Inflation vs Deflation VI
Nate boldly elects to defends his position concerning fiat money in a post entitled Fiat or Shenanigans:
You. Whimpering in the corner. Suck it up and get back on your feet. You knew the US money system was a wreck or you wouldn't be reading this debate in the first place. So Vox and I conspire through competition to show you precisely how wrecked it is... and at the first glimpse you curl up in a little ball.The five or six of you still attempting to follow this debate should read the rest of it there. My response will be posted tomorrow.
Man up. Its not going up hill from here.
Setting aside the obvious difference of opinion that we have (he's wrong by the way which I will presently demonstrate with no little amusement), our view of where we stand in the grand scheme of things is profoundly similar. If you look carefully... you'll see that I was the one that dropped the bomb... not Vox. Vox just stepped back and said.. "did you see that bomb he dropped? Say boys... That's a big freaking bomb. I doubt even he knows how big a bomb he just dropped." Then, being the cruelty artist he is, he explained the bomb. Then you realized... "Oh damn. There's a bomb."
You see what this debate is important? It's the format. The format itself allows you to accept things that you would otherwise refuse to believe.
86 Comments:
Test
Only five or six?
Is this turning into the blog equivalent of the bataan death march?
No, Josh. Worse.
Gamma Rabbit Von Mises death march.
There is poetry in hell.
They just don't do it very well.
Nice arguments back and forth, but I'm just hoping it ends like this.
I think its more than 5 or 6. I for one can't wait for the next installment. I've already started backing these things up on cdr.
After the dust settles, and if you two are still on speaking terms, it would be great if one or both would put together a booklet?, or something with it all there and final thoughts. And, additions too.
I'm curious how you and Nate categorize Bitcoin and similar cryptocurrencies. My guess is that they're "fiat money" by mutual agreement rather than by government mandate. There's no physical commodity which is conveyed with the transfer of BTC, but arguably, it does "complete the transaction".
I won't quit trying to understand.
and if you two are still on speaking terms
Here's the thing. Vox and Nate are both grown ups and this is an academic debate. It's not personal. Think of the debates that Chesterton and Shaw had a hundred years ago.
The idea that an academic debate will end in hurt feelings and people not talking to each other is a feminine or rabbit phenomenon.
There's no physical commodity which is conveyed with the transfer of BTC, but arguably, it does "complete the transaction".
NO, NOT THIS AGAIN! WE'VE MOVED BEYOND THE COMPLETED TRANSACTION!
Make it stop, please...
@Daniel: Maybe a bit less Final? After all, there should be some pieces to pick up and carry on into the future. [if there is a future, or course. I keep track of things over at the raidersnet and am expecting the aliens to land any day; just after the final Pope is elected and turns into the classical depiction of Satan on world wide television] The problem with this is that there is just not enough popcorn and bourbon in the world to get us through it all.
Was Nate wearing Scalzi's fishnet stockings when he wrote that? If this gets any gayer you'll be blowing each other by the end of it.
Here's to the 5 or 6 of us left!
" Vox just stepped back and said.. "did you see that bomb he dropped? Say boys... That's a big freaking bomb."
I'd like to see something like this after everyone on of these posts - Nate writing a one paragraph summary of each of Vox's post and Vox writing a one paragraph summary of each of Nate's post.
It might increase the count of people following from 5 or 6 to 13 or 14. Or even 15.
5 or 6?
I am making this required reading for my 16 year old.
"I'm curious how you and Nate categorize Bitcoin and similar cryptocurrencies. My guess is that they're "fiat money" by mutual agreement rather than by government mandate. There's no physical commodity which is conveyed with the transfer of BTC, but arguably, it does "complete the transaction"."
This may need an actual new category. digital money. its like comodity money in that it competes on its own without artificial aid. If mises hadn't included "commercial" in his terminology we might could just call it straight up commodity money... but I don't think this meets the commercial standard so I would create a whole new category.
in terms of soundness... if it were to win the competition to become the dominant commodity in a given economic zone... it would be sound money.
believe it or not.
There.
Anyone still think this is gonna be an "Only Gold is Money!" debate?
Anyone still think this is gonna be an "Only Gold is Money!" debate?
You shall not crucify humanity upon a cross of gold!
"Was Nate wearing Scalzi's fishnet stockings when he wrote that? If this gets any gayer you'll be blowing each other by the end of it."
Oh look... two grown ups are testing arguments without employing cheap rhetoric to hide the fact that they don't know what they are talking about!
GAY!!!!
Here's to the 5 or 6 of us left!
We're making t-shirts, right?
I agree with Jack. A booklet, or the whole debate on kindle would be great. This is like watching a boxing match between two evenly match pros. I eagerly wait for each punch and counterpunch. As long as I don't think about the consequences of which one is correct.
Does everyone see how bizarre this is?? I mean...
Vox has sided with Mises on credit money.
While I have attacked Vox and Mises... by employing... something dangerously close to a new explanation of monetary theory... and... the Mises Institute?
***boggle***
Told ya the score wasn't the most interesting aspect.
OT -- Senator Rand Paul filibuster right now ... protesting drone strikes:
http://www.c-span.org/Live-Video/C-SPAN2/
ALSO OT
"Paul also said that he was “alarmed” at the lack of definition over who can be targeted by drone strikes. He suggested that many college campuses in the 1960s were full of people who might have been considered enemies of the state.“Are you going to drop … a Hellfire missile on Jane Fonda?” "
well... the trouble with that is... about 90% of the people that heard him say that thought... "YES! ... oh wait... no? awwww"
@ Dot's MS Today & Now
Good call that...I had failed to think of Kindle and I use mine all the time. Maybe Vox/Nate could do this. I would pay for it on Kindle; though, I could just save the pdf to my Kindle under an folder. They would do a much nicer job. And, include, I hope, all the comments from both blogs.
How bout it guys?
@Nate:
Hellfire on Fonda?
Yeah, bro, I would have yelled 'YESSSS' at first and then remembered the Constitution. So, she gets a pass; from us that still remember our Constitution.
and if you two are still on speaking terms
If anything, these two will have more respect for each other and a deeper sense of comraderie
@ ajw308
If anything, these two will have more respect for each other and a deeper sense of comraderie
Sounds like another vote for * Gay * to me.
What I find interesting about this debate is if TSHTF and our current FRNs devalue dramatically there will still be many different types of money around competing with each other. Precious metals will be a strong competitor, but depending upon the severity of the crash everything from bleach to foreign currency will be in the mix.
Sounds like another vote for * Gay * to me.
Before you know it, Nate will be drinking umbrella drinks instead of bourbon.
He suggested that many college campuses in the 1960s were full of people who might have been considered enemies of the state.
Don't forget the Gov't sanctioned school shooting at Kent State. State Police and firehoses could have handled that protest but a military force was sent in as an escalation of force by someone who didn't think out the likely outcome.
There is triad here of preparation, justification of behavior that they are training and equipping for. It's a lot like deploying National Guardsmen at a riot.
Sounds like another vote for * Gay * to me.
Uh, no. You project to much.
Josh, yes: Vox and Nate must become pamphleteers. All the cool revolutionaries did it.
Vox: more than 5 or 6, but struggling, yes. It might help if you gave chapter quizzes instead waiting for the cumulative final. I think I understand where we are so far - but do I, really?
"What I find interesting about this debate is if TSHTF and our current FRNs devalue dramatically there will still be many different types of money around competing with each other. Precious metals will be a strong competitor, but depending upon the severity of the crash everything from bleach to foreign currency will be in the mix."
its even more interesting if you consider that the compeition you're referencing... is actually going on right now... already.
And always has been.
You just haven't noticed because the government has forced one option to win.
I'd love to see a debate over post-SHTF commodities that might be used as money. Some criteria would be:
* portability
* density
* perishability
* alternative uses that would cause gradual deflation
Toilet paper fails the density and deflationary tests. Salt is denser, but deflationary until mining or desalinization starts producing abundant quantities, at which point it's inflationary. Can openers aren't consumed themselves, but eventually there are no cans left to open. Ammunition is obviously subject to consumption.
Looking at a chart of the loss of 98% of the value of the U.S. dollar for the last 100 years, It appears that it could take another 100 to lose 98% of the last 2%.
Ammunition is obviously subject to consumption.
So are cigarettes, but they are still used as money in prisons, I've heard. A lot depends on the timeline, and how much SHTF.
This is not the first time TSHTF for some. Look at how Vietnamese refugees preserved wealth: portable gold jewelry and precious stones.
Precious metals will be a strong competitor, but depending upon the severity of the crash everything from bleach to foreign currency will be in the mix."
Don't forget vaginas. Vaginas are money!
its encouraging to see that some of you grok.
Cans of mackerel are also used as money in prison, at values higher than they cost in the prison store.
It's like going in to see Tyson v Holyfield.
You knew you were going to see something epic, but you didn't think you'd come away queasy and questioning the very essence of the human condition.
I'd love to see a debate over post-SHTF commodities that might be used as money.
Gold, silver, platinum, diamonds, other gemstones, ammo, guns, tobacco, twinkies.
The main problems during a SHTF scenerio won't involve money, but rather the supply chain and food production. People can figure out how to trade goods and services fairly quickly. But, it takes time to shorten a supply chain, especially when our supply chains are global.
Crispty: "So are cigarettes, but they are still used as money in prisons, I've heard."
Josh: "Cans of mackerel are also used as money in prison, at values higher than they cost in the prison store."
Both have renewable, but (artificially) restricted supplies, though. I imagine the consumptionary deflation is wholly offset or reversed by the inflation in supply.
As Crispy indicated, a lot depends on whether enough shit hit the fan to break the fan.
If you want to shorten a supply chain, you've got to break some eggs.
Speaking of an inability to forecast, I'm trying to decide which has had less impact on society: the sequester or SeaQuest?
I'm going to go with sequester. Sequestration doesn't have Roy Scheider.
It is so darn interesting to watch eggheads dance to fantasy proposals, on the other hand. But I guess SeaQuest had that covered, too.
Gold, silver, platinum, diamonds, other gemstones, ammo, guns, tobacco, twinkies.
Whisky, Josh, you forgot the damn whisky.
It proved to be too consumable
After the dust settles, and if you two are still on speaking terms, it would be great if one or both would put together a booklet?, or something with it all there and final thoughts. And, additions too.
This reminds me, Vox, why don't you migrate everything over to http://www.voxday.net? It would sure be a handy place for something like Jack's suggestion as well as lots of other stuff.
I'm glad booze and salt have been mentioned. I had forgot about them.
Booze was money for many early Americans. Look up the Whiskey Rebellion. Can't have a competitor for bank money or government money, no siree.
Even if you don't drink you should have some booze around for trade or medicinal use. You might even look into learning how to do some distillation yourself.
Salt has also been used as money. There were times when Roman soldiers were paid in salt.
Salt is one of those things we eat everyday and need to survive but because it is currently so cheap and ubiquitous we don't see it as precious anymore.
Imagine a world of manual labor, subsistence farming, because the grocery stores ran out of food months or years ago and won't be filled again for years yet, maybe decades. Where do you get the salt you need to live?
You did put away some large containers of salt in the basement didn't you?
I would advise doing some research on the web for local salt sources close to where you live. You will find them, they may not be in use anymore but they will still be there. If you're lucky they will only be one or two days away on foot. If you're not so lucky they will be more than a week away. Hope to have water transport to and from the salt source if you want to carry what you need in one trip.
Of course this kind of salt source research is for the far future. Or is it?
I think along with guns and the NFL that TEOTWAWKI discussions are likely never OT here. In Greece medicine is now money as pharmacies run short and Greece is now in the "emerging market" category from "developed" for the sake of investing categories.
As far as banking and money here is a taste of what is to come if the US collapses: "[Greece]...allow the state’s monitoring and collection mechanism to access the country’s banking system via an online connection and let the government have access to depositor bank accounts."
Lesson: If things get bad enough not even cash in a bank will be safe.
There's more than 6 posters here.
Regardless, I've been following it every evening.
Adding another tick to the "five or six" followers...
Enjoying the discussion. My dictionary defines "fiat money" as: inconvertible paper money made legal tender by a government decree.
Since the dollars being discussed, paper, bank notes and credit dollars are all "convertible" into other currencies or commodities, are those dollars then NOT fiat money?
OR
Are all paper, notes and credit currently being exchanged fiat, because those exchanges are the only ones allowed by the world's collaborating governments; aka, government decrees?
While a Kindle version of the debate would be nice, why not simply compile the debate into a PDF file for download by those of us who would like to read, review then pass it on. Be sure to include your blog info so new comers can join along the Vox-Nate Econ Express.
It's been very informative thus far, but as one who has never been a student of economics to any depth, I've struggled a bit. Learning something new each day is not as easy when you turn 61.
@JartStar:
Lesson: If things get bad enough not even cash in a bank will be safe.
Preach it. I stopped keeping any excess cash, that not needed day to day, in a bank long ago. A desperate government will literally so anything to save its own ass and those of its sycophants; the people at large be damned...
Thanks to both of you for the economics class that we never got in college. A couple of random thoughts:
So if gold roughly equals the only real money, then we have already seen price deflation because it takes less gold ounces to buy most goods now than it did 5 or 10 years ago.
If we look at the money substitute supply, it seems that price inflation is happening as reflected in the price of most goods and services. But will the money substitute supply grow or shrink? If we know that it has been growing thru shenanigans (why can't credit expansion, leverage, etc. Be lumped with all the other shenanigans), then I would expect the growth to continue no matter what and therefore inflation. I am interested to see Vox explain how the money substitute supply ever shrinks to any great extent without TPTB propping it back up. Or maybe TPTB want it to shrink at some point? It seems like this debate comes down to a guess at how TPTB are going to behave.
Anyway, it's a nice break from shooting rabbits.
Very clever young man, but it's turtles all the way down.
It didn't start out that way, and there's a stack of non-turtles over to the side, but we lost the last non-turtle on our stack some years ago.
Don't forget vaginas. Vaginas are money!
It doesn't hold it's value.
Count me among the half dozen or so following along. I'm just not commenting much because I am definitely viewing this from the perspective of student. I'm also pleased that this is moving along in a way that those of us who have no preconceived ideas as to which of you are correct can follow along and grasp enough of it learn something. I think it would be somewhat informative at the end of this debate if each of you were to give a sort of summary of what you believe the outcome will look like in real world terms of your viewed positions coming to fruition e.g. prices plummeting on certain things because we're all broke or prices skyrocketing due to massive amounts of money in circulation or both in some for or another.
The thing about real money, is that, you have to store it somewhere and worry about security.
I got this idea, see. You get a bunch of people together and put all your real money in one place that is very secure, and you get an accounting of how much of the common stock of real money is yours, and you can get it any time you want. Then you don't have to worry about some roaming band of mutherfloggers taking your money.
Genius, eh?
I'll just charge a small storage fee to maintain the security and smooth operation of the place.
What could go wrong?
realmatt March 06, 2013 6:13 PM
Don't forget vaginas. Vaginas are money!
It doesn't hold it's value.
Plus, they are not always available on demand, and vagina-surrogates are plentiful.
I am following the debate, so I guess I'm part of the five or six left.
I may be missing it, but what exactly is the question being debated? Whether we will have deflation or inflation is clear, but what does that mean.
I know what deflation means to me, things get cheaper, but I am fairly sure that is not what is really being argued.
All this discussion about what is and isn't money may have merit, but what is the practical impact on humanity?
I fail to see how the US Government, for example, will not try to print its way out of its problems or pull something similar. You can argue all day about things behind the scenes, but ultimately it comes down to whether I can afford things or not. I would bet many more are like me.
Only slightly OT since velocity does deal with currency, but check the latest figures from the St. Louis Fed.
Don't forget vaginas. Vaginas are money!
It doesn't hold it's value.
Plus, they are not always available on demand, and vagina-surrogates are plentiful.
True, but they are fungible.
Random notes (including bitcoin)
Note how either Vox OR Nate understands things better than most everyone else. Even thus far in the debate, reading Krugman and similar makes them appear as two learned Oxford dons of Mathematics among a bunch of toddlers who have trouble being convinced of 2+2=4. The difference is toddlers are expected to grow out of ignorance.
But the toddlers are running things. No, you aren't scared enough. They are children of the popcorn.
Bitcoin goes to the definition of property. Gold is of limited use (most malleable, corrosion resistant, etc., but there are more common substitutes). very large integers with specific mathematical properties are of equally limited use. Bitcoin creates a way (using mathematics, cryptography which I know something about) to assign ownership of such a hard to find number to a person or entity. That preserves its rarity. At grc.com is an archive of Steve Gibson's "Security Now" (also at twit.tv) discussion of Bitcoin which gives an overview.
You can't eat gold, but you can exchange it for food. If you can exchange a bitcoin (or a fractional portion - an important property) for food it is like gold in that sense. It can function as money because it can denominate value. The value doesn't depend on a promise but a property.
"Fiat Money" reminds me of Chrysler in the Iacocca days, "Buy a car, get a check".
Plus, they are not always available on demand, and vagina-surrogates are plentiful.
Like most commodities, there are varying degrees of quality. The higher quality ones fluctuate.
Plus, they are not always available on demand, and vagina-surrogates are plentiful
Not to mention they can become toxic assets and often have management fees that are incompatible with capital preservation.
Brad Andrews
I fail to see how the US Government, for example, will not try to print its way out of its problems or pull something similar.
Eventually it is self-defeating.
You can argue all day about things behind the scenes, but ultimately it comes down to whether I can afford things or not. I would bet many more are like me.
And that is why all the mooks and muppets are reactive instead of proactive, ultimately spend their time wondering what happened and whining about the lack of toilet facilities in the cattle cars.
It is quite bolder for Nate to even claim that Mises was wrong.
But he was able to show us why and in terms most(I think) would understand.
There is neither novelty nor shame in claiming Mises was wrong. He wrote a century ago, and was prescient. Yet he could not see everything and perhaps was too optimistic.
Rothbard and Mises diverge (as to whether you label such as disagreement I will leave open).
Toby Temple says: It is quite bolder for Nate to even claim that Mises was wrong.
Thank goodness for that. Did we really want to see a quote mining battle?
A little backwoods guerilla warfare is a nice touch.
What Nate did here this time:
Vox: Nate is wrong about credit money being fiat. Let me appeal to Mises and history.
Nate: Nice try, Vox. But Mises is wrong. Now that's a shocker. Here, let me show you. and history also shows you that you are wrong.. here, let me show you.
I've re-read the whole debate again and all I can say is this - if we talk about taking and keeping the high ground, then Nate has done it more than Vox...
"Yet he could not see everything and perhaps was too optimistic."
...
One has to have read Mises to know how bad things have to be...for mises to have been considered optimistic.
Of course... If you read Vox's case in RGD... it gives perspective if one realizes that I considered it to be a wild-eyed sunshine and roses book.
Fallout 4 Live! is a real possibility guys.
No shit.
Toby.. Lets let Vox have his shot at correcting me before I accept any awards ok?
I will say that it is fair to say that half of Vox's refutation really was, "Mises said fiat money had never actually existed in history."
So when I point out that he said it in 1912... and Mises obviously never conceived that people's stupidity would allow them to do what has been done by totally severing the currency from all reserves... well... thats' a very fair point.
But that part isn't the important part. Arguing over what Mises said when doesn't matter.
What matters is the theological difference that has been exposed.
Toby.. Lets let Vox have his shot at correcting me before I accept any awards ok?
Just my observation.
If I have to reward you, I reward you with "I admire your courage." for claiming that "Mises is wrong." Did not see that coming, I admit.
Vox will retake(try to) the high ground on his next post(like he did before).
He will try. But he's going to have to do it by also being brave... because he'll have to do a lot more than just say... "because Mises said so." Because I already through Mises out as an objective measure.
Still... its Vox we're talking about.
There is plenty of horse power under the hood. I am very much looking forward to seeing how he attacks this.
What about attempting to prove that you are wrong about Mises being wrong?
Showing how Mises came up with the idea of credit money being distinct from fiat money instead of being a subcategory?
That is what I expect. Still, I welcome surprises.
Want the video version of the inflation/deflation debate?
http://www.youtube.com/watch?v=pSOGwthC_JQ
Harry Dent vs. James Rickards
The deflation dude needs to control his anger!
I'm a little surprised that this debate continues to be so interesting and productive, considering that from the very first post the two contestants have agreed upon a fundamental error. Depending on where things go, it may or may be relevant to the final boss battle, so I'll just enjoy my peanuts politely for the moment.
I'm enjoying the convo and learning a lot.
"Showing how Mises came up with the idea of credit money being distinct from fiat money instead of being a subcategory?"
We have additional perspective that Mises did not have. Its one of the choice few benefits of living through interesting times.
Mises saw what leverage did to commodity based money. He saw it over and over and over and again.
By his own admission... he never even saw actual fiat money... and thus couldn't possibly be held accountable for not knowing that fiat would react differently with leverage than commodity would with leverage. Its like asking the Wright Brothers to describe the flight characteristics of an F22.
I am perfectly prepared to explain all of this... should it become necessary.
Only slightly OT since velocity does deal with currency, but check the latest figures from the St. Louis Fed.
How did we ever wind up with two Federal Reserve Banks in Missouri?
Seems the nancy boys in charge have been afraid of this place since before it was admitted as a state.
and are dead set on controlling it.
Simple enough for the simple, like me...
If it spends, it's money.
" Vox just stepped back and said.. "did you see that bomb he dropped? Say boys... That's a big freaking bomb."
No I missed it. Could someone repeat the "bomb"?... or fart.
If Japan is anywhere close to how things will go then this debate surely better get to it soon; the next 20 years is likely to be a mild price depression until Mars Attacks! So hold on to your hat... you may be in for a most boring ride... and then??? the sun also rises.
Hmmm... I just thought about how I did not think the Lord would return while modern society was so modern which I thought was so civil compared to the years of yor. Men's ways (probably women caused and ruled over by children) are always most precarious to Moses and plain uncivil when civil at best so keep your lamp trimmed and burning. The Lord may return on the next Dow high!... or just more hell like Japan. I quess it's hell in Japan? Ok, Futjigamma nuclear plant aside. Bordom is hell... ah for the days of a business cycle when men where men and women where not listened to. ;-)
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