In a comment at WWS, one F. Beard clarifies a key Luddite rallying cry:
”loans create deposits” = counterfeiting.
It's the new mantra of the slow & left behind.
How else does he imagine a fiat currency system works? Agile exploration of national policy options is not counterfeiting, it's adaptation & survival.
Statements like F. Beard's miss the point completely. Truth is that an increasingly complex national economy demands increasingly agile & complex policy decisions. There's a time element to agility. Making an increasingly complex system increasingly agile requires making all operations increasingly dynamic - while ALSO independently tightening tolerance limits on ALL our increasingly distributed processes.
That's the only way we can explore our options as fast as they keep expanding.
Throughout history, the slow have always been easily daunted, and left not believing that progress is possible. However, the very existence of history refutes them, immediately & utterly.
One billion years ago, flatworms couldn't imagine that mammals, primate & humans were possible. Luckily, some fraction weren't cowed ... and here we are, nonetheless. Rest assured that the future will proceed regardless of F. Beard's advice to deny & ignore it. That's the comical part.
The sad part? That we're even continuing a discussion with the F. Beard's of the world. Must we all also be left behind in the dustbin of history, dragged down by the slow & left behind? As usual, it's a policy choice. Gentlepeople, start your decision engines! In a complex, dynamic culture such as ours, all distributed decision-making sums to a survive-or-not outcome in each, fleeting context.
Statements like F. Beard's miss the point completely. Truth is that an increasingly complex national economy demands increasingly agile & complex policy decisions. There's a time element to agility. Making an increasingly complex system increasingly agile requires making all operations increasingly dynamic - while ALSO independently tightening tolerance limits on ALL our increasingly distributed processes.
That's the only way we can explore our options as fast as they keep expanding.
Throughout history, the slow have always been easily daunted, and left not believing that progress is possible. However, the very existence of history refutes them, immediately & utterly.
One billion years ago, flatworms couldn't imagine that mammals, primate & humans were possible. Luckily, some fraction weren't cowed ... and here we are, nonetheless. Rest assured that the future will proceed regardless of F. Beard's advice to deny & ignore it. That's the comical part.
The sad part? That we're even continuing a discussion with the F. Beard's of the world. Must we all also be left behind in the dustbin of history, dragged down by the slow & left behind? As usual, it's a policy choice. Gentlepeople, start your decision engines! In a complex, dynamic culture such as ours, all distributed decision-making sums to a survive-or-not outcome in each, fleeting context.
We have to choose to embrace the future & move forward - RAPIDLY - or submit and relegate our children as well as ourselves to being left behind with the Luddites.
It's your choice, and this is the last year it matters. Maybe the last month.
ps: Policy displays many analogies to sport. Both require agility in competitive situations, seconds count, "losing" habits acquire their own institutional momentum, and the glory goes to those unafraid to seize new opportunities ... by embracing new, more dynamic methods. So why is there a whole field of sports kinetics, while we have no comparative field of Policy Kinetics?
For example, it's common to hear economists & politicians say "I don't deal with operations." Have you EVER heard a sports coach say "I don't deal with fundamentals?" Coaches or leaders in any other setting are rapidly fired if they only draw up plays and don't worry about execution.
What the heck has happened to our economics, general policy and especially fiscal policy staff? They're all making the one mistake Napoleon noted as terminal: "paint an imaginary picture of a situation and accept it as real." In short, they've abandoned the adaptive yoke linking theory & practice, imagination and reality. Theory is something you diversify to excess, and then select from - but NEVER SETTLE ON! The only purpose of theory is to compare to operations. Yet here we are, in the USA, in the 21st century ... idly sitting by while our own policy twits say with impunity "I don't do operations."
Fine. We don't hire them! That's the only survival option. When we have that many schizophrenic thinkers at large, YOU and you alone must select to NOT vote them into either legislative or teaching positions. It's your choice, and you must select as though it matters. Because it does.
What the heck has happened to our economics, general policy and especially fiscal policy staff? They're all making the one mistake Napoleon noted as terminal: "paint an imaginary picture of a situation and accept it as real." In short, they've abandoned the adaptive yoke linking theory & practice, imagination and reality. Theory is something you diversify to excess, and then select from - but NEVER SETTLE ON! The only purpose of theory is to compare to operations. Yet here we are, in the USA, in the 21st century ... idly sitting by while our own policy twits say with impunity "I don't do operations."
Fine. We don't hire them! That's the only survival option. When we have that many schizophrenic thinkers at large, YOU and you alone must select to NOT vote them into either legislative or teaching positions. It's your choice, and you must select as though it matters. Because it does.
You MMTers are the most dishonest bunch this side of Maoists.
ReplyDeleteHow else does he imagine a fiat currency system works?
We KNOW HOW A FIAT CURRENCY SYSTEM WORKS. The government creates essentially counterfeit money to pass out to its favorites without having to extract taxes in the first place to pay for it. This way, the populace generally cannot focus on the reason why they are getting poorer nor do they understand that their purchasing power has been transferred away to a government favorite without due process of law.
You MMTers repeat this all of the time as if we don't understand how it works. We understand how it works. We are appalled. A normal person would be appalled. Since most people go to government schools where the truth is not taught, they do not understand the system. If they ever do, they will be appalled. That is why so many representatives voted to audit the Fed because the rabble is waking up. But it might not wake up enough.
Erm Roger knowing F Beard from online (he posts at Naked Cap, Bill Mitchells, and various english newspapers in fact bump into him all over) hes pro a lot of MMT, Quotes Bill all the time, think you are being a bit harsh on him he just hates banks.
ReplyDeleteBob, suppose you and Major Freedom create some money instead - Austrian Bucks, carrying the image of Ludwig von Mises - and pass them out to your favorites. Assuming you can get the money accepted and people start using it, are Austrian Bucks "counterfeit" money? And if not, then what is wrong with the national government I support issuing its own form of money?
ReplyDeleteAnd if all of these forms of money are counterfeit, then where is the real money in this world? And what makes it real?
"That is why so many representatives voted to audit the Fed because the rabble is waking up."
ReplyDeleteNow's THERE'S a pantheon of intellectual superiority if I ever saw one.
So they audit the Fed. Big deal. What are they going to find? An accounting ledger? Debits, credits in our national unit of account?
You are so ridiculous.
And purchasing power has NOT gone down. The labor required to buy a house, a car, a basket of groceries, etc, is less now than it was 40 years ago. Not to mention that the quality, selection and availability of those items has gone up exponentially since then. That's not lower purchasing power.
> It's the new mantra of the slow & left behind.
ReplyDeleteNot to detract from the general craziness and incoherence of this post, but I think it's worth point out that neither is true.
Loan quantity (just like the quantity traded on any market) is controlled by *both* a supply curve and a demand curve.
To see this explained in detail: http://worthwhile.typepad.com/worthwhile_canadian_initi/2012/07/is-simultaneity-necessary-in-economics.html
So now that you've stumbled across an *even more* correct description of the world, you'll stop saying "loans create deposits," right? So you can be more adaptive or whatever.
Bob, your slogans like funny money and counterfeit money are empty. They have no meaning outside your perverted philosophy. Or should I say religion instead?
ReplyDeleteWhat's counterfeit and what's not is definitely not decided by the cult you belong to. Most of the cult members don't understand money, how It is created, and how It works. It wasn't too long ago when Bob Murphy was talking about money multiplier and how Fed reserve pumping is going to create so much more money in the future because banks are going to lend It out. I guess you know more than him because you read this post and learned that loans create deposits.
You would have guessed Rothbard understood banking since he waged a war against fractional reserve banking but not so:
"Banks keep checking deposits at the Fed and these deposits constitute their reserves, on which they can and do pyramid ten times the amount in checkbook money."
Any time Bob Murphy talks about economy, he should state: I am Austrian, I know nothing about modern banking in our economy, I am talking about my dream what would be if we had free market and gold money.
marris, lets just say MMT economist and Nick have many disagreements.
ReplyDelete"where is the real money in this world? And what makes it real?"
ReplyDeleteDan,
This looks like where, with a lot of these folks in the present as well as going back into human history, the naturally occurring metals which are now in column 11 of the periodic table come in to view, ie Cu, Ag, and Au.
Don't ask me why .... meanwhile I continue to investigate this recurring phenomenon.
rsp,
@ Bob Roddis,
ReplyDelete"The government creates essentially counterfeit money to pass out to its favorites without having to extract taxes in the first place to pay for it."
Thanks for posting that, Rob. It clarifies your position in a way I never could fully grasp before.
It seems as though we've been talking past one another from day one. Your position stems entirely from an inability to scale up trust and coordination. I agree, that is the key point. Where we differ is in response.
Austrians say to go back to a simpler system where you could rely on your own, personal experiences, accept the bounds, and stay as is. That would not have allowed even the 13 original colonies to form. Heck, it wouldn't even allow all tribal systems to exist. Show me a human who isn't part of a trusted culture? What part of scalable Social Species is in dispute?
Here's my position. Yes, scaling trust is the issue. Yet we have to face it & find ways to scale up distributed bonds of trust fast enough & far enough to survive the pace of context change. That's exactly the choice we faced in the run up to the DG & WWII. Best minds of the day did the obvious & unavoidable. They transitioned to an agile fiat currency AND started the endless process of inventing safeguards to insure it's use within inflation/deflation tolerance limits.
There's no other option. The simplest preamble to the Theory of Evolution is: "For every seemingly insurmountable solution, there is a solution, and that solution will involve another layer of indirection."
Sure, added indirection = added complexity, and that requires novel forms of regulation. But we've been at this for ~14 Trillion years. Eukaryotes even invented siRNA so they could scale their dynamically interleaved gene complexes beyond what prokaryotes could achieve with protein-based regulation of gene control. It wasn't easy, and it was very costly. Yet here we are, with fiat gene expression in humans. Bacteria insisted on sticking with Austrian genetics. Not bad, but there were even better approaches, complex as they are. Same is happening in dynamic cultures. You can try to index human initiative to a static asset, but the bulk of humanity has already voted with their feet - for the dynamic, intangible asset of scaling organization via fiat denominations. Some people can surf unpredictable reality.
Everyone embracing dynamic systems lives with uncertainty & doubt, but lives to incrementally master that challenge through indirection.
In parallel, "For every complex human problem there is a seemingly wonderfully simple solution ... that is wrong."
Everyone trying to deny evolution insists that we can live with stasis and opt out of a changing universe.
That's a one way ticket, of course. It's a personal choice, but it's immoral to aggressively insist that everyone else go with you.
oops, sorry for the typo
ReplyDelete"For every seemingly insurmountable PROBLEM, there is a solution, and that solution will involve another layer of indirection." "
Yay, Bob is back!
ReplyDelete"Austrians say to go back to a simpler system where you could rely on your own, personal experiences, accept the bounds, and stay as is. ..... Yet we have to face it & find ways to scale up distributed bonds of trust fast enough & far enough to survive the pace of context change."
ReplyDeleteRoger, I wish we could get all of our citizens to understand that this is so to speak the "Yin and Yang" of all of this...
I think Bob and the Major at least see at some level that this is the choice. They are coming down on the one side (that of exogenous "money"), looks like out of a distaste for warfare which I personally find hard to argue with.
I myself coming down on the side of endogenous "money", which itself looks like it can become a slippery slope down to injustice if not used righteously.
But at least Bob and the Major look like they are starting to understand these two options, the MORONS who are in charge of things presently have no clue what we are even talking about....
rsp,
Funny money bad, sad money good!
ReplyDeleteAndyCFC said...
ReplyDelete"Erm Roger knowing F Beard from online (he posts at Naked Cap, Bill Mitchells, and various english newspapers in fact bump into him all over) hes pro a lot of MMT, Quotes Bill all the time, think you are being a bit harsh on him he just hates banks."
Then I'm baffled! "We have met the enemy [yet again] ... and he is [STILL] us!"
Looking forward to meeting F. Beard & apologizing for any insult he takes. Let's just say that we can't be sloppy about tuning complex systems. It just don't work. Beard better tighten up some of his tolerance limits, or it will cause more harm than good.
Just been chatting to him on the Daily Telegraph Roger honestly hes a top bloke, but start him on banks and its a red rag to a bull.. I assure you he does get it really... Just dont mention the banks ;)
ReplyDeleteBob Roddis really has it in for you guys-he just tried to get his boyfriend, Major freedom to start babbling all night like the class A obssessive-compulsive that he is.
ReplyDeleteAnd purchasing power has NOT gone down. The labor required to buy a house, a car, a basket of groceries, etc, is less now than it was 40 years ago.
ReplyDeleteEach injection of new fiat funny money allows the recipient to make purchases at the money’s existing purchasing power and before it has filtered into the economy thereby raising prices. That is a theft of purchasing power from those holding the existing money. And yes, price and wages tend to adjust later to the new par but each injection is still a theft. In fact, that is purpose of the entire “operational reality” of a fiat funny money system, to allow the theft of purchasing power from those holding the existing money so that the victims do not know what hit them, they have no recourse for the theft in court and so State Court Jesters like MMTers can continue to deny the obvious and fraudulently claim that there really wasn’t a theft of purchasing power when there really was.
So, to deny that the dollar has lost 96% of its purchasing power since 1913 is a fraudulent statement intended to hide the ongoing and purposeful theft of purchasing power that accomplishes nothing but that theft of purchasing power.
What cost $1000 in 2010 would cost $187.88 in 1971.
Also, if you were to buy exactly the same products in 1971 and 2010,
they would cost you $1000 and $5463.92 respectively.
Do you want to do another calculation?
http://www.westegg.com/inflation/infl.cgi
evilsax: Re: "boyfriend"
ReplyDeleteSo can we assume that MMTers are anti-gay now?
Not necessarily. Just you and Major. I mean what woman could stand either one of you stuffed shirt windbags prattling on all night?
ReplyDeleteBob Roddis,
ReplyDeleteHow does an expanding economy do with a fixed stock of money (funny or serious, or humorless - which do you support exactly?). GDP is 6x what it was in 1950, how can we buy all this stuff with the 1950 stock of money? And if we can't, it won't be produced. Out go the cars, fridges and iPads... :(
Dan Kervick:
ReplyDelete"And if not, then what is wrong with the national government I support issuing its own form of money?"
>> Because they also grant and enforce a monopoly on money production. If currency competition were allowed for instance, then it seems that shouldn't be a problem for you since you prefer federal reserve notes. But why force me to use it as the only form of legal tender if I prefer an alternative?
A free market in money production would be regulated by the profit and loss test and subject to market supply and demand by meeting individual preferences, just like any other good. Today's system does essentially partake in counterfeit because money is produced outside of this profit and loss test and instead used to carry out "monetary policy" to effectuate some kind of desirable macroeconomic outcome (or so they say). New dollars are not printed to satisfy people's preferences. There's no market function at work here. There's no choice. If someone in DC decides we need to target 2% inflation and they're relatively successful, my purchasing power is being robbed and/or I'm being coerced into buying something I may not need at a time I don't want because someone else feels the need to "stimulate" aggregate demand. We transact in it solely because of government decree and the power to expand/contract supply is left to the whims of a few selected elites.
I'm not sure why this is even controversial.
Money4Nothing, I like your blog but can you translate it to English? I'm pretty sure you but I can't remember how
ReplyDeleteMike T,
ReplyDeleteIt is controversial because the sectoral balances. If all money is credit money created by banks, then any saving will result in demand leakage and there will be chronic economic underperformance, since not all goods capable of being produced will be bought.'\
If on a bullion standard or gold standard with full reserves, then credit is severely restricted.
In both cases, the gain of a fixed supply of money is inflation control at the risk of constant deflationary pressure due to saving desire.
There is also the issue of external trade, which under free banking requires payment for trade deficits in precious metals. The result is mercantilism, which all countries cannot be mercantilists. So either trade is restricted to more or less balanced trade.
The upshot is that economic expansion is restricted by the fixed money supply, making it difficult to meet demand for real resources due to population growth. There is also less venture capital and credit available to fund investment in innovation.
Finally, government are restricted in policy space, which is one of the aims of proponents of such a system. The result is two-tier society of have's and have-not's, in which inequality rises because money makes money.
Tom, thanks for your response.
ReplyDelete"since not all goods capable of being produced will be bought."
>> Sure they would, if the prices of goods fell.
"If on a bullion standard or gold standard with full reserves, then credit is severely restricted."
>> I wasn't necessarily advocating a Rothbardian 100% reserve standard. We did quite well in the late 19th century on a ~40% standard, despite there being some flaws back then.
"risk of constant deflationary pressure due to saving desire."
>> Count me in with those who are not spooked by falling prices. I think there needs to be a distinction made here: 1) falling prices due to a firesale of inventory, and 2) falling prices due to technological advancement lowering production costs. Isn't the latter considered "progress?"
"The result is mercantilism, which all countries cannot be mercantilists."
>> I agree there are challenges with respect to international trade, but how is our current enforcement of the petrodollar, worldwide military occupation (esp in the middle east), economic sanctions, etc not acts of mercantilism?
"The result is two-tier society of have's and have-not's, in which inequality rises because money makes money."
>> Are you suggesting this is a reflection of our current system? Or on an alternative free market monetary system?
Ok, it seems there's statistics suggesting that economics students tend to be more stingy than the population mean (similar to analogous studies saying serious psych students are themselves "troubled")
ReplyDeletehttp://www.nytimes.com/2011/12/18/opinion/sunday/economists-are-grinches.html?_r=1
Feedback is suggesting that avowed Austrian economists are paranoid and mistrustful.
Why not just rename the von Miser Inst as the "Inst. for Paranoid Economics" ? ??
Mike ">> Sure they would, if the prices of goods fell."
ReplyDeleteyou are not taking saving into account. Without social programs like SS and Medicare, workers would have to save much more than they do now. Sound money also encourages saving.
Saving is demand leakage, that is income that is not spent. The only way to make that up in a closed economy without net exports or govt deficits is an increase in private debt and that is has shown itself to be unsustainable over time.
It is true that govt would be less inclined to spend on military and that decrease is also a subtraction from GDP. Those jobs would have to come from somewhere else. In US that is a significant chuck of high paying jobs other than the grunts.
With free banking there is also a huge counterfeiting problem. The US govt has a very significant anti-counterfeiting force. Doubtful that private banks could match it effectively.
">> Count me in with those who are not spooked by falling prices. I think there needs to be a distinction made here: 1) falling prices due to a firesale of inventory, and 2) falling prices due to technological advancement lowering production costs. Isn't the latter considered "progress?"
Falling real prices matched by falling real wages is nominal change only. No real change. However, debts are payable at the nominal amount of the contract unless the contract specifies the real amount rather than the nominal. This is why deflation favors creditors and disadvantages debtors, just as inflation disadvantages creditors and disadvantages debtors.
What "sound money" does is reduce the spread between real and nominal. This encourages saving and discourages investing. A larger spread between real and nominal encourages investing and discourages saving.
">> I agree there are challenges with respect to international trade, but how is our current enforcement of the petrodollar, worldwide military occupation (esp in the middle east), economic sanctions, etc not acts of mercantilism?"
If we say this, then US cannot be at the short end of the stick with China and Germany as mercantilists.
The energy situation and the US handling of it is a different issue. It's a relationship in which the energy exports send real resources (oil) and receive dollars, agreeing saving dollars in tsys and buy weapons. They get money that makes money and weapons to protect their control, and the US gets energy more inexpensively than it would if it had to ship gold, That would create demand for gold and drive the price up, devaluing the USD. Both parties are getting a good deal in their eyes.
">> Are you suggesting this is a reflection of our current system? Or on an alternative free market monetary system?"
It's certainly an effect of the present system and sound money would exacerbate it. The counter is progressive taxation or, better, taxing economic rent rather than productive contribution.
Peter:
ReplyDelete"how can we buy all this stuff with the 1950 stock of money? And if we can't, it won't be produced. Out go the cars, fridges and iPads... :("
>> I can't speak for Bob, but where does he suggest that the supply of money would be "fixed?" If money is treated as a good, it's supply would fluctuate as other goods do in a free market. Regardless, we would buy all that stuff at lower prices. Between 1870-1914, prices fell in half and I think it's safe to say we didn't have a problem with economic growth during this period.
Why don't you guys make a small attempt at READING some Austrian material? Hayek did win the Nobel Prize after all. I did buy and read much of the ominously titled "The Economics of Control" by Lerner.
ReplyDeletehttp://www.flickr.com/photos/bob_roddis/5560086472/in/set-72157626353319778/
I realize that you guys think that you are clairvoyant and can know that the Austrian School is all wrong without ever engaging a scintilla of its literature.
http://mises.org/money.asp
Tom,
ReplyDelete"Without social programs like SS and Medicare, workers would have to save much more than they do now."
>> They aren't sustainable now. Programs that pay out more than they take in can't be sustained.
"Sound money also encourages saving."
>> Why is that bad?
"Saving is demand leakage, that is income that is not spent"
>> Exactly, and is freed up for investment via time deposits.
"In US that is a significant chuck of high paying jobs other than the grunts."
>> But that capital wouldn't just disappear. It would remain in the private sector to be used for consumption or investment. And would be much more wisely spent through the market pricing mechanism and profit/loss test rather than federal bureaucrats handing out lucrative contracts overpaying for goods/services to fulfill their bloated budgets.
"With free banking there is also a huge counterfeiting problem."
>> This can be solved with private certifiers. Sure you're always going to have some trying to game the system. How is it any different from those trying to counterfeit federal reserve notes now?
"This encourages saving and discourages investing."
>> Savings increases the amount of loanable funds for investment. I'm not sure why you think increased savings discourages investment.
"It's certainly an effect of the present system and sound money would exacerbate it."
>> I certainly agree it's a problem now, but I don't see how sound money would exacerbate this. Just take Fed monetary policy over the past few years and in the foreseeable future where they have effectively pushed short term rates to 0% which translates to 0% funding for banks, hedge funds, wealthy investors fueling the speculative class while punishing responsible savers and those on fixed incomes essentially forcing them into riskier assets to realize any return on their money. How would sound money exacerbate the wealth divide more than current policy?
"taxing economic rent rather than productive contribution."
>> Well we would certainly agree that productivity taxes aren't the optimal solution for government raising revenue.
"So they audit the Fed. Big deal. What are they going to find?"
ReplyDeleteC'mon Mike. That's the whole point of a full audit! To find out what we don't know, not to mention raising public awareness of what is being done to our money.
I can't fathom how anyone sympathetic to free markets could possibly endorse the Federal Reserve System.
Suppose we decided to install a similar system for another commodity, say tomatoes, where the government granted a monopoly to a single institution to produce tomatoes and set the price while only dealing directly with 22 other wholesalers/distributors directly who then circulated tomatoes into the market. Furthermore, any private individual/institution growing and selling their own tomatoes or tomato substitute would be arrested. The only government oversight entailing executive appointments by the President and periodic Congressional hearings. Would the public go for this? And not even expect to know all the dealings of the tomato monopolist? Of course not. So why then do we allow this for a monopolist that controls a good that represents 1/2 of EVERY transaction?
I can't fathom how anyone sympathetic to free markets could possibly endorse the Federal Reserve System.
ReplyDeleteThe MMTers are a bunch of commies and central planners, which explains most everything.
http://www.flickr.com/photos/bob_roddis/5560086644/in/set-72157626353319778/
I don't want to disrupt the flow if this exchange because it's interesting, but can I ask Mike T and/or Bob…..
ReplyDeleteIn response to this: ""This encourages saving and discourages investing."
>> Savings increases the amount of loanable funds for investment. I'm not sure why you think increased savings discourages investment."
Can either of you explain how banking would work in the society you describe? This line: "Savings increases the amount of loanable funds…"
Would B
banks would exist? And id they did, would it be their job to take in deposits and loan those deposits out to borrowers?
Also, would there be anything like FDIC insurance? Any protection for depositors? Or, would depositors be viewed as investors? Meaning, if a borrowers defaults on it's loan, and it's loan was YOUR deposit, would you lose your money?
Or would deposits all be mixed together so every loan was a micture of every depositors dollars? And so, if a borrowers defaults on a loan, does every depositor (investor?) take a hit on their "savings/investment" ?
Finally, would banks be making a profit on the difference/spread of the interest borrowers pay to borrow the money, and depositors/investors are paid for depositing/investing? If so, does this not require "new" money to be created to cover the interest spread? Where would this new money come from? Can banks just create it out of thin air?
Your world is very confusing. Please elaborate.
p.s. sorry for the bad grammar and spelling. I think I'll start typing my comments in Word and then copy/paste them in this box. Or proofread.
ReplyDeleteBob,
ReplyDeleteI almost want to think I'm missing something here, but every way I look at it, the underlying premise that attempts to hold MMT together seems completely antithetical to how a free market economic system should function.
I was viciously attacked for suggesting that fractional reserve notes should have explicit warnings on the face of the notes of their extreme difference from warehouse receipts for specie, considering a lack of government deposit insurance.
ReplyDeletehttp://factsandotherstubbornthings.blogspot.com/2012/07/bob-roddis-makes-bad-argument.html
Mike T: "If money is treated as a good,"
ReplyDeleteGoods are produced. How is money is produced other than on a bullion standard when metal is dug out of the ground, refined and minted? Even bullion coin issued by govts is not fungible with bullion due to seignorage. Arguably, with state money even bullion coins are credit-money. Money other than metal, shells, beads, etc. functioning as a commodity is credit-based. It's either a private liability (deposits created by loans are bank liabilities) or a public one.
Modern money is credit based. Ii is not a commodity. Of course, it could be argued that an international trade gold standard is commodity based in that it involves the transfer of gold bars from country to country. But that is no longer the case, and I would say it is unlikely to become the case other than perhaps some % of gold being added to the basket that makes up SDR's.
Mike T, you need read up on MMT. YOu are way out of paradigm. MMT shows how all that is is wrong. Start with Warren Mosler's The Seven Deadly Innocent Frauds of Monetary Policy, and Soft Currency Economics, and work through the rest of the mandatory readings if you are interested in finding out. Otherwise, I don't have time to waste in arguing this again, when these arguments always end up in disagreement over fundamentals.
ReplyDeleteBob Roddis: Why don't you guys make a small attempt at READING some Austrian material? Hayek did win the Nobel Prize after all. I did buy and read much of the ominously titled "The Economics of Control" by Lerner.
ReplyDeletehttp://www.flickr.com/photos/bob_roddis/5560086472/in/set-72157626353319778/
I realize that you guys think that you are clairvoyant and can know that the Austrian School is all wrong without ever engaging a scintilla of its literature.
The world has moved on.
If you believe that savings fund investment, why not eliminate the middle man (banks) and just go to peer2peer? The saver writes a contract to delivers a specified amount of bullion for a specified time at compound interest in bullion. Neat and clean.
ReplyDeleteI'm no defender of the Fed and the good thing about the Congressional mandate for an audit shows who is really in charge.
ReplyDeleteBut this is largely a waste of time since Congress isn't smart enough to be able to interpret an audit correctly and actually recognize anything useful. So different factions will "find" something that suits their position and make a big deal out of nothing. More hot air.
Mike T: "I almost want to think I'm missing something here, but every way I look at it, the underlying premise that attempts to hold MMT together seems completely antithetical to how a free market economic system should function."
ReplyDeleteCongratulations. You figured it out. Now go join Peter Thiel's project with Major Freedom.
Tom,
ReplyDeleteHave you seen this: http://www.prosper.com/
It seems to fit into the world of no banks. I'm guessing this is what Mike T and Bob Roddis imagine.
I think it would be very interesting if the internet free'd individuals to side-step the banking system.
The only thing people would need "banks" for would be to store specie or to obtain investment advice. Incompetent advisers will go out of business.
ReplyDeleteYou MMTers have it all bass-ackwards. The explanation of a free society with sound money is simple. The complex part consists of individuals trying to satisfy the needs of others for goods and services, a process disrupted by fiat funny-money. MMTers think the latter part is simple and the first part is an immensely complicated Rube Goldberg machine that only they know how to operate. They think only they are wise enough to centrally plan society.
I was viciously attacked...
ReplyDeleteBob, I'm not trying to be intentionally stupid about this, but can you please point out where you were "viciously attacked"?
And if you can provide that evidence, I am moderately confident I can conclude someone is taking themselves way too seriously, as well as someone who can't differentiate between a reasoned argument and rhetorical nonsense. Both of which you have a history of engaging in on a regular basis.
JK,
ReplyDelete"Also, would there be anything like FDIC insurance?"
>> No.
"Any protection for depositors?"
>> Sure, private insurers can fill this role. We use private insurers to cover other prized assets (house, car, life, etc), why not bank deposits? And don't you think a private insurer would regulate banks more strictly than federal bureaucrats? After all, even if the FDIC came in to rescue depositors, we'd all still have to pay that thru taxes anyway.
I found this quote interesting from a certain President regarding bank deposit insurance:
“I can tell you as to guaranteeing bank deposits my own views, and I think those of the old Administration. The general underlying thought behind the use of the word ‘guarantee’ with respect to bank deposits is that you guarantee bad banks as well as good banks. The minute the Government starts to do that, the Government runs into a probable loss . . . We do not wish to make the United States Government liable for the mistakes and errors of individual banks, and put a premium on unsound banking in the future.”
This was FDR. The same FDR who signed into law Glass Steagall that brought FDIC into existence.
"Or would deposits all be mixed together so every loan was a micture of every depositors dollars? And so, if a borrowers defaults on a loan, does every depositor (investor?) take a hit on their "savings/investment" ?"
>> There would be two distinct types of banking: demand banking (checking accounts) and loan banking (savings or time deposits). The former would not be permitted to be loaned out (must be redeemable on demand). The latter would be loaned out but would not be redeemable on demand according to whatever agreement is made with the bank and depositors would be compensated interest on those funds.
"Finally, would banks be making a profit on the difference/spread of the interest borrowers pay to borrow the money, and depositors/investors are paid for depositing/investing?"
>> Yes
"Where would this new money come from? Can banks just create it out of thin air?"
>> No, they'd be restricted by the amount of savings. New money would be produced like other goods where minting companies would respond to an increase in money demand which would raise the value of money and producers would capture the profit.
Does that make more sense? Bob may want to add or correct anything I may be missing here.
Tom,
ReplyDeleteYou seem to keep "describing" what we have today (much of what is not part of my disagreement) and then followed up with "you're wrong," "you're out of paradigm," "go join peter theil."
Why so defensive?
Peer2peer lending is growing, JK. Now there is a call for an open source credit rating agency to bi-pass the big three.
ReplyDeleteTom,
ReplyDelete"If you believe that savings fund investment, why not eliminate the middle man (banks) and just go to peer2peer?"
Why can't someone set up a system of exchange matching willing lenders and borrowers and compete with traditional banks? What's the problem?
You MMTers have it all bass-ackwards. The explanation of a free society with sound money is simple. The complex part consists of individuals trying to satisfy the needs of others for goods and services, a process disrupted by fiat funny-money. MMTers think the latter part is simple and the first part is an immensely complicated Rube Goldberg machine that only they know how to operate. They think only they are wise enough to centrally plan society.
ReplyDeleteBob Roddis, you have not yet figured out what is going on here. We are dealing with the world as it is, not as we would like it to be. Many of us would disagree over the latter, but we generally agree that dealing with the world as it is would be improved by applying intelligence to the problem we face and the institutions we have. We are concerned with public policy that could be implemented under the present system and we show how the present system can be improved with some tweaks but no major re-do. In other words, something politically and economically practical.
You want to create a whole new system. Fine. Go for it.
I have created that system with my private network so I have been able to live it for the pasts decades. I decided to take this route in the Seventies, when it became obvious that the prevailing system was not going to change anytime soon, and I was tired of being an activist. I am a libertarian of the left and my network is people that value freedom in community. We are lovers, not utility maximizers.
I recommend that people get with their own kind and isolate themselves as much as they can from influences that seek to control them. The basic principle of social kung fu is, "Be transparent to friends, and invisible to enemies." Friends are self-sufficient individuals voluntarily cooperating for mutual benefit, and enemies are those that seek to control others.
If you want to be an activist for a social, political and economic system as a national and international standard for institutions, follow your dream.
I'd be satisfied with some policy tweaks that makes life better in the global village, while I get on with my life with my friends and continue forging ahead.
"Man is something to be surpassed. What have you done to surpass him?" — Friedrich Nietzsche, Also Sprach Zarathustra, (1883) Prologue, sect. 3.
This was FDR. The same FDR who signed into law Glass Steagall that brought FDIC into existence.
ReplyDeleteAnd why did FDR do this?
Bank runs.
""Man is something to be surpassed. What have you done to surpass him?" — Friedrich Nietzsche, Also Sprach Zarathustra, (1883) Prologue, sect. 3."
ReplyDeleteWhile we're quoting Nietzshe:
"Verily, I advise you: depart from me, and guard yourselves against Zarathustra! And better still: be ashamed of him! Perhaps he hath deceived you. The man of knowledge must be able not only to love his enemies, but also to hate his friends. One repays a teacher badly if one remain merely a student. And why will you not pluck at my wreath? You venerate me; but what if your veneration should some day collapse? Take heed lest a statue crush you! You say, you believe in Zarathustra? But of what account is Zarathustra! You are my believers: but of what account are all believers! You had not yet sought yourselves: then did you find me. So do all believers; therefore all belief is of so little account. Now do I bid you lose me and find yourselves; and only when you have all denied me, will I return unto you. -- Zarathustra
Mike T: "You seem to keep "describing" what we have today (much of what is not part of my disagreement) and then followed up with "you're wrong," "you're out of paradigm," "go join peter theil."
ReplyDeleteI said you don't understand the MMT postion on saving and the rationale behind it. You view of loanable funds in not applicable in today's world.
You want to live in a world that doesn't exist in any developed country at present, and ti is highly unlikely that one will open anytime soon. So I'd say if you want to live your dream,, they join Thiel, Major Freedom and other who have figured this out and decided to build their own world as they like.
I am not being defensive about this. I think that it is great that people are following their dream, whatever it is.
I have done the same in my life, only based indifferent criteria and values. I recommend that everyone do this. "Letting a hundred flowers blossom and a hundred schools of thought contend is the policy for promoting progress in the arts and the sciences and a flourishing socialist culture in our land" — Mao Tse-tung. Of course, that view is not restricted to "socialism" but rather is the basis of liberalism.
We are doing something different here, as I explained above in my comment to Bob R.
Mike T: "Why can't someone set up a system of exchange matching willing lenders and borrowers and compete with traditional banks? What's the problem?"
ReplyDeleteIt's already happening.
I have never taken out a bank loan in my life personally (non-business), other than by using credit cards, and I ordinarily pay them off immediately to avoid interest charges. Consumer credit is crazy.
Yes, Nietzsche was not only a philosopher but also a poet inspired by his muse. He caught Zarathustra's drift.
ReplyDeleteWhile Nietzsche was not a prophet, he did have a prophetic inspiration. Like William Blake. And one could also include Kierkegaard.
Mike T,
ReplyDelete"Why can't someone set up a system of exchange matching willing lenders and borrowers and compete with traditional banks? What's the problem?"
Did you see the link I posted earlier? I think this is what you're looking for: http://www.prosper.com/
Bank runs are always caused by fractional reserve banking, time deposits masquerading as demand deposits.
ReplyDeletehttp://mises.org/daily/3687
Bob, over the 19th century the US money supply increased dramatically, both because the supply of gold and silver increased, and because commercial banks operated on a fractional reserve basis and massively expanded the supply of paper money relative to gold and silver.
ReplyDeleteIt's nonsense to say that a "free market" in money inevitably leads to a fixed supply strictly tied to the quantity of gold. That doesn't even make sense. Banks aren't bullion warehouses. They exist to lend money, and as they do so the quantity of credit or deposit money in the economy necessarily increases. People keep their money in banks because they want it to be lent out and invested, so that they can earn interest.
In my "personal" battle against fractional reserve I've come to understand is IMPOSSIBLE to limit the human ability to leverage their assets.
ReplyDeleteYou can call it fractional reserve banking or shadow banking or alternative payment systems or whatever but as the economy expands humans always find or invent financial (contractual/legal) tools to leverage the current base of assets to (wait for it): create more assets!
It's the way the damn economy works. You can try to limit (which 'exogenous' credit creation does IMO) the collateral damage etc.
The obsession (and ignorance on how banking & finance works in reality) of austrians with this theme is just an other self-defeating stigma with humanity. Apparently it all will be good if we surrender to gold (although the more 'realist' and knowledgeable austrians are more of free-banking types, but this historically has been proved to be a complete disaster again; refusing to self-government of society is just a failure and will always be, no conceptual ideal 'free market' is a substitute of solid institutional and social cohesion, period).
Bob criticizes the real world from the viewpoint of a fantasy world which has never existed and never will exist, because it's an impossible fantasy.
ReplyDeleteIt's not possible for all prices to endlessly fall "at a steady rate" (magically) whilst everyone somehow (magically) gets richer at the same time. This is Rothbardian nonsense that even von Hayek disagreed with.
"I am not only against inflation but I am also against deflation."
(von Hayek)
Increases in the quantity of money are not necessarily inflationary - that's another bit of Rothbardian nonsense. If demand for money increases as supply of money increases then there is no change in value.
Inflation can and does occur for reasons other than excess increases in the money supply. If the supply of goods falls but demand for them remains the same, then their price will rise. (Oil, for example). Other causes include higher wage demands, and 'seller's inflation' (i.e higher mark ups on goods to increase profits).
I believe the MMT position on "inflation" is that it is a function of the prices that govt agrees to pay to provision itself and the prices govt allows it's banks to assign to collateral assets..
ReplyDeletersp
Bob Roddis: Bank runs are always caused by fractional reserve banking, time deposits masquerading as demand deposits."
ReplyDeleteAnd your solution is go to bullion.
Again the saving issue. FDR took the US off gold because of hoarding.
The countries that abandoned the gold standard earliest during the Great Depression did best in raising GDP.
But we have been through this at least once before. Probably several times now.
Dan Kervick:
ReplyDeleteBob, suppose you and Major Freedom create some money instead - Austrian Bucks, carrying the image of Ludwig von Mises - and pass them out to your favorites. Assuming you can get the money accepted and people start using it, are Austrian Bucks "counterfeit" money? And if not, then what is wrong with the national government I support issuing its own form of money?
And if all of these forms of money are counterfeit, then where is the real money in this world? And what makes it real?
Dan, you have to distinguish between HOW one can "get the money accepted." If I pointed a gun at you and said you must pay me a tax in MY issued currency, even if you don't ever accept it on your own volition because then I will just demand that you pay me the Major_Freedom Dollar "equivalent", then if I started printing off Major_Freedom Dollars for myself and my friends, then we would be exploiting everyone who we are threatened by force to accept.
There is nothing wrong with people printing off their own money, provided that others are not forced to accept them via taxation and legal tender laws.
Mike Norman:
So they audit the Fed. Big deal. What are they going to find? An accounting ledger? Debits, credits in our national unit of account?
You are so ridiculous.
Keep sleeping, sheep, because if you were paying attention, you would known that 2003-2008, it was discovered via the watered down audit the Fed bill that the NY Fed secretly (at the time) sent $40 billion to Iraq to finance the war.
A true Fed audit would probably expose things that would make even MMTers blush. If it's all just accounting ledger, and debits and credits, then you should not be at all concerned with an audit.
And purchasing power has NOT gone down. The labor required to buy a house, a car, a basket of groceries, etc, is less now than it was 40 years ago. Not to mention that the quality, selection and availability of those items has gone up exponentially since then. That's not lower purchasing power.
Purchasing power HAS gone down, if you ever understood the standard from which this statement is made. The standard is not the past. The standard is what otherwise would have existed had inflation not taken place and money was produced in the free market, just like potatoes, computers, and shirts. This standard is grounded not in observation, but in economic first principles, a field of inquiry which is over your head.
If I robbed from you, and yet your nominal income increased over time because I am robbing you at a pace that is less than the rate of your nominal income growth, then by your worldview, my robbing you has not made your standard of living go down, because your income is technically going up over time. Yet it would be asinine to believe that your purchasing power has not been negatively affected by my theft, because even MMTers can understand that you would have otherwise have had higher purchasing power. The world in which I didn't rob from you is unobservable, but we can still know that I reduced your purchasing power despite your purchasing going up over time
Nobody is saying that inflation has to result in absolutely declining purchasing power over time. If inflation did that, the people would rise up and revolt. But if the inflationists can print juuuuuust enough to result in positive real growth over time, then dimwitted yahoos who can't reason their way out of a paper bag might believe that the inflation is causing the positive real growth, as if without monopoly inflation, real growth would have been lower.
Roger Erikson:
ReplyDeleteAustrians say to go back to a simpler system where you could rely on your own, personal experiences, accept the bounds, and stay as is.
No, it's the exact opposite. Austrians want to advance to a more complex system of individual responsibility. Tribal societies of masters and subjects is what is old and simpler. In societies with individual responsibility, complexity skyrockets. It's precisely why innovation and technological advances that increase our standard of living are highest in countries with some functioning protection of individual private property rights, and individual contracting.
Mike Sax:
Bob Roddis really has it in for you guys-he just tried to get his boyfriend, Major freedom to start babbling all night like the class A obssessive-compulsive that he is.
So Mike has showed his true colors once again. A hypocrite (because he babbles all night like a class A obsessive-compulsive and yet he accuses others of doing so) AND a homophobic bigot (because he insinuates there is something wrong with it by treating it like the scarlett letter).
Tom Hickey:
ReplyDeleteAgain the saving issue. FDR took the US off gold because of hoarding.
No, FDR stole the people's gold via Executive Order 6102, because he couldn't otherwise enact his fascist economic policies that were modeled after his role model Mussolini.
He forced people off gold. He didn't do it with everyone's consent. It was an act of aggression.
Gold wasn't abandoned because of hoarding. It was forcefully abolished by elite power grabbers who wanted to spend more money on themselves and their friends than they could collect via taxing and borrowing only.
The countries that abandoned the gold standard earliest during the Great Depression did best in raising GDP.
Not all GDP raises standard of living (especially if GDP is composed of government spending dollar for dollar), and the fact that countries which reneged on their promises to foreign lenders first, ended up recovering first, doesn't prove the benefits of fiat over gold.
If I had an outstanding mortage, I too could "recover" if I reneged on my promise to pay in dollars, and paid back in blank pieces of paper with my picture on them.
Tom Hickey:
ReplyDelete"This was FDR. The same FDR who signed into law Glass Steagall that brought FDIC into existence."
And why did FDR do this?
Bank runs
And why were there bank runs?
Fractional reserve banking the mechanics of which most people did not understand and were mislead into believing was safer than it really was.
money4nothing:
ReplyDeleteWhat's counterfeit and what's not is definitely not decided by the cult you belong to.
Right. It's decided by the cult you belong to.
Most of the cult members don't understand money, how It is created, and how It works.
Right, because you cult members abandon economic science when you prattle on about the accounting tautologies of state monopoly in money.
It wasn't too long ago when Bob Murphy was talking about money multiplier and how Fed reserve pumping is going to create so much more money in the future because banks are going to lend It out.
Did he give a timeline?
You would have guessed Rothbard understood banking since he waged a war against fractional reserve banking but not so:
"Banks keep checking deposits at the Fed and these deposits constitute their reserves, on which they can and do pyramid ten times the amount in checkbook money."
This is true. If bank reserves decreased by say half, then they could not loan as much as they could before.
Any time money4nothing talks about economy, he should state: I am MMT, I know nothing about economics, I am talking about accounting tautologies and making false inferences about them.
July 26, 2012 2:52 PM
y:
ReplyDeleteover the 19th century the US money supply increased dramatically, both because the supply of gold and silver increased, and because commercial banks operated on a fractional reserve basis and massively expanded the supply of paper money relative to gold and silver.
And the credit expansion (along with two central bank experiments, and state intervention that cartelized the major banks) is why there were periodic bank runs and recessions.
It's nonsense to say that a "free market" in money inevitably leads to a fixed supply strictly tied to the quantity of gold.
Right, but then who is claiming that?
Banks aren't bullion warehouses. They exist to lend money, and as they do so the quantity of credit or deposit money in the economy necessarily increases.
The question is not about what they do, but whether they should do it. Nobody is disputing the mechanics of credit expansion.
People keep their money in banks because they want it to be lent out and invested, so that they can earn interest.
People ALSO keep their money in banks because they want to keep it safe and available at all times, and they don't expect to earn interest.
Along with all of their other problems, the MMTers do not seem to grasp the Austrian concept of economic calculation or how economic calculation is seriously impaired by fiat funny money.
ReplyDeleteJohn Carney of CNBC wrote:
I'm not trying to shoot down the core insights of MMT. In fact, I find them extremely valuable to my reporting and analysis.
But there are some statements coming out of MMT that are highly misleading or confusing to people. Much of this confusion stems from the impression people get reading MMT blogs and papers that saving requires deficit spending. This is wrong, of course. But many smart, intelligent folks think this is what MMT is claiming.
So they dismiss it as nonsense.
What I've been trying to do is explore what it is that makes people think this is an MMT claim and what must be said to clarify it.
Furthermore, I do think there's a problem with MMT that cannot be confined to confusion.
The problem is as follows: MMTer are so focused on sectoral balances and the interaction between the private domestic sector and the public sector that they often downplay the intra-sector dynamics.
Finally, MMTers do not seem to fully appreciate the problems of ignorance and calculation that inform Austrian economics. They seem to recoil at even thinking about them because of the implications for the limits of political action. This also needs to be corrected.
http://tinyurl.com/7sycbey
That's nonsense, Bob. I have often said that Hayek's "The Use of Knowledge in Society" is a favorite of mine, and its is a good reason to end the political independence of the cb's. WArren Mosler has proposed that the natural rate of interest is zero. This would leave interest rate setting to the market. MMT agrees that monetary policy is more trouble than it is worth, since it involves picking winners and losers by rewarding savers or investors.
ReplyDeleteStill, fiscal policy is necessary in modern nation states since govt run budgets. Modern nations aren't closed endogenous systems. Govts play a huge role, if only due to the % of GDP that goes to defense, and so does external trade.
This implies the sectoral balances and therefore the sectoral balance approach to macro modeling as a rationale for fiscal policy. Functional finance is simply the statement that for maximum effectiveness and efficiency, govt needs to run a full employment budget by offsetting non-govt saving desire.
How the people choose to allocate fund to public purpose in a liberal democracy is not an economic question but a political one. Economics can inform the the debate but not settle it, since different value systems are operative.
The sectoral balance identity show that not doing this will result is either continuously rising price level, where broad money is growing faster than the capacity of the economy to expand, or else economic contraction, rising unplanned inventory, and increasing unemployment.
"He forced people off gold. He didn't do it with everyone's consent. It was an act of aggression."
ReplyDeleteI have to agree with the Major's description of FDRs policy here.
Also I agree with FDRs decision and dont see anything wrong with it....
rsp,
`And this [is] the heave-offering which ye TAKE from them; gold, and silver, and copper," Exodus 25:3
ReplyDeleteLooks like the first thing you may want to do is to remove all of the gold, silver and copper from circulation within the population.... this looks like it is at least a good start.....
rsp,
Bob Roddis/Major_Freedom/Leverage said: "suggesting that fractional reserve notes should have explicit warnings on the face of the notes of their extreme difference from warehouse receipts for specie"
ReplyDelete"Bank runs are always caused by fractional reserve banking"
"In my "personal" battle against fractional reserve"
Guys. Fractional reserve is a concept of the gold-std. On a fiat currency system there is no such thing as fractional reserve banking - unless you can think of a way to fractionate public initiative (i.e., fiat). Banks are not currently reserve-restrained, but are instead (in theory) responsible for their credit-rating reports, via completely separable examiner ratings of risk management, and judged behavior.
That distinction raises added complexities that we need novel, indirect solutions for (Glass-Steagall, etc, etc, etc). There's no going back to less agile paradigms.
THERE IS NO SUCH THING AS FRACTIONAL RESERVE BANKING ANYMORE. Please repeat that 10x before every statement you make.
Bob,
ReplyDeleteIn your imaginary world economic calculation is always perfect. There is no government or paper money and everyone somehow agrees to use gold as money and never to increase the supply of credit. Prices are always predictable and they always move downwards at a steady rate. Despite this people keep increasing output and everyone gets richer over time. How wonderful.
Problem is, that's not the real world. It has never been the real world. It will never be the real world. It can't be the real world. That's not how the real world functions. The real world has never functioned like that. It never will.
Stop basing your criticisms on an alternative imaginary world and come back to reality.
THERE IS NO SUCH THING AS FRACTIONAL RESERVE BANKING ANYMORE. Please repeat that 10x before every statement you make.
ReplyDeleteWe know that. We understand fiat funny money created out of nothing. We get it. But we were talking about the cause of bank runs under a sort of gold exchange standard or gold standard with fractional reserve lending and pointing out that the problems were caused by the fractional reserve lending which is not a valid criticism of gold, silver or Austrians. You're just trying to change the subject.
MMTers and their Whac-a-Mole debating style.
Major_Freedom said...
ReplyDelete"Austrians want to advance to a more complex system of individual responsibility."
Bob Roddis says:
(individuals will rise to accomplish all these infinitely scaling computations)
Here's another place where you'd benefit from collaborating with people outside you're field. All living systems do NOT scale up by brilliance in individual computation. No matter the personal heroics, superheroes like predatory wasps are dwarfed by the accomplishments of social species.
We're currently the pinnacle of social species evolution. Our peak return, by far, is always return-on-coordination. Ecologists call this "autocatalysis" - as does Gen. Systems Theory.
Key point is that aggregates that can quickly converge to how few distributed calculations have to be processed in some unique context ... run circles around "single CPUs."
The reason social species rule is the same reasons computing clusters outdo insane investments in individual computers. The agility of configurable clusters runs circles around the cost of continuously re-engineering individual CPUs.
It's the same reasons humans are a network of several trillion cells, instead of one giant cell.
It's boils down to the cost of scaling up individual CPU complexity, vs utilizing agile permutations of either cloned or diversified CPUs. Both approaches require incredibly dense engineering, but the cost of scaling the 2 approaches diverges radically, and the "social" approach won, hands down, millions of years ago.
Your Austrian calculation theory simply does not scale. It's cost & latency of functioning are at least an order of magnitude larger (and diverging) than the cost of operating a networked system. The main savings is in forgoing things that don't have to be calculated at all, thereby transferring much redundant & hence useless CPU cycles away from individual processors.
In your imaginary world economic calculation is always perfect.
ReplyDeleteIn the real world, nothing is perfect. In the real world, there is only one method to learn quasi-objectively about the subjective valuations of other humans beings and that is through the prices resulting from voluntary exchanges. State bureaucrats with their SWAT teams cannot gain such knowledge. Only in the imaginary worlds of "progressives" MMTers, Keynesians and other central planners can the planners obtain such knowledge.
People act. People cannot read other people's minds. People have very limited knowledge of their circumstances. Central planners and their SWAT teams are people too. My world is real. Yours is a delusion.
THERE IS NO SUCH THING AS FRACTIONAL RESERVE BANKING ANYMORE.
ReplyDeleteRight. There is no fixed supply of real reserves and banks don't lend out nominal reserves or against nominal reserves.
Bob, your world is an ideal world. It doesn't exist on earth, and there is little reason to think that it will anytime soon.
ReplyDeleteMeanwhile the world is moving on, SWAT teams and all.
"My world is real"
ReplyDeleteNo, because the world you describe has never existed.
Bob, your world is an ideal world. It doesn't exist on earth, and there is little reason to think that it will anytime soon.
ReplyDeleteI would agree that my goal of eliminating the initiation of violence against innocent people will probably fail. But you guys shouldn’t be so outwardly joyous about the continuation of violence against the innocent. And I’m not at all sure what that has to do with the real world natural and universal limitation of human knowledge which is nothing but an unchanging given of the universe.
"Why not just rename the von Miser Inst as the "Inst. for Paranoid Economics" ? ??"
ReplyDeleteHow about "the Inst. for Aztec Economics"?
Sorry, this discussion is so wacky I couldn't resist!
I would agree that my goal of eliminating the initiation of violence against innocent people will probably fail.
ReplyDeleteBob, I am willing to bet that everyone here has that goal. Most of us don't think that your solution is a viable one.
"Why not just rename the von Miser Inst as the "Inst. for Paranoid Economics" ? ??"
ReplyDeleteHow about "the Inst. for Aztec Economics"?
At some point, your inability to grasp even the simplest concepts overwhelms even me.
"I would agree that my goal of eliminating the initiation of violence against innocent people will probably fail"
ReplyDeleteRidiculous overblown sanctimonious disingenuous mindless rhetoric.
Major I ddin't say there's anythingn wrong with it, you're a very cut couple.
ReplyDeleteIf you compare my median comment to yours the only one compulsive is you. I'm able to make my point iwthout writing a dissertation.
Even Bob Roddis is much less needlessly wordy than you.
What you don't get is that simplicity ispart of intelligence. That you can't make your point succinetly is part of your compulsively overleaded brain that can't think properly.
You fail even basic presentation which is why all your braying gets you nowhere.
On the other hand you are the biggest hypocrite in town. You all the time try to call people by saying their comment is falsified while you yourself try to pretend that your claims aren't also falsifiable.