it except what free market? I worked hard to get an engineering degree and I worked hard as an engineer too. Now, I am retired and willing to see my country escape disaster and be free. But to save fascism? No, I’m not interested.
“In addition to not understanding the purpose that “money” serves in a modern economy, you also miss the benefits of network effects.” Angry MBA
What I advocate is debtor bailout and liberty in money creation, usage and acceptance afterward. My views on money are irrelevant since a free market would pick the best monies. Besides you misrepresent my views anyway.
“Life is simply much easier if we all use the same few currencies. The more widely that they are accepted, the more convenient and efficient that it is for us to transact business. Instead of tying up our resources with a wallet full of 50 different currencies that people may or may not understand, trying to find other parties who will accept them and devoting a lot of effort to determining what they are worth, we instead use a couple without needing to haggle over what their value allegedly is.
Bypassing that step gives us the, er, liberty to get on with the business of business, instead of dealing with tedious libertarian nonsense every time that we want a cup of coffee. A good currency will beat barter or barter substitutes most of the time because it redirects our energies toward stuff that matters.” Angry MBA
I’d rather let the free market determine the correct balance between convenience and other factors including honesty, stability, decentralization, profitability, etc., than to allow some conceited tyrants to monopolize the money supply. You guys have done such a wonderful job, haven’t you?
“It’s a bit like having everyone use Microsoft Word, instead of 100 different word processing programs. My life gets easier if everyone uses the same software that I do (and vice versa), as it simplifies the process of trading data. While it might seem liberating to you for us to have a gazillion different formats, it’s better for the rest of us to have a couple of standards and to focus on the substance of the content, rather than dwelling on the process of accessing the content.” Angry MBA
MS Word won its near monopoly in the market place. That same market place ensures that Microsoft must work hard to retain that monopoly. OTOH, FRNs “won” their monopoly via legislation passed on Christmas Eve in 1913. Are you too blind to see the difference? Now you have risked the gold-bugs implementing their government backed gold standard. It will be your fault if they succeed, not mine. Or do you have your own hoard of gold? LOL!
” … Common currencies allow to focus on production, which is far more worthwhile to us than is hoarding.” Angry MBA
Who said anything about hording? That’s a straw-man argument.
“Production gives the currency its value; your belief that the value is arbitrary or strictly determined by government is proof positive that you don’t know what money is.” Angry MBA <— Straw-man followed by ad hominem argument.
Let's have liberty in money creation, usage and acceptance and we'll see who understands money and economics best. Hint: It isn't you though you are well-versed in the conventional arguments. Note also that you require government violence to support your system since it is inherently unstable as we witness once again.
So, your system is dishonest, unstable and requires a government enforced and government backed monopoly. All in the name of convenience?
Want to know what being a fascist feels like? You already do. I used to be one myself so there is hope.
My views on money are irrelevant since a free market would pick the best monies.
The free market already has chosen. It hasn’t chosen as you would have chosen, but perhaps it’s time that you got over it.
Now you have risked the gold-bugs implementing their government backed gold standard.
The libertarian nutbars have no traction in the real world. A non issue.
Let’s have liberty in money creation
Once again, go start your own exchange, and see how well you do with it. Stop bitching, start doing. You obviously enjoy complaining, rather than getting results.
“The free market already has chosen. It hasn’t chosen as you would have chosen, but perhaps it’s time that you got over it.” Angry MBA
What part of government backed fractional reserve banking cartel in a government enforced monopoly money supply sounds like the free market to you?! Getting an MBA must be easier than I thought.
“Once again, go start your own exchange, and see how well you do with it. Stop bitching, start doing. You obviously enjoy complaining, rather than getting results.” Angry MBA
Who said anything about an exchange? Not me. No, I won’t be shunted off into a flea market somewhere. As for results, what are you wasting your time for?
What part of government backed fractional reserve banking cartel in a government enforced monopoly money supply sounds like the free market to you?
If Americans wanted an alternative currency or form of trading, they’d use it. Throughout the world, when citizens don’t trust money, they turn to barter, gold, cigarettes, alternative currencies or whatever. If there that there is an “official” currency value that they believe to be inflated, then they use black markets to correct for that value.
No, the mechanisms that you claim to want already exist. We don’t use them in the United States because we don’t want them.
The problem isn’t with the market, but with you. The market obviously likes the dollar, and you just can’t conceive of how anyone could possibly disagree with you, even though their actions make it clear that they do. The market doesn’t share your odd views of how the world should be, and I suggest that you get over it.
Who said anything about an exchange?
If you understood what money is, then you’d understand this point. Money is a tool for motivating output. Output gets traded through exchanges, which act as a clearinghouse that can price and distribute it efficiently. If you have a “currency” that cannot be used in such a fashion, then it really isn’t money. Since you’re the one banging on about money, it would help you to know what it is.
“If Americans wanted an alternative currency or form of trading, they’d use it. Throughout the world, when citizens don’t trust money, they turn to barter, gold, cigarettes, alternative currencies or whatever.” Angry MBA
Fine, then let’s drop all legal tender laws, the capital gains tax, the FDIC and any other privilege for FRNs. It sounds like unnecessary coercion, to hear you speak.
Just admit it. You believe in government privilege and coercion to support your system. Speaking of excuses, how are you going to top blaming Chinese peasants for saving too much to divert attention from your failures? The world waits and dreads.
You believe in government privilege and coercion to support your system.
I’ve told you repeatedly to go start your own exchange, if you don’t like the current system.
But you’re obviously full of it. When push comes to shove, you don’t want to do anything that would support your alleged beliefs. You’re all talk, no action. You’ll devote lots of bandwidth on the internet going on about it, but you obviously aren’t going to do a bloody thing.
“But you’re obviously full of it. When push comes to shove, you don’t want to do anything that would support your alleged beliefs. You’re all talk, no action. You’ll devote lots of bandwidth on the internet going on about it, but you obviously aren’t going to do a bloody thing.” Angry MBA
No, I’ll keep watching the deflation progress, keep posting and keep learning about money and banking and continue reading my Bible. Oh and I’ll continue learning at sites like this and by debating insulting posters like you. I’m in no hurry. I’m not responsible for this mess; I figure the MBAs, bankers, and economists are. If anyone should be in a hurry it should be you.
But look. All I seek (after a reset) is the allowance of alternative currencies (Don’t give me the barter baloney again, please). I’m not asking that the Fed be abolished just completely privatized. Let FRNs compete on a level playing field with other forms of money including gold, silver and common stock. That way, at least you won’t be totally responsible for what may be coming. In fact, I would share some of the responsibility for advocating it.
Or be stubborn and have all the blame to yourselves.