Debate with Friend over Keynesian Economics

[KramerDSP]

I need some help here. I am debating Austrian versus Keynesian economics with a friend who loves him some Krugman. It's probably a losing cause, but it's worth a shot anyway.

He said the following:

"the worst thing we can do is to panic & make abrupt cuts only to end up with even worse deficits because of contracting economies, like some European nations are experiencing now."

"had we ran up surpluses during boom years (by not cutting taxes), we'd be better equipped for hard times. Oh well."

"again, if the govt was actually Keynesian, it'd have run up surpluses during boom years & it's truly disingenuous for Repubs to blame the debt on spending- it didn't start racking up till Reagan, W & Obama's tax cuts."

"and didn't you see the news articles I tweeted? Govt cuts only led to bigger deficits in Europe."

"keeping govt local means a lot to you right? http://bit.ly/m9jxLN"

I would appreciate any feedback on the above. This guy has said that he would not mind seeing Ron be the Governor of some state where he could implement his ideas on a smaller scale, and loves Ron's foreign policy but believes his economic policies would be a disaster. He tends to link to Krugman alot. Do I have a chance at getting through to him?

[Travlyr]

"the worst thing we can do is to panic & make abrupt cuts only to end up with even worse deficits because of contracting economies, like some European nations are experiencing now."

"had we ran up surpluses during boom years (by not cutting taxes), we'd be better equipped for hard times. Oh well."

"again, if the govt was actually Keynesian, it'd have run up surpluses during boom years & it's truly disingenuous for Repubs to blame the debt on spending- it didn't start racking up till Reagan, W & Obama's tax cuts."

"and didn't you see the news articles I tweeted? Govt cuts only led to bigger deficits in Europe."

"keeping govt local means a lot to you right?

I would appreciate any feedback on the above. This guy has said that he would not mind seeing Ron be the Governor of some state where he could implement his ideas on a smaller scale, and loves Ron's foreign policy but believes his economic policies would be a disaster. He tends to link to Krugman alot. Do I have a chance at getting through to him?

He is completely lost at this stage of the game.

Ask him if he would be interested in learning how real money works, then point him to "Gold, Peace, and Prosperity" by Ron Paul if he says, "yes." It's about a two hour read, or so... and well worth the effort.

[KramerDSP]

Thanks for the suggestion. I'll try. He did agree to watch "Money As Debt" and get back to me, so maybe he is receptive. I admit my understanding isn't sharp enough that I can retort back with responses, but I just know that what Ron is saying makes absolute sense.

[Travlyr]

Thanks for the suggestion. I'll try. He did agree to watch "Money As Debt" and get back to me, so maybe he is receptive. I admit my understanding isn't sharp enough that I can retort back with responses, but I just know that what Ron is saying makes absolute sense.

If you get the opportunity, and haven't already done so, read, at least, the first couple of chapters of "The Mystery of Banking" by Murray N. Rothbard. You will be up to speed in a few hours.

[Lothario]

Mises.org (http://Mises.org) is your friend. Check out Mises Institute on iTunes U (http://itunesu.mises.org/) also - all free audio. One of my faves on the austrian business cycle, and causes and cures of depressions is this by Murray Rothbard: Article (http://mises.org/daily/3127), PDF (http://mises.org/Books/economic_depressions_rothbard.pdf), Audio (http://mises.org/media/2504/Economic-Depressions-Their-Cause-and-Cure)

Your friends rhetoric is very vague and ambiguous...hard to pin it on a wall to form an argument against. You need to force him into specifics. Taxation is a form of the broken window fallacy (http://mises.org/daily/3804) - which of course says there are unforeseen costs associated with removing money and resources from the free market in the form of what investments and stimulation could have occurred had the taxed money been allowed to flow freely in the private sector.

Murray Rothbard's material above fleshes out the importance of savings and the irrelevance of spending - savings are required to foster growth a la the Crusoe social philosophy (https://mises.org/AUSTECON/CHAP2.ASP), whereas spending presupposes production.

[tsai3904]

The problem with government spending is that it does not create wealth, it only misallocates resources. It may increase GDP, but GDP does not equal wealth (or standard of living). If we make drastic cuts today, there will be a lot of pain because the people reliant on the government's money will be cut off. But, if you believe that only the private sector is able to improve the standard of living for the most amount of people (the premise of capitalism), than it will be beneficial in the long run that people become a part of the productive private sector rather than part of the problem. If we don't make the cuts today, we will only drag on this false recovery propped up by government spending while adding to our debt

I feel like Keynesians are too short sighted where they believe that we need to do whatever we can to fix our problems now without worrying about the long term costs. Your friend believes that the government should continue spending, but where does the government get the money to spend? It can only tax the private sector or borrow the money. If it taxes the private sector, you are saying that the government knows more than the private sector where money should be spent, which hopefully is clear that it isn't true. If it borrows, the government is adding to the mountain of debt that the private sector must repay. The deficit may seem like a problem now but when the day comes that our creditors don't believe we'll be able to repay our debt, the deficit problem today will seem like nothing.

[Nate-ForLiberty]

This youtube channel is invaluable.

http://www.youtube.com/user/misesmedia

Sooooo many hours of great stuff. Organized playlists for extended view/listening. My favorite speakers are Tom Woods, Robert Murphy, Jeffrey Tucker, and Thomas DiLorenzo.

I think two great playlists to start with are....

Economics in One Lesson
http://www.youtube.com/user/misesmedia#grid/user/6EF300C10AC5999C

Economics for High School Students
http://www.youtube.com/user/misesmedia#grid/user/C3272CF0337DEE39

[Nate-ForLiberty]

http://www.youtube.com/watch?v=6XbG6aIUlog

[Vessol]

Ask him about stagflation in the 70's, that'll shut up just about any Keynesian.

[JCLibertarian]

Here's a video that debunks the logically flawed broken window fallacy, which is the basis for a Keynesian Economics. It is three minutes, and is very simple and to the point.He should have time to watch it.

http://www.youtube.com/watch?v=LKSGMkOlAw0

[Sentient Void]

http://4.bp.blogspot.com/_9n4xrwD-LUQ/TMd4PEUilHI/AAAAAAAABOM/vMPNzEgpJaE/s1600/KrugmanFail.jpg

And yes, the broken window fallacy is key - understanding that and the concept of 'opportunity costs' destroys many foundations of Keynesian fallacies.

He is equating money with wealth, as if printing money creates wealth. Wealth only comes from production and savings/investment. Not spending. He and other keynesians put the cart before the horse. People spend because they have wealth, people don't become wealthy because they spend - this is an ergo propter hoc fallacy. If it were true you could have the State employ/pay people solely to dig holes and fill them back up again. This clearly does not create wealth, even though they are being paid and will spend that money. It is a recipe for disaster.

Keynesians also fail because they treat economics as a natural science, when it is a social science. You can't quantifiably, objectively measure things which are qualitative and subjective in nature. This is a big reason why they fail on everything so badly and their formulas and graphs must always be changed to adjust to new data that doesn't fit in with their BS.

[hugolp]

I need some help here. I am debating Austrian versus Keynesian economics with a friend who loves him some Krugman. It's probably a losing cause, but it's worth a shot anyway.

He said the following:

"the worst thing we can do is to panic & make abrupt cuts only to end up with even worse deficits because of contracting economies, like some European nations are experiencing now."

First, tell him that if he wants an honest debate he should stop using cheap rethorical tricks like saying cutting spending is panicking. In reality the only ones promoting fear mongering are the keynesians who repeat constantly that if government doesnt spend the economy will just get destroyed.

Second, European governments are generally not cutting spending depite the propaganda. In reality its just the german policiticans promoting the idea because they want their citizens not getting angry. German and in general centro-european citizens dont want to pay for the PIGS mess, so their politicians promote the idea that the PIGS are cutting spending when it is not so. Even Ireland who was signaled by Germany as the austerity kings are increasing the deficit. Tell him to stop listeing to the propaganda and check the data.


"had we ran up surpluses during boom years (by not cutting taxes), we'd be better equipped for hard times. Oh well."

"again, if the govt was actually Keynesian, it'd have run up surpluses during boom years & it's truly disingenuous for Repubs to blame the debt on spending- it didn't start racking up till Reagan, W & Obama's tax cuts."

This is always the intellectual scape route for dishonest keynesians. The problem with this is that we live in the real world, so you have to design policies for the real world.

If you give the politicians a justification for government spending, like keynesianism do and therefore give the politicians the power to massively intervene the economy, surprise surprise, they are going to do it. Politicians are people and have their own self-interests. If your theory does not account for this its not a real world theory.

Also, even if the government runs a surplus during the bubble years and then spend during recessions that would be bad. It would be better than what we have seen but still bad because politicians misallocate funds, they do not invest properly. Ask him this question: If politicians really do know how to allocate efficiently funds even during a depression, why do we need a market for? Lets just let this brilliant polliticians allocate resources always.

In reality, keynesian government spending its just there to save the monetary/banking system, because it avoids defaltion which would send a lot of the banks into bankruptcy. But keynesians hide this by saying they want to help the people, when in reality they are making things worse for the people. We discussed this just some hours ago here: http://www.ronpaulforums.com/showthread.php?289472-Cheney-Was-Right-About-One-Thing-Deficits-Don-t-Matter


"and didn't you see the news articles I tweeted? Govt cuts only led to bigger deficits in Europe."

The problem is that the PIGS are running deficits. Acording to him its the right thing to do. If he claims they are not running big enough deficits its because they can not. Greece debt is already at 20+% interests. They can not run more deficits.


"keeping govt local means a lot to you right? http://bit.ly/m9jxLN"

I would appreciate any feedback on the above. This guy has said that he would not mind seeing Ron be the Governor of some state where he could implement his ideas on a smaller scale, and loves Ron's foreign policy but believes his economic policies would be a disaster. He tends to link to Krugman alot. Do I have a chance at getting through to him?

He hasnt said anything really. He just keeps repeating that government spending is good, like a chant. Nothing more.

Btw, tell him that if he is going to follow Keynesianism and not economics at least he should read a serious keynesian and not Krugman's political propaganda.

[Travlyr]

The problem with this is that we live in the real world, so you have to design policies for the real world.


Austrian economics describes real money for the real world.

Keynesian economics embraces irredeemable paper and electronic money created out-of-nothing (Federal Reserve Notes) mandated by legal tender laws to force people to use it.

Money is simply a medium of exchange. The best money an economy can have has the qualities listed below because when you trade something of value for a product or service, then you expect value in return. For example, if you are going to spend 8 hours of your day working for someone else, then you want to get paid something of value for your time. The more value you get for your time ... the more prosperous you are. In other words, if you can earn $100 per hour then you are more valuable than a minimum wage earner. High value is good.

High value money is:

Desirable - people like it and are willing to exchange it
Durable - it won't rot, burn, or vanish
Divisible - can make both large and small exchanges
Portable - easy to carry around
Scarce - the immutable laws of supply and demand maintain its value


Precious metals climb to the top of the money quality chain because they meet all the above characteristics necessary for a high value currency. Irredeemable paper and electronic money fail the durability test and the scarcity test miserably. So, they do not hold value like silver, gold and other forms of money.

In day's gone by, a silver dollar was worth one paper silver certificate because you could exchange the paper for a real silver dollar at the bank if you wanted to. The paper was as good as the real thing. But that is not true anymore because it is no longer redeemable.

Today, a gallon of gasoline is either about $0.10 in silver, or $3.65 paper/electronic things. Real money is holding its value, paper is being inflated with mass creation (QEI, QEII, and soon to be QEIII) because they can ... it is not a scarce commodity like the real stuff.

Austrian economics is real and honest. People who are getting paid in real money are experiencing lower prices for goods and services while people who are getting paid in fiat money are experiencing rising prices as the Fed inflates the value away.

I hope this helps.

[angelatc]

Ask him about stagflation in the 70's, that'll shut up just about any Keynesian.

Even Keynes admitted he was wrong before he died.

He's right about the "if we had raised taxes" part according to Keynes, but that's the fatal flaw of Keynes. It is far too complicated to execute flawlessly, and it depends on a human to make the right choice - to sacrifice a short term gain in order to achieve a long term result. That's not the nature of Washington D.C. and although I disagree, I suspect your friend would admit that it's the very nature of man to be greedy. So Keynes is doomed by humanity even before the math fail of stagflation.

Markets have no such baggage. Left to their own devices, they do what they're supposed to do.

[KramerDSP]

Thanks, all. Great suggestions. I will encourage him to view this thread, and will also read the books recommended to me. Because we are both Deaf, many of the YouTube videos and podcasts won't suffice.

[Travlyr]

http://4.bp.blogspot.com/_9n4xrwD-LUQ/TMd4PEUilHI/AAAAAAAABOM/vMPNzEgpJaE/s1600/KrugmanFail.jpg

And yes, the broken window fallacy is key - understanding that and the concept of 'opportunity costs' destroys many foundations of Keynesian fallacies.

He is equating money with wealth, as if printing money creates wealth. Wealth only comes from production and savings/investment. Not spending. He and other keynesians put the cart before the horse. People spend because they have wealth, people don't become wealthy because they spend - this is an ergo propter hoc fallacy. If it were true you could have the State employ/pay people solely to dig holes and fill them back up again. This clearly does not create wealth, even though they are being paid and will spend that money. It is a recipe for disaster.

Keynesians also fail because they treat economics as a natural science, when it is a social science. You can't quantifiably, objectively measure things which are qualitative and subjective in nature. This is a big reason why they fail on everything so badly and their formulas and graphs must always be changed to adjust to new data that doesn't fit in with their BS.

I owe you one! Great post!

[Koz]

It is hopeless, you are better off spending your time helping someone with an open mind.

[ababba]

You guys keep trying to debunk the Keynesian economics of the 1940's-1960's. Welcome to 2011. Stagflation can be easily explained by temporary negative technology shocks and an accommodating monetary policy. The broken window fallacy has absolutely nothing to do with the modern Keynesian arguments by mainstream economists. Keynesian economics, as a descriptive economic theory, has nothing to do with supporting a particular type of currency system.

So far, its all straw men.

[Lothario]

This has arrived right on time: Fight of the Century: Keynes vs Hayek Round 2 (http://vote4reason.com/2011/04/28/amazing-video-fight-of-the-century-keynes-vs-hayek-round-two/)

[Travlyr]

You guys keep trying to debunk the Keynesian economics of the 1940's-1960's. Welcome to 2011. Stagflation can be easily explained by temporary negative technology shocks and an accommodating monetary policy. The broken window fallacy has absolutely nothing to do with the modern Keynesian arguments by mainstream economists. Keynesian economics, as a descriptive economic theory, has nothing to do with supporting a particular type of currency system.

So far, its all straw men.

How about you just read Murray N. Rothbard's book, "The Mystery of Banking" and get back to us. Keynesian economics sucks, imo.

[ababba]

How about you just read Murray N. Rothbard's book, "The Mystery of Banking" and get back to us. Keynesian economics sucks, imo.

How about you actually have some idea what Keynesian economics is because your posts demonstrate you don't.

[Lothario]

The broken window fallacy has absolutely nothing to do with the modern Keynesian arguments by mainstream economists.

Krugman and other Keynesians have commented on the economic stimulus that would be provided by 9/11, by Katrina, and all other disasters of recent years...that's the broken window fallacy in action in modern times.

[VBRonPaulFan]

How about you actually have some idea what Keynesian economics is because your posts demonstrate you don't.

Can you link a few articles you think are pretty good in intellectually describing the theory?

[low preference guy]

How about you actually have some idea what Keynesian economics is because your posts demonstrate you don't.

I bet he does. Keynesianism is nothing but a sad joke.

[ababba]

Krugman and other Keynesians have commented on the economic stimulus that would be provided by 9/11, by Katrina, and all other disasters of recent years...that's the broken window fallacy in action in modern times.

I'm not sure you are right about 9/11 and Katrina, they clearly lowered output and I'd be surprised if a lot of people said otherwise. I think people do tend to make this argument about war, so that might be a better example for you to use.

The broken window fallacy is the idea that breaking a window and paying someone to repair it can make people better off. Although its not impossible that these actions raise the amount of goods produced, it will most likely make people worse off. This is a reason why GDP isn't a good measure of well-being and why economists tend to use the discounted value of all future consumption as a measure of welfare (sometimes adjusting for the value of leisure). However, in general, GDP is highly correlated with consumption, so it isn't a bad proxy for welfare.

I think the best argument against the broken window idea is the following. Whatever you believe about whether the broken window incident increased GDP, there is always a dominant policy of paying someone to do something productive in the same amount of time, rather than essentially doing nothing. Even if GDP goes up by more than the cost of the window because of multipliers, it is still a bad policy.

I think just because a few people said dumb things isn't a reason to condemn a school of thought. We should try to understand the correct or best interpretation of a school and debunk that.

[Lothario]

I'm not sure you are right about 9/11 and Katrina


http://www.youtube.com/watch?v=SQFhm4s_-Pk

[ababba]

Can you link a few articles you think are pretty good in intellectually describing the theory?

I'll look, but let me describe my understanding of the New Keynesian Economics as it stands today.

There are basically two building blocks for the theory. The first is prices and wages that do not adjust instantaneously to economic shocks. The second is a zero lower bound on nominal interest rates, which is related to the idea of a liquidity trap. The first implies the potential for monetary policy to stabilize output, to get us closer to the equilibrium that would occur if prices were perfectly flexible. The second implies the potential for fiscal policy to perform this role if nominal interest rates reach the zero lower bound and monetary stimulus is no longer effective.

These are descriptive theories, not advice for policy. People can believe in sticky prices and support a variety of different monetary policies. People can believe that the zero lower bound is a constraint on monetary policy and still be against fiscal policy with very low nominal interest rates.

[Travlyr]

I bet he does. Keynesianism is nothing but a sad joke.

Thanks, friend. It is a sad joke.

My experience with Keynesian economics is this: It was a community college required course to graduate. Macro Economics.

One of my good friends and I attended regularly in order to earn the certificate to qualify for "higher education." Our "teacher" hated President Ronald Reagan... hated him. It turns out that she grew up in Yugoslavia. I was just trying to learn what economics was all about... 1980's. Again she hated "Supply Side Economics." And I needed a resume.

My good friend and I were simply trying to make a living... and improve our game by getting a "higher education." Another classmate was a little more radical than us. He saw through the bullshit. One evening, our "teacher" was especially disturbed with the happenings of the day and said, "Reagan is destroying the economy." Well that set him off. He stood up in front of the class and said, "You are a fucking Communist." Then, he left and never came back to class.

While he was right, me and my good friend sank in our seats (we needed the grade).

Keynesian economics is dumbshit stuff. Don't buy into it. You will end up in poverty.

[ababba]

http://www.youtube.com/watch?v=SQFhm4s_-Pk

That video is exactly what I said in my previous post.

[Lothario]

That video is exactly what I said in my previous post.

I only used the video for the 9/11 and earthquake quotes.

[hugolp]

You guys keep trying to debunk the Keynesian economics of the 1940's-1960's. Welcome to 2011. Stagflation can be easily explained by temporary negative technology shocks and an accommodating monetary policy. The broken window fallacy has absolutely nothing to do with the modern Keynesian arguments by mainstream economists. Keynesian economics, as a descriptive economic theory, has nothing to do with supporting a particular type of currency system.

So far, its all straw men.

There has been a lot of comments in this thread. You could comment on those. Instead you have not answered any of the claims and adopted an extremely arrogant attitude calling everyone here ignorant. If we are so ignorant you should be able to counter our arguments easily. Come on, do it.

Saying that during the 40's there was keynesian economics shows your ignorance. At the end of the IIWW (mid 40's) the USA government massively deregulated and cut governmen programs. Keynesians argued that it was going to be a disaster and the economy would collapse. As usual, keynesian predictions were wrong and the economy boomed. Now you claim that the 40's were keynesian... Its proposterous.

In reality, keynesianism did not become the mainstream economic view in academia until mid 50's and the 60's, when Samuelson's book "Economics" became the most sold book for college.

Before calling everyone ignorant you should pick up a book... or two.

EDIT: Btw, saying that keynesianism does not imply a certain currency system is another proposterous argument. Keynesianism always assumes by default a money monopolly and does not even question it.

[hugolp]

Thanks, all. Great suggestions. I will encourage him to view this thread, and will also read the books recommended to me. Because we are both Deaf, many of the YouTube videos and podcasts won't suffice.

Tell him to come to the forum and reply.

[ababba]

There has been a lot of comments in this thread. You could comment on those. Instead you have not answered any of the claims and adopted an extremely arrogant attitude calling everyone here ignorant. If we are so ignorant you should be able to counter our arguments easily. Come on, do it.

Saying that during the 40's there was keynesian economics shows your ignorance. At the end of the IIWW (mid 40's) the USA government massively deregulated and cut governmen programs. Keynesians argued that it was going to be a disaster and the economy would collapse. As usual, keynesian predictions were wrong and the economy boomed. Now you claim that the 40's were keynesian... Its proposterous.

In reality, keynesianism did not become the mainstream economic view in academia until mid 50's and the 60's, when Samuelson's book "Economics" became the most sold book for college.

Before calling everyone ignorant you should pick up a book... or two.

EDIT: Btw, saying that keynesianism does not imply a certain currency system is another proposterous argument. Keynesianism always assumes by default a money monopolly and does not even question it.

Which comment haven't I addressed? I saw broken window arguments, stagflation arguments and fiat currency arguments, thats why I made that post.

I wasn't saying anything about whether Keynesian economics was mainstream in a particular decade, I was saying something about whether the arguments against Keynesian economics were against modern Keynesian economics or the Keynesian economics of an earlier time. The point is this: why are you still trying to debunk things that most economists have move on from?

The last point is just false, as a descriptive theory, Keynesian economics could easily tell you what would happen if there was a commodity currency and compare that to a fiat currency. They usually assume a fiat currency because they are trying to describe a world with a fiat currency.

[Teaser Rate]

It appears like I'm a little late to the discussion, but I'll give responding to the original claims a shot. (maybe my answers will get some posters stop calling me a Keynesian) From the OP:


"the worst thing we can do is to panic & make abrupt cuts only to end up with even worse deficits because of contracting economies, like some European nations are experiencing now."

This might be a valid point, however, it's also worth noting that the government's original panicked reaction after Lehman collapsed was a large part of starting the financial crisis in the first place. The government getting involved into the market can send both good and bad signals.


"had we ran up surpluses during boom years (by not cutting taxes), we'd be better equipped for hard times. Oh well."

The tax revenues between 2004-2007 actually beat their pre-Bush tax cuts baselines. There's an ex post argument to be made that the tax cuts cost the government revenue, but those who argued that claim were wrong a priori.


"again, if the govt was actually Keynesian, it'd have run up surpluses during boom years & it's truly disingenuous for Repubs to blame the debt on spending- it didn't start racking up till Reagan, W & Obama's tax cuts."

There are two problems with that statement. 1-it implies that spending hasn't grown and 2-it implies that tax cuts are responsible for a decrease in revenue.

1 is false because spending has increased at a higher pace than revenue for the last 30 years:

http://img62.imageshack.us/img62/4930/usgovernmentspendingver.jpg

2 is false because government revenue has stayed quite consistent over the past 50 years regardless of the tax rate.

http://img854.imageshack.us/img854/9850/hauserlawconfirmed.jpg


"and didn't you see the news articles I tweeted? Govt cuts only led to bigger deficits in Europe."

What do you make of the case of Poland? To quote John Taylor:

"The only economy in the 27 countries in the European Union that did not have a recession during this Great Recession. I think the reason is they didn't over-react; kept their policy steady; didn't have a big stimulus package; monetary policy remained pretty steady."

To the OP: do you mind linking those articles?

[Travlyr]

The last point is just false, as a descriptive theory, Keynesian economics could easily tell you what would happen if there was a commodity currency and compare that to a fiat currency. They usually assume a fiat currency because they are trying to describe a world with a fiat currency.
There is a commodity currency. It's just illegal to use. Governments can pass a laws to say that PM's are not real money. They can pass a law that negates gravity. They can pass a law that negates the laws of supply and demand. But the only thing that the law changes is who gets to point the gun at whom. PM's are still real money, gravity will still drag your ass to the ground, and the laws of supply and demand will make scarce elements more valuable than plentiful elements. Just don't get caught, and you'll remain free.

Definition of FIAT
: a command or act of will that creates something without or as if without further effort

It's not honest, ababba. Fiat money cheats productive members of society. Why can't you see that? It's a great gig if you are one of them. But most of us are not special enough... we weren't born with a silver spoon in our mouths, so we have to do the work for our overlords who create money out-of-nothing. Then they must send their thugs with guns to our homes and put us in cages if we don't obey their orders.

Here are the choices:

Work and produce something of value ... like food, clean water, a flying car, a play, music, dig for precious metal, fish, clothes, something ... something of value that others will voluntarily trade for something else of value.

Or

Steal - push a computer button and create money out-of-nothing.


The first choice is performed voluntarily for purpose and meaning of life. The more effort one puts forth, the more successful one can become.

The second choice requires a security team (military-industrial-complex & police state) because if everybody is allowed to create money out-of-nothing, then you are back to square one where everybody has to produce something of value. Some people loathe getting their hands dirty, so they would rather own slaves ... and they do.

It's time we put an end to the craziness. Down with Keynes! Honesty FTW!

[TNforPaul45]

Give him a pocket edition of Human Action and he will hug you 12 weeks later.

[ababba]

There is a commodity currency. It's just illegal to use. Governments can pass a laws to say that PM's are not real money. They can pass a law that negates gravity. They can pass a law that negates the laws of supply and demand. But the only thing that the law changes is who gets to point the gun at whom. PM's are still real money, gravity will still drag your ass to the ground, and the laws of supply and demand will make scarce elements more valuable than plentiful elements. Just don't get caught, and you'll remain free.

Definition of FIAT
: a command or act of will that creates something without or as if without further effort

It's not honest, ababba. Fiat money cheats productive members of society. Why can't you see that? It's a great gig if you are one of them. But most of us are not special enough... we weren't born with a silver spoon in our mouths, so we have to do the work for our overlords who create money out-of-nothing. Then they must send their thugs with guns to our homes and put us in cages if we don't obey their orders.

Here are the choices:

Work and produce something of value ... like food, clean water, a flying car, a play, music, dig for precious metal, fish, clothes, something ... something of value that others will voluntarily trade for something else of value.

Or

Steal - push a computer button and create money out-of-nothing.


The first choice is performed voluntarily for purpose and meaning of life. The more effort one puts forth, the more successful one can become.

The second choice requires a security team (military-industrial-complex & police state) because if everybody is allowed to create money out-of-nothing, then you are back to square one where everybody has to produce something of value. Some people loathe getting their hands dirty, so they would rather own slaves ... and they do.

It's time we put an end to the craziness. Down with Keynes! Honesty FTW!

I'm a consequentialist, I just care about which system leads to the best economic outcomes. You've made it clear in countless threads that you don't want to argue about economics as something separate from your moral intuitions. Most of the time when I make a point about economics, you have some point about morality.

If a fiat currency made people better off, I would rather live in a country with a fiat currency. That's the only question for me.

Besides, inflation hurts holders of currency, and the biggest holders of us currency are foreigners and criminals.

[Travlyr]

I'm a consequentialist, I just care about which system leads to the best economic outcomes.
The economic outcomes are lessor in the fiat system because man made shortages are profitable to the people in power. Production and competition are suppressed.


You've made it clear in countless threads that you don't want to argue about economics as something separate from your moral intuitions. Most of the time when I make a point about economics, you have some point about morality.
It is a moral question. The question is: Who gets to prosper and who must starve?


If a fiat currency made people better off, I would rather live in a country with a fiat currency. That's the only question for me.

Then either take over a country and buy yourself a nice printing press, or marry into it. It absolutely does make some people better off... the special ones... you can join them.


Besides, inflation hurts holders of currency, and the biggest holders of us currency are foreigners and criminals.

Inflation is a transfer of wealth. Inflation hurts those who do not understand that.

[ababba]

The economic outcomes are lessor in the fiat system because man made shortages are profitable to the people in power. Production and competition are suppressed.


It is a moral question. The question is: Who gets to prosper and who must starve?



Then either take over a country and buy yourself a nice printing press, or marry into it. It absolutely does make some people better off... the special ones... you can join them.



Inflation is a transfer of wealth. Inflation hurts those who do not understand that.

I don't think the economic outcomes are worse in a fiat system. There is the potential for monetary policy to stabilize output in response to external shocks. However, the most important thing to understand here is that monetary policy's effects are actually pretty small, whether you come down on the pro or con side.

How does a predictable 2% a year inflation make people starve?

Inflation is a transfer of wealth from the holders of currency to the government. Most holders of currency are foreigners and criminals.

[Travlyr]

I don't think the economic outcomes are worse in a fiat system.
The economic outcomes are multiples worse in a fiat system. Man-made shortages suck. You have to be quite special to not see how man-made shortages are less productive than abundance.


Would you be able to see this concept if a man went to your bank account and caused you a man-made shortage of money?
Or if he went further and stopped by your refrigerator afterwards and caused you a man-made shortage of food too?
And if he went even one step further and put you in a cage and brought you some bread crumbs?
After about the 3rd day, you would begin to see exactly how man-made shortages cause starvation.


There is the potential for monetary policy to stabilize output in response to external shocks. However, the most important thing to understand here is that monetary policy's effects are actually pretty small, whether you come down on the pro or con side.
Honest monetary policy doesn't need managed on a macro level ... it is managed by individuals.


How does a predictable 2% a year inflation make people starve? Only special people get a 2% raise each year. That means that the non-special people have to pay a larger percentage of their income for their food, each year. Eventually, food becomes so expensive they go into malnutrition and eventually starve. You can see them on the street today holding cardboard signs, and their numbers are increasing rapidly with each passing day. Their numbers are growing around the world even faster. That is what the riots and protests are about. You can close your eyes if you want... that way you don't have to see it. Or you could throw them some bread crumbs.


Inflation is a transfer of wealth from the holders of currency to the government. Most holders of currency are foreigners and criminals.

Inflation under a fiat monetary system is theft. I know... I know... back to morality.

[ababba]

The economic outcomes are multiples worse in a fiat system. Man-made shortages suck. You have to be quite special to not see how man-made shortages are less productive than abundance.


Would you be able to see this concept if a man went to your bank account and caused you a man-made shortage of money?
Or if he went further and stopped by your refrigerator afterwards and caused you a man-made shortage of food too?
And if he went even one step further and put you in a cage and brought you some bread crumbs?
After about the 3rd day, you would begin to see exactly how man-made shortages cause starvation.


Honest monetary policy doesn't need managed on a macro level ... it is managed by individuals.

Only special people get a 2% raise each year. That means that the non-special people have to pay a larger percentage of their income for their food, each year. Eventually, food becomes so expensive they go into malnutrition and eventually starve. You can see them on the street today holding cardboard signs, and their numbers are increasing rapidly with each passing day. Their numbers are growing around the world even faster. That is what the riots and protests are about. You can close your eyes if you want... that way you don't have to see it. Or you could throw them some bread crumbs.



Inflation under a fiat monetary system is theft. I know... I know... back to morality.

Real wages over long horizons follow labor productivity growth. In addition the labor share of output is roughly constant over time. There is no empirical evidence for the idea that inflation reduces real wages in the long run. There is substantial support for the idea that real wage growth, over long horizons, does not depend on the average inflation rate.

You haven't described how fiat money creates a man made shortage of anything. In order to get inflation, the money supply has to increase. How does money growth being higher than you would like it to be cause a man made shortage of money?

[Teaser Rate]

If a fiat currency made people better off, I would rather live in a country with a fiat currency.

I’m having an increasingly hard time understanding how anyone can have a moral objection to this.

[Travlyr]

Real wages over long horizons follow labor productivity growth. In addition the labor share of output is roughly constant over time. There is no empirical evidence for the idea that inflation reduces real wages in the long run. There is substantial support for the idea that real wage growth, over long horizons, does not depend on the average inflation rate.
You forgot to give John Maynard Keynes credit for this. He, and evidently you, must be part of that "special" crowd that I've been referring to. Because if you had to live with shortages, you'd get it. Have you polished your silver spoon this morning?


You haven't described how fiat money creates a man made shortage of anything. In order to get inflation, the money supply has to increase. How does money growth being higher than you would like it to be cause a man made shortage of money?
Good point.

Here is how that works. In laissez-faire free-market capitalism where honest sound money is legal to use for daily trades and individual property rights are respected by others, then people can grow, build, create, innovate whatever it is that they want or need. Only when the individual violates the rights of others are they restricted from continuing. The ole' "My right to swing my fist stops at your nose" philosophy. Abundance is in the hands of individuals, if they want it.

Under a fiat monetary system special people get to say what is worth growing, building, creating and innovating because they can buy the politicians with lobby money. And that's where the military and police come in... got to protect the money making machine. Abundance of resources and control is in the hands of the Ivy League "special" people, and individuals are at the mercy of them.

Here is a glaring man-made shortage; there are plenty more examples, but you can do your own research if you are really interested.

Industrial hemp. You can go to jail for growing hemp. It is a man-made shortage of a perfectly environmentally friendly God given product that is so good that it competes with cotton, nylon, energy, plastics, waste-management, medicine, food, and more... much much more.

Money shortages are caused by the "sleight of hand" inflation tax... the debasement of currency. Again, you would "get it" if you experienced it first hand. And, if you don't get yourself some real money soon, then you may get to experience it first hand soon.

[Travlyr]

I’m having an increasingly hard time understanding how anyone can have a moral objection to this.

You have to have a degree of empathy to understand it.

[ababba]

You forgot to give John Maynard Keynes credit for this. He, and evidently you, must be part of that "special" crowd that I've been referring to. Because if you had to live with shortages, you'd get it. Have you polished your silver spoon this morning?


Good point.

Here is how that works. In laissez-faire free-market capitalism where honest sound money is legal to use for daily trades and individual property rights are respected by others, then people can grow, build, create, innovate whatever it is that they want or need. Only when the individual violates the rights of others are they restricted from continuing. The ole' "My right to swing my fist stops at your nose" philosophy. Abundance is in the hands of individuals, if they want it.

Under a fiat monetary system special people get to say what is worth growing, building, creating and innovating because they can buy the politicians with lobby money. And that's where the military and police come in... got to protect the money making machine. Abundance of resources and control is in the hands of the Ivy League "special" people, and individuals are at the mercy of them.

Here is a glaring man-made shortage; there are plenty more examples, but you can do your own research if you are really interested.

Industrial hemp. You can go to jail for growing hemp. It is a man-made shortage of a perfectly environmentally friendly God given product that is so good that it competes with cotton, nylon, energy, plastics, waste-management, medicine, food, and more... much much more.

Money shortages are caused by the "sleight of hand" inflation tax... the debasement of currency. Again, you would "get it" if you experienced it first hand. And, if you don't get yourself some real money soon, then you may get to experience it first hand soon.

Real wage growth in the long run is about changing labor productivity, not inflation. It doesn't matter what decile of the income distribution we are talking about.

So I think I get your man made shortages argument. Its about a man made shortage of a currency with zero inflation, which is in short supply because commodity currency is illegal and fiat currency involves a small steady rate of inflation.

Now I'd like to hear how this particular man made shortage makes people worse off.

I think you could recognize that some man made shortages make people worse off and others better off. When we tax polluters to account for the costs that they impose on other people, they pollute less, but this makes people better off. This means it is not impossible for a man made shortage to increase well being in a country. Why does this particular man made shortage reduce well being?

[Travlyr]

Now I'd like to hear how this particular man made shortage makes people worse off.

I think you could recognize that some man made shortages make people worse off and others better off. When we tax polluters to account for the costs that they impose on other people, they pollute less, but this makes people better off. This means it is not impossible for a man made shortage to increase well being in a country. Why does this particular man made shortage reduce well being?
Do you have any examples of the taxing the polluters strategy ever producing the desired result? I cannot think of even one at the moment.

[ababba]

Do you have any examples of the taxing the polluters strategy ever producing the desired result? I cannot think of even one at the moment.

Government has a reluctance to use market based solutions. A tax is better than a cap because pollution is not bad, the question is whether the benefits of a particular unit of pollution (increased production) outweigh the costs. A tax better accomplishes this goal than a cap but the caps are the more common way to reduce pollution.

Anyway, here is the second link I found on google with a series of examples of taxes that reduce pollution.
http://www.grist.org/article/pollution-taxes-work

[Cutlerzzz]

Real wage growth in the long run is about changing labor productivity, not inflation. It doesn't matter what decile of the income distribution we are talking about.
While inflation does not lower real wages per say, it does lower past wages. If I save $1000 in 2010 and by 2020 the dollar has lost half of its value, my prior labor production I saved just had it's value dropped in half.

Inflation will also lower wages for some in the short term, as it's effects do not go through the entire economy at the same pace. Who ever gets the money first(banks and often the politically favored groups) will have their wages effectively increased, what ever industry gets the money last will have their wages lowered.

[Travlyr]

Government has a reluctance to use market based solutions. A tax is better than a cap because pollution is not bad, the question is whether the benefits of a particular unit of pollution (increased production) outweigh the costs. A tax better accomplishes this goal than a cap but the caps are the more common way to reduce pollution.

Anyway, here is the second link I found on google with a series of examples of taxes that reduce pollution.
http://www.grist.org/article/pollution-taxes-work

I do agree that some man made shortages would be good. A shortage of government workers would be great!

As for the pollution problem, I would prefer a method of restitution to the victims rather than paying bureaucrats. Being responsible for your actions is fundamental to liberty.

[ababba]

While inflation does not lower real wages per say, it does lower past wages. If I save $1000 in 2010 and by 2020 the dollar has lost half of its value, my prior labor production I saved just had it's value dropped in half.

Inflation will also lower wages for some in the short term, as it's effects do not go through the entire economy at the same pace. Who ever gets the money first(banks and often the politically favored groups) will have their wages effectively increased, what ever industry gets the money last will have their wages lowered.

Except for the fact that the rate of return on savings increases with the rate of inflation rate. The real rate of return on savings should not be affected by the rate of inflation. If you are lending me money and we both know there will be a 2% inflation before I pay you back, then we will both agree that I need to pay you 2% more dollars in order to keep the same real interest rate.

The second point about getting money first doesn't make any sense. First of all, money is expanded by exchanging money for bonds, the people that get the newly printed money give up something of equal value. Second, even if there was some benefit to getting the money first, whatever that means, there is no connection between getting printed money and wages.

[Teaser Rate]

As for the pollution problem, I would prefer a method of restitution to the victims rather than paying bureaucrats. Being responsible for your actions is fundamental to liberty.

How would a victim be able to prove that the damage caused to his property by acid rain was caused by the pollution emitted by factory X 300 miles away?

[Travlyr]

How would a victim be able to prove that the damage caused to his property by acid rain was caused by the pollution emitted by factory X 300 miles away?

There would be multiple victims in this case. You would locate the source and sue for damages.

[smokemonsc]

Real wages over long horizons follow labor productivity growth. In addition the labor share of output is roughly constant over time. There is no empirical evidence for the idea that inflation reduces real wages in the long run. There is substantial support for the idea that real wage growth, over long horizons, does not depend on the average inflation rate.

You haven't described how fiat money creates a man made shortage of anything. In order to get inflation, the money supply has to increase. How does money growth being higher than you would like it to be cause a man made shortage of money?

Inflation can contribute to man made shortages because of how it distorts the price structure of goods across the economy. When inflation enters the system those who touch the inflated dollars first (banks and other special interests) benefit because no effort produced the extra money and no prices have yet increased because the money has yet to enter in to circulation.

Inflation also has the initial cause of lowering interest rates. Yes that's right - the first thing it does is lower interest rates because the money now sitting in banks is confused as actual deposits and savings. This drives down the cost of money which causes a shortage of REAL SAVINGS because people are no longer incentivized in to saving. With the cost of money cheap it makes more sense for savers to invest their money in ever increasingly risky investments until the monetary bubble pops.

Please watch this video for more information: http://www.youtube.com/watch?v=d0nERTFo-Sk

So the above happens if banks invest their money, driving down the costs of money and in a search for yields pursue ever increasingly risky investments - thus creating the boom of the boom and bust cycle.

Moral of the story? The even greater shortages experienced in the bust are DIRECTLY CAUSED by the man-made shortage of savings during the boom.

Moving on...say the banks decide that instead of investing the inflated money, decides to speculate on commodities (like they are doing RIGHT NOW). This causes the cost of said commodities to increase. You have noticed how the cost of most foods has doubled in the past two years? This is a direct result of the Fed's printing 3 trillion dollars over the same period.

Inflation in this case causes shortages not because the actual products are in short supply, but the cost has become prohibitive to every day people. Food might as well be in shortage if even the working class can no longer afford it.

While you're at it, watch this video too: http://www.youtube.com/watch?v=GTQnarzmTOc

As Hayek says - I prefer the planning of the many over the planning of the few.

[Teaser Rate]

There would be multiple victims in this case. You would locate the source and sue for damages.

Doesn't answer the question. How would one or multiple victims be able to prove that the source of their damage originated from factory X and not power plant Y?

[low preference guy]

I’m having an increasingly hard time understanding how anyone can have a moral objection to this.

Translation: I have an increasingly hard time understanding how threats of jail and violence against innocent people who transact with what they choose can be seen as immoral.

I doubt you even know what "moral" means. Moreover, fiat money makes people worse off. You don't understand ethics, and you don't understand economics. That's pretty fucked up all around.

[Travlyr]

Doesn't answer the question. How would one or multiple victims be able to prove that the source of their damage originated from factory X and not power plant Y?

Maybe I'm missing something here, but you would use factual evidence to prove your case. If you could not come up with evidence, then are you really harmed?

[Cutlerzzz]

Except for the fact that the rate of return on savings increases with the rate of inflation rate. The real rate of return on savings should not be affected by the rate of inflation. If you are lending me money and we both know there will be a 2% inflation before I pay you back, then we will both agree that I need to pay you 2% more dollars in order to keep the same real interest rate.

The second point about getting money first doesn't make any sense. First of all, money is expanded by exchanging money for bonds, the people that get the newly printed money give up something of equal value. Second, even if there was some benefit to getting the money first, whatever that means, there is no connection between getting printed money and wages.
No. The inflation comes because the Federal Reserve is keeping interest rates low. This will keep interest rates relatively low on savings accounts, CDs, ect...

As for the second part, let's see if Hazlitt can help you understand. See part two.

http://www.fee.org/library/books/economics-in-one-lesson/#0.1_L23

[smokemonsc]

Government has a reluctance to use market based solutions. A tax is better than a cap because pollution is not bad, the question is whether the benefits of a particular unit of pollution (increased production) outweigh the costs. A tax better accomplishes this goal than a cap but the caps are the more common way to reduce pollution.

Anyway, here is the second link I found on google with a series of examples of taxes that reduce pollution.
http://www.grist.org/article/pollution-taxes-work

And each community, locale, environment type have different wants, needs, and desires for how much or how little they want/can absorb. How can you justify a community of tree-loving hippies being forced to accept a heavily polluting factory from being setup within their town limits just because the federal, or hell even state governments have legalized pollution via taxation? As long asy ou pay your tax you can pollute as much as you want right?

No thanks - I think property owners should have the final say on how much pollution they are willing to except in order to reap the economic benefits of production.

Your solution of taxation also completely ignores what I consider the moral obligation of a polluter to clean up their own mess. Taxation on pollution is corporatist in nature because it allows industrialists to privatize their profits and socializes the costs of production. How does it do this? Because it gives a flat value to the cost of production rather than the variable cost that actually exists. Any extra costs to production are absorbed by the community rather than the business who caused the pollution.

My solution is to protect individuals and their communities private property rights. Let local communities and individuals decide rather than a central government decide what the appropriate amount of pollution is acceptable and the costs thereof. The market will self-regulate as people will decide for themselves what combination of prosperity and pollution best fits there needs. Regardless if it's 'tree hugging hippies' or its 'heartless industrialists' - people will decide for themselves and be happier for it.

[Teaser Rate]

Maybe I'm missing something here, but you would use factual evidence to prove your case. If you could not come up with evidence, then are you really harmed?

I'll try again: acid rain falls on your property and destroys your crops. To get compensation for this, you sue the closest factory (with or without other property owners). When you go to trial, what evidence can you provide that factory X, and not another source of pollution is the one responsible for the acid rain?

[ababba]

Translation: I have an increasingly hard time understanding how threats of jail and violence against innocent people who transact with what they choose can be seen as immoral.

I doubt you even know what "moral" means. Moreover, fiat money makes people worse off. You don't understand ethics, and you don't understand economics. That's pretty fucked up all around.

In order to distinguish between a utilitarian consequentalist view of the world and some other ethical view of the world we have to think about cases in which they would lead to a different answer.

What he is saying is that when the utilitarian answer goes against intuitive moral intuitions, then the utilitarian answer is probably the right one. A policy should be judged by its consequences. This means that the negativity of the initiation of force can sometimes be justified if the net result of the force is positive.

You aren't saying that initiation of force has to make people worse off, you seem to be saying even if the initiation of force could make people better off, it is still wrong. I disagree with that view.

[Travlyr]

I'll try again: acid rain falls on your property and destroys your crops. To get compensation for this, you sue the closest factory (with or without other property owners). When you go to trial, what evidence can you provide that factory X, and not another source of pollution is the one responsible for the acid rain?

Maybe it's just me, but seems like it would be hard to hide a factory pumping out acid rain.

[ababba]

Inflation can contribute to man made shortages because of how it distorts the price structure of goods across the economy. When inflation enters the system those who touch the inflated dollars first (banks and other special interests) benefit because no effort produced the extra money and no prices have yet increased because the money has yet to enter in to circulation.

Inflation also has the initial cause of lowering interest rates. Yes that's right - the first thing it does is lower interest rates because the money now sitting in banks is confused as actual deposits and savings. This drives down the cost of money which causes a shortage of REAL SAVINGS because people are no longer incentivized in to saving. With the cost of money cheap it makes more sense for savers to invest their money in ever increasingly risky investments until the monetary bubble pops.

Please watch this video for more information: http://www.youtube.com/watch?v=d0nERTFo-Sk

So the above happens if banks invest their money, driving down the costs of money and in a search for yields pursue ever increasingly risky investments - thus creating the boom of the boom and bust cycle.

Moral of the story? The even greater shortages experienced in the bust are DIRECTLY CAUSED by the man-made shortage of savings during the boom.

Moving on...say the banks decide that instead of investing the inflated money, decides to speculate on commodities (like they are doing RIGHT NOW). This causes the cost of said commodities to increase. You have noticed how the cost of most foods has doubled in the past two years? This is a direct result of the Fed's printing 3 trillion dollars over the same period.

Inflation in this case causes shortages not because the actual products are in short supply, but the cost has become prohibitive to every day people. Food might as well be in shortage if even the working class can no longer afford it.

While you're at it, watch this video too: http://www.youtube.com/watch?v=GTQnarzmTOc

As Hayek says - I prefer the planning of the many over the planning of the few.

So all of this is wrong in a case where the increase in the money supply happens from open market operations, an exchange of money for bonds. Then the people to get the money first, exchanged something of equal value for that money. They don't benefit from the transaction because the value of the bonds equaled the value of the money.

[smokemonsc]

I'll try again: acid rain falls on your property and destroys your crops. To get compensation for this, you sue the closest factory (with or without other property owners). When you go to trial, what evidence can you provide that factory X, and not another source of pollution is the one responsible for the acid rain?

1) You prove that acid rain caused the damage by taking soil samples
2) You prove what was in the acid rain by taking soil samples
3) You compare the pollutants in the rain to the pollution coming from the factory
4) You prove via a meteorologist witness that pollution from the factory could have been in the rain on your property
5) You use this and other evidence to try to convince a jury
6) If your case beats the factory's then you will win and receive compensation

Just because you bring up an example here that people who aren't scientists have difficultly explaining in detail how to prove a case is an intellectually dishonest way to build your case. How has anyone ever proved the source of acidic rain? Seriously a simple google search would've helped you build the list I just gave.

[Teaser Rate]

Translation: I have an increasingly hard time understanding how threats of jail and violence against innocent people who transact with what they choose can be seen as immoral.

I doubt you even know what "moral" means. Moreover, fiat money makes people worse off. You don't understand ethics, and you don't understand economics. That's pretty fucked up all around.

You missed the point entirely.


In order to distinguish between a utilitarian consequentalist view of the world and some other ethical view of the world we have to think about cases in which they would lead to a different answer.

What he is saying is that when the utilitarian answer goes against intuitive moral intuitions, then the utilitarian answer is probably the right one. A policy should be judged by its consequences. This means that the negativity of the initiation of force can sometimes be justified if the net result of the force is positive.

You aren't saying that initiation of force has to make people worse off, you seem to be saying even if the initiation of force could make people better off, it is still wrong. I disagree with that view.

Actually, what I was saying is that in an issue as abstract and devoid of value judgments as the source of money, I'd want the most effective option. I really couldn't care less if the Fed or Wal Mart prints my dollars as long as they remain useful.

I can understand and often support forgoing economic benefits for certain principles, but having the right ink on my money just isn't one of them.

[ababba]

No. The inflation comes because the Federal Reserve is keeping interest rates low. This will keep interest rates relatively low on savings accounts, CDs, ect...

As for the second part, let's see if Hazlitt can help you understand. See part two.

http://www.fee.org/library/books/economics-in-one-lesson/#0.1_L23

So your intuition for this is essentially for a model where the price level is constant and aggregate supply is a horizontal line unaffected by money growth.

A surprise increase in the money supply drives down interest rates, we agree there.

If the increase in the money supply is fully anticipated, then the price level increases along with the money supply and the real interest rate is unaffected by the monetary expansion. The nominal interest rate goes up by exactly the amount of expected inflation.

[Teaser Rate]

Maybe it's just me, but seems like it would be hard to hide a factory pumping out acid rain.

Still doesn't answer the question. The burden of proof is on the plaintiff, not the defendant, when the owner of the factory says "you can't prove that the pollution didn't come from the coal power plant across the river", you need to have a counter to that claim if you want to win.


1) You prove that acid rain caused the damage by taking soil samples
2) You prove what was in the acid rain by taking soil samples
3) You compare the pollutants in the rain to the pollution coming from the factory
4) You prove via a meteorologist witness that pollution from the factory could have been in the rain on your property
5) You use this and other evidence to try to convince a jury
6) If your case beats the factory's then you will win and receive compensation

Just because you bring up an example here that people who aren't scientists have difficultly explaining in detail how to prove a case is an intellectually dishonest way to build your case. How has anyone ever proved the source of acidic rain? Seriously a simple google search would've helped you build the list I just gave.

Nice try, but you'll have a really hard time building any kind of meteorological model which will be able to prove that the pollution came from one specific source.

In the real world acid rain is caused by a number of different sources of pollution which accumulate in the air and travel in clouds. Even if you were to identify the exact source of the rain (which you couldn't with current technology), it would probably end up being something like 25% factory 25% power plant 20% from traffic 10% from natural sources and 20% from Canada. If you're going to make the power plant and the factory each pay 25% of the costs and make travelers nearby pay the 20%, it would be much easier to just levy a tax on pollution approximate to its impact on the environment.

[smokemonsc]

So all of this is wrong in a case where the increase in the money supply happens from open market operations, an exchange of money for bonds. Then the people to get the money first, exchanged something of equal value for that money. They don't benefit from the transaction because the value of the bonds equaled the value of the money.

No you are wrong - because every day people cannot create money out of thin air. You are comparing apples or oranges. Every day people produce value which they exchange for money (among other things). The first people who benefit from their production are the people themselves. The money you receive for your labor is a function of the value you created to the marketplace. When a central bank creates money out of thin air (see fiat money....since you can't 'create' gold') they have committed fraud because no production occurred - no extra value was created by their efforts. If a private citizen had created money out of thin air they would be arrested for counterfeiting.

In each transaction in a free market it is assumed that both parties believe they are benefiting from the transaction otherwise they wouldn't do it. You are mistaken on so many levels when you say "They don't benefit from the transaction because they value of the bonds equaled the value of the money."

Why are you wrong? Because the seller valued the money more than he/she valued the bonds, and the buyer valued the bonds more than the money. Why? We may never know - and it's not important. The point is people trade because they value goods subjectively.

[smokemonsc]

Still doesn't answer the question. The burden of proof is on the plaintiff, not the defendant, when the owner of the factory says "you can't prove that the pollution didn't come from the coal power plant across the river", you need to have a counter to that claim if you want to win.



Nice try, but you'll have a really hard time building any kind of meteorological model which will be able to prove that the pollution came from one specific source.

In the real world acid rain is caused by a number of different sources of pollution which accumulate in the air and travel in clouds. Even if you were to identify the exact source of the rain (which you couldn't with current technology), it would probably end up being something like 25% factory 25% power plant 20% from traffic 10% from natural sources and 20% from Canada. If you're going to make the power plant and the factory each pay 25% of the costs and make travelers nearby pay the 20%, it would be much easier to just levy a tax on pollution approximate to its impact on the environment.

No - the nice try is you. It is quite simple to prove "air flow from factory A moved over location B". We have been tracking air flows in the US for over 50 years. The fact that you just described some of the sources of acidic rain proves my case. It is discernible. Thanks for making my case.

"It would be much easier...." I really don't care if you think something is easier, you are not king. You have yet to make the moral justification for the use of force to impose your regulations against people who may not want it, who may want something stronger, or who may want something weaker. The burden of proof is on you to justify your actions.

I'll ask again - how have people proven sources of pollution in the past? Has it happened? Good luck with that one.

[Travlyr]

Still doesn't answer the question. The burden of proof is on the plaintiff, not the defendant, when the owner of the factory says "you can't prove that the pollution didn't come from the coal power plant across the river", you need to have a counter to that claim if you want to win.


If there are a lot of factories pumping nasty stuff in the air, then your problems are bigger than losing a crop.

Your whole premise fails.

[Travlyr]

1) You prove that acid rain caused the damage by taking soil samples
2) You prove what was in the acid rain by taking soil samples
3) You compare the pollutants in the rain to the pollution coming from the factory
4) You prove via a meteorologist witness that pollution from the factory could have been in the rain on your property
5) You use this and other evidence to try to convince a jury
6) If your case beats the factory's then you will win and receive compensation

Just because you bring up an example here that people who aren't scientists have difficultly explaining in detail how to prove a case is an intellectually dishonest way to build your case. How has anyone ever proved the source of acidic rain? Seriously a simple google search would've helped you build the list I just gave.

Thanks. I wasn't going to work that hard. He is not being genuine. He posts illogical arguments all the time, so I was looking for the bump and milking the entertainment value. ;)

Years ago pollution was a gargantuan problem. People littered America with free abandon and rivers contained some real bad stuff... most everybody on this forum is aware of it. But the reason they were allowed to pollute was because we trusted our leaders and did not get accurate information. On the nightly news, Walter Cronkite would tell us ... "And that's the way it is ... and then rattle off the date ... and say in his grandfatherly manner ... "Good Night." We were all "warm and fuzzy" because we learned the news of the day ... and could rest peacefully... so we thought. Come to find out ... we were all "warm and fuzzy" because we were swimming in some nasty toxic garbage.

The worst polluters were cleaned up and today our air, water, and land are much, much cleaner than they were when we were constantly being lied to. The Internet (the truth machine) is the free-market in action, so it is much tougher to hide the dastardly deeds today. Proof positive the free market works and is fun, too!

[ababba]

No you are wrong - because every day people cannot create money out of thin air. You are comparing apples or oranges. Every day people produce value which they exchange for money (among other things). The first people who benefit from their production are the people themselves. The money you receive for your labor is a function of the value you created to the marketplace. When a central bank creates money out of thin air (see fiat money....since you can't 'create' gold') they have committed fraud because no production occurred - no extra value was created by their efforts. If a private citizen had created money out of thin air they would be arrested for counterfeiting.

In each transaction in a free market it is assumed that both parties believe they are benefiting from the transaction otherwise they wouldn't do it. You are mistaken on so many levels when you say "They don't benefit from the transaction because they value of the bonds equaled the value of the money."

Why are you wrong? Because the seller valued the money more than he/she valued the bonds, and the buyer valued the bonds more than the money. Why? We may never know - and it's not important. The point is people trade because they value goods subjectively.

These transactions are generally made by banks that specialize in making a market for treasury securities. This means they are both willing to buy and sell treasuries at a given price. This is the definition of indifference, being willing to both buy and sell a good at the same price. The fact that they were also willing to buy bonds at the same price they sold bonds at implies that they don't benefit from the transaction.

There is a small bid asked spread which may be a few basis points in a liquid treasury market.

[smokemonsc]

You missed the point entirely.



Actually, what I was saying is that in an issue as abstract and devoid of value judgments as the source of money, I'd want the most effective option. I really couldn't care less if the Fed or Wal Mart prints my dollars as long as they remain useful.

I can understand and often support forgoing economic benefits for certain principles, but having the right ink on my money just isn't one of them.

The source of money is an incredibly moral question and it is not abstract at all. Is money created out of thin air or is it produced? How is wealth created? How did trade develop? How do people make economic decisions? What is money? What is value?

Two posts now you've centered on what's easiest for you. Is it easier to steal or to make your own money? It's a lot harder to produce your own wealth than it is to steal it from others.

Money is a representation of value - the value of all the produced wealth in the world. Wealth is created by people consuming less than they produced. Money in a free society is a form of wealth and a representation of savings. Fiat is theft because it is created without the accompanying creation of wealth. It distorts and makes less valuable the wealth of others in an unjust manner. Fiat treats money not like the store of value it is, but a tool to be manipulated by those in power.

Again - why is it morally OK for a government to print fiat and produce nothing in value in return - yet if I were to do it I'd be labeled a counterfeiter? The answer is - it is no different, both instances it is counterfeit.

[hugolp]

So all of this is wrong in a case where the increase in the money supply happens from open market operations, an exchange of money for bonds. Then the people to get the money first, exchanged something of equal value for that money. They don't benefit from the transaction because the value of the bonds equaled the value of the money.

This has to be your more retarded comment until date.

"They dont benefit from the transaction because the value of the bonds equaled the value of the money"... really?

[ababba]

This has to be your more retarded comment until date.

"They dont benefit from the transaction because the value of the bonds equaled the value of the money"... really?

Read my previous post. They are willing to both buy and sell the bond at a given price. This implies indifference between having the bonds and not.

This was posted in response to the people claiming that some people getting the money first had big economic effects. I questioned even the idea that this has big distributional effects. Beyond that its not clear how the distributional effects, if they did exist, lead to economic distortions.

[smokemonsc]

These transactions are generally made by banks that specialize in making a market for treasury securities. This means they are both willing to buy and sell treasuries at a given price. This is the definition of indifference, being willing to both buy and sell a good at the same price. The fact that they were also willing to buy bonds at the same price they sold bonds at implies that they don't benefit from the transaction.

There is a small bid asked spread which may be a few basis points in a liquid treasury market.

All you did was restate your point which I've already debunked. Unless you have a counter to "Because the seller valued the money more than he/she valued the bonds, and the buyer valued the bonds more than the money. Why? We may never know - and it's not important. The point is people trade because they value goods subjectively." there's not much further this discussion can go.

Clearly they value the bonds more than the money the bonds replaced on their balance sheet - otherwise why did they do it? Specifically because they make money in providing a service to other buyers of Govt debt.

If you value your money at the same level as what you are trading it for - you have no incentive to trade. Why do people do anything? Because they will profit from the activity in some way - they will meet some need or want.

[smokemonsc]

Read my previous post. They are willing to both buy and sell the bond at a given price. This implies indifference between having the bonds and not.

This was posted in response to the people claiming that some people getting the money first had big economic effects. I questioned even the idea that this has big distributional effects. Beyond that its not clear how the distributional effects, if they did exist, lead to economic distortions.

No, you are still wrong - why would they trade if they got nothing out of it? Why perform the activity at all? You are completely ignoring why humans act.

[ababba]

All you did was restate your point which I've already debunked. Unless you have a counter to "Because the seller valued the money more than he/she valued the bonds, and the buyer valued the bonds more than the money. Why? We may never know - and it's not important. The point is people trade because they value goods subjectively." there's not much further this discussion can go.

Clearly they value the bonds more than the money the bonds replaced on their balance sheet - otherwise why did they do it? Specifically because they make money in providing a service to other buyers of Govt debt.

If you value your money at the same level as what you are trading it for - you have no incentive to trade. Why do people do anything? Because they will profit from the activity in some way - they will meet some need or want.

They do it for the bid asked spread as I said. This is a few basis points in the treasury market.

[smokemonsc]

I'll try again: acid rain falls on your property and destroys your crops. To get compensation for this, you sue the closest factory (with or without other property owners). When you go to trial, what evidence can you provide that factory X, and not another source of pollution is the one responsible for the acid rain?

Why would you arbitrarily sue the closest factory? You are making really awful assumptions here. I'm going to cut right to the logical end of this line of thinking - do you think most people are too stupid to act for themselves? You're on RPF so I suspect your gut reaction to most instances would be "of course not". So why do I get the feeling that you think the answer is yes in this scenario?

[smokemonsc]

They do it for the bid asked spread as I said. This is a few basis points in the treasury market.

They do it for profit!

http://en.wikipedia.org/wiki/Profit_(economics)

[Travlyr]

In the real world acid rain is caused by a number of different sources of pollution which accumulate in the air and travel in clouds. Even if you were to identify the exact source of the rain (which you couldn't with current technology), it would probably end up being something like 25% factory 25% power plant 20% from traffic 10% from natural sources and 20% from Canada. If you're going to make the power plant and the factory each pay 25% of the costs and make travelers nearby pay the 20%, it would be much easier to just levy a tax on pollution approximate to its impact on the environment.
And screw the property owners out of damages.

On the other hand, if property owners could sue the polluters for damages, then responsible parties would clean-up their own act to remain in business.

Governments allow polluters to pollute based on how much the polluter can afford.
Free markets self-regulate.

[ababba]

They do it for profit!

http://en.wikipedia.org/wiki/Profit_(economics)

I just looked up how much profit. The bid asked spread on a 3 month bill is on average .71 basis points. On a one way transaction thats .305 basis points. Thats 30.5% of 1% of 1% of the value of the transaction. That says for a billion dollar Tbill transaction, they make 30,500 dollars. This is tiny compared to the scale of the economy. There is no way that this has large effects on the entire economy.

[ababba]

And screw the property owners out of damages.

On the other hand, if property owners could sue the polluters for damages, then responsible parties would clean-up their own act to remain in business.

Governments allow polluters to pollute based on how much the polluter can afford.
Free markets self-regulate.

I think both solutions, tort solutions and taxes could potentially work. The downside of the tort solution is that there is a lot of wasted time and money that goes into trials that wouldn't be necessary if there was a tax.