Help Needed - Economics/Federalism Argument

[dt_]

A friend of mine is arguing against the gold standard making the following points:

- We had numerous periods of inflation and depression and so forth when we were on the gold standard

- Having a static money supply would lead to super high deflation, meaning that gold would rise big time in value, therefore hurting borrowers because real interest rates would skyrocket.

- The Austrian business cycle is to economics as creationism is to modern biology (??) and it has no scientific basis


Another individual is saying that Ron Paul wants less oversight over "Brown v. Board of Education" decision and would be "worse than Reagan" in ensuring equality in schools and so forth.

Any ideas as to how I can outargue these folks? They probably agree with Ron on foreign policy but domestic policy troubles them :/

Thank you very much in advance. I appreciate it

[thechitowncubs]

Maybe if they referred to specific time periods you can research their argument with this site.

http://www.projects.ex.ac.uk/RDavies/arian/amser/chrono.html

Also, make sure that Ron Paul wants to legalize competing currencies in order to get the dollar back on track, then a process to back the money by something with worth would ensue afterwards is my understanding.

www.mises.org for any questions on the Austrian Economics arguments

[dt_]

Thanks but no they didn't bother referencing specific instances :/

[niall]

A friend of mine is arguing against the gold standard making the following points:

- We had numerous periods of inflation and depression and so forth when we were on the gold standard

- Having a static money supply would lead to super high deflation, meaning that gold would rise big time in value, therefore hurting borrowers because real interest rates would skyrocket.

- The Austrian business cycle is to economics as creationism is to modern biology (??) and it has no scientific basis


Another individual is saying that Ron Paul wants less oversight over "Brown v. Board of Education" decision and would be "worse than Reagan" in ensuring equality in schools and so forth.

Any ideas as to how I can outargue these folks? They probably agree with Ron on foreign policy but domestic policy troubles them :/

Thank you very much in advance. I appreciate it

1) Ron is not necessarily for a Gold standard, but rather a free market in currencies. Think FedEx vs. the U.S. Post Office. This is because a government-controlled gold standard can be manipulated just like fiat currency, but to a lesser degree because they have to redeem for gold.

2) There are two kinds of deflation: monetary deflation and price deflation. There would not be monetary deflation, because the amount of gold in the marketplace would not decrease. However, we would see price deflation, which is the natural order of prices over time (even in our inflationary environment, items like computers are still decreasing in price). Lower prices mean greater purchasing power and wealth for holders of gold. This is good. I see no support for his argument regarding interest rates.

3) Ironically, he's arguing that there's no scientific basis for Austrian economics, and yet he has failed to provide a logical basis for his argument. This is an ad hominem attack which at the mercy of his definition of "scientific."

[Mark Rushmore]

The gold standard is obsolete. Paul respects it because it's Constitutional and (if the regime is actually obeyed) prevents the government from printing itself money at will. I'm pretty sure I've heard him say he would not abolish the Fed. outright and try and switch one day to a gold standard. Rather he would push to legalize competing private currencies.

That aside: while a gold standard might have plenty of problems, our current system does have plenty of problems - and is heading for collapse.

[dt_]

wouldn't competing currencies cause major problems though? how would you trade one for another when you travel around between states and so forth? it seems unreasonable

[jonahtrainer]

A friend of mine is arguing against the gold standard making the following points:

- We had numerous periods of inflation and depression and so forth when we were on the gold standard

- Having a static money supply would lead to super high deflation, meaning that gold would rise big time in value, therefore hurting borrowers because real interest rates would skyrocket.

- The Austrian business cycle is to economics as creationism is to modern biology (??) and it has no scientific basis


Another individual is saying that Ron Paul wants less oversight over "Brown v. Board of Education" decision and would be "worse than Reagan" in ensuring equality in schools and so forth.

Any ideas as to how I can outargue these folks? They probably agree with Ron on foreign policy but domestic policy troubles them :/

Thank you very much in advance. I appreciate it

The gold standard, invented by Isaac Newton, was the best monetary system available at its time. However, it has its flaws which are greatly multiplied by fractional reserve banking. Due to technology this issue is now irrelevant. Banks and central banks are now obsolete. A whole new level of currency (http://www.mygoldmoney.com) is available.

The argument about gold 'rising in value' etc. are all specious. Gold has always been at the center of the financial universe. At all times and in all circumstances gold remains money. It has no counter-party risk. Therefore, the value of gold does not change. Everything else changes value relative to gold. It is the constant against which everything else is measured. Many people have been deceived into using the US$ as the measuring stick but they are incorrect in their belief. They have no historical examples to back up their claim. By analogy it is the Sun of our solar system.

But they are correct, we are already in the massive deflationary winter that comes from a collapsed credit cycle. Just measure any asset (fiat currency, stocks, real estate, bonds, etc.) in terms of gold. Here are the graphs (http://www.runtogold.com) to prove it.

As far as Brown goes, that is a highly overreaching case by the Supreme Court. There is no enumerated powers granted by the US Constitution to 'ensure equality' in education. That right is reserved to the States or people themselves under the X Amendment. Oh wait, that Amendment was done away with under Lincoln and FDR.

[stewie3128]

wouldn't competing currencies cause major problems though? how would you trade one for another when you travel around between states and so forth? it seems unreasonable

There were more than 30,000 currencies in the United States before the Fed was created in 1913 - we were doing fine.

[jonahtrainer]

wouldn't competing currencies cause major problems though? how would you trade one for another when you travel around between states and so forth? it seems unreasonable

We already have competing currencies. For example, FRNs, gold or silver coins or medallions, frequent flyer miles, apples, oranges, tickets you get at the arcade or the most dangerous currency to the central banking regime (http://www.mygoldmoney.com), etc.

Issuers of currency, just like in any other good, seek market share to increase the utility of their good. The more widely accepted the issued currency is the more liquid and consequently this imparts a 'medium of exchange' premium on its value in the marketplace. The US$ enjoys a very large market share.

[stewie3128]

wouldn't competing currencies cause major problems though? how would you trade one for another when you travel around between states and so forth? it seems unreasonable

There were more than 30,000 currencies in the United States before the Fed was created in 1913 - we were doing fine.

[slantedview]

A few thoughts. I'm sure others can give more detailed info.



- We had numerous periods of inflation and depression and so forth when we were on the gold standard

this is just an absolutely ridiculous statement. sure there were recessions before, but we have WAY more recessions now, and you can't even compare the monetary inflation we have now with what we had before the fed. it was practically non-existant before the fed! check out these graphs:

http://www.libertydollar.org/graphics/home/nationaldebt.jpg
http://www.libertydollar.org/graphics/home/purchasepower.jpg

the general argument for the fed is that they help protect the economy and ensure stability. wonder who they were protecting and stabilizing during the post ww1 recession, the great depression, and the recessions of 45, 48, 53, 57, 60, 65, 69, the crisis in 73, the crisis in 79, the recessions in 81, 88, 2000, and the recession starting right now?


- Having a static money supply would lead to super high deflation, meaning that gold would rise big time in value, therefore hurting borrowers because real interest rates would skyrocket.

who said static money supply? just because we get rid of the fed doesn't mean our money supply is static. we can choose to grow it any number of ways - perhaps at a fixed rate such as milton friedman suggests, or at a rate that matches our GDP, or we can simply grow it at a rate in line with the gold we accumulate (if we were on a gold standard).


- The Austrian business cycle is to economics as creationism is to modern biology (??) and it has no scientific basis

let me ask what's the scientific basis or reasoning behind the ridiculous inflation we're now suffering through (see the graphs above). only a fool would attempt to argue that sort of inflation, as we have under the federal reserve, is better than the alternative.

[sdczen]

1 - We also had the Federal Reserve Bank while we were on the Gold Standard. Everyone must understand that in healthy economics you must go through many mini-recessions in order to readjust. The problem with the Central bank is that inflating the money supply causes much more than a small recession. It causes crashes, severe loss of wealth to the middle/lower class. It's evident in the DOT COM crash and now with the Mortgage crash. FYI the mortgage crash will be much larger than anything we've seen since 1929.

2- The deflation periods would happen around the time of the mini-recessions. It's a natural cycle. What you should compare it to the real benefit of having a commodity backed money supply and that is to restrain the government to spend freely. It's not a good thing that we have a 9 Trillion dollar deficit and future obligations of 56 Trillion. This simply could not happen if we were on a Gold standard. (this is a good thing!!)

3 - Austrian Economics is mostly scientific with an added human element to it. It's not just number crunching, it takes human behavior into account. I don't see anything wrong with that.

The problem with ensuring quality standards in schools is that it costs way too much money and you get a poor result. It's no surprise that our testing averages are poorer today than they were 30 years ago. Not to mention the drop out rate. If things are left to local school boards, then this would enable the community to challenge the school boards to get better results. Right now, they can challenge the school boards, but everything is kicked up to Washington. The schools need to be competitive like universities.

A side note, there are educational organizations that could help guide schools curriculum and standards without using taxpayers money.




A friend of mine is arguing against the gold standard making the following points:

- We had numerous periods of inflation and depression and so forth when we were on the gold standard

- Having a static money supply would lead to super high deflation, meaning that gold would rise big time in value, therefore hurting borrowers because real interest rates would skyrocket.

- The Austrian business cycle is to economics as creationism is to modern biology (??) and it has no scientific basis


Another individual is saying that Ron Paul wants less oversight over "Brown v. Board of Education" decision and would be "worse than Reagan" in ensuring equality in schools and so forth.

Any ideas as to how I can outargue these folks? They probably agree with Ron on foreign policy but domestic policy troubles them :/

Thank you very much in advance. I appreciate it

[cmc]

- Having a static money supply would lead to super high deflation, meaning that gold would rise big time in value, therefore hurting borrowers because real interest rates would skyrocket.
This is not correct.

As it is, investing fiat dollars in the stock market or in bond is good for the economy as those dollars remain in use while you still retain ownership. This is healthy as it supports jobs and research. When you deposit money in a bank account, it also remains in the economy because of the accounting gimmick known as fractional lending. This is actually inflationary because you still hold a certain amount of dollars, while at the same time, they have been loaned out and are in use by someone else with the contractual promise to pay sometime in the future. The lower the interest rates, the more lending, and the more inflation. This is only healthy in small doses. But in addition to the interest rate, you need to watch the reserve requirement because that dictates what percent of your money the bank actually has to have on hand (typically 10-20%). A good way to kick an economy in the shins would be to drastically raise the reserve requirement -- in fact China has been doing this slowly in order to prevent their economy from overheating.

But back to the point: buying gold, silver, etc. is deflationary with today's fiat currency because when you put, say $900 into an ounce of gold, that money is totally gone from the economy. Your magical fiat dollars are converted to a metal of which you have 100% ownership, but the value of that metal is not productive. That is, unlike a stock, that money is not available to pay someone's salary, build someone's house, buy a new car, etc. etc. etc. The only way to make that money productive again is to sell the physical gold, but historically people hang on to gold for years and years.

During the depression, people were afraid for their money and began demanding physical gold out of fear (i.e. putting money in stocks wasn't going so well...). That is why Roosevelt (ugh) forced everyone to sell their gold to the federal government at about $20/oz. As people put their money into banks again, fractional lending kicked in and began to stimulate the economy. This was a very heavy-handed approach and I disagree with it on a moral basis mainly because of what happened next: the gov't promptly robbed everyone by raising the gold price to $35! They debased the currency and essentially stole 75% of every American's savings -- and of course, then they started selling off the massive gold supplies back to the public at the higher price. The proceeds went to fund big government programs and interventionism... Sound familiar?? What a sham.

Edit: to give a really clear example of what happened, imagine if I forced you to sell me your car for $10,000, and then demanded $17,500 from you for its return! And also I outlawed you from buying any other car!

So a government-controlled gold standard is just as vulnerable to looting as the fiat system, as Roosevelt proved. That is why Ron Paul is so intelligent in proposing private, legal, competing currencies: the marketplace will deliver a safer, more accountable product. If a private group debases your money, you can sue them for it.

I hope that address some of your question. I hope I didn't rant too much.

[hawks4ronpaul]

A friend of mine is arguing against the gold standard making the following points:

- We had numerous periods of inflation and depression and so forth when we were on the gold standard

- Having a static money supply would lead to super high deflation, meaning that gold would rise big time in value, therefore hurting borrowers because real interest rates would skyrocket.

- The Austrian business cycle is to economics as creationism is to modern biology (??) and it has no scientific basis


Another individual is saying that Ron Paul wants less oversight over "Brown v. Board of Education" decision and would be "worse than Reagan" in ensuring equality in schools and so forth.

Any ideas as to how I can outargue these folks? They probably agree with Ron on foreign policy but domestic policy troubles them :/

Thank you very much in advance. I appreciate it

These people do not understand their topics. They also offer no evidence (or if they did you mentioned none). Put them on the defensive.

Your friend's first and second points contradict each other. Make up your mind. Does gold cause inflation or deflation?

The third point is baseless name-calling. If anything, Keynesianism is the illogical system, based on Keynes' "animal spirits."

After your friend replies:

Find a graph showing inflation for the last 200 years. Where is the most inflation?

The Fed caused the Great(est) Depression (even Bernanke admits).

"Hurting debtors"=protecting savers. "Helping debtors"=hurting savers. Current monetary policy destroys savings and causes our debt problem. Gold systems encourage people to stay out of debt.


Brown rejected de jure segregation (too much government regulation in education). RP supports the principles behind Brown (deregulation, less government, treat people as individuals not groups).


Make these people work a little harder for their crazy accusations.


http://hawks4ronpaul.blogspot.com/

[Goldwater Conservative]

wouldn't competing currencies cause major problems though? how would you trade one for another when you travel around between states and so forth? it seems unreasonable

Visa, MasterCard, Discover, American Express... we already have "competing currencies" and we deal with it just fine. Paul simply wants that to also be the case for our actual money.

And I love how people predict these gold standard horror stories... yet neglect to mention that we had the GREAT DEPRESSION only after adopting the Federal Reserve, which most respected economists now blame for it.