jon_perez explain yourself

[Bradley in DC]

Oops, sorry

I missed this post (after I went to bed last night and didn't see it this morning until just now), please put my responses to yours in that order. :o

You're not going to give this a rest, are you?

No, I'm not going to give it a rest. And I've explained why (devotion to Dr. Paul, personal experience in Peru and because it's the single most important public policy issue).

I would've thought that anyone who was aware of the history of how deflation came about and the effects of a constriction on money supply would not even need to ask that.

Most people don't like inflation and think that deflation is a good thing. But deflation can be just as insidious and oppressive as inflation. If your business relies on credit, deflation and high interest rates hurt just as bad (worse even) than rampant inflation. Again, I thought I had explained this already.

Different people (savers v. debtors) gain or lose, on net, from inflation or deflation. We're all, I should think, in agreement there. Clarifying that we're talking about changes in the general price level (not the CPI) or purchasing power of money, prices should, under a market economy, gently fall over time. Look at the price of computing power to give an easy example staring at you in the face right now. If an economy is growing, and prices are gently falling, the price level is somewhat stable. (Price "stability" is emphatically NOT the goal, but we can pick that up or not as you want.)

More important, IMHO, is the analysis of the Austrian Business Cycle Theory (Hayek's triangles, etc.). Under a fiat system, but generally not with gold (Imperial Spain notwithstanding), we suffer the boom and bust cycle of the economy and the resulting malinvestment and relative net loss because of the artificial credit creation.

You have to ask yourself, which was more painful? The Great Depression or the stagflation of the 70s? Anyway, this is what I had learned when I tried to study the other side of the argument. (And bear in mind, chancing upon the writings of Rothbard, Mises, etc... was what initially stoked my interest in these issues...

There are, of course, many factors to consider in the historical examples. In the 1930s we went off the gold standard domestically and embarked on protectionist trade policies, abandoned our previous underpinnings of the rule of law, negated contractualism, increased central planning and corporatist economic policies of the most wild dirigiste dreams. The 1970s under Carter, weirdly, ushered in a period of great economic deregulation and an end to war finance with the eurodollars being different as well.

[Rothbard and Mises were people, not things, it's "et al." not "etc." ]

I don't see how you can account for the dominance of Keynesian thought in the first half to the middle of the 20th century other than that it was a bloody good theory.

Without trying to be dismissive but I've got to get going, please check out The Commanding Heights. In short, Keynes won the battle, Hayek is winning the war. Viva Hayek!

 

[jon_perez]

If, when you posit gold is "pernicious," one substituted fiat money in its place, what is the inherent distinction?

You have yet to make a convincing argument why gold, under situations of short supply, will not have a destructive deflationary/recessionary effect. With a fiat money supply, this is not as serious a problem, because, as central bankers have said, "they can always print more money"...

You are operating under the assumption that inflation is bad but choose to ignore the fact that deflation can be just as bad, if not worse (as so many episodes in history can attest to). Inflation eats away at savings, but as long as you have a job you can survive. Deflation, on the other hand, has historically resulted in massive loss of livelihood.

This, of course, is the Keynesian thesis under consideration. What would be the Austrian response to this?

 

[jon_perez]

Without trying to be dismissive but I've got to get going, please check out The Commanding Heights. In short, Keynes won the battle, Hayek is winning the war. Viva Hayek!

Sure, I loved the PBS documentary. You seem to think that I am taking sides, I am not. My point has ever been to appreciate where we have come from. As "Commanding Heights" presents it, Keynesianism did seem to work quite well in the past, only to run out of steam after a while and needed a fresh injection of ideas.

Also, what I picked up from CH (the video, haven't read the book) is not of antagonism between one theory that was right versus another theory that was wrong, but rather a portrayal of the evolution of economic thought. Friedman, for example, critiques Keynesianism on its own terms. This would seem to be an acknowledgement that the ideas and concepts developed by Keynes were valid.

 

[jon_perez]

(Price "stability" is emphatically NOT the goal, but we can pick that up or not as you want.)

Does/Can the central banker's concept of 'price stability' account for the fact of varying supply and demand?

I would think that is an implicit assumption otherwise it would be a bogus concept...

 

[Bradley in DC]

You seem to think that I am taking sides, I am not.

Also, what I picked up from CH (the video, haven't read the book) is not of antagonism between one theory that was right versus another theory that was wrong, but rather a portrayal of the evolution of economic thought. Friedman, for example, critiques Keynesianism on its own terms. This would seem to be an acknowledgement that the ideas and concepts developed by Keynes were valid.

You introduce yourself to the forum basically saying Dr. Paul's agenda is "dastardly" which, yes, gives one strong first impression that isn't going to subside quickly or easily. <makes "I'm watching you" finger gestures>

The CH book is excellent too. Hugely impressed with the documentary--that had to have been difficult given the breadth of the subject. Friedman and Keynes are both positivists. We're market process. Better, IMHO, is to understand from the CH lesson is that we took a detour that didn't work as planned (sorry for the pun) and then corrected course. (Keynes of course was all over the map over the decades.)

 

[Bradley in DC]

Abct

You have yet to make a convincing argument why gold, under situations of short supply, will not have a destructive deflationary/recessionary effect. With a fiat money supply, this is not as serious a problem, because, as central bankers have said, "they can always print more money"...

You are operating under the assumption that inflation is bad but choose to ignore the fact that deflation can be just as bad, if not worse (as so many episodes in history can attest to). Inflation eats away at savings, but as long as you have a job you can survive. Deflation, on the other hand, has historically resulted in massive loss of livelihood.

This, of course, is the Keynesian thesis under consideration. What would be the Austrian response to this?

[Really gotta jet now but putting a placeholder here. In short, ABCT.]

 

[Bradley in DC]

Does/Can the central banker's concept of 'price stability' account for the fact of varying supply and demand?

I would think that is an implicit assumption otherwise it would be a bogus concept...

That would have to be a new thread, which is fine.

 

[jon_perez]

prices should, under a [true] market economy, gently fall over time.

This would indeed be a kind of utopia. But why should this be necessarily so? Supply and demand do not move monotonically and this would certainly not apply to non-replenishable natural resources and the products based on them.

 

[fsk]

Does/Can the central banker's concept of 'price stability' account for the fact of varying supply and demand?

Under the Federal Reserve, there is no real "price stability". You have a steady inflation rate of 6%-15%, which is entirely different from price stability.

With unregulated free banking, banks can issue trusted paper promises for gold to expand the money supply. This is *NOT* inflationary if those loans are backed by actual goods and services. In a free market, if a bank tries to issue too many paper promises for gold, it will find itself flooded with redemption requests.

 

[jon_perez]

You introduce yourself to the forum basically saying Dr. Paul's agenda is "dastardly" which, yes, gives one strong first impression that isn't going to subside quickly or easily.

I am quite sure you read much more into that statement than was intended. As well, part of the exercise was to try to be devil's advocate and get more robust answers.

Frankly speaking, I was rather disappointed by the attitudes I encountered. But maybe there were indeed some misunderstandings.

 

[Lord Xar]

Without reading all 9 pages, can someone tell me the following.

1. Did jon_perez answer the original questions put forth by bradley?
a. If not, why is this thread 9 pages long?

He didn't take you all on a wild goose again, did he?

 

[fsk]

1. Did jon_perez answer the original questions put forth by bradley?
a. If not, why is this thread 9 pages long?

He didn't take you all on a wild goose again, did he?

The trolls are winning.

The real problem is that this forum needs some sort of moderation feature. I was thinking of writing my own forum engine at some point.

When people make a biased false argument, I feel morally obligated to respond, because otherwise people will see the false reasoning and assume it's right.

 

[angelatc]

If an economy were operating on the gold standard and banks loaned out the gold at an interest rate higher than the rate increase of the total gold supply, what's to prevent the bankers from eventually owning all the gold?

Duh. Demand. None of the factors in your equation is static.

 

[jon_perez]

When people make a biased false argument, I feel morally obligated to respond, because otherwise people will see the false reasoning and assume it's right.

Right, the argument is "biased and false and trolling" because it doesn't jive with your own beliefs and because you say so...

 

[jon_perez]

With unregulated free banking, banks can issue trusted paper promises for gold to expand the money supply. This is *NOT* inflationary if those loans are backed by actual goods and services.

Backed by "actual goods and services" or backed by gold? Which is it? How would a mechanism wherein notes are "backed by actual goods and services" work? How would one redeem the latter?

In a free market, if a bank tries to issue too many paper promises for gold, it will find itself flooded with redemption requests.

And are you saying that you do not consider fractional lending of gold to be a problem?

 

[jon_perez]

If an economy were operating on the gold standard and banks loaned out the gold at an interest rate higher than the rate increase of the total gold supply, what's to prevent the bankers from eventually owning all the gold?

Duh. Demand. None of the factors in your equation is static.

How would 'demand' prevent the bankers from eventually accumulating/owning all the gold? More demand for gold would actually put the bankers in a stronger position to raise interest rates for the lending of gold and speed up such a process.

 

[angelatc]

How would 'demand' prevent the bankers from eventually accumulating/owning all the gold? More demand for gold would actually put the bankers in a stronger position to raise interest rates for the lending of gold and speed up such a process.

Have you taken even one basic level economics class?

 

[Bradley in DC]

[Prices naturally falling over time] would indeed be a kind of utopia. But why should this be necessarily so? Supply and demand do not move monotonically and this would certainly not apply to non-replenishable natural resources and the products based on them.

Stop thinking like a socialist. Not a personal attack, but seriously: instead of macro, join us and think micro. The fallacies of oversimplified "aggregate supply and aggregate demand" (and yes, this one time, I'm putting words in your mouth) are well established.

Go to the example I used with computing power. Think about any other one thing. In a normal production cycle there are (to some degree) fixed costs, start up costs, etc. If one understands marginal cost pricing (Google it or look at the book I linked to previously under the Carter deregulation section), you'd understand that prices should gently fall over time for all goods. Yes, of course, new products will come on the market (HD TVs are more expense than my old ones), but for each product, yes, the real prices should fall over time (yes, in a market economy as you clarified).

 

[Bradley in DC]

Without reading all 9 pages, can someone tell me the following.

1. Did jon_perez answer the original questions put forth by bradley?
a. If not, why is this thread 9 pages long?

He didn't take you all on a wild goose again, did he?

There has definitely been a wild good chase again, yes. That said, with great teeth-pulling, he's refining his answer marginally. But, no, not really, not to my satisfaction at least.

 

[Lord Xar]

There has definitely been a wild good chase again, yes. That said, with great teeth-pulling, he's refining his answer marginally. But, no, not really, not to my satisfaction at least.

See, this is a big issue. This what the 'trolls' do. I say "troll", at this point, because when given questions and you just keep playing round robin or deflecting with questions or steering the conversation is dishonest.

I would say, 'IF' he doesn't answer your question point blank. Then you should dismiss him as he dismisses your questions.

Liberals/socialists do this alot. Do you think he actually read ANY of your resources or references? It is like a neocon. You use references to foreign policy, and writings that support your argument and they still parrot their same position. I think his ONLY reason here is to dissuade those from following or believing in Ron Paul's monetary policy, OR just any opposition to the 'current' money policy implementation.

See, he controls the threads because he uses your passion for monetary policy against you. He/she knows that you will get sidetracked by his/her nicely veiled attaks and insinuations.