Quote: (02-18-2012 03:43 PM)tenderman100 Wrote:
Quote: (02-18-2012 01:45 PM)RebelLibertarian Wrote:
No, mismanaging of an institution does not strictly mean that the institution is itself undesireable. In this case, however, a central bank that creates money from debt is harmful no matter whether its inflation rate seems "high" or "low" to us - it is still engaging in grand larceny from those who use its depreciating dollars (and we are pretty much forced to, given that taxes must be paid in USD, debts are declared legal tender in USD, and we are subject to 15% capital gains taxes when we flee to precious metals) to the Banksters and Gov. Expansion of the money supply also causes the boom-bust cycle. I'll detail how if you're interested (I'll really just be quoting Rothbard and Mises, so if you've read their works I'll have no new info for you).
Read 'em both.
Inflation, like leverage in an of itself, isn't bad--it's TOO much inflation that's bad. I subscribe to Milton Friedman's view -- a structured libertarian view, as oppose to an anarcho-libertarian view -- the the Fed should increase the money supply by a fixed percentage each year, every year, no matter what.
Fair enough. How should this rate be calculated? Should it be convertible to gold/silver/&c., albeit at a differentiably-declining exchange rate? And should people be forced to use this depreciating currency? Moreover, how is the excess money to be distributed? In our current system, the bank$ters would skim a cool proportion off of the top, our congresscritters would find it easier than ever to spend it on some God-awful war or gov't program, &c. I will say that the transparency and constancy this system would afford us would be vastly superior to our current system.
Quote: (02-18-2012 03:43 PM)tenderman100 Wrote:
What really matters is your REAL rate of return on capital -- the amount over and above inflation. An expanding money supply allows increase capital to be put to productive uses. This is how you create wealth. Fixing your currency to an inert piece of metal does NOT create wealth.
No, fixing one's currency to metal doesn't itself create wealth (nor does printing money, decreasing the money supply, &c.). Wealth is created when consumer needs/wants are met through voluntary transactions, and its production is accelerated when new methods, technologies, types of resources, &c. that facilitate the meeting of desires are discovered & used. The seminal question here is, why is an expanding money supply required to allow for the creation of wealth? Remember that, at least in the fiat system (in the case of a free coinage system, no one would choose to use the depreciating paper), citizens are coerced through tax laws, legal tender laws, and capital gains taxes into using the fiat currency.
If an aggressive body (usually calling itself a State) wishes to change the buying/selling habits of its subjects (really, victims) it usually can do so easily enough given its power, but unless it changes all of their habits (to do which it would have to put them in gulags basically. Not that I would put this above our elites) its aggression will introduce economic distortion. In the case of secretly-managed fiat currency, I think Rothbard explains very well how this causes the boom-bust cycle that is so wasteful of capital vis-a-viz consumer desires. In the more appealing case of a constantly-inflated gold-convertible currency, assuming we can trust the central bank (which is non-trivial concern!), we still have the problem of how the newly-created money is to be distributed (remember that it is procured through a tax!), and why it's even necessary in the first place. It's not as if the only money one can invest has to have been inflated from one's original savings.
Quote: (02-18-2012 03:43 PM)tenderman100 Wrote:
Quote: (02-18-2012 01:45 PM)RebelLibertarian Wrote:
In a truly free society, there would be competing medims of exchange advertised by their managers for quality and difficulty of counterfeiting. In practice, the efficiency of the *pure* market system (As distinct from the crony crapitalism we now suffer under as from pure socialism!) would ensure that these coins or banknote certificates for precious metals were completely backed by precious metals and thus subject to no inflationary conjuring.
This isn't a vision of a free society...it's a vision of a society in economic chaos -- of a different kind than we have now, granted, but still chaotic.
The market is chaotic. If you're disposed to buy an AR-15 rifle, say, would you feel more comfortable with a single State-owned company, or a mass of competitors? In the former case (unless its products were subsidized by the taxpayer, which I think we can agree would be immoral as well as economically undesirable), you would have to do almost no research into calibers, barrels, uppers, lowers, handguards, rails, pistol grips, stocks, &c., but no doubt you would not get the best quality/price ratio in your weapon. In procuring my AR-15, I had to spend a great deal of time researching it but got a more accurate, reliable, and hard-hitting weapon than those advertised by mainstream companies.
Quote: (02-18-2012 03:43 PM)tenderman100 Wrote:
The first step has to be not debt liquidation but true asset writedown. And the assets that have to be written down? Bank assets. Once that happens the dollars that are ostensibly in the system AGAINST those assets have to be booked as decreases in capital. What we should be doing in undertaking a orderly write down of these assets -- every body takes turns and we methodically re-value. By the way this goes for the Fed, too.
This isn't a bad idea. I'd prefer an orderly phase-out of the Federal Reserve Note at the Fed and allowing the market to liquidate/write down/&c. companies' debts as the market decides they should be.