Austrian School vs. itulip / FIRE

[Mashuri]

Re: Austrian School vs. itulip / FIRE

Actually, it is relevant because while Praxeology per se supposedly studies human behavior, praxeology as employed by the Austrian economists is carried out via studying prices.

I don't think I need to show how studying prices in and of itself is a false methodology, do I?

Why do you keep up with the straw men? How is praxeology carried out via studying prices? This, again, simply shows your ignorance of the subject.

I find it amusing that you think I am praising fiat money.

I also find it amusing that somehow the dismantling of civilization has anything to do with a gold standard (or lack thereof).

Anyway, your multiple attempts to show that somehow the Austrian school of economics has either a grip on reality or any modicum of credibility with regards to solutions have been notably unsuccessful.

Certainly your interpretation of Austrian theory, which has very little to do with actual Austrian theory, has little grip on reality. I've tried to help but every time I see a new post from you with yet another gross misinterpretation.

We're back to Square 1 c1ue. You're just going to have to accept that your knowledge of Austrian theory is lacking.

[DSpencer]

Re: Austrian School vs. itulip / FIRE

In effect, it assumes the worst of everyone: that given the opportunity to cheat via fiat currency and or fractional reserve lending, that it must always happen.

Can you provide any example where fiat currency and fractional reserve lending did not lead to a reduction of the currency's purchasing power.

If I take a briefcase full of cash with my name and number on it and put in on the sidewalk outside my house for a month , I can reasonably assume that sooner or later it will be stolen. Maybe the first time someone honest will return it to me, but if I keep leaving it out there, it will be stolen.

Basically, everyone believes this, evidenced by the existence of security in various forms. It doesn't mean every person is a cynical paranoid person who believes everyone else is a criminal. It's just being realistic.

Do you lock your doors? Do you use passwords on your email, etc? Do you set your ATM pin to 1234? So why should we allow central banks/governments to control the value of our currency when they have proven time and again that they are not worthy of this trust? Fool us once, shame on them; fool us repeatedly throughout human history, shame on us.

I wish I could live in a world that was safe to not lock my doors or use passwords for everything. If admitting that we don't live in that world means that I'm making negative assumptions about the net mental state of my fellow humans then so be it.

Overall, I think that if the Austrian school makes assumptions about the net mental state, they are generally positive. The assumption that people will naturally work together to better their lives seems generally optimistic to me. The opposite belief that left to their own devices, people will naturally screw everything up and therefore need to be tightly controlled by authority figures seems to be the pessimistic view.

[c1ue]

Re: Austrian School vs. itulip / FIRE

Certainly your interpretation of Austrian theory, which has very little to do with actual Austrian theory, has little grip on reality. I've tried to help but every time I see a new post from you with yet another gross misinterpretation.

We're back to Square 1 c1ue. You're just going to have to accept that your knowledge of Austrian theory is lacking.

I've invited you to demonstrate your supposedly superior knowledge, but in turn you just bandy about the generic term Praxeology - which is a specific discipline with the Austrian school attempts to apply to economics.

Since you cannot or will not actually state what your understanding is, then the result is that my understanding is correct.

Can you provide any example where fiat currency and fractional reserve lending did not lead to a reduction of the currency's purchasing power.

Fiat currency has not led to reduction in purchasing power, because in prior eras a nation generally only went to a fiat currency when they needed specifically to devalue purchasing power.

Fractional reserve lending, on the other hand, has existed for literally thousands of years, generally right along side a gold and/or silver standard.

Do you think the gold and/or silver standard has preserved purchasing power in these circumstances?

The answer is no.

As always, the Austrian school attempts to gain the high ground by stipulating an impossibility: a world with neither fractional reserve lending nor fiat currency.

More importantly, any and all currencies can and should be expected to lose purchasing power. The reason is simple: the world is not a static place. So long as productivity increases, this in turn guarantees erosion of purchasing power; consider the value of cloth before and after the invention of the power loom.

If I take a briefcase full of cash with my name and number on it and put in on the sidewalk outside my house for a month , I can reasonably assume that sooner or later it will be stolen. Maybe the first time someone honest will return it to me, but if I keep leaving it out there, it will be stolen.

Basically, everyone believes this, evidenced by the existence of security in various forms. It doesn't mean every person is a cynical paranoid person who believes everyone else is a criminal. It's just being realistic.

Do you lock your doors? Do you use passwords on your email, etc? Do you set your ATM pin to 1234? So why should we allow central banks/governments to control the value of our currency when they have proven time and again that they are not worthy of this trust? Fool us once, shame on them; fool us repeatedly throughout human history, shame on us.

I wish I could live in a world that was safe to not lock my doors or use passwords for everything. If admitting that we don't live in that world means that I'm making negative assumptions about the net mental state of my fellow humans then so be it.

Overall, I think that if the Austrian school makes assumptions about the net mental state, they are generally positive. The assumption that people will naturally work together to better their lives seems generally optimistic to me. The opposite belief that left to their own devices, people will naturally screw everything up and therefore need to be tightly controlled by authority figures seems to be the pessimistic view.

I'm not sure what point you are trying to make.

If the example is choosing not to leave your money in a briefcase outside, the counterexample is not having any money to put in the briefcase because all those who already have the money have monopolized it.

Consider that in his lifetime, J.P. Morgan at the time of his death literally owned almost all the money in the United States. Without fractional reserve lending or fiat currencies, his ancestors would own ALL of it now.

How then is forcing all monetary power into the hands of those who already control most of it - a good thing?

[Sharky]

Re: Austrian School vs. itulip / FIRE

...

I reject Nietzsche in every way. I reject nihilism. I reject subjectivism.

I disagree with you on every point. We are clearly on opposite sides of the philosophical spectrum.

If you would like to go back to the pre-Enlightenment days, by all means please do so. You can start by destroying the PC you're using to make these obscene posts.

[Mashuri]

Re: Austrian School vs. itulip / FIRE

I've invited you to demonstrate your supposedly superior knowledge, but in turn you just bandy about the generic term Praxeology - which is a specific discipline with the Austrian school attempts to apply to economics.

As you've pointed out, my attempts to educate you on Austrian theory have failed. That does not change the fact that you're still uneducated regarding said theory, and anything you state about the subject should be taken with a grain of salt. Alas, it is your responsibility to learn, not mine. I've provided links to reading material that will help, if you so desire.

[c1ue]

Re: Austrian School vs. itulip / FIRE

As you've pointed out, my attempts to educate you on Austrian theory have failed. That does not change the fact that you're still uneducated regarding said theory, and anything you state about the subject should be taken with a grain of salt. Alas, it is your responsibility to learn, not mine. I've provided links to reading material that will help, if you so desire.

If you cannot articulate your understanding of the Austrian school, clearly you cannot debate it either.

Similarly by being unable or unwilling to actually spell out what I am supposedly not understanding, you also fail to build credibility.

I've already noted your attempt to misdirect by focusing on Praxeology vs. what the Austrian school of economics specifically engenders.

Now you seek to misdirect by pointing at some generic links.

Again, spit out what you know or supposedly know.

[Mashuri]

Re: Austrian School vs. itulip / FIRE

If you cannot articulate your understanding of the Austrian school, clearly you cannot debate it either.

Similarly by being unable or unwilling to actually spell out what I am supposedly not understanding, you also fail to build credibility.

I've already noted your attempt to misdirect by focusing on Praxeology vs. what the Austrian school of economics specifically engenders.

Now you seek to misdirect by pointing at some generic links.

Again, spit out what you know or supposedly know.

You can blame me for your ineptitude regarding Austrian theory all you like, if it makes you feel better. I'm not taking you on as my basket case student so read the links, if you're actually interested in learning. Otherwise, deal with the fact that your knowledge is lacking. The fact that you present yourself as knowledgeable makes me suspicious of any information you may present on other subjects I don't know as much about.

[Serge_Tomiko]

Re: Austrian School vs. itulip / FIRE

If you cannot articulate your understanding of the Austrian school, clearly you cannot debate it either.

Similarly by being unable or unwilling to actually spell out what I am supposedly not understanding, you also fail to build credibility.

I've already noted your attempt to misdirect by focusing on Praxeology vs. what the Austrian school of economics specifically engenders.

Now you seek to misdirect by pointing at some generic links.

Again, spit out what you know or supposedly know.

c1ue, I'm very glad you have the time and patience to deal with this randroids and false Austrian gods. Very thorough and entertaining.

[vinoveri]

Re: Austrian School vs. itulip / FIRE

More importantly, any and all currencies can and should be expected to lose purchasing power. The reason is simple: the world is not a static place. So long as productivity increases, this in turn guarantees erosion of purchasing power; consider the value of cloth before and after the invention of the power loom.

Please explain how productivity increases guarantees loss of purchasing power.

In your example, the cloth is a good; the loom is capital. Investing savings in developing a loom results in the cloth costing less (think commodity). Only the barter value of the cloth will go down. The worth of the cloth in terms of utility will remain the same or go up as more widespread use occurs. This is an increase of wealth.

So ..... can new fiat money serve as capital in the above (and similar wealth producing enterprises), which is at the heart of our current system? Of course the evidence is clear that it can. The question though is whether the system is both "just" and sustainable.

One of my problems with Keynesianism and the structure of our monetary system (the FED Banking Cartel) is not fiat money per se but in how that fiat capital is disbursed, i.e., via debt which is clear usury since the lender-bank never had any "capital" of its own to lend in the first place, but is simply entitled to create money by law based on a promissory note from the borrower AND to who it is disbursed to first, i.e., greater erosion of purchasing power occurs to those who are farther downstream in the fiat/debt money chain "supply chain".

[c1ue]

Re: Austrian School vs. itulip / FIRE

Please explain how productivity increases guarantees loss of purchasing power.

In your example, the cloth is a good; the loom is capital. Investing savings in developing a loom results in the cloth costing less (think commodity). Only the barter value of the cloth will go down. The worth of the cloth in terms of utility will remain the same or go up as more widespread use occurs. This is an increase of wealth.

All you describe is accurate, but the problem is that the increase in wealth accrues not to the former weavers of cloth, but to the owners of machinery. The vastly more numerous (think lower middle class) weavers all lost jobs which were outsourced to power looms, and this already negative dynamic also exacerbated by the 'putting out' policies which Capital deployed - the power looms were far too expensive for individual weavers and so capitalists 'loaned' out power looms, including supply monopoly on cotton/thread/dyes and interest costs for the 'loan'.

Much as China today - while no one can argue all the Chinese things in Wal Mart are cheap, equally from the American middle and lower class perspective there has been a clear loss in purchasing ability - hence overall purchasing power.

It is just a different dynamic than inflation.

So ..... can new fiat money serve as capital in the above (and similar wealth producing enterprises), which is at the heart of our current system? Of course the evidence is clear that it can. The question though is whether the system is both "just" and sustainable.

The example above is excellent - because the risk and difficulty of loans in that era meant that capital was exceedingly hard to come by. A greater availability of loans, hence capital, would have at least enabled a few of the weavers to borrow to buy the power looms rather than a handful of capitalists controlling the entire industry.

One of my problems with Keynesianism and the structure of our monetary system (the FED Banking Cartel) is not fiat money per se but in how that fiat capital is disbursed, i.e., via debt which is clear usury since the lender-bank never had any "capital" of its own to lend in the first place, but is simply entitled to create money by law based on a promissory note from the borrower AND to who it is disbursed to first, i.e., greater erosion of purchasing power occurs to those who are farther downstream in the fiat/debt money chain "supply chain".

I agree with your sentiment.

To be clear, I am not in any way defending our present US Fed+reserve bank system.

I simply note that going to the extreme the other way - i.e. super hard money, no fiat, no fractional reserve - has just as many problems, if not more, than what we are experiencing today.

Strictly speaking the Federal Reserve has done a relatively good job compared to the regular 15 year panic in the era before the Fed's formation.

The problem of course is that the problem we're facing now is so much worse than any seen before: the panic of 1893 for example is considered by some to be the worst ever experienced by the US (until now).

But the US was a vastly different nation in 1893 - as I've noted before a primarily agrarian society is far less affected in general by panics and depressions.

What we have now is an 1893 style depression combined with a largely urban population, in a global labor marketplace, with no more frontier to expand into.

[vinoveri]

Re: Austrian School vs. itulip / FIRE

All you describe is accurate, but the problem is that the increase in wealth accrues not to the former weavers of cloth, but to the owners of machinery. The vastly more numerous (think lower middle class) weavers all lost jobs which were outsourced to power looms, and this already negative dynamic also exacerbated by the 'putting out' policies which Capital deployed - the power looms were far too expensive for individual weavers and so capitalists 'loaned' out power looms, including supply monopoly on cotton/thread/dyes and interest costs for the 'loan'.

Much as China today - while no one can argue all the Chinese things in Wal Mart are cheap, equally from the American middle and lower class perspective there has been a clear loss in purchasing ability - hence overall purchasing power.

It is just a different dynamic than inflation.



The example above is excellent - because the risk and difficulty of loans in that era meant that capital was exceedingly hard to come by. A greater availability of loans, hence capital, would have at least enabled a few of the weavers to borrow to buy the power looms rather than a handful of capitalists controlling the entire industry.

Hh..mmm
So perhaps to check the progress, in your hypothetical, of the 'natural' tendency to displace workers and, to the extent it does, concentrate wealth we should implement the following (easier said then done on doubt):
no tax on labor
no tax on saved 'real' capital and low+ tax on gains therefrom
high tax on gains from investment with fiat capital

Tax revenues and reinvestment is the fruit of the well intended and what must be a well regulated fiat capital creation. Our fiat will be sound to the extent it creates real wealth and this is used to raise the living standards of everyone.

Now that I've said all that I realize that nothing will work without fairness, transparency, and abscence of corruption...oh.boy......what are we going to do about that?

[c1ue]

Re: Austrian School vs. itulip / FIRE

Now that I've said all that I realize that nothing will work without fairness, transparency, and abscence of corruption...oh.boy......what are we going to do about that?

A nice first step would be to at least enforce the laws that are already there - which appear to more or less have worked for many decades.

A second step would be directed efforts to remove perverse incentives.

TBTF banks/banksters with mark to fantasy, big bonuses, and big donation profiles would seem to be an ideal target.

[DSpencer]

Re: Austrian School vs. itulip / FIRE

Fiat currency has not led to reduction in purchasing power, because in prior eras a nation generally only went to a fiat currency when they needed specifically to devalue purchasing power.

Fractional reserve lending, on the other hand, has existed for literally thousands of years, generally right along side a gold and/or silver standard.

Do you think the gold and/or silver standard has preserved purchasing power in these circumstances?

The answer is no.

As always, the Austrian school attempts to gain the high ground by stipulating an impossibility: a world with neither fractional reserve lending nor fiat currency.

Are you saying that the Austrian school is wrong because countries using fiat currency don't experience an erosion of purchasing power? Or are you saying that they are wrong to consider the erosion of purchasing power through inflation as undesirable?

More importantly, any and all currencies can and should be expected to lose purchasing power. The reason is simple: the world is not a static place. So long as productivity increases, this in turn guarantees erosion of purchasing power; consider the value of cloth before and after the invention of the power loom.

Is that what you really believe? My belief is that as people can create the same product with less resources the price will drop meaning the purchasing power of money has increased. Can you provide any reason to believe that you are correct on this point?

I'm not sure what point you are trying to make.

If the example is choosing not to leave your money in a briefcase outside, the counterexample is not having any money to put in the briefcase because all those who already have the money have monopolized it.

Consider that in his lifetime, J.P. Morgan at the time of his death literally owned almost all the money in the United States. Without fractional reserve lending or fiat currencies, his ancestors would own ALL of it now.

How then is forcing all monetary power into the hands of those who already control most of it - a good thing?

What percent of the money counts as owning literally almost all of it? Do you have any factual sources to back up these claims?

[c1ue]

Re: Austrian School vs. itulip / FIRE

Are you saying that the Austrian school is wrong because countries using fiat currency don't experience an erosion of purchasing power? Or are you saying that they are wrong to consider the erosion of purchasing power through inflation as undesirable?

Too little credit is just as bad, if not worse, than too much fiat.

Is that what you really believe? My belief is that as people can create the same product with less resources the price will drop meaning the purchasing power of money has increased. Can you provide any reason to believe that you are correct on this point?

The previous exchange with vinoveri - I mentioned the advent of the power loom. While cloth definitely got cheaper, at the same time a huge chunk of the population that used to weave cloth were either thrown out of work or put into thrall by capitalists via the 'putting out' system.

Lower prices alone do not dictate economic progress.

The present US situation is another excellent example of that: prices for many everyday things are falling, yet overall clearly very few people are better off.

What percent of the money counts as owning literally almost all of it? Do you have any factual sources to back up these claims?

1) JP Morgan with the assistance of the the Rothschilds in Europe recapitalized the entire US Treasury in 1895 to the tune of $65M in gold:

http://www.americanheritage.com/arti...010_4_66.shtml

2) In 1912, JP Morgan controlled via his holding company, railroads, US Steel, National City Bank, etc etc something in the order of $22B. The entire US GDP in 1912 was $37B

http://www.usgovernmentspending.com/...olor=c&local=s

[DSpencer]

Re: Austrian School vs. itulip / FIRE

Too little credit is just as bad, if not worse, than too much fiat.

The previous exchange with vinoveri - I mentioned the advent of the power loom. While cloth definitely got cheaper, at the same time a huge chunk of the population that used to weave cloth were either thrown out of work or put into thrall by capitalists via the 'putting out' system.

Lower prices alone do not dictate economic progress.

The present US situation is another excellent example of that: prices for many everyday things are falling, yet overall clearly very few people are better off.

You said: "So long as productivity increases, this in turn guarantees erosion of purchasing power". Then you show an example of increasing productivity lowering prices to prove your point. Which in my opinion proves the opposite.

Now you seem to be saying that what you meant was something different than what you said. It seems what you actually meant was more along the lines of: as productivity increases, this in turn guarantees an erosion of standard of living. While I acknowledge the short term problems that can result from technological improvements, I also think this idea is incorrect on the whole. I guess I'm not a neo-Luddite, or in this case, a literal old-fashioned Luddite.

1) JP Morgan with the assistance of the the Rothschilds in Europe recapitalized the entire US Treasury in 1895 to the tune of $65M in gold:

http://www.americanheritage.com/arti...010_4_66.shtml

2) In 1912, JP Morgan controlled via his holding company, railroads, US Steel, National City Bank, etc etc something in the order of $22B. The entire US GDP in 1912 was $37B

http://www.usgovernmentspending.com/...olor=c&local=s

Instead of typing a disagreeable response to this, I'd rather move back to the discussion of Hudson's FIRE economy solutions. I had more questions, it seemed to me that the discussion was more productive, and it also seems more on topic than the wealth of JP Morgan.