tag:blogger.com,1999:blog-6276561747841568697.post2382213280276338117..comments2024-03-12T08:15:56.379-04:00Comments on Krugman-in-Wonderland: Krugman: Welfare is the Nation's "Seed Corn"William L. Andersonhttp://www.blogger.com/profile/01802990642236807359noreply@blogger.comBlogger107125tag:blogger.com,1999:blog-6276561747841568697.post-54777133274046293812011-02-18T20:40:04.932-05:002011-02-18T20:40:04.932-05:00"Bala, I do wish you wouldn't get cranky ..."Bala, I do wish you wouldn't get cranky and bring down the tone of an otherwise excellent discussion."<br /><br />I'm sorry about that bit, but his repetition of the same fallacious notion in spite of the argument presented started to get at my nerves. I guess I'll have to keep my temper in check. Thanks.<br /><br />I will go through the links and even the book you suggested. Thanks for that too.Balanoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-29432487476857532412011-02-18T20:19:20.498-05:002011-02-18T20:19:20.498-05:00... the foolish belief that money was ever, could ...<i>... the foolish belief that money was ever, could ever fundamentally be a thing, a commodity, not a creditary relationship.</i><br /><br />Many thousands of years of history where people either bartered or exchanged gold and sliver (in coin or otherwise) would argue otherwise. Commodities work perfectly well as money, although in some circumstances creditary relationship can also work.<br /><br />Let's consider the Australian Dollar. In the hands of an Australian citizen, it's got value as protection money so you can pay your tax with it. In the hands of a Chinaman, or an Indian, it has no value as protection money because they have no need of protection from the Australian government, and they have no obligation to pay Australian tax. However, the Chinaman and the Indian are both thinking about the coal, iron, zinc, gold, wheat, beef, lamb, sugar, etc they can buy with that AUD so the value it has in their hands is driven by commodities.<br /><br /><i>5-6 months ago i gave an example to him about Iraqis rejecting state money in favor of a spontaneous system of bottled water, cigarettes and goats. the answer i got was (and im paraphrasing, but i believe it to accurately reflect the answer) 'thats not how i define it, so it doesnt count'.</i><br /><br />The early Australian economy used bottles of rum as money. Worked perfectly well, if you weren't bothered by the good citizens doing their duty to prevent inflation.<br /><br />I've yet to see any certificate of fractional reserve rum cellaring!<br /><br />Mind you, if you buy alcohol in Australia today, 90% of what you pay is tax, and you could very easily make the same stuff without the tax except that doing so happens to be illegal. So in essence, not much has changed in 200 years.Telhttp://lnx-bsp.net/noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-15572454025242246152011-02-18T20:04:06.767-05:002011-02-18T20:04:06.767-05:00FRB causes the business cycle which in turn causes...<i>FRB causes the business cycle which in turn causes the downfall of the FRB system. To call the factors exogenous is either utter idiocy or a barefaced lie. I know what it is in your case, you whatever-Keynesian pathological liar.</i><br /><br />Bala, I do wish you wouldn't get cranky and bring down the tone of an otherwise excellent discussion.<br /><br />I think the words you are looking for are <b>"positive feedback"</b>, as discussed by Paul Ormerod in his book "The Death of Economics". If you haven't read the book then I can heartily recommend it. I'll buy copies for people in this discussion who can provide some way for me to get postal details, and who are too poor or too cheap to get their own copy.<br /><br />Can I also recommend Steve Keen's work on stability in a credit-driven economic system? <br /><br />http://www.debtdeflation.com/blogs/2010/11/15/why-credit-money-fails/<br /><br />I thought this speech articulated the problem very nicely.<br /><br />http://debtdeflation.com/blogs/wp-content/uploads/talks/MichiganSustainability2010KeenSpeech.mp3<br /><br />By the way, Steve Keen tends to be Keynesian about finding solutions to the problem (i.e. more government intervention, more money printing, and explicit debt forgiveness). I'd say he can be correct about his analysis that we do have a problem, but incorrect about his approach to a solution. For what it's worth, Keen considers Krugman to be a "Neoclassical" economist, but a good quality neoclassical (heart in the right place, just a bit deluded).Telhttp://lnx-bsp.net/noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-71734452320894923682011-02-18T19:52:35.161-05:002011-02-18T19:52:35.161-05:00@ 3:55 anon
"You know, don't claim to hav...@ 3:55 anon<br />"You know, don't claim to have the support of history when you pick and choose what parts of history you want to consider. "<br /><br />5-6 months ago i gave an example to him about Iraqis rejecting state money in favor of a spontaneous system of bottled water, cigarettes and goats. the answer i got was (and im paraphrasing, but i believe it to accurately reflect the answer) 'thats not how i define it, so it doesnt count'.burkll13https://www.blogger.com/profile/00458192777661669534noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-76814318755726320662011-02-18T19:41:24.085-05:002011-02-18T19:41:24.085-05:00AA,
The fallacies in "The Lost Science of Mo...AA,<br /><br />The fallacies in "The Lost Science of Money" are simply mind-blowing!! Thanks for pushing me to read. I haven't laughed so much in a long time.<br /><br />Of course, if your source/s is/are different, please guide me to them.Balanoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-85802635121100797622011-02-18T19:20:17.289-05:002011-02-18T19:20:17.289-05:00AA,
I see that you are well and truly lost in &qu...AA,<br /><br />I see that you are well and truly lost in "The Lost Science of Money". Just downloaded it and started reading it, but just a quick glance at the first few pages reveals quite a few pieces of fallacious thinking. Just wanted to know if this "masterpiece" is what you treat as the basis of your "argument" and your "credible" stories.Balanoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-38002958313557408022011-02-18T19:06:49.092-05:002011-02-18T19:06:49.092-05:00IMHO, the really crucial pillars of the modern ban...<i>IMHO, the really crucial pillars of the modern banking system are the government machinery of taxation and the deposit insurance system. The former forces people into the banking system and the latter reduces the chance that they get out.</i><br /><br />But Bala, you repeat yourself.<br /><br />Deposit insurance has no hoard of gold and silver to back it, any more than the main banking system does. Ultimately only government force is backing the entire system, and generally that force will manifest as taxation (possibly hidden by inflation), or if things get really bad they will just change the rules.<br /><br />Once more, we get back to the fundamentals of a protection racket, and the banks are merely part of that process. Since we appear to be debating the morality of honest transactions here, it seems reasonable to be upfront about the process -- the government sells protection, you buy the protection and sell labour, goods or whatever.<br /><br /><i>You are right that the government backing of private banks can encourage moral hazard - which is why banks - bank lending - bank money creation - should be strictly regulated. The current crisis is partly due to abandonment and nonenforcement of regulation.</i><br /><br />What the Austrians and Libertarians are asking for is: [1] that banks keep a largish percentage of reserves in the form of precious metal or some solid and tangible commodity (say 25% would keep most of us happy), [2] that banks clearly declare their percentage of reserve, where it is held, how it is held, etc and [3] government provides some mechanism to allow some genuine choices in the market.<br /><br />So if we rename our demands as a "strictly regulated" banking industry does that make our position more acceptable? We could even live without [1] because it is a natural consequence of [2] and [3]. Trouble is we are now living with bank regulations thick as a phonebook, poorly understood by anyone (even the regulators) and haphazardly enforced.<br /><br />The Austrians are suggesting banking regulations that could be written on a postcard and understood by everyone and demanding that basic concepts (such as honest dealing) would be strictly enforced rather than a mile of esoteric frippery with no hope of enforcement.<br /><br /><i>The insurance industry - just like FRB - can be operated profitably over long periods and is stable.</i><br /><br />Except for those short periods when something major goes wrong, and that's when you really need insurance.<br /><br /><i>But when some unforeseen disaster happens (a massive natural diaster) the insurance companies would be overwhelmed by claims and collapse, because they cannot pay.</i><br /><br />And basic statistics says these situations will happen sooner or later. The longer you wait, the more that a "freak" event becomes an inevitable event.<br /><br /><i>Is that an even REMOTELY serious argument against insurance?</i><br /><br />You question is not clear, if you are asking whether it is an argument against the customer taking out insurance at all, then certainly the possibility of a massive event that wipes out the insurance company is something the customer should be taking into consideration.<br /><br />If you are asking whether we have an argument to remove the entire insurance industry, then that would be a straw man anyhow -- it is merely an argument for the insurance company to issue a clear statement about their own limitations and likelihood of bankruptcy in the case of a major disaster. In other words, just like a bank they should be forced to declare how deep their reserves are and what those reserves consist of... and just like any other business they should be forced to declare exactly what the product is that they are selling.<br /><br />On what basis should banks and insurance companies (often one and the same) be treated differently to other businesses?Telhttp://lnx-bsp.net/noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-35262802181100283762011-02-18T18:55:12.897-05:002011-02-18T18:55:12.897-05:00@Aa: So, those POWs in WW2 didn't spontaneousl...@Aa: So, those POWs in WW2 didn't spontaneously develop a currency without prompting or decree from a state. Its all a matter of those ebil economists rewriting history. -_-<br /><br />You know, don't claim to have the support of history when you pick and choose what parts of history you want to consider.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-32686844850992087042011-02-18T18:19:13.431-05:002011-02-18T18:19:13.431-05:00AA,
"the foolish belief that money was ever,...AA,<br /><br />"the foolish belief that money was ever, could ever fundamentally be a thing, a commodity, not a creditary relationship."<br /><br />Firstly, even the statement that money is a creditary relationship is a "belief". You are just claiming that it is backed by a list of areas of study (don't want to call them sciences because they are not).<br /><br />Secondly, I don't know if you realise that almost all the areas you cite are little more than story telling exercises. Archaeology digs up artifacts and spins them together into what the archaeologist or the historian studying those artifacts believes to be a credible story. History is itself a story-telling exercise. Numismatics too builds stories around available facts. Please convince me that your story-telling exercises are more credible than the story I hold more credible right now.<br /><br />Thirdly, every story telling exercise has premises. Care to list out the premises that led you to the conclusion that money is, was and always has been a creditary relationship and not a commodity?Balanoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-11317687755631474662011-02-18T15:42:50.244-05:002011-02-18T15:42:50.244-05:00Bala - I understand the Austrian (hi)story of mone...Bala - I understand the Austrian (hi)story of money. It is the mainstream story - believed even by Lord K here to some degree. What is not widely understood is how much all of mainstream "economics" depends on the foolish belief that money was ever, could ever fundamentally be a thing, a commodity, not a creditary relationship. <br /><br />"My" tall tales are the ones supported by archeology, sociology, numismatics, anthropology and history. The Austrian story is supported by ... nothing. When archeology etc were in their infancy, maybe it was a reasonable guess - but now? - It just shows the extraordinary low scholarly standards of "economics".Another Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-77292952843448353272011-02-18T11:18:11.964-05:002011-02-18T11:18:11.964-05:00AA Feb 18, 2011 2:46 AM,
What's hilarious is
...AA Feb 18, 2011 2:46 AM,<br /><br />What's hilarious is<br />1. Your notion that your statements have anything at all to do with economics<br />2. That you consider your tall tales to be history<br />3. Thirdly, with the kind of nonsense you hold to be knowledge, that you can find anything at all amusing<br /><br />What a joke!!Balanoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-45810536516882944502011-02-18T10:38:37.674-05:002011-02-18T10:38:37.674-05:00"Rothbard's position is still basically a..."Rothbard's position is still basically a moral argument, pure and simple."<br /><br />I'm sorry, but you don't have any idea on what you're talking about. Rothbard's main argument against fractional reserve banking is that it is inherently unstable. Have you ever read any of Rothbard's major works?<br /><br />With that said, if anybody would like to read an introduction to free frb, I wrote one: <a href="http://www.economicthought.net/2011/02/the-theory-of-free-banking/" rel="nofollow">http://www.economicthought.net/2011/02/the-theory-of-free-banking/</a>Jonathan M.F. Catalánhttp://www.economicthought.net/noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-53320046637558849962011-02-18T05:46:40.790-05:002011-02-18T05:46:40.790-05:00@Bala - Glad you find economics & its history ...@Bala - Glad you find economics & its history amusing. I do too. :)Another Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-75490706536422352702011-02-18T02:33:24.441-05:002011-02-18T02:33:24.441-05:00LK,
I suspect this is the article you are referri...LK,<br /><br />I suspect this is the article you are referring to.<br /><br />http://gene-callahan.blogspot.com/2009/05/immorality-of-fractional-reserve.html<br /><br />Once again, I fully agree with Gene Callahan and support even you in saying that FRB should not be prohibited. What you are failing to realise is that my argument is not the immorrality of FRB but its inherent instability that comes from endogenous factors unlike the insurance industry whose instability comes from exogenous factors.Balanoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-32018345313077523532011-02-18T02:27:51.213-05:002011-02-18T02:27:51.213-05:00Hey LK,
I just read Gene Callahan's article a...Hey LK,<br /><br />I just read Gene Callahan's article and you know what? I fully agree with him. The small but important point that you seem to have missed out is that Callahan's purpose is not to study the stability of FRB but to consider the validity of the call to prohibit it.<br /><br />Unless, of course, you are talking of a different article, pitting Gene Callahan's against my argument is a serious case of barking up the wrong tree.Balanoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-62923797088682156562011-02-18T02:04:50.653-05:002011-02-18T02:04:50.653-05:00"a transferrable credit/debt relationship&quo..."a transferrable credit/debt relationship" is money???? Thanks for the laughs.Balanoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-49604323490530062252011-02-18T01:59:37.096-05:002011-02-18T01:59:37.096-05:00"Credit/state theories of money encompass all..."Credit/state theories of money encompass all forms of money. Austrian/commodity/"medium of exchange arising through free markets" (without the dirty rotten government) money never existed. "Honest money" is a figment of the imagination; there is no historical evidence of it ever existing. The only kind that has ever existed is "funny money" -which has always been basically a creature of the state"<br /><br />ROFLMFAOBalanoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-37294674270706060392011-02-18T01:55:32.629-05:002011-02-18T01:55:32.629-05:00Yes, but what you didn't do is give 1 reason f...<i>Yes, but what you didn't do is give 1 reason for why bank money is "money". LK tried and failed. Why don't you?</i> Didn't you notice? I gave a minimal definition of money - a transferrable credit/debt relationship - that bank money fits. It being accepted for taxes makes it almost, but not quite, equivalent to state money.<br /><br />Credit/state theories of money encompass all forms of money. Austrian/commodity/"medium of exchange arising through free markets" (without the dirty rotten government) money never existed. "Honest money" is a figment of the imagination; there is no historical evidence of it ever existing. The only kind that has ever existed is "funny money" -which has always been basically a creature of the state.Another Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-89080865655639554122011-02-18T01:05:47.315-05:002011-02-18T01:05:47.315-05:00"Subjective expectations drive business confi..."Subjective expectations drive business confidence and business investment, because eocnomci lfe is a world of uncertainty. You could have a 100% reserve banking system and still have recessions and depressions."<br /><br />Yeah!! And a sudden surge in "animal spirits" causes an investment boom that we call the boom phase of the business cycle. Even worse, a sudden inexplicable vanishing of these "animal spirits" and a general, causeless feeling of pessimism causes the bust phase of the business cycle. All put together, the causes of the business cycle are random, exogenous factors and inherent weaknesses in the free market itself. Where do you think I have heard this "explanation", you whatever-Keynesian pathological liar?Balanoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-58533643942279476862011-02-18T01:00:45.019-05:002011-02-18T01:00:45.019-05:00Oops!! I didn't mean to link to any url. Don&#...Oops!! I didn't mean to link to any url. Don't know how it came in.Balanoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-4967869165090595312011-02-18T00:57:15.912-05:002011-02-18T00:57:15.912-05:00This comment has been removed by the author.Balahttps://www.blogger.com/profile/09242182963177548732noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-58741355634907222242011-02-18T00:47:02.002-05:002011-02-18T00:47:02.002-05:00"Subjective expectations drive business confi..."Subjective expectations drive business confidence and business investment, because eocnomci lfe is a world of uncertainty. You could have a 100% reserve banking system and still have recessions and depressions."<br /><br />FALSE. Rothbard's explains very clearly that FRB CAUSES the business cycle. Any attempt to say that you could have a business cycle under 100% reserve banking and a free market in money is either a reflection of complete ignorance of ABCT or, like in your case, is a lie that only a whatever-Keynesian pathological liar can and will utter.<br /><br />"The factors that could bring about the downfall of an FRB system are as exogenous as the factors that might cause an insurance company to fail."<br /><br />Repeating the same lie does not make it true. FRB causes the business cycle which in turn causes the downfall of the FRB system. To call the factors exogenous is either utter idiocy or a barefaced lie. I know what it is in your case, you whatever-Keynesian pathological liar.<br /><br />"You ignore the other explanation I mentioned that refutes you: factors such as a sudden need for money from a large part of a FR bank's clients due to family death, accident, unemployment, unexpected bills etc.<br />which would bankrupt it"<br /><br />Family death, accidents, unexpected deaths and unexpected bills may cause business failure of a few banks but not the business cycle which destabilises the ENTIRE FRB SYSTEM, you retard. Your "explanation", therefore is total balderdash. Unadulterated nonsense.Balanoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-19862023537135426222011-02-18T00:35:46.191-05:002011-02-18T00:35:46.191-05:00Subjective expectations drive business confidence ...Subjective expectations drive business confidence and business investment, because eocnomci lfe is a world of uncertainty. You could have a 100% reserve banking system and still have recessions and depressions.<br /><br />The factors that could bring about the downfall of an FRB system are as exogenous as the factors that might cause an insurance company to fail.<br /><br />You ignore the other explanation I mentioned that refutes you: factors such as a sudden need for money from a large part of a FR bank's clients due to family death, accident, unemployment, unexpected bills etc.<br />which would bankrupt it.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-25704539860867459732011-02-18T00:26:45.982-05:002011-02-18T00:26:45.982-05:00"The reason the FRB is suddenly unable to ful..."The reason the FRB is suddenly unable to fulfill its obligations is a surge in claims for money which in turn is caused by a EXOGENOUS FACTORS over which the firm has no control, could not have expected and hence could not have factored into its policies, like a change in subjective business expectaions causing a fall in investment and a recession"<br /><br />No you retard!! ABCT explains why FRB has to result in the depression and the surge in claims. It can be anticipated and factored into the firm's policies. Hence, the insurance analogy is FALSE. The factors that bring about the downfall of an FRB system are indeed ENDOGENOUS.<br /><br />Stop hiding behind Gene Callahan. Present the argument yourself.<br /><br />Whatever-Keynesian pathological liar.Balanoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-61617917995488133692011-02-18T00:23:53.074-05:002011-02-18T00:23:53.074-05:00"A 100-reserve banking system could still mak..."A 100-reserve banking system could still make large numbers of bad loans that default, causing huge loss of savings, a demand contraction and a business cycle - Rothbard is wrong that the business cycle would disappear under his fanasty 100% reserve system."<br /><br />ROFLMFAO. Now you are refuting ABCT without explicitly saying so. What mendacity!!!<br /><br />"Never. Why? Because free markets have led time and again to FRB. And there are plenty of instances where FRB arose without a central bank"<br /><br />What a fanciful notion. It arose on the market, but it could not have survived without blatant government intervention in the form of suspension of the obligation to redeem notes and deposits in specie, sundry other restrictions on redemption and the institution of Central Banks at the later stages of the evolution of the FRB system.<br /><br />Whatever-Keynesian pathological liar!!Balanoreply@blogger.com