so, what is he supposed to do? He can either sit around like Bush, or we have to go into deficit to fund things. Remember, he was bagged by Bush.

To pay off the debt, he has to raise taxes later - so, what else is new?? The tax cuts were irresponsible in the first place. The money has to come from someplace folks. There is not enough space for trees on the White House lawn to grow it.

The guy who wrote this article reminds me of the Sierra Club, who complain no matter what...except Obama does not even have some kind of utopian thing like wind power that he can promise.

Norman -

He could, oh, I don't know, CUT FUCKING SPENDING.

Tax cuts are NEVER irresponsible. Only spending increases are.

Obama has thrown 14 billion dollars at GM, and then said "ok, we're gonna force you into bankruptcy", so that's 14 billion gone.

He's tossed over a trillion at the banks, and now won't let them pay it back because he wants control of the banks.

And if he tried to raise taxes as much as he'll have to for his further disastrous power-grabs, you're going to see an expatriation of wealth the likes of which has never happened before.

Bush hardly just "sat around". He presided over the Medicare prescription benefit, the largest expansion in the program since Johnson. The Dept. of Education budget increased by half again in real dollars (funny, I don't see the schools getting any better, do you?). Congress, Republicans and Democrats alike, increased spending by more than at any time, again, since Johnson. Bush gleefully signed off on it all.

Trotting the tired old mantra that "Bush did it" is just giving justification to jump off a bridge just because someone else did it. Regardless of what Bush did, Obama has now created structural trillion dollar annual deficits into the foreseeable future, while increasing federal unfunded commitments by a number roughly equivalent to the annual GDP. And he has no plan to pay for it except to borrow from the Chinese and print more money. Tax increases necessary to fund all this stuff would be politically impossible, not to mention kill whatever productivity is left in the economy.

Welch is right. Obama is all smoke and mirrors. 52% of the good folks out there who bothered to vote, were taken in by his vague promises of "hope" and "change". What claims he made during the campaign (no tax increases on households earning under $250K) are mathematically impossible to carry out. Some of us knew that. Everyone else is going to find out, too, in time. The only question is whether, in the meantime, we're going to become some grim combination of a European "social democracy" (economic stagnation, permanently high unemployment) and a banana republic (authoritarian dictates and corruption) beyond our ability to reverse the effects of this crew's policies.

"The money has to come from someplace folks. There is not enough space for trees on the White House lawn to grow it."

What a witty analogy!

Norman, if you actually knew anything about economics you would realise that even if money did grow on trees there would be no need for it. Not when money is already created out of thin air.

Since the collapse of the gold standard, all of the world's major economies have been on a system of fiat money. That is, the national currency is essentially backed by no assets or commodities, and central banks can largely create as much of it as they choose.

The US federal reserve can create another billion or trillion US dollars by simply adding an entry to a database. They can then credit that money to banks, or use it to buy government debt, or indeed credit it to whoever they please.

Already, a large proportion of the US national debt is owed to the Fed. Whenever governments borrow money from central banks it effectively amounts to simply printing more money to fund government expenditure.

"Remember, he was bagged by Bush."

This is why I ask people, "If George Bush did this, would you support it?"

I don't think you would. You've elected a different person than you thought through willful blindness.

Nick -

Gold standards are irrelevant. As long as the Congress is responsible for currency (through their puppet institution the Federal Reserve) inflation is inevitable.

What we're witnessing is the same thing that happened in numerous other countries both before and after the gold standard was abandoned.

We're simply devaluing the currency by creating more of it. There's nothing in a gold stnadard to prohibit that.

If the US prints a trillion more dollars, and there hasn't been a concurrent increase in output of a trillion dollars in the US economy, then each and every dollar is worth a little bit less than it was before the printing happened.

So here's how the scam works: Borrow money from China. Print more dollars. Pay China back with the devalued dollars in the future.

In other words, You loan me $5 today, I pay you back $4 tomorrow. I'm just hoping you're stupid enough not to realize that and you just see that I've given you $5.25 in today's money to pay back yesterday's pre-dilution $5.

This is exactly the same thing that happens when a company dumps a shitload of stock on the market. Every other outstanding share is worth a little bit less because the company's value didn't increase with the offering.

Rad -

"Blame Bush" is all they have left. The gilt is off of their messiah, and they cannot handle it. Therefore, it must not be that he was a false messiah, but that he was set up by Satan.

Brian, the reason the gold standard ended was because the money supply increased to the point where it was no longer possible to continue to exchange dollars for gold, and so President Nixon announced that the US would no longer redeem dollars for gold.

In other words, the government largely ignored the rules and just printed more money. But just because the rules might be broken is no reason to abandon the system. It is merely a reason to have tougher sanctions to enforce the rules.

A gold standard would probably have been more sustainable if it was supplemented by currency issued by private banks, provided they had a minimum reserve requirement of gold. In this situation if the government increased the money supply too rapidly to the point where it perhaps couldn't redeem for gold, then people would quickly decide to favor private over public notes as payment. But when the state has a monopoly on currency, people have little choice but to accept their paper.

Nick - either you aren't an American, or you're a goldbug. Yes, I mean goldbug in the most derogatory way possible.

The US Government controls our currency because it is one of the few enumerated powers in the Constitution. Private currencies are, while not illegal, inherently meaningless for public debts. This was done precisely because of the inherent unmanageability of private currencies. Prior to the revolution, states had their own currencies. Which meant that interstate commerce was a pain in the ass. Do you really want to go to a system where you have to deal with multiple floating currencies just to buy lunch?

All a gold standard would do is either mask inflation through devaluation, or prevent growth by putting an absolute upper limit on total wealth.

A gold standard impedes growth. The gold standard ended because it was, in the end, utterly useless.

If Obama's the Wizard, does that make Dubya the Scarecrow?!

One other thing.

Let's say we had a system of private and public currencies. That means that in order to survive any market upheavals or manipulations, everyone has to be a currency trader, and has to maintain reserves in every accepted currency as a hedge against ECB-style shenanigans.

Which means that I would have to maintain one bank account in US dollars, another in "NickNotes" and so on. And then I have to deal with vendors who are all going to have preferred currencies, and pay them in those currencies to avoid any "preference fees".

The system quickly becomes unworkable. This is why nations issue currencies. The Euro is showing the other end of the spectrum - when multiple disparate interests (i.e. nations) decide to pool their resources into a single currency managed by a third-party with no interest in the well-being of any of the members.

Currency at any level above or below the national is going to cause inefficiencies and imbalances.

James -

Sure. The scarecrow was intelligent, but didn't know it. I think that sums up GWB to a T.

And the Wizard was ultimately nothing but smoke and mirrors. Again, fitting O to the letter.

Here are two interesting windows into Obama's character.

Richard Epstein discusses Barack Obama

Richard Epstein is the James Parker Hall Distinguished Service Professor of Law at the University of Chicago, where he has taught since 1972. He was a colleague of Barack Obama when Obama taught as an instructor. Epstein had mutual friends with Obama, and talked to Obama about some issues. His main description is that Obama is under complete self-control.

easyopinions.blogspot.com/2009/03/obama-and-god.html
Obama and God

When God talks to you through your inner voice, it is even better than prayer. Obama experiences this every day, in his own words, revealed in a March 2004 interview with a reporter on religious issues.

This is the direct reference to the second link above:

Obama and God

When God talks to you through your inner voice, it is even better than prayer. Obama experiences this every day, in his own words, revealed in a March 2004 interview with a reporter on religious issues.

Brian,

Well I'd cast SHillary as the Tin (wo)Man.

Not sure about the Lion... any thoughts?

Hopefully the lion turn out to be the american public

It used to be that Bush was the bad guy for deficit spending. Now Obama's the good guy for making Bush's deficit spending look like a trip to the candy store.

Yeah, I never thought I'd see a bigger spender than Bush in office.

Brian says "The US Government controls our currency because it is one of the few enumerated powers in the Constitution. Private currencies are, while not illegal, inherently meaningless for public debts."

I'm not disputing any of this. What I suggested may well require changes to the constitution.

"Prior to the revolution, states had their own currencies. Which meant that interstate commerce was a pain in the ass. Do you really want to go to a system where you have to deal with multiple floating currencies just to buy lunch?"

No, and I never suggested anything of the sort. I completely understand that having multiple floating currencies trading within the one country would be a huge pain in the ass. That is not what I suggested at all.

If you had a gold standard where private banks or institutions could issue currency provided they had sufficient gold reserves, then the value of currencies issued would be fixed to one another. That is, it wouldn't matter if you received a $100 note from one bank or another, because it would all be redeemable for the same amount of gold. Just as it makes little difference whether you currently receive a cheque from one bank or another, so long as the bank is solvent and will honor the payment.

"All a gold standard would do is either mask inflation through devaluation, or prevent growth by putting an absolute upper limit on total wealth."

Firstly, inflation could not be simply "masked" through devaluation. Any change to the value of dollars to gold would not go unnoticed. But that is simply a reason for having tougher measures to prevent this happening, like a constitutional guarantee.

As for a gold standard impeding growth by putting an upper limit on wealth, this may be true but a few things should be considered:
- under a gold standard, deflation encourages more gold mining while inflation reduces it, thereby promoting price stability

- Under a gold standard, it is theoretically possible that you could have a situation where world economic output rose rapidly, but the gold supply only rose marginally, and this would therefore lead to significant deflation and hurt the economy. But a couple of things should be considered. One is that modest deflation (say 1% a year) is probably not harmful. Only much higher deflation is economically harmful. In addition, these risks are fairly minor in comparison to the risks of hyperinflation under fiat money. No system is perfect, but the risks in a gold standard are lower.

Brian, another thing is that a gold standard would actually promote international trade through greater price stability if most currencies were fixed to gold.

It is ridiculous that businesses involved in importing and exporting should have their fortunes so heavily tied up in currency fluctuations.

Brian, given that you don't like the gold standard, and given the obvious problems with fiat money, what alternatives do you offer?

I prefer fiat money to anything tied to a finite commodity. The "problem" with fiat currency is politicians. As long as the currencies have some rational basis in relation to each other, you don't get any major fuckups. When you have politicians like the ones in Brussels that manipulate the currency in order to shaft one country, or you have politicians looking to devalue their way out of stupidity, you get problems. But these too are self-correcting. Brussels' manipulation of the Euro collapsed and cost a bunch of Soros' money in the process. Our devaluing of the dollar will result in a lot less of them being bought. The politicians will be forced to either cut spending, or raise taxes - resulting in significant political upheaval. Sunlight, my friend. That's all it takes to "fix" fiat currency.

When you tie total wealth to a fixed quantity asset, you have either an upper limit on the size of the economy, or you have an asset which has a value that increases without bound. There is no way to fix this problem.

There is a finite amount of gold on the planet, and any time you have a resource that has multiple uses, it is to everyone's benefit that it be put to the most productive use. Burying it in vaults and paying people to guard it with their lives is hardly productive. Turning it into chains and teeth for rappers is not only more interesting, it generates significant wealth in the process.

I understand the inherent distrust of politicians. But given the alternatives, this is probably the best we've got. You want a gold standard to inhibit government. But at the same time, you will crush commerce. You can't have economic growth with a fixed upper bound for value, unless I'm making a fundamental misunderstanding of economics.

Brian, it is no doubt true that countries that debase or manipulate their currency end up paying a price. But there are a lot of innocent victims who get caught up in the economic ruin, and it would be much better for everyone if it was simply made more difficult for this to happen in the first place.

You mention one of the commonly cited arguments against a gold standard. Namely, that it is a wasteful use of resources to mine gold simply in order to lock it up in bank vaults. There are two objections to this argument:
- people will still mine gold and hoard it for speculative purposes or as a store of value regardless of whether or not a gold standard exists. It could well be argued that using this hoarded speculative wealth as a basis for guaranteeing the currency is actually a more productive use of existing resources
- any measure designed to increase security often entails some opportunity cost in resources. If no-one bought door locks, car alarms, home security systems, surveillance cameras etc., those resources could be put to other productive uses. But there would be an increase in risk that would perhaps outweigh the benefits.

It is also true that there is a finite supply of gold in the world. To which one might say, that is the whole point. No-one can simply produce limitless amounts and consequences be damned.
The only problem I can really see with this is that if you had a situation where world economic output increased significantly, but the world had exhausted its supplies of gold deposits, then it would potentially produce harmful deflation. And in this situation, ending the gold standard would be advisable. But this is an exaggerated threat for two reasons:
- the world is currently going into an economic downturn, while there are still gold deposits that haven't been mined in parts of the world. So I'd say that risk is minimal
- compared to the risks of hyperinflation under fiat money, it is less damaging. There's no point worrying about potential molehills when the mountains are caving in.

"You can't have economic growth with a fixed upper bound for value, unless I'm making a fundamental misunderstanding of economics."

You can still have economic growth even with an upper limit to the growth of the money supply. It would simply mean that beyond that point money would start to become more valuable. Again, this is only a problem if you are concerned about deflation. But as I've said, modest deflation is not a problem. And moreover, we are nowhere near this point anyway.

Another thing is that putting an upper limit on the potential money supply would not put an upper limit on the potential notional GDP.

The reason is due to the multiplier effect of money. That is, every dollar spent can circulate through the economy many times (so there can be no real limit on nominal GDP).

It would create an upper limit on money as a store of value. Obviously not everyone could have a vast nest egg of gold or money redeemable for gold. But then, currency does not have to be retained as a store of value. People can use other assets, capital, land, or other scarce commodities as a store of value.

Nick - doesn't your last scenario describe hyperdeflation?

Too few dollars chasing after too many goods?

Without sufficient cash available, there won't be anybody able to purchase anything, because the dollars simply won't be available.

Since WWII, the workforce in the USA has doubled. Had we stayed on a gold standard and hit the limit, wouldn't that have resulted in massive wage deflation? There just isn't that much Gold left unmined in the Earth.

I just don't see how there are any advantages to a gold standard. The government won't be constrained in it spending by it. Rather than printing more money to inflate their way out of it, they'd simply revalue the currency and inflate that way. Or they'd float more long bonds.

Sorry. I just don't see any benefit to a gold standard. It's bad enough we're spending God knows how much money to defend Fort Knox and any other gold depositories we have. The one implied positive (that it would stop government overspending) is not guaranteed, and the negatives are far too great.

We would still be in the shit soup we're in right now if there had been a gold standard.

"We would still be in the shit soup we're in right now if there had been a gold standard."

I disagree. Whether a gold standard would be good or not, I can't say. But it would not have prevented bad politics, bad lending practices, or rising housing prices. At most, it might have restrained the amount of debt-spending going on just now.

I ran across an interview (sorry, can't seem to find the link) with a retired IMF worker who had helped bail out several third world countries. His take was: if you would drop a couple of zeroes off the financial amounts and hide the name of the country, the situation in the USA is classic - exactly what he has seen x-times in banana republics.

Some group of cronies gains far too much political influence, get greedy and start raking in the loot. Eventually they overstep and get into financial trouble. The government, influenced by these cronies, tries to bail them out while digging its own hole deeper and deeper. Eventually, one of two things happens: either the government drops the cronies down a deep, dark shaft or the whole house of cards collapses.

In the case of the USA, the cronies are the financial industry. The rest of his analogy was all too obvious...

Bradley - Are you disagreeing with me? I don't think you are. You say you disagree, and then explain how my point is perfectly valid.

Gold standard or no, our politicians would have mandated the elimination of moral hazard, which would have led to the housing bubble, which would have led to the oversupply of homes (especially at the high end), which would have led to the housing market deflation. And the connected bubble of bullshit mortgages would still have been created, and would still have popped, leaving us picking up the pieces of all the hidden risk that Congress forced the system to take on.

Gold doesn't prevent corruption. Only transparency does that. And the Congress is trying their damndest to prevent anything resembling transparency from hitting the financial world for fear that they'll be exposed for causing it.

To paraphrase Obama - their obstructionism is the only thing between them and the pitchforks.

Please notice that a tacit assumption is also behind the loss of gold as a standard: the idea that new citizens should make as much money as their neighbors.

The idea that the amount, in dollars, of money in circulation should go up with population is an assumption never questioned.
Market communication does move wealth from the many to the few. That doesn't mean anything other than that the few think they can spare it. Then, the many get mad because somebody other than them has money.

It's nasty.

Rad - that depends upon your view of money and labor.

If the labor pool increases, there are two ways to deal with it. Either the value of labor depreciates such that the total number of dollars available for labor does not change, or the value of labor stays the same and you increase the number of dollars chasing it.

Reality is somewhere in between, depending upon capacity and need. What usually happens is the value of individual labor decreases a small amount, but the aggregate value increases. Which means that more money must be injected into the market to chase that labor.

If you have a fixed amount of money circulating in the economy (gold standard), then there comes a point where there's simply no room to add more labor or anything else, because there's just not enough money to go around. You end up with a liquidity problem.

So how do you put more money in the market? You dig up more gold (which means that governments end up owning all gold mines, and probably go toward gold confiscation) or you print more money. If you are on a gold standard, you can't do the second, and the fact that gold is a finite resource puts an upper limit on that.

The very rarity and difficulty of acquisition of gold that gives it its value is the reason it is useless as a currency in a growing market.

It was pointed out earlier that Nixon ended the gold standard in the US. What else happened around that time - a massive influx of women into the labor pool. While there was a small devaluing of existing labor, there was a massive increase in productivity and subsequently more money flowing to attract the new labor.

If I had to guess (I was three when it happened, and I've not read the economic treatises of the time) I'd say that Nixon's people ran face first into this problem and realized that even then there was not enough gold in the world to support the level of economic growth we were experiencing.

Shorter me:

I'm not going to take a pay cut just so someone else can have a job.

I had a goldbug once tell me with a straight face that if we were still on the gold standard that a cup of coffee would still be 20 cents.

I didn't have the time to explain to him how wrong he was, so I just chuckled and left it at that.

"If you have a fixed amount of money circulating in the economy (gold standard), then there comes a point where there's simply no room to add more labor or anything else, because there's just not enough money to go around. You end up with a liquidity problem."

This is true, but it's illustrative of the problem most people have with basic monetary concepts.

Liquidity is only necessary because of an assumption - that when a hour of labor is worth x, then two hours of labor is worth 2x, however it is distributed between laborers.

You've probably noticed that what you call your marker ("dollar") has nothing to do with how much it's worth - but nobody imagines that competition for the same ounce of gold will make it worth more in labor - lowering apparent hourly rates.

The wag looking for 20-cent coffee doesn't want to think about the accompanying difficulty: taking $1/hr wages.

I am so furious with people who get fixated on the numbers and not on the principles.

Rad -

Here's the problem with the principle you don't think I grasp.

I grasp it fine.

But if there are two hours worth of work to be done, whether I pay one guy for two hours, or two guys for one, the same amount of money has been paid.

The thing is, the amount of work to be done is what's increasing here. Which is why money supply has to be elastic. Money is information. The price of things versus prevailing wages is an indicator of how long someone is willing (or simply needs) to work in order to acquire a thing.

I can't see how you can increase the amount of work done in a fixed asset system without devaluing work itself. Wouldn't that act as a disincentive to increase output?

And I agree with you on the wage thing - people expect that their labor is worth more this year than it was last year, because through experience they become more productive, and therefore more valuable. This may or may not be the case, but it is the perception.

The numbers have never been my focus. It is the fact that gold is a finite resource with a fixed value that has. At some point, all extractable gold will have been extracted. If you are going to use that mass of gold as a fixed measure of wealth, you are going to have wars where countries try to steal other country's gold. You are not going to have a stable system, because you are trying to hold down a dynamic economy with a large gold nail.

I just can't wrap my mind around the concept and get it to work. Can't do it.

Trotting the tired old mantra that "Bush did it" is just giving justification to jump off a bridge just because someone else did it

Really? 8 years ago, the same people who said that said "Clinton did it" (you know, the guy who balanced the budget after Bush and Reagan fucked it up).

cut spending

gimme a f'rinstance. Oh I know, only cut the things which do not affect YOU personally!

I advise you to consult Arnie on that first..you know, the guy who cut spending and now has to release thousands of prisoners to help dig California out of billions in debt! But don't worry, soon you will be complaining about crime and demanding more spending to fight it. And longer jail terms to boot.

tax cuts are never irresponsible

What are you talking about? Does your home planet have an 'inverse economy'?

The US federal reserve can create another billion or trillion US dollars by simply adding an entry to a database. They can then credit that money to banks, or use it to buy government debt, or indeed credit it to whoever they please.

Already, a large proportion of the US national debt is owed to the Fed.

So..what exactly is your recommendation? (as an aside, it sounds like you're saying a portion of the government debt is owed to another arm of the government? If the government cannot pay off its debt to itself, why don't they just print more money and leave it at that?)

I appreciate all you guys chipping in to give us the ECON 101 class, but all that you say applies to Bush as well as to Obama, right? So..did you make the same points and ask the same questions during the Bush administration that you are now? And if so, why didn't he follow through? Or, he did, and for some odd reason we were, and still are, in a mess?

When Bush said he had "inadequate intelligence", was he just referring to the supposed WMD's, or was he making a general descriptive statement about himself?

I don't think you would. You've elected a different person than you thought through willful blindness.

Actually, I didn't vote for Obama. so ...you cannot "blame me". Hah!!

Norman L.:

So..did you make the same points and ask the same questions during the Bush administration that you are now? And if so, why didn't he follow through? Or, he did, and for some odd reason we were, and still are, in a mess?

Yep. I told everyone back in 2000 that Bush was a big spending liberal. Nobody listened. By 2005 they believed me, but it was too late. Bush vetoed precisely zero spending bills. Oh, and Clinton didn't balance the budget. Most of that was actually projections based upon the fraud that was the dot com bubble.

Never make the assumption that because I bash Obama that I had any affection for Bush. I did not. I was forced to accept him because those running against him were totally unacceptable. The same reason I was forced to pull the lever for McCain in 2008. It took me a week to wash the stink off after that one.

gimme a f'rinstance. Oh I know, only cut the things which do not affect YOU personally!

Eliminate the Department of Education, Eliminate the CIA and move its function to DIA. Simplify the tax code to the point where the IRS could be run by a dozen temps. Eliminate all subsidies. That's about 10% of the budget right there.

If I took the time, I could probably knock out about 50% of federal spending.

It occurs to me that I didn't respond properly to your snark in the request for examples.

The more I think about it, the more I realize that I get just about nothing from the federal government outside of national defense and the interstates.

The state taxes me to maintain the state roads, the city taxes me to cover local roads. I have no children and so get nothing from the schools I fund.

I really can't think of any direct benefit I get from the federal government at all. As I said, the indirect benefits from national defense, highways, and not much else. And all it costs me is 35% of my annual income.

Norman, I don't know how many times you have directed anti-Bush jibes at me, despite the fact that I can't remember a single occasion that I have said something favorable to Bush.

Truth is, you are not interested in arguing with the actual substance of what anyone else writes. You simply like to take cheap shots, misrepresent people, and debate your own selected soft targets and straw men.

Here's a handy tip. Now that you have your own blog set up, you can log in under another identity and simply post flimsy straw man arguments that you can then knock over under your real identity. Have fun debating yourself! But please leave us grown-ups alone!

To the other posters: ignore him guys. He's a troll. But he will eventually give up.

"So..what exactly is your recommendation? (as an aside, it sounds like you're saying a portion of the government debt is owed to another arm of the government? If the government cannot pay off its debt to itself, why don't they just print more money and leave it at that?)"

My whole point is that the government is already effectively printing money to pay its bills, no matter what accounting fiction they use to disguise.

It's very simple, if the federal government borrows from the Fed, and the Fed can create as much money as it wishes, then this effectively amounts to printing money to fund government spending.

By definition, if a central bank can create as much money as it needs without that money being backed by anything else, then the central bank would have no need to ever call in these debts.
What are they gonna say: "Hey Uncle Sam, the printing presses aint working today. Can you pay us back those trillions we lent you".

So effectively that debt is money that will probably never be repaid, and is created through simply issuing new currency. Basically printing money to fund expenditure.

The only reason why the government doesn't say "Hey, we are going to pay our bills by printing more money" is that if they did, everyone would say "how risky and irresponsible is that". Whereas by pretending that the government is simply borrowing more, this may not look good but at least it doesn't look like a dodgy "funny money" solution.

In other words, it is basically just an accounting fiction to make it look more respectable than printing money.

Oh oh, the man from Down Under, who knows me from another blog, on which us two were having an argument about something else a while back. Watch out people, he can sure hold a grudge!

Your greatness, I didn't even look at the names of people commenting above. I just saw a discussion about currency or something, so I commented. What's the problem?

(I would not put it beneath Nick to try and get at me through my own blog. Oh well, good thing the comments on it are moderated!)

Bush was a big spending liberal.

I see. Maybe you can write in Uncle Scrooge. He's the only one I know who will implement your recommendations..oops he's dead - too late!

(I would say write in Nick, who is always bragging about how great Bush is, but he's not a U.S. citizen!)

P.S. Nick has his own blog, I've seen it before. But he's not posting a link to it here on Amy's site, because he wants to keep me from proving he's a troll.

"I can't see how you can increase the amount of work done in a fixed asset system without devaluing work itself."

Sorry; the principle I am trying to illustrate is that today, in the short term, we have the idea that an hour of labor is a constant as well as the monetary unit used as a marker for trade, yet we accept that the value of an hour of labor changes, and we are saddened or shocked that a "dollar" does, too.

This is wholly artificial, and illustrated well by the idea of the gold standard. Nobody can print gold, and so its value goes up as competition for it increases. This depresses the "value" of labor by requiring more of it for the same quantity of gold. Unfortunately, this depression makes the laborer think, "I can work for something else" and defeats that system.

Radwaste:

Nobody can print gold, and so its value goes up as competition for it increases. This depresses the "value" of labor by requiring more of it for the same quantity of gold. Unfortunately, this depression makes the laborer think, "I can work for something else" and defeats that system.

Wait. Is that good or bad? I would think that depressing the value of labor in the face of increased demand would be a bad thing. You'd be setting the equilibrium at a falsely low level.

Nick S:

So effectively that debt is money that will probably never be repaid, and is created through simply issuing new currency. Basically printing money to fund expenditure.

The gold standard doesn't prevent this. All Congress does is redefine the value of gold, and we start all over again. What part of this are you not getting? The problem isn't that the fed prints money, it's that Congress spends money IT WILL NEVER HAVE. The gold standard won't change that.

Amy, in all fairness to Norman he does provide a good clown show free of charge. It's always amusing to see whatever kind of peurile catty retort he can come back with.

Apparently there is a vast conspiracy to try to sabotage his blog. We are all trembling in fear of the unpalatable truths that Norman is communicating to the world, so we are desperately trying to shut him down. But Norman, the brave courageous dissident against fascist oppression, just keeps soldiering on! What an inspiring hero!

Brian, a few points. You keep saying that a gold standard is pointless because the government will just decide to devalue. But that is a bit like saying that we shouldn't worry about laws against theft, because many people will just ignore the laws and get away with it anyway.

Of course there may be difficulties in enforcing a gold standard. But I don't think we should just run up the white flag.

The problem with fiat money is not simply that governments cannot be trusted. It's simply that some things are so inherently flimsy that they are almost bound to fail sooner or later. You don't serve hot soup in a thin plastic container with a leak, not because you don't trust people to be careful but simply because it is inherently risky.

Any money system that is backed by nothing real is doomed to fail sooner or later. I challenge you to find one example of a fiat money system that has survived and worked okay for a long time, like perhaps a couple of centuries. Yet there are many examples of commodity-backed currencies that have survived and produced fairly stable prices for long periods of time.

Gold has been a reliable form of currency for thousands of years, and it will continue to be once the current fiat money is in a museum somewhere.

Nick -

That depends upon what your goal is.

If your goal is price stability, then by all means peg your currency to a finite resource.

If your goal is growth and mobility, then the worst thing you can do is tie your currency down.

Like Rad alluded to - in a world where there is a finite pie, the more people at the table, the less pie for each.

The only reason that the gold standard lasted as long as it did was that we were able to mine or expropriate gold in sufficient quantities to support growth. Look what happened to Europe's economy after Spain came back from the new world after stealing all the Aztec's (or was it Mayan's or Inca's) gold.

That's right - hyperinflation. Ultimately, ALL currency is fiat currency. A thing is worth what a man will give for it. Ultimately, the only store of value a person can wrap their mind around is "how much work would I be willing to do in exchange for that thing?"

All currency does is allow me to dissociate one transaction from another. Instead of fixing the farmer's truck in exchange for a chicken, he gives me some amount of currency that we agree upon, and I go buy beer instead.

Who controls the currency is ultimately irrelevant. Governments are going to do bad things. You cannot constrain them with abstract concepts. There are three boxes with which the government can be constrained - the ballot box, the jury box, and the ammo box. The money box never enters into it.

believe I e-mailed you about Martin, a commenter

Yes, and I believe I emailed you yesterday stating that a "Nick S." from Adelaide, south Australia went to my blog and searched on "Glenn Sacks"; my blog having nothing to do with glenn or men's rights. He's the same dork I was arguing with on ...you guessed it...glennsacks.com.

Hi Nick, heat still getting to you in S. Adelaide?

I think Nick is still upset, because for some reason he took it personally when I stated that back in the old days, the policy of forced retirement was resulting in the poor health and even suicide for significant numbers of men. If it's not true, then why is he so obsessive about denying it?

"Around these parts, you live and die (or simply flounder) by the strength of your words and your wit"

Dang. I was hoping to get by on my good looks.

Norman seems to believe that he has uncovered some sort of scandal simply because someone looked at his website and did a quick search to see what kind of material he is publishing. I didn't realise browsing internet sites is a felony offence.

It's hard to understand what sort of idiot would bother contacting a third party to complain about a non-issue of someone looking at their website and doing a quick search to see what is there. Let's be clear. Norman did not even suggest that anyone has tried to sabotage his blog, or post abusive messages, or do anything else untoward. He is complaining about someone searching his blog. That's right folks. A site that is accessible to millions of internet users, and Norman is complaining that someone went and had a look to see what material is published there.

Norman is also accusing others of trying to somehow "get at" him through his blog. Yet in reality Norman is actually using his own blog to monitor anyone who accesses it.

I find it extraordinary that anyone would resort to publishing online information (such as the location) of someone guilty of absolutely nothing except browsing a perfectly legal website to see what is there. This crosses a line into personal harassment.

Another thing: If Norman is so concerned about people somehow "getting at him" through his site, why the hell does he continue to post links to it?