Anti-Gold Propagandist Steps into the Shredder

I have four things to say.

(1) David Weidner wrote an article critical of the gold standard.

(2) The article contains gems of knowledge like this:

Another problem is that rather than try to improve our currency systems, we keep going back to this 600 B.C. technology that’s a step up from seashells. Gold is pretty, but it’s just a piece of metal. Its uses are limited. It can be dug out of the ground. In other words, it’s really all about human confidence that gold is worth something. And, you know, the earth is flat too….

A big problem is that the gold standard never works. It’s like getting back together with that old girlfriend. Your memories of how good it used to be are tainted by your current pain of loneliness. I get it. The pull is very, very tempting. But haven’t we gone down that road enough already?

(3) Weidner probably never expected this insignificant, phoned-in piece of inanity to be subjected to withering ridicule and refutation, point by point. A refutation so thorough that it even smashes his clumsy efforts at humor (e.g., contrary to popular belief, and as I myself have pointed out, essentially no one believed the earth was flat).

(4) But such a refutation was indeed written, and as a result Weidner now looks like a fool. We can hope that next time he’ll think a teensy bit more deeply before reflexively and predictably aping the conventional wisdom. Either way, enjoy.

http://plenarchist.wordpress.com/ plenarchist

“Another problem is that rather then try to improve our currency systems, we keep going back to this 600 B.C.”

Fallacy of wishful thinking. The current monetary system can’t be improved with the current political system. As long as we have representative government, we’ll have unaccountable and corrupt officials. As long as we have corrupt officials, everything they have control over will also be corrupt.

But is a return to the gold standard the best we can do or should do? No one before the Internet could have foreseen it including Mises and Hayek. Maybe we need to rethink things… If we could describe the “ideal” monetary system assuming an incorruptible and “good” political system for the Information Age, what qualities would it have? Might it be different?

I don’t like fiat money for the same reasons Austrians don’t, but then I don’t like commodity-based money for reasons Austrians ignore. Seems like a better system can be devised for the digital age. At the end of the day, prices are just information… What matters most for a monetary system is that market actors have the benefit of the most accurate prices.
Anonymous

Gary North is Zorro.
Michael Mills

It wasn’t refutation it was practically eviceration. My only critique is he should’ve ended it on a punchier note.

For lack of a better word “Booya!” though I doubt its acceptable at the high academic level and tone I want to believe Mr. North said it when he hit the publish button
Michael Mills

I think the issue with Austrians is the follow up question. ” prices in relation to what?”

Ultimately the truth of it is prices in “work” in the sense of labor value. How much work must I do in order to afford an apple. How do you know you are measuring the value of my work properly?
george

Gold fits this. As do bit coins (sort of).
http://plenarchist.wordpress.com/ plenarchist

“How much work must I do in order to afford an apple.”

We know exactly the value of any good or service by what price consumers are willing to pay. All prices are set relative to all other prices. The price reflects *everything* relevant to that good or service at any moment in time (weather, labor costs, demand… everything).

So taking your example, I can measure the value of your work accurately by knowing how much your employer is willing to pay for your labor assuming your employer is selling his product. Once the market has spoken (by purchasing the product), that then sets the value of your labor relative to all other goods and services.

So if your employer pays you $25/hr and a loaf of bread at the grocery is $5, then I can accurately say an hour of your labor is 5x that of the loaf of bread, right? The market tells us.

But say then that between the time you get paid and the time you get to the store the money supply doubles. When you got paid, you thought your wage would by 5 loaves of bread but when you get to the store you can only buy 2… Your plans for spending your money are all messed up now and you need to renegotiate your wage because *relative* to the bread your labor value didn’t change. And this is true if the money supply halves. Good for you but bad for the grocer. Call it “price signal distortion.” Hey, I just made that up!

That’s the problem with changing the money supply. That’s why I believe money shouldn’t be *part* of the economy subject to supply and demand. That’s why fiat or gold is still not good since both distort prices just gold is not so arbitrary.

My point above then is that prior to the Internet, money *had* to be a physical good. With the Internet, it might be possible to remove money from the economy and completely eliminate changes in the money supply. It seems to me then that by doing so, a monetary system could be devised such that the supply remains constant generating accurate prices always. Then when prices change, market actors know there are underlying causes.

But such a system as I said above requires an honest government or it simply will be a digital version of fiat and abused way more. And since there can be *no* such thing as an honest government, then such a system can only be implemented by the authority of an anarchic state… That’s right, Tom… an anarchic state!
http://plenarchist.wordpress.com/ plenarchist

The medium doesn’t matter. If the medium is physical and/or persistent (bitcoins are persistent), it will distort prices.
Michael Mills

By that logic we should go on a commodity based standard due to the inherent flaws and inevitable corruption creep in government.

Unless you envision a truly anarchic state in the near future?
http://plenarchist.wordpress.com/ plenarchist

Like I said, if I have to choose between fiat and gold, I pick gold… But I think the anarchic state better be in our not-so-distant future if we expect to have one.
Michael Mills

Short of freeing vermont from the union (i prefer Rhode Island since its so small they might not notice.. Or maybe Delaware. It will take some doing because like dragons, governments are covetous and humans are easy to eat for both.
Michael Mills

Ugh throttling is making my ability to fix my gramatical error impossible. My apologies
http://plenarchist.wordpress.com/ plenarchist

We need a new political model to replace the old. Once people realize that the old one has been a rhetorical illusion, I’m hopeful they will be open to another. I don’t know what else to do. I’m working as best I can on such a model. The future convergence of advanced technology and the sociopathic personalities currently in power is not a future I care to see…
Michael Mills

Just Re-read the article on flat earth, Tom… As a historian could you reasonably call that one of the longest running straw man arguements in history?
Michael Mills

The difficulty is in overcoming the lethargy of the masses or as I like to call it “complacent inertia” in order to bring about change. The reality is as long as Americans can watch TV and eat the chances of meaningful change are nill. I know Ive witnessed it first hand. Until they had bread lines o country built up the necessary gumption to change its government for the better.
http://plenarchist.wordpress.com/ plenarchist

Right. People become a lot less complacent when they are hungry. Right now the economy is limping towards the cliff. All signs tell me that the gov knows this. They’re quietly preparing…

But all I can really hope for is to get a start-up model society going to act as proof-of-concept. If it were to work, then other people will get on board. Monarchy became representative government, right? It has been done. I do wonder though if a radical political change can be peaceful… Hope so.
Michael Mills

Anything is possible, probability is the stickler. I think there is an example in San Marino… I could be wrong though my memory is fuzzy this late at night… So do you plan on squatting on some uninhabited island? If its tropical let me know I may have to join this example society…
http://plenarchist.wordpress.com/ plenarchist

You can visit my blog at http://plenarchist.wordpress.com to find out more. There are many strategies for implementing plenarchy. The more obvious ones would be leasing territory (like Hong Kong was) or even buying outright. A free society I think can attract capital and as the world economy slowly continues its death spiral, I think poorer countries would become potential candidates. And there are several tropical locales that might just be perfect…
lulu

“So taking your example, I can measure the value of your work accurately
by knowing how much your employer is willing to pay for your labor
assuming your employer is selling his product.”

Actually you don’t have to asume that. He doesn’t have to sell anything to fulfil the price condition – it is when it happens, when employer paid him voluntarily. There, that’s the price.

“But say then that between the time you get paid and the time you get to
the store the money supply doubles. When you got paid, you thought your
wage would by 5 loaves of bread but when you get to the store you can
only buy 2… Your plans for spending your money are all messed up now
and you need to renegotiate your wage because *relative* to the bread
your labor value didn’t change. And this is true if the money supply
halves. Good for you but bad for the grocer. Call it “price signal
distortion.” Hey, I just made that up!”

When the money stock doubles you go to store and see little or none price inflation – it takes time. Interesting thing happens: people that get new money have their full pre-diluted value – they get to buy stuff cheap. And as they do so, they bid up prices and occures the rippling through economy of new information that sais “there is around two times much money than it was before some point back in time”. Now that “everyone” knows that prices has risen you see bread price up.
Why did you omit the insidious part when the actual stealing occurs and the thieves are being revealed?
See the reverse process of deflation by increasing productivity of capital and labour with this superior capital done produces price deflation because there is more stuff relatively to money. And when it occues I am happy to buy cheap bread, but rest assured, the baker is just as happy with lower flour, energy and capital cost too. We would be all happier without governments and bankers spending purchasing power of our money.

Why would you imagine that under market chosen money such as gold and in absence of central bank hence without FDIC with banks close or literally on 100% reserves because prone to bank runs … so, something like cutting in half money supply would occure? What characterises gold as money is precisely price stability. How gold is actually – if chosen by market, without monopoly in it, central banks – distorting prices?

You see, government monopoly in money, central bank, fdic, fractional reseve banking on really grand scale that could be sufficient enaugh to make it possible to slash money stock by half via credit crunch, and bancrupcies – all this stuff is not an inherit part of neither gold nor money.
It’s allmost like blaming roads for not innovating and improving to new challenges. It’s not roads fault, it’s the government’s involvement in the stuff that breaks it.

“My point above then is that prior to the Internet, money *had* to be a
physical good. With the Internet, it might be possible to remove money
from the economy and completely eliminate changes in the money supply.
It seems to me then that by doing so, a monetary system could be devised
such that the supply remains constant generating accurate prices
always. Then when prices change, market actors know there are underlying
causes.”

You are contradicting yourself. But let’s pretend you didn’t write you want to abolish money and market test of profit and loss. Than you are writing about gold for example. You still have to prove your point that gold as money distorts prices. You didn’t do so.
http://plenarchist.wordpress.com/ plenarchist

“Why would you imagine that under market chosen money such as gold… something like cutting in half money supply would occur?”

I was just making an illustration above but there is an obvious reason supply of gold could change dramatically. Speculation. Maybe not by half, but a lot. Speculation could wreak havoc on prices just as it likely does with fiat money.

“You still have to prove your point that gold as money distorts prices. You didn’t do so.”

It would seem pretty obvious. Gold currency would physically exist in the economy. That means the currency is subject to supply and demand. As supply and demand changes, so does the basis used to set prices and in chaotic ways.
When prices change due to changes in the medium of exchange and not due to any underlying economic factor, market actors get the wrong signals.
Gold is used in industry, it is subject to speculation, it can be hoarded… right? All these effects on the supply of gold as a currency *artificially* impact price information. And that is bad for the economy. As I said above, not as bad as fiat but I still believe undesirable.
guest

Regarding the issue of hoarding:
Defending the Undefendable (Chapter 15: The Miser) by Walter Block
http://www.youtube.com/watch?v=x4XSEVJLrdY
lulu

Explain please how could gold be manipulated via speculation
absent FED. And when I ask for explanation I don’t ask for one word answer.

“Gold currency would physically exist in the economy.

That means the currency is subject to supply and demand.”

It should be, as all commodities on the free market. This way you avoid
distortions introduced by various government actions.

“As supply and demand changes, so does the basis used to set prices and in
chaotic ways.”

Eexplain it to me – how on Earth free market regulation via supply and demand
mechanism is chaotic.

You seem to be not familiar with Misesian argument about socialism and it’s
impossibility of economic calculation.

http://oll.libertyfund.org/index.php?option=com_content&task=view&id=840&Itemid=351

You got it reverse. It’s the central planning of economy that is chaotic. Not
the free market.

Remember that money is the most marketable commodity – everyone wants it,
everyone accepts it (good as gold some people would say). It’s not potatoes
that farmers planted too much second year in a raw (because they’ve been dumbed
down by subsidies and regulations noise and they can’t calculate properly) and
now noone wants it so they have to plow it. That is what happened in Poland
this year. Living example of chaos under centally planned economy …

Speculation, hoarding (destroyed by Block linked by guest http://www.youtube.com/watch?v=x4XSEVJLrdY
) are just words – show me the mechanism. I want to know how it works according
to you so I can have my way with it.

Use in industry is important to fulfill regression theorem.

http://smilingdavesblog.blogspot.com/2011/06/bitcoin-takes-beating.html

http://smilingdavesblog.blogspot.com/2012/07/bitcoin-and-intrinsic-value.html#comment-form

And no, it’s not costly to use gold as money instead of (or should I say parallel to)
industry. It’s an equivalent of the cost of lock on your bike – you could use
paper band instead, right? But you don’t, you tend to use hardened steel chain
to guard your bike against theft – what a waste of resorces, right? Gold
handcuffs do the same thing and it’s way more costly to use monopoly money than
paper locks on bikes.

“Gold is used in industry, it is subject to speculation, it can be
hoarded… right?”

No. Give me explanations, not one word answers I can’t argue with, because you
are simply not making the case. Focus on one thing maybe and elaborate on it.

“All these effects on the supply of gold as a currency *artificially*
impact price information.”

You ment that holding gold, using it to make stuff and speculating on it’s rise
in price (if you see for example Helicopter-Ben in action) have an effect on
it’s price. Those are not some insidious effects – this is market.

How is it artificial when it involves market actors? It
would be, if the story was that government used gold to make stuff, or
government would lock half of the gold and refuse to use it (never happened
contrary to Friedman’s story), because government is not legitimate owner of
the gold. I am constantly refering to gold as market chosen money absent
government influence on it, absent coercive power of the state and it’s guns
enforcing monopoly. If I want to hold it and not lend it out for profit – it’s
my call. You are not in a position to judge my action involving my stuff. Be
aware – it’s very expensive to use gold in industry so it’s not over-utilized
there. It’s used just as much as necessary – the market is there to
“say” what is reasonable regarding all gold’s purpuses including
monetary and industrial.

Speculation under market chosen money (that was gold) and
without monopoly in this money – How
would it work? And what exactly do you mean by this term.

“And that is bad for the economy. As I said above, not as bad as fiat but
I still believe undesirable.”

I care not about your beliefs. Present here instead genuine arguments, facts
and evidences.

Last but not least. You seem to have some imaginary
construct in your mind about what is money that says it can and should be
detached from any other usage. You say it’s harmfull and unnecessary to use
gold as money. I think you need to watch this:

http://www.youtube.com/watch?v=vowbrq_g5NM
http://plenarchist.wordpress.com/ plenarchist

There’s nothing wrong with saving. The problem is taking money out of circulation. If someone deposits into a bank and the bank loans out the funds, the money stays in circulation. If someone buries money in the backyard, it is taken out of circulation. Gold can buried in the backyard…
http://plenarchist.wordpress.com/ plenarchist

I’m not going to argue with you. You either get it or you don’t.

“… how on Earth free market regulation via supply and demand mechanism is chaotic.”

One last time… market decisions are based on price information. The more accurate the prices, the better the decisions. If the medium of exchange is subject to supply and demand (by being part of the economy), then prices change in a NONLINEAR manner.

Per Wikipedia, Hayek says “… price signals are the only means of enabling each economic decision maker to communicate tacit knowledge or dispersed knowledge to each other, in order to solve the economic calculation problem.”

It’s like looking at the world through a lens. If the lens remains true and constant, your view of the world remains accurate. If someone changes that lens (by changing the medium) in ways unknown to you, your view of the world gets distorted. It’s like the passenger side mirror on a car “Objects appear closer than they are” except someone is able to warp that mirror without your knowledge… How far away then is that truck behind you?

No sense in arguing more on this. It’s simple logic. The ideal monetary exchange system should not be subject to supply and demand (by not being part of the economy).
http://plenarchist.wordpress.com/ plenarchist

”
You say it’s harmfull and unnecessary to use gold as money.”

I think you should stop putting words in my mouth. I’ll repeat once more… if I have to choose between gold or paper, I’d choose gold for obvious reasons.

What I’m suggesting is that if money is part of the economy it will cause unpredictable price distortions. There can be no disputing this. Further, if a system of exchange can be devised (digitally) without it acting like a physical good per se by being in constant supply, readily divisible, and *not* persistent in time, it should provide for more accurate prices. Call it “true money.”

In summary:

Gold currency:

Generally constant supply… ok
Not readily divisible (inelastic)… bad
Persistent… bad

Fiat currency:

Arbitrary supply… really bad
More readily divisible than gold (elastic)… ok
Persistent… bad

True money (digital but not bitcoin):

Fixed constant supply… good
Readily divisible… good
Not persistent (deprecated)… good

True money can increase in supply but all currency in circulation and prices are instantaneously and uniformly adjusted.
lulu

Right, I mean, no – you are totally wrong. Lets begin the refutation process

“If the medium of exchange is subject to supply and demand (by being
part of the economy), then prices change in a NONLINEAR manner.” Well, does it MEAN anything?

“There’s nothing wrong with saving. The problem is taking money out of
circulation (true for paper or gold). If someone deposits into a bank
and the bank loans out the funds, the money stays in circulation. If
someone buries money in the backyard, it is taken out of circulation.
Gold can be buried in the backyard…”

Yes it can be burried, and there is nothing bad about it either. Purchasing power goes to all the remaining money – nothing bad happened. Owner of the money did with it whatever he wanted. There is no point in judging him. Because after all – it was his money. Money is not some ephemeral, angelical, platonic and sterile being, a social good or cetral planer’s means to ends. Money is a market creation it emerges form barter via commodity competition to this role.
http://mises.org/daily/3834/Halloween-and-Its-Candy-Economy
Market decides what money is, and what isn’t. You seem to confuse loan banking and depostit banking here – those are two separate things. Deposit banking is just like burying money in the ground + you pay for the opportunity to do so. By your logic – there should be ban against holding cash – because money is not in the bank than. This is simply defiance against property rights – are you sure you’re not anarcho-communits? I do with my money whatever I want and you won’t tell me what to do with it – it’s called property rights.
Your “True” (sorry-laughable) money is subjected to supply and demand just as gold. Money is also a good people buy with stuff and services when they want more liquidity in their possesion. So “true” money is subjected to hoarding just as gold is. Oops. What now genius

Can your money go to zero in value?
What will give it value before it will be money?
How about when market decides it’s no longer money?
You call it whatever you want. I call it BS.
How will you make people to use it?
Wouldn’t you need a state to run such a thing? I suppose it might be necessary for some reason. Like security or to ban all other forms of money since people might not like your idea so they might develop their own “true” monies. If so the slippery slope will bring us back to Greenspan and Bernanke and giant state gripping on throat of humanity. Of course it would be imaginary anarcho-state (which is an oxymoron) that would be there to provide imaginary “perfect” money that wouldn’t “distort” prices via process of money consuption nor money production obviously.
People buy money with other stuff and consume it. Yes it brings price of money up so that new prices reflect lack of money that was consumed – no place for dramatic changes in price levels since eating money is kind of stupid and self-regulating. Just look at historical data – we have all the gold that has been mined, People don’t do much stuff from gold since it tends to make them bankrupt, and if they do it’s freaking instantly reflected in prices so they are accurate also, and it’s their property so back off.

Lets move on to Herbener’s testimony:
http://mises.org/daily/6044/Leave-Money-Production-to-the-Market
‘If money demand rises, the resulting increase in money’s purchasing power would bring forth more production of money and moderate falling prices. The modest price deflation over time in a market economy is an integral part of its economizing production.”

If demand to consume money rises it will bring it’s prices up until it’s no longer socially desirable to consume it. Money consumption and production are mutually beneficial for society – otherwise there would be no profit in it. And they kind of fit together don’t they.

“Moreover, entrepreneurs earn profits and avoid losses by anticipating these changes. If they anticipate falling prices of their outputs, they will reduce their demands for inputs today pushing their prices down. When output and input prices fall together, profit and production are maintained. The symmetric process occurs during price inflation. If entrepreneurs anticipate higher output prices, they will increase their demands for inputs today pushing their prices up. As a result, output and input prices move up together and profit and production are maintained.”

Right, so entrepeneurs will anticipate money consumption – prices will be real, not distorted, k-ok.

Think of it this way – money is used to idk, space something that doesn’t come back from space anymore. Well, what was it bought than with? Not with money – that’s the end. With what was the gold bought? Other goods and services? So somebody took some gold he earned via selling services and other goods and used it to make space gadget that doesn’t return from space. And you truly believe that this process falsifies prices? It’s part of the freaking living market! To ad insult to injury – it’s not even inflationary, because goods and services gold was bought with roughly equals gold value ejected into space. Net effect is zero.

To sum it up. Your objections are bogus, without any groudings in real
world facts nor history, and obviously against property rights.

Have a nice day
http://plenarchist.wordpress.com/ plenarchist

>> “Money is not some ephemeral, angelical, platonic and sterile being, a social good or cetral planer’s means to ends.”

I never said anything about “central planners.” Again, you put words in my mouth. But should money be created as an economic public good? Ideally, yes.

>> “Can your money go to zero in value?”

Nope.

>> “What will give it value before it will be money?”

People using it… Currency *represents* value. What gives Fed notes “value”? People used to use shells as money. True money uses digital tokens…

>> “How about when market decides it’s no longer money?”

It won’t. If the Fed weren’t abusing the money, people would keep using their notes. And currently are…

>> “You call it whatever you want. I call it BS.”

Call it whatever you want. Call gravity BS, but it’s still gravity. A rose by any other name…

>> “How will you make people to use it? ”

I won’t because people would agree to voluntarily.

>> “Wouldn’t you need a state to run such a thing?”

Yes, an anarchic state. And if people sign a citizen’s contract that includes the condition to use true money… hey, no prob.

>> “Yes it can be burried, and there is nothing bad about it either. Purchasing power goes to all the remaining money – nothing bad happened.”

It’s bad when money is removed from circulation. It distorts prices. Same thing happens if the Fed destroys larges amount of fiat money. It causes deflation which distorts prices.

>> “Your “True” (sorry-laughable) money is subjected to supply and demand just as gold…”

No, it isn’t (but your responses increasingly are). Gold has persistent value and true money doesn’t. Money serves the purpose of facilitating exchange. Does it make sense to pay gold or silver for food or dry cleaning? That the goods and services you get in exchange for gold are gone as soon as you eat it or wear it? That the gold currency you paid can then go into a drawer for 10 years and continue to increase in value simply because currency units have been taken out of circulation? It definitely doesn’t.

>> “Money is a market creation it emerges form barter via commodity competition to this role.”…. “Market decides what money is, and what isn’t.”

What about fiat currency? Did the market decide that Fed notes are currency? By your reasoning, no one would take your Fed notes…

>> “‘If money demand rises, the resulting increase in money’s purchasing power would bring forth more production…”

This is not relevant to my point that you so deftly evade… All change in the medium of exchange distorts prices. There is no disputing this fact. Quibble over by how much all you want, but *any* change in supply/demand in physical money *will* distort prices.

>> “Right, so entrepeneurs will anticipate money consumption – prices will be real, not distorted, k-ok.”

Wrong, again. No one can “anticipate” future supply and demand. Can you tell me what the price of gold will be tomorrow, next month, or five years from now? So in your perfect world, entrepreneurs must become master speculators to know whether to make a long term investment?

>> “Of course it would be imaginary anarcho-state (which is an oxymoron)”

No it isn’t. The word “anarchy” means “no rulers”… not “no state.” A state without rulers then would be an anarchy.