Time to get this out of the way: What is Capitalism?

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  • Sat, Jan 31, 2009 - 06:27am

    #12

    ccpetersmd

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    Re: Time to get this out of the way: What is Capitalism?

All the gold extracted so far is worth a total of 4.8 trillion dollars?  Who defines what a dollar is worth, and, therefore, what gold is, intrinsically, worth?  I’m not denying your argument, per se, but merely pointing out what, I think, is a circular argument.  You need a better starting point, Matrix.  

"Money", as Chris has stated, is basically a commodity of labor, or energy.  It is difficult to value apart from that, and therefore equally difficult to value because of that.  If one is to question the value of a "fiat" money system (and, I do, in essence), it is impossible to question that same "fiat" money system by referencing back to it.

No offense intended; this is simply too much of my logistics training in college!

  • Sat, Jan 31, 2009 - 07:32am

    #13

    caroline_culbert

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    Re: Time to get this out of the way: What is Capitalism?

I think what Patrick Brown was trying to write was the definition of Capitalism.  Most of us would like to make value judgements about the affects of capitalism (and its causality), but I think a clear definition was all he was attempting to do.  I thought it was a good job.

It is really hard for most people to segregate the definition, of the term, with its affects and effects. 

An argument in defense of or opposing it is completely different from the definition (aka its nature).

I think all of you should keep that in mind when someone is writing about any system.  Find out if they are defending/opposing it or if they are just attempting to define it.

  • Sat, Jan 31, 2009 - 09:33am

    #14
    bearing01

    bearing01

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    Re: Time to get this out of the way: What is Capitalism?

Mike,

The solution is that, while there has been more money created/printed than there is available gold, the gold in the economy has to be revalued to the new volume of money.  This is what Pres. Roosevelt did in 1933 where he devalued the US dollar by 40% because the quantity of US gold would no longer cover the increased volume of US dollars.  For example, while free market for gold is now around $900 usd/oz if there were demand to monetize gold to make it money it would create additional demand for it.  Also, there are other factors to consider when monetizing a commodity such as gold to become money again.  You must ensure it is valued at the correct exchange rate with the countries currency that plans to use it for money.  Otherwise it won’t work, like it didn’t for England Pound Sterling back in the 1920’s.  The result is other currencies have to inflate in order for the gold standard to be sustainable for that country which plans to use it.  Because of this pitfall, gold could be revalued at say $2000 usd/oz or even more if it were to be monetized.  Again, there are ways to go about getting the market to determine the new exchange rate between dollars and gold money.  There are other potential issues as well such as holders of gold getting to receive windfall profits – this is why Roosevelt confiscated the citizens gold before revaluing it.  This could be a whole thread in itself. 

  • Sat, Jan 31, 2009 - 10:46am

    #15

    Stan Robertson

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    Re: Time to get this out of the way: What is Capitalism?

While I appreciate Patricks clear definition of capitalism, it cannot be left entirely to the unconstrained efforts of individuals to determine the extent to which resources will be exploited to produce capital. Finite consumable resources may be most  efficiently exploited by individuals of some particular generation without regard for people of the future. It is a legitimate function of governments to protect the collective interests of both present and future peoples. In the process they may legitimately constrain your exploitation of something that you would otherwise use to expand your accumulated capital.

Fiat money is merely a proxy for everyone’s capital. It is neither good nor bad in its own right and it is certainly not capitalism’s mortal enemy, however the world’s present corrupt fiat money system comes close. Much as everyone loves gold, it is not edible, has relatively few practical uses and is valuable only because everyone thinks that it is. It is, in addition, hard to counterfeit or expand the supply. It is possible that a carbon fibre material could be developed in the future and used for printing a stable cash supply that would satisfy all of the demands of durability and difficulty to counterfeit. But to avoid the ills of the present fiat money system, the actual production of cash would have to be fiercely regulated. In addition, to let modern computer based commerce proceed with any banks at all (central bank or not), there would have to be stringent capitalization requirements that would preclude money simply being loaned into existence. Such an economic system has never to my knowledge existed, but one ought to be possible in principle.

Stan

  • Sat, Jan 31, 2009 - 01:07pm

    #16
    Farmer Brown

    Farmer Brown

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    Re: Time to get this out of the way: What is Capitalism?

[quote=stanrobertson]

While I appreciate Patricks clear definition of capitalism, it cannot
be left entirely to the unconstrained efforts of individuals to
determine the extent to which resources will be exploited to produce
capital. Finite consumable resources may be most  efficiently exploited
by individuals of some particular generation without regard for people
of the future. It is a legitimate function of governments to protect
the collective interests of both present and future peoples. In the
process they may legitimately constrain your exploitation of something
that you would otherwise use to expand your accumulated capital.

Fiat money is merely a proxy for everyone’s capital. It is neither
good nor bad in its own right and it is certainly not capitalism’s
mortal enemy, however the world’s present corrupt fiat money system
comes close. Much as everyone loves gold, it is not edible, has
relatively few practical uses and is valuable only because everyone
thinks that it is. It is, in addition, hard to counterfeit or expand
the supply. It is possible that a carbon fibre material could be
developed in the future and used for printing a stable cash supply that
would satisfy all of the demands of durability and difficulty to
counterfeit. But to avoid the ills of the present fiat money system,
the actual production of cash would have to be fiercely regulated. In
addition, to let modern computer based commerce proceed with any banks
at all (central bank or not), there would have to be stringent
capitalization requirements that would preclude money simply being
loaned into existence. Such an economic system has never to my
knowledge existed, but one ought to be possible in principle.

Stan[/quote]

Stan,

While it may seem that government could serve a useful purpose by rationing scarce resources so that one generation could consume them out of existence at the expense of a future generation, in practice it does not work for two basic reasons:

I’ll start with the weaker argument first.  Giving the government the power to decide which resources need to be protected and by how much is akin to giving the government control over all resources.  Bascially, that puts us back into communism.  I know some will argue that is preposterous and that there would be nothing wrong with rationing oil, or some other resource.  The problem is that once control of any kind is handed over to the government, in a few years someone will come up with an excuse (perhaps well-meaning and sincere) to ration something else, or the same thing by more.  On top of that, this opens the door for special interests to influence what government rations and what it doesn’t.  As a coal producer, for example, I would love nothing more than for the government to ration silicon (those pesky solar panels are becoming annoyingly difficult to compete with); a few years later, maybe I could get them to put a lid on natural gas as well.  For the benefit of future generations and the overall good, of course.

The second reason this concept is fraught with pitfalls is that anytime you make something illegal, even if just by a little bit, it instantly creates a black market.  Black markets, besides subverting the very thing you are trying to do, are shadow markets and therefore do not produce the tax revenues the government would otherwise receive if they did not try to ration something to begin with.  They also tend to be a breeding ground for crime and a foundation from which to enter other criminal enterprises.

A great example that of all this is Prohibition in the 1920’s.

As for intergenerational resource depletion, while I do not agree with your solution, I also do not disagree that intergenerational resource depletion is real.  I think future mines are going to be located on top of old landfills, where previously mined and then thrown-away items will be dug up to extract what little they have in the form of copper, gold, etc.  Now that’s not my solution!  Just a side-note.  

In the past, technological advances or changes in lifestyle have allowed us to survive.  I do not claim to know for sure if this will save us again, but I also know that it’s also possible to live much less ostentatiously than we do today as a civilization, and if resources become so scarce that we have to downsize considerably, then we will do so.  That’s what people have always done when their economies have been ravaged by resource depletion of another kind – the kind that comes from wars, collapsed currencies, drought, famine, etc.   

 

  • Sat, Jan 31, 2009 - 01:32pm

    #17
    Farmer Brown

    Farmer Brown

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    Re: Time to get this out of the way: What is Capitalism?

quote[damnthematrix]

On another thread, it was estimated (and I checked!) that all the gold
extracted so far is worth a total of 4.8 trillion dollars.

SO, there isn’t enough gold to cover all the wealth/debts on the planet.

Solution please?

Mike[/quote]

Mike,

I am not sure if that figure makes any sense.  What I would like to know is how much physical gold there is in existence (as in tons, pounds, ounces).  

According to this, http://www.financialsense.com/fsu/editorials/dollardaze/2009/0126.html   the total gold ever mined is 165,147 tonnes, which is equivalent to 5.32 billion ounces.  The same article claims to estimate the world’s total money supply, but it only counts certain kinds of money.

What I would like to know is the total global money supply, printed or electronic.  Whatever that amount is divided by the amount of gold, is what gold should be allowed to be worth.  Once we’ve got that figured out, all currencies could be based on gold, but only if the central banks that issue those currencies have physical gold in their possession, and only if fractional-reserve banking is left in the ash-heap of history.  

It doesn’t really matter how much gold is in existence for a gold-based system to work.  Just because an ounce is worth say, $2,500 doesn’t mean we cannot have an effective currency.  Coins can always be minted that have 0.01 ozs of gold in them (the rest can be bronze or something) i.e., a $25 coin.  Demand deposits (what paper money used to be) can be printed in any amounts deemed useful.

  • Sat, Jan 31, 2009 - 01:41pm

    #18
    Farmer Brown

    Farmer Brown

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    Re: Time to get this out of the way: What is Capitalism?

[quote=denisaf]

Re: Time to get this out of the way: What is Capitalism?

This
is an anthropocentric view of capitalism. It is a comment on the
idealism behind capitalism without going into how it has been misused
by many at the expense of the masses. But I will concentrate on the
misunderstanding it encourages  by looking a t one side of the coin
only. All the operations of civilization entail using up limited
natural capital.That is the stark reality, even if most people do not
understand that. Consequently, most people are really parasites.
Capitalism is a means of giving freedom to people to be more parasitic.[/quote]

 

I do not know what other view of capitalism there could be other than anthropocentric.  It is a man-made concept, although it mimics ecosystems in the natural world.  

Parasites are organisms that live on or from the exertions of other organisms.  I guess what you mean is that we are parasites in the sense that we live off the resources of the planet, as if the planet itself, in the absence of all living things, were an organism.  

I’d be interested in knowing what alternative system you propose, because it is very difficult for me to imagine how we could live at all without being "parasites".

  • Sat, Jan 31, 2009 - 02:25pm

    #19

    Damnthematrix

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    Re: Time to get this out of the way: What is Capitalism?

It was worked out thus:  158,000 tonnes (from memory) @ $1000/oz.

Now just think about what all the ‘stuff’ we have built/made/accumulated over the last 100 years is worth.   one thousand trillion?  Ten?  One thousand?  I’d hate to hazard a guess really….

158,000 tonnes is ~ 5 billion ounces.

If the wealth of civilisation was, for argument’s sake 1000 Trillion ($,1000,000,000,000,000), then gold would have to be valued at $200,000/oz

If I had to guess, I’d say Civilisation’s wealth would have to be one or two orders of maginitude higher….  which would make gold then be also worth one or two orders more…  like $2 to 20 million/oz. 

Whatever the truth……  hang onto that gold Dude!

Mike 

  • Sat, Jan 31, 2009 - 02:37pm

    #20

    Damnthematrix

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    Re: Time to get this out of the way: What is Capitalism?

You see bearing, you again assume that anyone opposed to capitalism is automatically a socialist or a communist…..

You say Capitalism should be allowed to operate without intervention from governments.  OK fine, so how do you ensure it doesn’t deviate from Patrick’s ideal version without interference? 

It’s all very well to define an idealistic version of Capitalism, but the fact remains it didn’t turn out that way, and it evolved into a monster…..

Mike 

  • Sat, Jan 31, 2009 - 02:42pm

    #21

    Damnthematrix

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    Re: Time to get this out of the way: What is Capitalism?

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