ralfy

See also the CBC denial machine documentary:

http://www.cbc.ca/fifth/denialmachine/

One clip from the feature:

You seem to have missed my larger point. The idea of value is a social one, and gold is no different than dollars in this regard. We as a social species have deemed that "thing" to have value, and it's arbitrary whether we assign social value to a brick of melted metal or to a piece of paper with symbols on it.

This does not disprove my argument. Something can be deemed "to have value" even if it does not. Even though money can be perceived as valuable, it is still debt.

 

 

However, there are useful differences between a fixed currency like gold and a fiat currency like dollars or euros. The units of fiat money are not arbitrarily locked in like physical commodities and hence can adjust as times change. This allows it to be much more flexible and useful in achieving stability since they can be inflated and deflated to deal with temporary shocks to the economic system. It also allows us to avoid massive suffering and needless pain, but the moral argument here is peripheral. In addition to not making moral sense, a fixed currency doesn't make economic sense.

 

Unfortunately, that argument works both ways. As seen today, we have an unregulated global derivatives market with a notional value of $1.5 quadrillion. The 2008 crash "only" involved around $1 trillion in subprime lending, leading to over $30 trillion vaporized worldwide. Governments struggled to create even more debt to counter that threat, and it didn't even work as the global economy is still in crisis.

To recap, that crash involved only $1 trillion out of over $1.5 quadrillion (notional value) in unregulated derivatives.

So much for "flexibility."

 

When using a fiat currency, steps can be taken to inflate and deflate relative to the currencies of other nations. This ability to quickly mitigate shocks is quite useful, helps avoid massive and needless suffering, and allows us as modern animals to maintain a very strong degree of stability in our lives, the lives of our families, and the lives of our neighbors. If you enjoy keeping your worldview rooted in reality, all you need to do to confirm the usefulness of fiat currency is look around the globe right now. Look now at how nations that can inflate and deflate the value of their currency are performing in this great recession relative to those that cannot (nations like Greece and Spain and Italy, for example).

 

Especially when the same "shocks" involve the same fiat currency!

And the economies that are currently performing better "in this great recession" are not doing so because they can "inflate and deflate the value of their currency" but because large amounts of "hot money" are entering their system.

 

Many folks just like you seem attracted to the gold standard because it seems to assure long-term price stability, and that's an understandable position to take. The real challenge, however, is that even a cursory glance at history and evidence shows that such stability under the gold standard really never existed.

 

A gold standard will not solve our problems because a global capitalist economy requires ever-increasing capital, and on a scale that even a so-called money multiplier can achieve. That's why in 2007 US M2 reached not $400 billion given reserves of $40 billion but $7.25 trillion, many times greater than what fractional reserve banking allows.

There's your flexibility for you.

 

The main driver of this is because pegging your currency to a fixed standard like gold causes a nation to become magnificently more vulnerable to monetary and fiscal shocks in the short-term. When we were on the gold standard, purchasing power was not actually stable at all. In crises like the one we just faced, gold would have resulted in massive deflation just like it did during the great depression, and that directly rebuts the arguments people make in favor of gold that it somehow ensures price stability. It really doesn't. You may as well be arguing that purple unicorns and leprechauns ensure price stability.

 

Typical neo-liberal garbage, i.e., measuring economic growth through purchasing power. How to achieve that? Create more money, which is easy to do without a gold standard or banks following any reserve requirements.

 

Another argument I often hear from those in favor of reimplementing a gold standard is that bubbles wouldn't happen on the gold standard, or at least not as often. Well, that's of course entirely true, except... well, you know... never mind. It's really not true at all. When we were on the gold standard we faced MAJOR financial panics and crises in 1873, 1884, 1890, 1893, 1907, 1930, 1931, 1932, and 1933. So much for that whole "there are no bubbles on the gold standard" argument, eh? Unemployment was also much higher when we were on the gold standard, especially during those market shocks that the gold standard prevented us from adequately mitigating in a timely manner.

 

I am not calling for a gold standard, but I very much question your incredibly naive view of the current situation which actually stems for the same "flexibility" you espouse!

 

Not to put too fine a point on this, but the gold standard played a direct role in causing the Great Depression... a shock which was marked by extreme deflation and a gigantic unemployment rate of more than 25 percent. Gold did that, yet folks somehow still manage to argue that it's the safer option that doesn't suffer from the risks of price instability and bubbles. It's the height of ignorance and ideology trumping reality, really... and that doesn't even begin to address how a return to the gold standard in the modern age would erase the credibility of the US dollar and quite likely incite a trade war with other superpowers on whom we rely. It's not like we're living in a farm community anymore. We are a global economy moving at nanosecond pace, and a 17th century solution tied to shiny rocks really ain't gonna cut it for us.

 

Here's a piece from back in 1996 that summarizes it far better than I can: http://www.pkarchive...ks/goldbug.html

 

And some more recent pieces here:

 

http://www.american....rch/fools-gold/

http://www.bbc.co.uk...gazine-19422104

http://www.washingto...ediscover-gold/

 

 

There really are no good arguments in favor of a gold standard in this modern age. The only arguments people make crumble under basic scrutiny or suffer from extreme blindness to other factors.

 

And the absence of a gold standard leads to success, with the current crisis some minor occurrence that we hope will go away as long as we create more credit?

A gold standard will never be sustainable in a global capitalist system that requires increasing levels of credit, and increasing levels of credit will not lead to some idealistic adjustment of credit but one crash after another.

 

And any unit of exchange that humans agree to use in social settings... whether green slips of paper, electronic ones and zeros, bars of gold, women as wives, dried fish, or colorful beads and feathers... each are promissory notes no different than the money we use in this modern age. You seem to be making an argument with no purpose here... a distinction without difference. Modern money is no different than the items we bartered in ancient times, and this remains true even when discussing fancy shiny metals like gold that do for some reason seem to regularly fascinate and bewilder more simple minds. "oooh... look... sparkly!"

 

Complete and utter nonsense, as if you can create more wives, dried fish, or colorful beads and feathers in the same way that money can be created today.

 

The point being that none of these things, not even gold, has any "intrinsic value" whatsoever. All value is contingent upon the norms of society itself, and the norms of society evolve and change with time. Gold is only stable so long as we collectively agree that it's stable... just like the dollar.

 

More nonsense. Let's see you argue that dried fish has no "intrinsic value" if that's the only thing you have to eat.

 

When governments fall apart, we don't trade in gold... we trade in food and shelter. This is much more parsimonious with my position on this issue than yours.

Your last paragraph contradicts your previous one!

Ultimately, your wavering stance on this issue (e.g., your first paragraph shows that we give value to what has no value, as pointed out in your second-to-the-last paragraph, but which we still see as valuable, as seen in your last paragraph, which really doesn't matter because we can easily "inflate" and "deflate" the level of credit--which isn't really true--but in case we don't, then we can go back to trading things which have no intrinsic value but which we think have intrinsic value) doesn't disprove my argument:

"I would not bother looking at GDP given the use of money, which is essentially debt."

What should we look at, then? Not a gold standard, but

"Another point to consider is that a higher standard of living may lead to more resource consumption which offsets any savings due to lower birth rates.<br style="font-size: 13px; line-height: 16px; background-color: rgb(243, 249, 246);"><br style="font-size: 13px; line-height: 16px; background-color: rgb(243, 249, 246);">"For example, the U.S. has one of the most advanced economies in the world, but it achieved that at very high costs. It has less than 5 pct of the world's economy but has to consume almost a quarter of world oil production. It has over 250 million passenger vehicles, or almost one for every adult citizen.<br style="font-size: 13px; line-height: 16px; background-color: rgb(243, 249, 246);"><br style="font-size: 13px; line-height: 16px; background-color: rgb(243, 249, 246);">"In general, something like 12 pct of the world's population, likely part of a global middle class, are responsible for a significant portion of resource consumption."

Thus, we should look at availability of resources in light of consumption. And we can't argue that over-consumption is normal simply because the economy of a country (and again, an economy driven by money which is essentially debt) is large.

Are you getting my point now? A country like the U.S. can consume resources at significant rates because its currency is used worldwide for trade. The level of credit has been increasing considerably the past three decades because of deregulation and financial speculation, not to mention consumer spending connected to resource consumption.

In such a case, a gold standard will never work because the U.S. needs lots of credit to consume more, and so does a growing global middle class. And your contradictory views of the matter (money has value and doesn't have value at the same time) does not in any way contradict what I said about money as debt and money being used for increased resource consumption.

Thus, the claim that resource consumption rates of a country should be "in line" with the size of its economy is complete garbage.

Just so you know, iNow, a true gold-thumping Austrian would refute a lot of those points about gold being responsible for those bubbles. For example, the big national banks do, at least, coincide with the bubbles you refer to and its possible to inflate the money supply even when tied to a physical standard by fractional reserve backing. And indeed modern proposals for a gold standard don't look like the gold standards in the inter-war periods (which was high inflationary).

 

You might be interested in Rothbard's book on the subject (even just to read what the 'opposition' is reading). mises.org/books/historyofmoney.pdf

 

I'm divided about the issue myself.

FWIW, I'd like to add that I don't support Austrian economics or Keynesian views (e.g., the hopelessly naive view that credit levels can be adjusted easily). The economy has to be studied in another way, i.e., not by seeing it in monetary terms but by looking at availability of resources, such as resource consumption per capita or ecological footprint vs. biocapacity.

That is why I find the argument that resource consumption levels should be justified by economic size as based on incredible levels of naivete, as if we can produce resources as easily as we produce credit.

What nonsense.

What a meaningless deepity. This doesn't even make sense. Money is a unit of exchange. Apples or sexual favors could equally be used as units of exchange. Debt is the outcome of imbalanced exchanges between two actors. Debt is where one actor owes units of exchange to other actors... whether that unit be apples, sexual favors, or money. Money is not itself debt, no matter how profound you think it sounds to assert that it is. Suggesting otherwise displays only your ignorance on the topic.

Apples or sexual favors may be seen as units of exchange or as a physical good (for the first) or a service (for the second). Money can only be seen as a unit of exchange, but that doesn't make it the same as apples or sexual favors.

Money is not debt as long as it is backed by something that is seen as valuable, such as gold. That was the case for the U.S. dollar until the gold standard was dropped. (Research on "Nixon Shock" for details.) Thus, money has been essentially a promissory note (hence, debt) for decades. It has no intrinsic value other than a guarantee by the government that it can be exchanged for goods and services.

That is why when governments fall apart....

5% of the economy? I think you meant to say 5% of the population. $15 trillion in GDP, while the worldwide GDP was $65 trillion last year, or 23%. The outsized US consumption is in line with its economy, as one might suspect.

Yes, I meant 5 pct of the world's population. And I would not bother looking at GDP given the use of money, which is essentially debt.

The U.S. total debt and deficit are due ultimately to the use of the dollar as a world currency. We can see this in light of the ff. points:

The U.S. moved away from the gold standard because it had to create more credit to support police action in Vietnam, and that in turn was likely connected to the need to secure resources in Indochina and to block Communists. The peak in domestic oil production also did not help. To counter this, the U.S. formed agreements with Saudi Arabia and other OPEC members, leading to the rise of the petro-dollar.

Not surprisingly, one trade deficit after another followed from the early 1970s onward.

Reagan's reaction was to embark on increased borrowing and spending made possible through deregulation. The result was increased borrowing and spending across the board--government, corporations, households--from 1981 to the present.

The military and covert activity were used to prop up the petro-dollar by blocking other countries that wanted to move away from it, including Iraq and Libya, and now Iran.

Citizens supported this arrangement--war costs passed on to national debt, easy credit from banks, deregulation allowing Wall Street to profit, and tax cuts--by voting for one administration after another that promoted the same scheme: use the military to prop up the petro-dollar and encourage borrowing and spending, especially given an economy partly dependent on consumer spending and even war costs partly funded by foreign loans. Meanwhile, the government continued to work for Wall Street.

Probably not due to the complexity of human thought.

Another point to consider is that a higher standard of living may lead to more resource consumption which offsets any savings due to lower birth rates.

For example, the U.S. has one of the most advanced economies in the world, but it achieved that at very high costs. It has less than 5 pct of the world's economy but has to consume almost a quarter of world oil production. It has over 250 million passenger vehicles, or almost one for every adult citizen.

In general, something like 12 pct of the world's population, likely part of a global middle class, are responsible for a significant portion of resource consumption.

Given demand destruction and economic problems in OECD countries coupled with the opposite for BRIC and emerging markets, it might be reversed.

You can check results of tests by visiting sites like AV-Comparatives.

From what I remember, the NAS discusses this point in its final report. You may visit the "America's Climate Choices" website to read it.

John Taylor Gatto discusses similar points in his website and in various essays.

You can look up issues such as EROEI rather than prices. For example,

"The Energy Trap"

http://physics.ucsd.edu/do-the-math/2011/10/the-energy-trap/

That is, look at the energy and resources required to produce energy from a given source, then see how look it will take to make up for the energy and resource cost.

Also, don't forget the need for petrochemicals, availability of resources such as oil (according to the IEA, conventional production peaked in 2006), etc.

Finally, there's also the phenomenon in free market capitalist systems of using non-utilized resources or energy to make more profits. Thus, efficiency may lead to more consumption.

Likely not if the future will bring about de-industrialization due to a debt-ridden global economy, the threat of a resource crunch, and long-term effects of environmental damage, including global warming.

Same as the Presidents before him: deregulation with heavy borrowing and spending to prop up the economy.

This type of regulation is inevitable given debt-ridden economies coupled with the threat of a resource crunch.

What I mean is, we are probably both rational and irrational. Sometimes, we act based on logic, and sometimes based on emotion, belief, a hunch, etc.

Because of the human condition, both will always be in tension with each other, and neither will win.

Prob. best to adhere to the UN declaration of human rights, which supports both freedom of speech and of worship.

Definitely, as scientists are human.