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How Good is Gold? How Bad is the Fiat?

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  • Sat, Jan 11, 2014 - 03:42pm

    #11
    Doug

    Doug

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    davefairtex wrote:I further

[quote=davefairtex]

I further suggest that the wisest course to take when we don't fully understand or care what we are doing to the earth is to stop doing it and start caring.  That, of course, requires radical changes to our ways of life, but in a macro sense, I don't see how our species can continue to live on this planet in the long term without those changes.  Short term arguments between one kind of ism and others, when all of them are ultimately destructive, are not helpful.

That's Doug, speaking Ex Cathedra.

Please forgive us for enjoying our non-helpful discussions about this topic anyway, ok?

[/quote]

No problem, I try to follow them myself because they are short term useful.  But, then I am struck with the feelings of futility.

  • Sat, Jan 11, 2014 - 04:39pm

    #12

    Jim H

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    Leave it to the PP.com crowd….

To take this discussion way beyond Gold vs. Fiat… what a cool place!  While I think the combination of capitalism and debt-based fiat money would work better if operated in the context of a reasonably well regulated (i.e. Glass-Steagall)  free market (minimal or no FED) environment, I do agree with points made by Arthur, Doug, and Rosehip that suggest that capitalism and the profit motive does not seem to promote the kind of behaviors that are going to lead to our survival as a species.  I think that the profit motive does a great job of spurring innovation forward… but capitalism has become so short term oriented, and we seem to have no means (think the absurd levels of mounting debt across most nations) of regulating our actions today based on probable bad outcomes farther down the line.  

I certainly don't have the answers either.  In my own utopian system there would be a base level of the earth's bounty that all humans have a right to.  Above this, there would be the opportunity to acquire more resources legitimately through hard work, inventiveness, creation of art… whatever other humans appreciate via the (human) market.  The thing that is missing I think, outside of some patchy framework of Gov't force that exists today (think EPA, think fisheries regulation) is the means by which we better account for the long term costs of our activities, to the earth and to ourselves, vs. the short term gains?  The burgeoning field of environmental economics is one hopeful sign, but these University-based programs generally imagine better guiding regulatory policy… not something more revolutionary.  

Here is how Dr. Steve Best describes the problem;

  There is a direct and profound relationship between global capitalism and ecological destruction. The capitalist economy lives or dies on constant growth, accumulation, and consumption of resources. The environmental crisis is inseparable from the social crisis, whereby centuries ago a market economy disengaged from society and ruled over it with its alien and destructive imperatives. The crisis in ecology is ultimately a crisis in democracy, as transnational corporations arise and thrive through the destruction of popular sovereignty.

link:  http://www.drstevebest.org/RevolutionaryEnvironmentalism.htm

Maybe instead of corporations being people, the US Supreme court should deem it that the earth is a person.. then the earth would have some rights herself.    

  • Sat, Jan 11, 2014 - 06:04pm

    #13

    darbikrash

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    I do get a chuckle out of all

I do get a chuckle out of all this Austrian mysticism and obsession with gold and alternative currencies. It takes the eye off the ball, which of course is the intention.

 

The “ball” in this case being a system that is perpetually self expansive, and in fact cannot function without expansion. A system where everything has a price, but no one knows what its value is. A system of shameless accumulation, and then valorizing all who accumulate, oh yes, with an occasional tsk, tsk, boys will be boys. Cronies will be cronies.

 

I guess if I was an Austrian, I would want to be digging in a very different direction. The Keynes/Hayek wars were fought a long time ago, and Hayek lost. Not saying Keynes was right, but he was in fact more right than Hayek.

 

Echo chambers make my ears hurt.

 

If I was an Austrian, I would be more than a little concerned about Larry Summers’ recent speech, and the rather surprising jumping on the bandwagon by more than a few mainstream economists to Mr. Summers’ thesis of “secular stagnation”. It seems that his conclusion is that capitalism cannot exist outside of a boom/bust cycle, so-called normal employment can never be achieved without the presence of a bubble, and we are doomed to a constant and never ending cycle of bubble inflation and bubble popping.

 

If memory serves, this conclusion was also reached quite some time ago by somebody else whose name cannot be mentioned, as to do so would conjure tanks rolling across the National Mall.

 

 

Of course, there was more than a grain of truth to that riposte. But rather than tackling the secular stagnation arguments directly, mainstream economists dismissed them with derision, in the sublime confidence that capitalism could never have crises. My favorite such statement was by Edward Prescott (who, with Finn Kydland got the Nobel Prize for inventing the "real business cycle, representative agent" approach to economics that still dominates the mainstream today). Entitled "Some obser­va­tions on the Great Depression” and writ­ten in 1999, it con­cluded with this rhetor­i­cal flourish:

 The Marx­ian view is that cap­i­tal­is­tic economies are inher­ently unsta­ble and that exces­sive accu­mu­la­tion of cap­i­tal will lead to increas­ingly severe eco­nomic crises. Growth the­ory, which has proved to be empir­i­cally suc­cess­ful, says this is not true. The cap­i­tal­is­tic econ­omy is sta­ble, and absent some change in tech­nol­ogy or the rules of the eco­nomic game, the econ­omy con­verges to a con­stant growth path with the stan­dard of liv­ing dou­bling every 40 years. (Prescott 1999)

Yeah, right. One decade later, that open­ing Marx­ist sen­tence began to sound a lot more real­is­tic than Prescott’s dis­missal of it.

And the inference here is that in order to keep people from starving, the government had better settle in to a long prolonged interventionist strategy, ‘cause you know, people gotta eat. So in a wage labor economy, people get jobs so they can eat. And it turns out the free market, with all its incumbent “magical” creative destruction, is not capable of providing this function in sufficient capacity to enable people to eat. Why yes, we can argue that academically, the market should function without external intervention, but then we’d have to overlook history, which shows us the opposite conclusion.

 

But is much more fun to argue that history is wrong, and to put forth a (preposterous) thesis that all of our woes are at the feet of debt based currency, malinvestment, and government intervention. We can instead grouse at the current Fed chairman like a bunch of old women, year after year, all the while certain that rampant hyperinflation is just around the corner. Really it is, just you wait and see! We can make one after another misguided prediction about the stock market collapsing this (last) year, commodity prices shooting to the moon (any day now) and oil prices inflating with reckless abandon.  We can constantly confuse profit taking in food commodity pricing with inflation (hey, even the packages are smaller- see it’s inflation)

 

And all this ends up with a lot of head shaking by the Austrians, what with sticking to principles and all. They just do not get it. Every single prediction-every one, wrong. Again.

 

Oddly, if the economy isn’t stimulated, if investments are not made, if there is insufficient demand, if there are no (or inadequately numbered) new businesses to absorb unemployed people, then people cannot eat. If large multi-nationals sit on enormous accumulated profits, and do not “reinvest” them to expansionist ends, then people don’t eat.

 

It turns out hungry people get restless.

One conclusion might be that capitalism will not, and in fact cannot accept any type of currency that imparts limits on capital growth. This is why gold will never be used again as a currency. Capital abides no limits, not resource limits, not labor limits, and not environmental limits- and certainly not monetary limits. There is a strong convergence with this reality and the desire of governments to not have a starving and restive populace. I am truly baffled as to why this simple conclusion is not only overlooked by Austrians, but not even acknowledged. As long as we have capitalism as the dominant class structure, we will have debt based fiat currency- and the resulting government intervention/manipulation. It seems really simple to me.

So I think that if I were an Austrian I would have to really have a few quiet moments outside of the echo chamber of King World news to consider whether a mode of production that requires endless growth to survive, is (and historically) demonstrated to be unstable, and is responsible for truly grotesque maldistribution of wealth, is this really caused by the use of debt based currencies and government intervention?

 

The smart money says no.

  • Sat, Jan 11, 2014 - 09:13pm

    #14

    Arthur Robey

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    Give Corporate Rights to the Earth.

Maybe instead of corporations being people, the US Supreme court should deem it that the earth is a person.. then the earth would have some rights herself.

That nails it Jim. I am going to have it printed up on Tee shirts.

Corporations Aren't People, The Earth Is.

 

  • Sun, Jan 12, 2014 - 05:42pm

    #15

    Jim H

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    Darbikrash

Thank you for the detailed response above.  To start with, the Universe dropped this into my lap just yesterday, so I thought I would pass it on  angry ;

Darbikrash said,

So I think that if I were an Austrian I would have to really have a few quiet moments outside of the echo chamber of King World news to consider whether a mode of production that requires endless growth to survive, is (and historically) demonstrated to be unstable, and is responsible for truly grotesque maldistribution of wealth, is this really caused by the use of debt based currencies and government intervention?

So more synchronicity insues… as I was reading your post, it occurred to me that, while I do continue to think, in disagreement with you, that the system dynamics of our debt-based fiat currency system (and the fact that the banks that run the place are harmed by deflation) are a primary motivator of the need for growth… there is another more fundamental driver;  exponential population growth, i.e. all of us!  Unless we come up with some new paradigms for living, vs. ideas like suburban sprawl… our population growth requires endless growth.  

The fact that Adam and Chris have served up the population growth topic in a separate post today makes me want to take this discussion over there…. 

https://www.peakprosperity.com/podcast/84314/bill-ryerson-challenges-presented-global-population-growth

 

 

 

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