A Tribute to the Thoughts of Another and his Friend "Everyone knows where we have been. Let's see where we are going!" -Another
Saturday, February 19, 2011
How is that different from Freegold?
FOFOA reader and supporter Cyril asked me by email:
I have a little question that I’d like to ask you. I don’t know if you are familiar with Peter Schiff: he has a radio show every day where he talks about macro-economics.
So the other night, I was listening to it and a caller brought you up in his question. He was a little dismayed that Peter Schiff was not aware of your work (and so was I). That’s probably why he didn’t do a very good job in summarizing the Freegold concept, but to be fair, I don’t know if anyone would have been to able do it in 20 seconds. But here’s the exchange:
"Many economic analysts have pointed out how the world has been anxiously watching while massive quantities of new money were injected by [the] USA into their economy, and through such infusion, into the entire world," he said.
"It is widely expected that such infusion, while possibly stimulating growth and employment within the issuing nation, would have a massive negative impact on the rest of the world in time to come."
Gee, I wonder what he thinks will replace the Dollar at the centre of the new financial order?
"The value of a unit of money is determined, like the value of a unit of a commodity, primarily by psychological factors, and not merely by mechanical or mathematical factors. As with commodities, the value of money is influenced not merely by the present quantity, but by expectations concerning the future quantity as well as the future quality. At the beginning of an inflation, many prices and wages remain as they are through habit and custom, and also because, even when the increase in the money supply is noticed, it is assumed to be purely a past event that is now over. Confidence in a sort of fixed value of the monetary unit remains high. Of course an increase in the supply of money will probably raise some prices, though the average of prices will not necessarily rise as much as the monetary increase."
and
"In the Fisherine equation of exchange, V is commonly treated as an independent variable. In other words, V is treated as something that can change independently of any change in T, or the volume of trade. An increase in the velocity of circulation is treated as being equivalent to the same percentage increase in the volume of money. Money is thought of as something that has a certain "amount of work to do." If the velocity of circulation of money is doubled, then one dollar is said to do "the work" previously done by two. According to this theory, if merely the velocity of money doubled, with no change in the quantity of money, the price level would double.
A common classroom illustration runs something like this: A owes B a dollar, who owes C a dollar, who owes D a dollar, who owes E a dollar, who owes A a dollar. If they sit around a table, and each pays the dollar he owes to the other, then the dollar "circulates," and one dollar "does the work of" five dollars. Two things may be noticed about this illustration. First, in the situation described, no actual dollar would have to change hands at all: debts could be cancelled out by mere bookkeeping transactions. This mutual cancellation of debts occurs in actual practice every day, and on a large scale, in bank clearing houses, or institutions that act as clearing houses. Secondly, the illustration, in fact, applies only to borrowing, or to paying off previously incurred debts.
But what we have to deal with, in the so-called circulation of money, is the exchange of money against goods. Therefore V and T cannot be separated. Insofar as there is a causal relation, it is the volume of trade which determines the velocity of circulation of money rather than the other way around."
"What the mathematical quantity theorists seem to forget is that money is not exchanged against a vacuum, nor against other money (except in bank clearings and foreign exchange), but against goods. Hence the velocity of circulation of money is, so to speak, merely the velocity of circulation of goods and services looked at from the other side. If the volume of trade increases, the velocity of circulation of money, other things being equal, must increase, and vice versa.
An increase in V may come about through greater eagerness to buy goods. But the velocity of circulation of money cannot be speeded up to anything like the extent commonly assumed by the mathematical quantity theory. This particularly applies to spending for consumption. There is a customary (and even a maximum) rate of consumption of food, for example, which is not speeded up even in a hyperinflation. People who are paid weekly may buy their entire week's stock of food (or whatever part of it will keep) on the day they get their weekly paycheck rather than buy their needs each day. But this will not increase the weekly V. In a hyperinflation, people may stock up much sooner than otherwise in their purchase of durable goods — housing, automobiles, appliances, clothing, jewelry, works of art, etc. But even this will not increase V over a prolonged period, unless the rate of production is correspondingly speeded up. After any buying spree of durable goods, there is likely to be, other things being equal, a less than normal rate of V for such durable goods — partly because nearly everybody will be "loaded up" with them, partly because retailers' stocks will be exhausted or low, unless output can be equally speeded up.These "hurryings" and "waitings" (to use the vocabulary of L. Albert Hahn[3]) are part of the business cycle.
As money is exchanged against goods, and as the rate of consumption can change only within comparatively minor limits, we must look elsewhere to find the reason for the variations in V that we actually do encounter. This reason is found in speculation. "
and
"What causes prices to go up and down, therefore, is not changes in the average cash holding, but changes in the valuations that people put on the monetary unit. V is not a cause but a result, or even a mere side effect. People who are more eager to buy goods, or more eager to get rid of money, will buy faster or sooner. But this will mean that V increases, when it does increase, because the relative value of money is falling or is expected to fall. It will not mean that the value of money is falling, or prices of goods rising, because V has increased.
When people value money less and goods more, they will offer more money for goods, and may increase "velocity of circulation." But it is not the mechanical increase in velocity of circulation that causes any subsequent price rise, let alone any proportional price rise. It is the changed valuation by individuals of either goods or money or both that causes the increased velocity of circulation as well as the price rise. The increased velocity of circulation, in other words, is largely a passive factor in the situation."
and
"Similarly, when we turn to money, increased exchanges (i.e., an increased V) may accompany a decline in the value or purchasing power of money. But there will be no necessary relation between the change in velocity of circulation and the extent of the decline in the monetary unit's purchasing power. In fact (though this happens less often), an increase in the velocity of circulation of money may be accompanied by an increase in the purchasing power of money, i.e., by a fall in prices. This can happen in a speculative collapse, as, say, in late 1929."
You note above "Fiat works just fine, you use it every day no?"
The fact that we are compelled to use it with legal tender laws does not mean it works just fine.
Varying the amount of fiat disrupts the market pricing mechanism and results economic malstructuring of the economy (read booms and busts").
We are living through multiple bubbles caused by fiat money today. It doesn't work, as much as it is easy to use.
also you state
"you say the amount of currency should not be varried, I say you will live through many depression."
Depressions are not resolved by inflating the currency. They are resolved by clearing bad debt and shut down of unproductive enterprise. Gold money speeds this process and indeed depressions under gold money are shorter and shallower.
Fine Gael leader Kenny, 59, said this week his priority will be to renegotiate the 5.8 percent interest rate on the bailout. The party has said it may seek European agreement to share the burden of rescuing the country’s financial system with senior bank bondholders.
EU Economic and Monetary Affairs Commissioner Olli Rehn said on Feb. 15 there is “no appetite” for imposing losses on senior bondholders at Irish banks.
Many people underestimate what fiat has given us these last few decades. Take a look at the world around us -- the real world I mean, let's put aside for a moment the horrendous financial situation -- it's a very different place than 1971. It's not *ALL* bad.
"The transmission channels between the financial and real sectors: a critical survey of the literature BCBS Working Papers No 18 February 2011
Understanding the transmission channels that exist between the financial and real sectors of the economy is critically important when assessing financial stability. Robust financial systems are viewed as those that do not adversely induce the propagation and amplification of disturbances that affect the financial system and those that are capable of withstanding shocks and limiting disruptions in the allocation of savings to profitable investment opportunities. Most definitions of financial stability and the "macroprudential approach" to financial supervision recently advocated by many financial stability bodies emphasise the macroeconomic consequences of disruptions to the functioning of the financial system.
This paper presents a review of the literature on the transmission channels between the financial and the real sectors, as well as observations regarding aspects of the transmission channels that remain inadequately addressed by the existing literature. The paper identifies three transmission channels that exist between the financial and the real sector: (i) the borrower balance sheet channel; (ii) the bank balance sheet channel; and (iii) the liquidity channel. The first two channels are often referred to as the financial accelerator channel; the third channel emphasises the liquidity position of banks' balance sheets, whose interest has been fairly recent - in part, spurred on by the current crisis.
A report reflecting some of the findings of this literature, as well as other analysis within the Basel Committee, will be published in the future." ~BIS
I have read the book that FGA and TDF are referring to. It is mostly BS. The authors (husband and wife) have written about some interesting people and events in Asia. The husband was a journalist who had some good contacts. Some of the stuff they have written about did step on a few important toes but a lot of it is "ancient history" now. IMO Lords of the Rim is probably their most accurate book. It's the story of the Chinese diaspora.
The Yamashita gold story was actually true up to a point. The Japanese did loot gold in China and SEA.
My source was part of the occupation forces in Japan after WWII. He was an officer in charge of a unit involved in decommissioning chemical weapons and logistics. The Japanese stockpiled a lot of materials and valuables in old mines that had been worked out long ago.
A lot of the valuables the Japanese looted during the war were used to fund their war effort. Apparently gold was held in higher esteem by their suppliers than IOUs from the Emporer (despite his unique lineage). Bear in mind too that Japan had some incredibly rich gold seams in their local mines as well. Nothing like the scale of a Boddington of course.
Here's a WA connection you might be interested in. After Australia began to trade with Japan again post war some of the big Japanese trading houses had maps of promising resource regions in WA that the locals had never seen before. The story goes that prior to, and during WWII, the Japanese put teams of engineers into remote areas of WA to identify promising areas for resource exploration. There could be other ways they acquired the maps but as the saying goes "never let the truth get in the way of a good story".
As a newby, and a rational, technical engineer, I agree with your sentiment. Even quantum physics can be explained and summarized in a wikipedia kind of article. So should Freegold, otherwise it indeed must be bullockes, imho. A good *attempt* is the least what one can expect. Having said that, I give FG the benefit of the doubt. The main point, as to explain to Peter Shiff and others is in my opinion about the international aspects.
In the classical Golden Standard, trade balances between countries were settled by shifting gold around. AND the paper money of each participating nation had a fixed rate towards gold, over a long period of time.
Now (post-1971) we have the USD as the international Reserve Currency and all fiats floating, against each other and against gold. Settlements of trade (oil, electronics) are done in yankee dollar.
Under FG, we have a mix of those two: - Trade balances between states are settled by swapping gold (that's why China is hoarding it) - Fiats are floating against each other and gold. (unlike classic GS).
The reasoning behind the need of floating fiat goes like this: modern economies need vast amounts of credit, so fiats may not be constrained by fixed-to-gold ratios.
Hope this helps. And hope also that good willing newbies are allowed to comment here too :-) Btw, here's a blog that today has a post titled "FreeGold, Simply Put" http://flowofvalue.blogspot.com/
Jim Willie Doug Casey Bill Bonner Jim Richards Bob Chapman Bill Buckner Harry Schultz Richard Russell Peter Schiff Jim Grant Eric Sprott Jim Sinclar Ben Davies Turd Ferguson
Ben Davies is a freegold guy but the rest of them are not.
The rest of them seem to think that gold is in the same type of bull market as internet stocks where in. They are all confused, they make little sense when it comes down to it. Freegold does not fit any of these guys businesses very well, that is why i think they don't say much about it. Deep in Schiff, Casey or Sprotts mind, they probably know that the best thing for their clients is 100% physical gold. Maybe some of them personally are 100% in gold, not silver but gold.
What's the record for the most links to the same article?
Pinto must be over 10 on that Shostak piece by now. Nice to see him varying the delivery with that link to Hazlitt's rehash of the same topic. What's next? Rothbard with his version of the same arguments.
I don't know if you saw JR's response to Pinto. It was a succinct explanation of the reconciliation between Rothbard's perspective on velocity of money and the approach of the economists who have followed in Minsky's footsteps. Pinto's response to JR was as inflexible and dismissive as always. At least JR was spared a serve like this (from the comments section of Defending The Precious)
Finally, I really recommend the slow reading and digestion of the Shostak article.
Pinto really, really appears to think that he has wandered into a remedial reading class. It's disappointing to see long time posters like Dimmed aurum defending the rights of numbskulls and patronising little shits like Pinto to be .. er .. patronising little shits.
Returning to the Hazlitt piece, which Pinto quotes extensively above, it would have been generous of Hazlitt to acknowledge Fisher's later work. In the 1930s Fisher repudiated many of his earlier theories. Many of these later theories were presented in his 1930 treatise The Theory of Interest. His theory of debt-deflation was presented during this later period at the same time that he rejected equilibrium theory.
I imagine that Hazlitt chose to focus on Fisher's paper from 1911 (The Power of Money) because it provides a convenient platform on which to attack the monetarists. I guess good straw men are hard to come by. It's probably inconvenient for the Austrians to acknowledge Fisher's later work on another level. It blows a hole in BOTH the monetarist stance and the Austrian stance on velocity of money.
It is my understanding "good willing newbies" are most welcome to comment.
Your comment reveals you have not read the other comments in this thread.
Did the blog you link to not satisfy your criteria of "Even quantum physics can be explained and summarized in a wikipedia kind of article. So should Freegold, otherwise it indeed must be bullockes, imho. A good *attempt* is the least what one can expect."?
While there are such definitions of subjects such as quantum mechanics, I believe they are hotly disputed by some.
The right to disagree is fundamental, no? Just seems a little indulgent to disagree before completing due diligence. FOFOA has made a comprehensive case; I would be surprised if a single detractor could honestly claim to have read it all.
@costata Thank you again for giving all due respect with your proper words of kindness to the imperfect nature of all us, followers of greater minds. I guess, if Another had the same stance to men as you do, he would have never written a single word and this great gathering of thought and passion (or blunders sometimes) would have never existed. Great mojo, but why the language? I really liked it up to here “Pinto really, really appears to think that he has wandered into a remedial reading class” and then your true self appeared and just projected you for all in the blog to see. I hope you like this image of yourself now and in the future for it will be a part of what you will be remembered with. Congratulations. -=Dimmed=-
I thought your presentation was commendable. In life we are often blind-sided by Others' ignorance.
You were trying to explain rain to someone who had never seen it. As he explains to you how such a phenomenon is impossible, it is best leave.
And however commendable it may be to spread the freegold concept to commentators you admire, do not expect they will give any indication of having any understanding. This has been my experience
But the good news is, we don't have to DO anything! Its one of the great things about freegold (aside from being rich). That understanding is a real treasure.
So when I feel like DOing something to usher in the freegold era. I lie very still. I lie very still and try to be like gold, as gold is.
In this way I can feel it move through me. Much less stressful. I'll have more at Wendy's on why it will happen no matter what we do or not do.
FOFOA, your FreeGold concept was recently brought to my attention by someone commenting on a variant monetary system proposal of my own. He suggested the possibility that you may too, have been inspired by Silvio Gesell's Depression-era "Freigeld" concept?
It seems we are largely on the same page - though I question if you've seriously considered the (un)likelihood of TPTB ever introducing/permitting a new system that in any way undermines their power.
Would you please take a look at my idea focussing on a "people's currency" - with an open mind - and offer feedback? I suggest that its effects would be conducive to (cause?) the FreeGold effects you have in mind, and so may be a mechanism to bring about the FreeGold result - whether TPTB like it or not. Please also take a look at the UPDATE link at the bottom, where a commenter refers and links to a recent proposal by BoE's Mervyn King to separate the transactional currency system from the "store of wealth system" as a "solution" to the GFC:
217 comments:
«Oldest ‹Older 201 – 217 of 217"Many economic analysts have pointed out how the world has been anxiously watching while massive quantities of new money were injected by [the] USA into their economy, and through such infusion, into the entire world," he said.
"It is widely expected that such infusion, while possibly stimulating growth and employment within the issuing nation, would have a massive negative impact on the rest of the world in time to come."
Gee, I wonder what he thinks will replace the Dollar at the centre of the new financial order?
Paul,
On confidence and velocity, please see:
http://mises.org/daily/2916
Some quotes:
"The value of a unit of money is determined, like the value of a unit of a commodity, primarily by psychological factors, and not merely by mechanical or mathematical factors. As with commodities, the value of money is influenced not merely by the present quantity, but by expectations concerning the future quantity as well as the future quality. At the beginning of an inflation, many prices and wages remain as they are through habit and custom, and also because, even when the increase in the money supply is noticed, it is assumed to be purely a past event that is now over. Confidence in a sort of fixed value of the monetary unit remains high. Of course an increase in the supply of money will probably raise some prices, though the average of prices will not necessarily rise as much as the monetary increase."
and
"In the Fisherine equation of exchange, V is commonly treated as an independent variable. In other words, V is treated as something that can change independently of any change in T, or the volume of trade. An increase in the velocity of circulation is treated as being equivalent to the same percentage increase in the volume of money. Money is thought of as something that has a certain "amount of work to do." If the velocity of circulation of money is doubled, then one dollar is said to do "the work" previously done by two. According to this theory, if merely the velocity of money doubled, with no change in the quantity of money, the price level would double.
A common classroom illustration runs something like this: A owes B a dollar, who owes C a dollar, who owes D a dollar, who owes E a dollar, who owes A a dollar. If they sit around a table, and each pays the dollar he owes to the other, then the dollar "circulates," and one dollar "does the work of" five dollars. Two things may be noticed about this illustration. First, in the situation described, no actual dollar would have to change hands at all: debts could be cancelled out by mere bookkeeping transactions. This mutual cancellation of debts occurs in actual practice every day, and on a large scale, in bank clearing houses, or institutions that act as clearing houses. Secondly, the illustration, in fact, applies only to borrowing, or to paying off previously incurred debts.
But what we have to deal with, in the so-called circulation of money, is the exchange of money against goods. Therefore V and T cannot be separated. Insofar as there is a causal relation, it is the volume of trade which determines the velocity of circulation of money rather than the other way around."
and...
Sincerely,
NoPintoMoney
cont'd....
"What the mathematical quantity theorists seem to forget is that money is not exchanged against a vacuum, nor against other money (except in bank clearings and foreign exchange), but against goods. Hence the velocity of circulation of money is, so to speak, merely the velocity of circulation of goods and services looked at from the other side. If the volume of trade increases, the velocity of circulation of money, other things being equal, must increase, and vice versa.
An increase in V may come about through greater eagerness to buy goods. But the velocity of circulation of money cannot be speeded up to anything like the extent commonly assumed by the mathematical quantity theory. This particularly applies to spending for consumption. There is a customary (and even a maximum) rate of consumption of food, for example, which is not speeded up even in a hyperinflation. People who are paid weekly may buy their entire week's stock of food (or whatever part of it will keep) on the day they get their weekly paycheck rather than buy their needs each day. But this will not increase the weekly V. In a hyperinflation, people may stock up much sooner than otherwise in their purchase of durable goods — housing, automobiles, appliances, clothing, jewelry, works of art, etc. But even this will not increase V over a prolonged period, unless the rate of production is correspondingly speeded up. After any buying spree of durable goods, there is likely to be, other things being equal, a less than normal rate of V for such durable goods — partly because nearly everybody will be "loaded up" with them, partly because retailers' stocks will be exhausted or low, unless output can be equally speeded up.These "hurryings" and "waitings" (to use the vocabulary of L. Albert Hahn[3]) are part of the business cycle.
As money is exchanged against goods, and as the rate of consumption can change only within comparatively minor limits, we must look elsewhere to find the reason for the variations in V that we actually do encounter. This reason is found in speculation. "
and
"What causes prices to go up and down, therefore, is not changes in the average cash holding, but changes in the valuations that people put on the monetary unit. V is not a cause but a result, or even a mere side effect. People who are more eager to buy goods, or more eager to get rid of money, will buy faster or sooner. But this will mean that V increases, when it does increase, because the relative value of money is falling or is expected to fall. It will not mean that the value of money is falling, or prices of goods rising, because V has increased.
When people value money less and goods more, they will offer more money for goods, and may increase "velocity of circulation." But it is not the mechanical increase in velocity of circulation that causes any subsequent price rise, let alone any proportional price rise. It is the changed valuation by individuals of either goods or money or both that causes the increased velocity of circulation as well as the price rise. The increased velocity of circulation, in other words, is largely a passive factor in the situation."
and
"Similarly, when we turn to money, increased exchanges (i.e., an increased V) may accompany a decline in the value or purchasing power of money. But there will be no necessary relation between the change in velocity of circulation and the extent of the decline in the monetary unit's purchasing power. In fact (though this happens less often), an increase in the velocity of circulation of money may be accompanied by an increase in the purchasing power of money, i.e., by a fall in prices. This can happen in a speculative collapse, as, say, in late 1929."
Sincerely,
NoPintoMoney
Hi Paul,
You note above "Fiat works just fine, you use it every day no?"
The fact that we are compelled to use it with legal tender laws does not mean it works just fine.
Varying the amount of fiat disrupts the market pricing mechanism and results economic malstructuring of the economy (read booms and busts").
We are living through multiple bubbles caused by fiat money today. It doesn't work, as much as it is easy to use.
also you state
"you say the amount of currency should not be varried, I say you will live through many depression."
Depressions are not resolved by inflating the currency. They are resolved by clearing bad debt and shut down of unproductive enterprise. Gold money speeds this process and indeed depressions under gold money are shorter and shallower.
Sincerely,
NoPintoMoney
Renegotiating Deal
Ollie Rehn- Head Marionette
Fine Gael leader Kenny, 59, said this week his priority will be to renegotiate the 5.8 percent interest rate on the bailout. The party has said it may seek European agreement to share the burden of rescuing the country’s financial system with senior bank bondholders.
EU Economic and Monetary Affairs Commissioner Olli Rehn said on Feb. 15 there is “no appetite” for imposing losses on senior bondholders at Irish banks.
Many people underestimate what fiat has given us these last few decades. Take a look at the world around us -- the real world I mean, let's put aside for a moment the horrendous financial situation -- it's a very different place than 1971. It's not *ALL* bad.
@DP
Now replace “fiat” in your paragraph with “cheap oil” and you will have something of meaning actually.
"The transmission channels between the financial and real sectors: a critical survey of the literature
BCBS Working Papers No 18
February 2011
Understanding the transmission channels that exist between the financial and real sectors of the economy is critically important when assessing financial stability. Robust financial systems are viewed as those that do not adversely induce the propagation and amplification of disturbances that affect the financial system and those that are capable of withstanding shocks and limiting disruptions in the allocation of savings to profitable investment opportunities. Most definitions of financial stability and the "macroprudential approach" to financial supervision recently advocated by many financial stability bodies emphasise the macroeconomic consequences of disruptions to the functioning of the financial system.
This paper presents a review of the literature on the transmission channels between the financial and the real sectors, as well as observations regarding aspects of the transmission channels that remain inadequately addressed by the existing literature. The paper identifies three transmission channels that exist between the financial and the real sector: (i) the borrower balance sheet channel; (ii) the bank balance sheet channel; and (iii) the liquidity channel. The first two channels are often referred to as the financial accelerator channel; the third channel emphasises the liquidity position of banks' balance sheets, whose interest has been fairly recent - in part, spurred on by the current crisis.
A report reflecting some of the findings of this literature, as well as other analysis within the Basel Committee, will be published in the future." ~BIS
http://bis.org/publ/bcbs_wp18.htm
Bron,
I have read the book that FGA and TDF are referring to. It is mostly BS. The authors (husband and wife) have written about some interesting people and events in Asia. The husband was a journalist who had some good contacts. Some of the stuff they have written about did step on a few important toes but a lot of it is "ancient history" now. IMO Lords of the Rim is probably their most accurate book. It's the story of the Chinese diaspora.
The Yamashita gold story was actually true up to a point. The Japanese did loot gold in China and SEA.
My source was part of the occupation forces in Japan after WWII. He was an officer in charge of a unit involved in decommissioning chemical weapons and logistics. The Japanese stockpiled a lot of materials and valuables in old mines that had been worked out long ago.
A lot of the valuables the Japanese looted during the war were used to fund their war effort. Apparently gold was held in higher esteem by their suppliers than IOUs from the Emporer (despite his unique lineage). Bear in mind too that Japan had some incredibly rich gold seams in their local mines as well. Nothing like the scale of a Boddington of course.
Here's a WA connection you might be interested in. After Australia began to trade with Japan again post war some of the big Japanese trading houses had maps of promising resource regions in WA that the locals had never seen before. The story goes that prior to, and during WWII, the Japanese put teams of engineers into remote areas of WA to identify promising areas for resource exploration. There could be other ways they acquired the maps but as the saying goes "never let the truth get in the way of a good story".
Cheers
@Mailon
As a newby, and a rational, technical engineer, I agree with your sentiment. Even quantum physics can be explained and summarized in a wikipedia kind of article. So should Freegold, otherwise it indeed must be bullockes, imho. A good *attempt* is the least what one can expect.
Having said that, I give FG the benefit of the doubt.
The main point, as to explain to Peter Shiff and others is in my opinion about the international aspects.
In the classical Golden Standard, trade balances between countries were settled by shifting gold around. AND the paper money of each participating nation had a fixed rate towards gold, over a long period of time.
Now (post-1971) we have the USD as the international Reserve Currency and all fiats floating, against each other and against gold.
Settlements of trade (oil, electronics) are done in yankee dollar.
Under FG, we have a mix of those two:
- Trade balances between states are settled by swapping gold (that's why China is hoarding it)
- Fiats are floating against each other and gold. (unlike classic GS).
The reasoning behind the need of floating fiat goes like this: modern economies need vast amounts of credit, so fiats may not be constrained by fixed-to-gold ratios.
Hope this helps. And hope also that good willing newbies are allowed to comment here too :-)
Btw, here's a blog that today has a post titled
"FreeGold, Simply Put"
http://flowofvalue.blogspot.com/
Interview to Fekete on youtube....
http://www.youtube.com/watch?v=_k2x8ETPLxk&feature=feedlik
@ Madalion
Jim Willie
Doug Casey
Bill Bonner
Jim Richards
Bob Chapman
Bill Buckner
Harry Schultz
Richard Russell
Peter Schiff
Jim Grant
Eric Sprott
Jim Sinclar
Ben Davies
Turd Ferguson
Ben Davies is a freegold guy but the rest of them are not.
The rest of them seem to think that gold is in the same type of bull market as internet stocks where in. They are all confused, they make little sense when it comes down to it. Freegold does not fit any of these guys businesses very well, that is why i think they don't say much about it. Deep in Schiff, Casey or Sprotts mind, they probably know that the best thing for their clients is 100% physical gold. Maybe some of them personally are 100% in gold, not silver but gold.
FOFOA,
What's the record for the most links to the same article?
Pinto must be over 10 on that Shostak piece by now. Nice to see him varying the delivery with that link to Hazlitt's rehash of the same topic. What's next? Rothbard with his version of the same arguments.
I don't know if you saw JR's response to Pinto. It was a succinct explanation of the reconciliation between Rothbard's perspective on velocity of money and the approach of the economists who have followed in Minsky's footsteps. Pinto's response to JR was as inflexible and dismissive as always. At least JR was spared a serve like this (from the comments section of Defending The Precious)
Finally, I really recommend the slow reading and digestion of the Shostak article.
Pinto really, really appears to think that he has wandered into a remedial reading class. It's disappointing to see long time posters like Dimmed aurum defending the rights of numbskulls and patronising little shits like Pinto to be .. er .. patronising little shits.
Returning to the Hazlitt piece, which Pinto quotes extensively above, it would have been generous of Hazlitt to acknowledge Fisher's later work. In the 1930s Fisher repudiated many of his earlier theories. Many of these later theories were presented in his 1930 treatise The Theory of Interest. His theory of debt-deflation was presented during this later period at the same time that he rejected equilibrium theory.
I imagine that Hazlitt chose to focus on Fisher's paper from 1911 (The Power of Money) because it provides a convenient platform on which to attack the monetarists. I guess good straw men are hard to come by. It's probably inconvenient for the Austrians to acknowledge Fisher's later work on another level. It blows a hole in BOTH the monetarist stance and the Austrian stance on velocity of money.
@ henq,
It is my understanding "good willing newbies" are most welcome to comment.
Your comment reveals you have not read the other comments in this thread.
Did the blog you link to not satisfy your criteria of
"Even quantum physics can be explained and summarized in a wikipedia kind of article. So should Freegold, otherwise it indeed must be bullockes, imho. A good *attempt* is the least what one can expect."?
While there are such definitions of subjects such as quantum mechanics, I believe they are hotly disputed by some.
The right to disagree is fundamental, no?
Just seems a little indulgent to disagree before completing due diligence. FOFOA has made a comprehensive case; I would be surprised if a single detractor could honestly claim to have read it all.
@costata
Thank you again for giving all due respect with your proper words of kindness to the imperfect nature of all us, followers of greater minds. I guess, if Another had the same stance to men as you do, he would have never written a single word and this great gathering of thought and passion (or blunders sometimes) would have never existed.
Great mojo,
but why the language?
I really liked it up to here “Pinto really, really appears to think that he has wandered into a remedial reading class”
and then your true self appeared and just projected you for all in the blog to see. I hope you like this image of yourself now and in the future for it will be a part of what you will be remembered with. Congratulations.
-=Dimmed=-
Hello Matt,
I thought your presentation was commendable. In life we are often blind-sided by Others' ignorance.
You were trying to explain rain to someone who had never seen it. As he explains to you how such a phenomenon is impossible, it is best leave.
And however commendable it may be to spread the freegold concept to commentators you admire, do not expect they will give any indication of having any understanding. This has been my experience
But the good news is, we don't have to DO anything! Its one of the great things about freegold (aside from being rich). That understanding is a real treasure.
So when I feel like DOing something to usher in the freegold era. I lie very still. I lie very still and try to be like gold, as gold is.
In this way I can feel it move through me. Much less stressful. I'll have more at Wendy's on why it will happen no matter what we do or not do.
The sage does nothing and
nothing remains undone.
FOFOA, your FreeGold concept was recently brought to my attention by someone commenting on a variant monetary system proposal of my own. He suggested the possibility that you may too, have been inspired by Silvio Gesell's Depression-era "Freigeld" concept?
It seems we are largely on the same page - though I question if you've seriously considered the (un)likelihood of TPTB ever introducing/permitting a new system that in any way undermines their power.
Would you please take a look at my idea focussing on a "people's currency" - with an open mind - and offer feedback? I suggest that its effects would be conducive to (cause?) the FreeGold effects you have in mind, and so may be a mechanism to bring about the FreeGold result - whether TPTB like it or not. Please also take a look at the UPDATE link at the bottom, where a commenter refers and links to a recent proposal by BoE's Mervyn King to separate the transactional currency system from the "store of wealth system" as a "solution" to the GFC:
http://theblissfulignoramus.com/reflections/the-peoples-nwo-every-man-his-own-central-banker/
Many thanks.
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