The downside to deflation in a debt-based monetary system?

[Black Flag]

Travlyr,

We both agree that it was a travesty.
The court erred badly in my opinion - where the value of the commodity that makes the currency does not matter when it is paper - but does matter when it is not paper is a contradiction of epic proportions.

Further, I agree that this is an example of the essence of government - that violent force has no reason; and when applied against non-violent people, creates human evil

....

True, the paper is not gold - it is a document proving ownership of gold - which in trade, transfers ownership.

Whether I trade the metal or a paper that proves ownership of metal; the end is the same - other than risk, that is, will my proof be accepted and recognized enough to actually take delivery on my demand.

 

[Black Flag]

My claim was real money is a medium of exchange by defintion.

Then you do not believe that money is an economic good - but merely a medium - like air carrying sound waves. The air is not the sound - but merely transfers the sound.

This is your view of money, correct?

Further, if this is the limit of your definition, why do you claim the FRN are not money, when -in fact- they are used as a medium of exchange.

As I explained before, you are using a feature of money to be the definition of money.

This is like trying to define "water" as being that which is "wet".

Then I presented the fact that some money is higher quality than other.

That's fine - some economic goods have different qualities then other economic goods - but these qualities do not make or not make a thing "money".

 

[Travlyr]

Then you do not believe that money is an economic good - but merely a medium - like air carrying sound waves. The air is not the sound - but merely transfers the sound.

This is your view of money, correct?

No. You did not read carefully. Fish can be a medium of exchange. Fish has value as a food, money, and currency. Fresh fish is high quality food and will be readily accepted by a hungry person in trade. Rotten fish is low quality money and currency. So a higher quality money is sought.

Precious metals fill the bill because they possess high quality characteristics of desirability, durability, divisibility, portability, and scarcity. Precious metals are valuable in and of themselves because they have other uses ... just like the fish. Irredeemable paper and electronic money fail the durability and scarcity characteristics so they are a low quality money. They function as a currency, as long as, you can trust the people printing the money to be honest and tell the truth. Once faith is lost, then they become worthless... like the Continental and Greenback.

Further, if this is the limit of your definition, why do you claim the FRN are not money, when -in fact- they are used as a medium of exchange.

Federal Reserve Notes function as a currency and are a low quality money because they are irredeemable and only hold the value of faith. Paper money has no other uses. As monetary inflation erodes the value of the paper's worth, then that faith is eroding. The more they print/create the less they are worth. Since I have no say in that, then I don't anything to do with the dollar, but it is forced on me anyway. I have control over sound money.

As I explained before, you are using a feature of money to be the definition of money.

This is like trying to define "water" as being that which is "wet".

Money is a valuable commodity. Fish, gold, land, car, etc. All commodities can be used as mediums of exchange. Precious metals, and 100% redeemable currency, makes the best currency.

That's fine - some economic goods have different qualities then other economic goods - but these qualities do not make or not make a thing "money".

How do you define money?

 

[Steven Douglas]

Then you do not believe that money is an economic good - but merely a medium - like air carrying sound waves. The air is not the sound - but merely transfers the sound.

Shame on you. Come now, you could only infer such a thing by using a single quote taken quite out of context (snipped out of context, actually, from his prior post, which showed the context). In his prior post he showed clearly that he believes that money CAN BE an economic good AND a medium of exchange, but for it to be sound (neither air nor sound waves) it must satisfy other criteria, to wit:

My claim was real money is a medium of exchange by defintion. Then I presented the fact that some money is higher quality than other.

The traits that determine high quality money have been handed down through the ages and they are:
Durability, Divisibility, Desirability, Portability, and Scarcity. All money originates in the free-market.

Can you really claim that you were listening for his definition, or were you only picking out the parts that were germane to the points you would like to make? Yours was an attempt to constrain his definition, rather than clarify. Clarification was easy enough, given that it was obvious that he was describing a broader defining characteristic of money.

It is equally obvious that he believes that all economic goods are a) a form of money, and also that b) a higher quality form would also be a store of value, among other things - other "defining characteristics".

Just as light behaves as both as a particle and a wave, every economic good is both a medium/carrier in itself, but not merely a medium, but also a store of value, in and of themselves. But all economic goods are not equally desirable or universal as a medium of exchange between unlike things of value. A Ferrari cannot easily be exchanged for eggs - not without an intermediary form of money, which could be an economic good, which could also be a quality store of value.

 

[Black Flag]

Fish can be a medium of exchange.

They so have been.

Fish has value as a food

Not to me.
Fish have no value to me.

Fresh fish is high quality food

Not to me.

and will be readily accepted by a hungry person in trade.

Not by me.
I'd rather be hungry then dead.

Precious metals fill the bill

Sometimes, but not all the time

because they possess high quality characteristics of desirability,

Depends on who you ask.

durability

Marble rocks equal.

divisibility

Marble rocks equal.

portability

Marble rocks equal.

scarcity

Marble rocks equal.

So, Marble rocks equal money?

Precious metals are valuable in and of themselves

There is no such thing as "intrinsic" value.

because they have other uses ... just like the fish.

Fish are not useful for me.

Irredeemable paper

Irredeemable for ... what?

Redeemable paper has words on them that say "This represents X of something, delivery on demand"
Irredeemable paper has these same words, but the party with the "something" refuses to deliver.

Paper that does not have these words at all is neither redeemable or irredeemable - it is just "paper".

and electronic money fail the durability

Electronic money last forever as long as there are computers.

Once faith is lost, then they become worthless... like the Continental and Greenback.

...they become unwanted...like the Continental.

A Continental has "worth" today - as a collector may tell you.

Federal Reserve Notes function as a currency and are a low quality money because they are irredeemable

...for what?

Where on the FRN does it say it is redeemable for?

and only hold the value of faith.

The market desires it, not because of faith....

Paper money has no other uses.

It stores well and protects against the cold and heat, if necessary.

As monetary inflation erodes the value of the paper's worth, then that faith is eroding.

...
As monetary inflation is caused by the supply of money being higher vs. the demand for it, thus the price of money in reference to all other goods falls - thus, takes more money to exchange for the same goods.

Like any economic good, if the supply is so sufficient, it will lose its desire and demand.

Money is a valuable commodity.

..the most desired economic good in a marketplace.

Precious metals, and 100% redeemable currency, makes the best currency.

Why?
Why not?

How do you define money?

That economic good that is the most desired in an economy.

 

[Black Flag]

Shame on you. Come now, you could only infer such a thing by using a single quote taken quite out of context (snipped out of context, actually, from his prior post, which showed the context). In his prior post he showed clearly that he believes that money CAN BE an economic good AND a medium of exchange, but for it to be sound (neither air nor sound waves) it must satisfy other criteria, to wit:

No, money is an economic good .. not a "might" (ie:"can be").

Can you really claim that you were listening for his definition, or were you only picking out the parts that were germane to the points you would like to make?

No, correcting parts that -from ample experience- will lead to bizarre crackpot theories.

Yours was an attempt to constrain his definition, rather than clarify. Clarification was easy enough, given that it was obvious that he was describing a broader defining characteristic of money.

To repeat - a characteristic is NOT a definition.

Do not keep repeating "qualities" or "characteristics" of a thing as if you are DEFINING the thing.

Saying something has fur, claws, a tongue and teeth are CHARACTERISTICS, but hardly worthwhile in defining A CAT.

It is equally obvious that he believes that all economic goods are a) a form of money,

All economic goods are not a form of money.
They all could be money, but a could is not an "is".

and also that b) a higher quality form would also be a store of value, among other things - other "defining characteristics".

You cannot store a subjective feeling.
Thus you cannot store value.

You can store things that you feel are valuable, however.

Just as light behaves as both as a particle and a wave,

Actually, light does not do that at all - but explaining this would take too long....

A Ferrari cannot easily be exchanged for eggs - not without an intermediary form of money, which could be an economic good, which could also be a quality store of value.

A Ferrari can be easily exchanged for eggs - without any money necessary.
All money in all times throughout all history has been an economic good with no exceptions.

And, you cannot store a feeling.
But you certainly can store things that make you feel.

 

[Travlyr]

They so have been.


Not to me.
Fish have no value to me.

Not to me.

Not by me.
I'd rather be hungry then dead.



Sometimes, but not all the time



Depends on who you ask.


Marble rocks equal.

Marble rocks equal.

Marble rocks equal.

Marble rocks equal.

So, Marble rocks equal money?



There is no such thing as "intrinsic" value.


Fish are not useful for me.


Irredeemable for ... what?

Redeemable paper has words on them that say "This represents X of something, delivery on demand"
Irredeemable paper has these same words, but the party with the "something" refuses to deliver.

Paper that does not have these words at all is neither redeemable or irredeemable - it is just "paper".


Electronic money last forever as long as there are computers.



...they become unwanted...like the Continental.

A Continental has "worth" today - as a collector may tell you.



...for what?

Where on the FRN does it say it is redeemable for?



The market desires it, not because of faith....



It stores well and protects against the cold and heat, if necessary.


...
As monetary inflation is caused by the supply of money being higher vs. the demand for it, thus the price of money in reference to all other goods falls - thus, takes more money to exchange for the same goods.

Like any economic good, if the supply is so sufficient, it will lose its desire and demand.


..the most desired economic good in a marketplace.



Why?
Why not?



That economic good that is the most desired in an economy.

Lolz... fish was just an example of a food that some people find valuable and could use for trade. If you would substitute one of your favorite foods for fish, then maybe it would be easier for you to understand. I'm not going to try and guess what you like. Marble rocks might work for you, but I probably will try and use precious metals and 100% redeemable certificates as often as I can. I suspect you are simply trying to make easy concepts hard to understand because you see the fiat empire crashing to the ground and you have a personal stake in it.

Do you agree or disagree with this?
"Human Freedom Rests on Gold Redeemable Money" by HON. HOWARD BUFFETT - U. S. Congressman from Nebraska

Congressman Buffett stresses relation between money and freedom and contends without a redeemable currency, individual's freedom to sustain himself or move his property is dependent on goodwill of politicians. Says paper money systems generally collapse and result in economic chaos. Points out gold standard would restrict government spending and give people greater power over public purse. Holds present is propitious time to restore gold standard.

I agree with him generally, but I would strike the words "gold standard" and replace them with "competing currencies" so that people had the freedom to choose whatever they want to use.

 

[Black Flag]

you see the fiat empire crashing to the ground and you have a personal stake in it.

Yes, to the first part
and
Yes, to the second ... and so do you, too, have a stake in it....

When such a tumbling is threatened, even if you do not support the system, the system will leave no one untouched should it tumble.

Do you agree or disagree with this?
"Human Freedom Rests on Gold Redeemable Money" by HON. HOWARD BUFFETT - U. S. Congressman from Nebraska

I like gold, but human freedom does not depend on it.

We will not be free just because we have gold - (see history).
We will be free when when choose to be free.

I agree with him generally, but I would strike the words "gold standard" and replace them with "competing currencies" so that people had the freedom to choose whatever they want to use.

That is appealing, yes.

But it will not happen as long as taxes exist.
The center of gravity will be taxes - its necessary currency will eventually evolve to be the one that people gravitate to...

 

[Steven Douglas]

No, money is an economic good .. not a "might" (ie:"can be").

Not so fast, Master Obfuscater Roy (slipping back into your habit of lengthy, tedious, line-by-line rebuttals, I see). We haven't even agreed on a definition for money, so don't keep arguing from your own premise, as if constant repetition and reinforcement will make it so. I said that money can be (i.e., can take the form of) an economic good, not that money is (by definition) an economic good, which is your premise, leading to bizarre crackpot theories about money.

To repeat - a characteristic is NOT a definition.

I never said a "characteristic" by itself was. Once again with your fallacy of composition hard at work, as you take PART of what I or others write, completely out of context, and attack that part as if it was the whole. You never did readily grasp the concepts of sets and subsets, Roy. I think it confuses you, and runs to the core of your own jumbled mish-mash of fallacious misunderstandings.

I said that he was using a "defining characteristic", not that a characteristic by itself was a definition.

Do not keep repeating "qualities" or "characteristics" of a thing as if you are DEFINING the thing.

Pay attention, Roy:

Noun

defining characteristic (plural defining characteristics)
A property held by all members of a class of object that is so distinctive that it is sufficient to determine membership in that class. A property that defines that which possesses it.

Saying something has fur, claws, a tongue and teeth are CHARACTERISTICS, but hardly worthwhile in defining A CAT.

No, but it may be quite useful as a beginning for defining certain sets of mammals. To define a cat you would have to go a little further, to distinguish it from other mammals, as a subset.

I could say: animal, warm-blooded, vertebrate, characterized by covering of hair on the skin, with females having milk-producing mammary glands for nourishing the young - and VOILA!! I have the definition (the defining characteristics) of "mammal"! And sure enough, dictionaries bear this out:

Mammal
Noun
Any of various warm-blooded vertebrate animals of the class Mammalia, including humans, characterized by a covering of hair on the skin and, in the female, milk-producing mammary glands for nourishing the young.

All that from "defining characteristics", Roy.

So stop telling me not to "keep repeating 'qualities' or 'characteristics' of a thing as if [I am] DEFINING the thing".

All economic goods are not a form of money.

Incorrect. All economic goods are the most direct forms of money. What cannot be said about all of them is that they are all useful as a common medium of exchange -- an intermediate good, when unlike goods cannot easily be exchanged. In other words, the bicycle maker wants a pair of shoes, and has a bicycle to trade. But the cobbler doesn't want a bicycle. So the bicycle maker must find someone who wants a bicycle, but is willing to trade something the cobbler wants. Well, that could be a number of things.

The bicycle maker finds a smoking pipe maker who happens to want a bicycle. He also remembers that the cobbler is a smoking pipe collector! What good fortune. He trades a bicycle for a very nice smoking pipe, which he takes to the cobbler, who is VERY pleased with the pipe, and trades him for a pair of very nice shoes.

In that instance, the bicycle, the smoking pipe and the shoes were all economic goods, all forms of money; the pipe bore the distinction of being the economic good used as a medium of exchange, given that it was the only economic good (of the three) that the cobbler would accept as payment. On the other hand, the bicycle was a direct exchange, money to money, without need of an intermediary, because the pipe maker would accept a bicycle as payment.

You cannot store a subjective feeling.
Thus you cannot store value.

THESE WORDS are now "stored" as "values" in your RAM. At this very moment. Thus, THESE WORDS, however temporarily stored, are values that are intrinsic to your RAM. They are also stored in your brain, which makes them intrinsic thereto. It is part of the subset of your thoughts, all of which are "stored", however fleeting and temporal that might be. Intrinsic to both your computer and you.

An egg cannot store THESE WORDS or A PRICE or A FEELING someone has about them. So while they are different types of "values", they are all EXTRINSIC to eggs. What is intrinsic to eggs: A shell, whites, yolk, etc., -- those are some of its most basic INTRINSIC VALUES.

A Ferrari can be easily exchanged for eggs - without any money necessary.

Sure they can. If the person selling the Ferrari wants eggs, and vice versa. Otherwise, not so "easily".

All money in all times throughout all history has been an economic good with no exceptions.

You have it exactly backwards. All economic goods at all times have been forms of money, with no exceptions.

 

[Black Flag]

Not so fast, Master Obfuscater Roy

Who is Roy?

(slipping back into your habit of lengthy, tedious, line-by-line rebuttals, I see).

Necessary. This way there is little doubt or risk of me misquoting you - it's right there.

We haven't even agreed on a definition for money

"We" have.

We're just waiting for you to catch up.

I said that money can be (i.e., can take the form of) an economic good, not that money is (by definition) an economic good, which is your premise, leading to bizarre crackpot theories about money.

Which goes back to the beginning where I said there are people who believe money is something different, outside the laws of economics and operates on whole different set of economics unlike the rest of everything else in an economy.

In other words, your crackpot theory is starting to sprout progeny!

For your crackpot monetary theory, we now need a brand new science of economics all on its own to explain it

So instead of simplifying the universe, as science and understanding is supposed to do - you are adding more complexity so to sooth your crackpottery.

I said that he was using a "defining characteristic", not that a characteristic by itself was a definition.

But as I pointed out, such a characteristic is not defining - or you missed the marble rock.

A "defining characteristic" is one that holds such a thing out to be unique yet not one darn thing about said characteristic is unique.

Pay attention, Roy:

Who are you talking to?

No, but it may be quite useful as a beginning for defining certain sets of mammals. To define a cat you would have to go a little further, to distinguish it from other mammals, as a subset.

I could say: animal, warm-blooded, vertebrate, characterized by covering of hair on the skin, with females having milk-producing mammary glands for nourishing the young - and VOILA!! I have the definition (the defining characteristics) of "mammal"! And sure enough, dictionaries bear this out:

But I was asking for a cat and you've missed the mark ...again... just like you miss the mark ...again... regarding money and its definition.

All that from "defining characteristics", Roy.

No, it is not the defining characteristic of a cat.

So stop telling me not to "keep repeating 'qualities' or 'characteristics' of a thing as if [I am] DEFINING the thing".

But I must and I shall until you actually provide a definition instead of characteristics.

Incorrect. All economic goods are the most direct forms of money.

No, as you exampled later - each and every example you chose - bikes and shoes - are not highly desired by the whole economy in a way that trade for bikes to money occurs with no "discount".

Your examples demonstrate "discounting" - that is, another (or more) transactions are required between the primary for the primary to occur.

There is no discounting in a trade for money. The transaction does not need any other subordinate transactions to occur.

THESE WORDS are now "stored" as "values" in your RAM. At this very moment. Thus, THESE WORDS, however temporarily stored, are values that are intrinsic to your RAM. They are also stored in your brain, which makes them intrinsic thereto. It is part of the subset of your thoughts, all of which are "stored", however fleeting and temporal that might be. Intrinsic to both your computer and you.

Did you miss the sign on the door?

We are talking about value - not physical quantities - that is, we are talking in economics, not physics.

All economic goods at all times have been forms of money, with no exceptions.

No, I got it right.
Your mud has never been money.

 

[Steven Douglas]

Who is Roy?

Oh, you don't mind if I call you Roy, do you? Think of that name as kind of like a form fitting glass slipper. Whomever it fits, that's the one who slipped out of the ball at midnight and changed costume. It seems to fit you, and Black Flag isn't a real name, so I figured I'd just call you Roy.

We haven't even agreed on a definition for money

"We" have.

We're just waiting for you to catch up.

Is that another way of accusing me of refusing to know self-evident and indisputable facts of objective reality? lol

 

[Black Flag]

Oh, you don't mind if I call you Roy, do you?

Whatever turns your crank

Think of that name as kind of like a form fitting glass slipper. Whomever it fits, that's the one who slipped out of the ball at midnight and changed costume. It seems to fit you, and Black Flag isn't a real name, so I figured I'd just call you Roy.

It is meaningless to me, so (shrug)....

PS: Black Flag IS a real name.

It surely amazes me how confused you are between real and imaginary things.

Thin-air "money" exists and is real, but the name that exists is not real.... how do you make it through your day?

 

[seraphson]

Okay...

Not sure how this exploded into 18 pages but perhaps I should rephrase the question.
What exactly does deflation do in a debt-based money system?
Is it any more different than say a gold standard money system?
Deflation is usually considered a balancing behavior to reach equilibrium in an inflated free market system; so just enough deflation to reach equilibrium is good; too much is obviously bad.
In our current deb-based money system why does Bernanke want housing prices back up? Is it because at the current pricing levels they don't pay back the money that was credited into existence with their construction?

 

[Black Flag]

Okay...

Not sure how this exploded into 18 pages

I arrived.

What exactly does deflation do in a debt-based money system?

It makes the debt much more expensive to pay off in terms of production.

Inflation benefit debtors and hurts lenders - the debtors receive maximum value for their money when they spend a dollar today - and as the dollar erodes in terms of production (that is, prices increase), the debtor pays back with money earned that has less marketable value.

Deflation hurts debtors and benefits lenders - for the opposite reasons above.

Now you know why government insists on inflation.

Is it any more different than say a gold standard money system?

Yes.

The greater the stability in the marketable value of the money, the less unpredictable the future economic returns on debt and loans become.

A debtor, knowing the marketable value of the money will be near the same when he borrows and when he pays back will be less inclined to over-borrow than he would have in an inflationary system, but in return, the interest rate cost he is asked to pay will be lower and more accurate in terms of the evaluation of risk of his project and less in terms of risk of the economy.

He can use the interest rate offer as a proxy measure of an independent review of others (his lender) on the actual degree of risk of the project that is not obscured by machinations of the money system.

The lender, with the same knowledge, can reduce his rates of interest as he is less inclined in attaching an "inflation" fee embedded in his interest rate that in an inflationary system is necessary to protect the erosion of his marketability of the principle.

Further, he is more able to evaluate risk of marketplace for his loans without the market being obscured by the manipulations of the banking system gyrations.

Deflation is usually considered a balancing behavior to reach equilibrium in an inflated free market system; so just enough deflation to reach equilibrium is good; too much is obviously bad.

Where does this notion that deflation, in a free market system devoid of central banking, is "obviously bad"?

How is this obvious to you (based on what economic theory)?

If you bought any economic good, and it appreciates in value, you think this is a good thing.
Yet, the economic good called money appreciating in value, you think this is a terrible thing! Utter contradiction!

Deflation in an unmolested economy is an incredibly good thing.

It means there is an ever-increasing input of new production and new goods. More goods in a market competing for trade with a semi-static supply of money - means the price of the goods goes down because the whole economy is increasing its productivity - people are making more economic goods then yesterday!

We call this economic prosperity!

Based on a bunch of crackpot theories, which instigated massive money manipulation, which so injured the system that a run of defaults created a central-bank created depression/deflation - now, people are scared of deflation in a system that has no money manipulation and no central bank!

In a free market with free banking, deflation means you are getting rich!

In our current deb-based money system why does Bernanke want housing prices back up?

Because the value of the property, in terms of money, is less than the value of principle loaned - called "being under water".
This threatens the banks with mortgage defaults - why pay for a house that is actually cheaper just to abandon?

Loan defaults are massively leveraged in the fractional banking system - around 9 to 1 - and quickly, if these losses are pervasive, will overwhelm even the largest capitalized banks.

By hook or crook, the FED needs the value of homes to go up and over the principle, so people stay and pay, saving the banks.

Is it because at the current pricing levels they don't pay back the money that was credited into existence with their construction?

No money was created into existence by building a house.

The banks have leveraged their capital in a way so to loan out the same deposit up to 9 times.
One of those loans going down, takes out the capital that supports the other 8 loans ... and the depositor!

If the bank does not have sufficient capital to cover that loss, the bank is in very serious trouble - it is bankrupt.

This has happened a few hundred times to banks in the last 5 years, with more coming down.....


PS: Ben has another tool, called a Massive Quantitative Easing Part 4 - manufacturing money in a way never before seen in American history.

He can trade this money in return for the bad mortgages - and hold those mortgages (now unmarketable) on the FED's books, where they don't matter.

This, however, would flood the market will new money, creating a massive inflationary spiral that will be very hard to control.

The FED would be riding a tiger - it can't stop the inflation, or the banks fail - it can't let inflation go beyond 20% or it threatens to go hyperinflation and the economy is wiped out. No major industrialized nation that has not lost a war has suffered hyperinflation.
If hyperinflation come to the US$, you will die.
Millions will die.
The division of labor would collapse across the entire economy.
Food would stop being shipped.
The cities would run out in 3 days.

After a week, the cities will burn to the ground.

After two weeks, the country side would be ablaze.

After two months, the death toll will reach into the millions....

Ben knows this.
He will avoid it at all costs.

The tight rope would be thread thin. He does not want to go there.

 

[Black Flag]

It's Not Really about the Debt
http://mises.org/daily/5942/Its-Not-Really-about-the-Debt

Fisher's crackpottery

The debt liquidation process is set in motion because of some random shock, for instance, a sudden large fall in the stock market. The act of debt liquidation forces individuals into distressed selling of assets.

As a result of the debt liquidation the money stock starts shrinking, and this in turn slows down the velocity of money.

A fall in money leads to a decline in the price level.

The value of people's assets falls while the value of their liabilities remains intact. This results in a fall in the net worth, which precipitates bankruptcies.

Profits start to decline, and losses emerge.

Production, trade, and employment are curtailed.

All this leads to growing pessimism and a loss of confidence.

This in turn leads to the hoarding of money and a further slowing in the velocity of money.

Nominal interest rates fall, however; but because of a fall in prices, real interest rates rise.

Note that the critical stage in this story is the stage 2, that is, debt liquidation results in a decline in the money stock. But why should debt liquidation cause a decline in the money stock?

Read the rest at mises.org above...

Unproductive debt is a threat to our future, but it is not inherently deflationary. Only when banks go belly-up, thereby imploding the fractional reserve process, is bankruptcy deflationary.

 

[Steven Douglas]

If hyperinflation come to the US$, you will die.
Millions will die.
The division of labor would collapse across the entire economy.
Food would stop being shipped.
The cities would run out in 3 days.

After a week, the cities will burn to the ground.

After two weeks, the country side would be ablaze.

After two months, the death toll will reach into the millions....

Yes, because a barter economy is death. And all this because our economic eggs were collectivized into a single currency basket. As if that was a good thing.

It's no different than relying on a single strain of wheat for world production and consumption, rather than multiple strains, as many as possible, so that if one dies, the rest take up the slack. Let one pandemic hit that wheat, and how long does it take for production to resume?

You're right. If the dollar dies, we're dead, most of us - but not because the dollar is anything wonderful, special, wholesome or vital to life. Only that there are no alternatives in place to take up the slack. No lifeboats aboard the Titanic.

We would still have all the means of production, with no sound means of facilitating its flow, and NOTHING in place to replace it. And why? Why, it's more efficient - easier to engineer and manipulate in the aggregate when its collectivized and centralized. Thus putting our fate, essentially, in the hands of one. Not one person. One currency that can be controlled by one person.

If HR 1098 was passed (and it won't be any time soon), FAR FEWER would die in such an event. Take away all the artificial barriers to entry, and let Thier's law take effect, as multiple currencies compete head to head for multiple commodities in a many-to-many relationship, instead of the insane, DEADLY INSANE one-to-many relationship we have now.

 

[Travlyr]

What exactly does deflation do in a debt-based money system?

It reduces the ability of borrowers to repay their debt. In a deflationary cycle, the reduction in money supply means that bankers do not get paid back for the loans they made.

Is it any more different than say a gold standard money system?

Quite different. The bankers would be much more careful about who they loan money to. Most people would own their homes, cars, education, and most everything outright. There would be some people in debt, but it would be based on calculated risk rather than necessity.

Deflation is usually considered a balancing behavior to reach equilibrium in an inflated free market system; so just enough deflation to reach equilibrium is good; too much is obviously bad.

I agree. It is better to allow honest free trade to find that equilibrium rather than rely on Ivy League graduates to determine the appropriate money supply. Free markets are also a lot freer society.

In our current deb-based money system why does Bernanke want housing prices back up? Is it because at the current pricing levels they don't pay back the money that was credited into existence with their construction?

Correct.

No money was created into existence by building a house.

Right. Money was not created into existence by building a house. Money can not be created. Money is mined, grown, or sewn.

Money was sewn into existence by building a house. A house can be considered money as it can be used as a media of exchange. A house is a poorer quality money than gold because its durability is shorter than gold, its divisibility and portability is not as easy as gold, its scarcity is not limited like gold, and it can be traded for gold.

Think about it. Cars can not be created by decree but you can trade a car for gold. You can trade a car for paper. If the paper is 100% redeemable, then you only need one piece of paper. If the paper is not redeemable, then paper is a poor choice because it would take several tons of paper to buy a car. You could trade a car for grain. Therefore, money can not be created. Claims to money can be created. Paper claims on money is grown. Electronic claims to money (computer bank account entries) are mined from the electrical grid. Paper and electronic claims to money are good as gold if they are 100% redeemable in gold. If claims on money are less than 100% redeemable, then it is wiser to hold the real commodity.

When money is printed or electronic entries are made on bank computers that increase the money supply, the counterfeiters are stealing value from production. It's very clever. That is why they do not want to be audited.

The banks have leveraged their capital in a way so to loan out the same deposit up to 9 times.
One of those loans going down, takes out the capital that supports the other 8 loans ... and the depositor!

Just like the shoe store that sells the same pair of boots online to 9 different people. First come first served everybody else is SOL. It's fraud.

If the bank does not have sufficient capital to cover that loss, the bank is in very serious trouble - it is bankrupt.

This has happened a few hundred times to banks in the last 5 years, with more coming down.....


PS: Ben has another tool, called a Massive Quantitative Easing Part 4 - manufacturing money in a way never before seen in American history.

He can trade this money in return for the bad mortgages - and hold those mortgages (now unmarketable) on the FED's books, where they don't matter.

This, however, would flood the market will new money, creating a massive inflationary spiral that will be very hard to control.

The FED would be riding a tiger - it can't stop the inflation, or the banks fail - it can't let inflation go beyond 20% or it threatens to go hyperinflation and the economy is wiped out. No major industrialized nation that has not lost a war has suffered hyperinflation.
If hyperinflation come to the US$, you will die.
Millions will die.
The division of labor would collapse across the entire economy.
Food would stop being shipped.
The cities would run out in 3 days.

After a week, the cities will burn to the ground.

After two weeks, the country side would be ablaze.

After two months, the death toll will reach into the millions....

Ben knows this.
He will avoid it at all costs.

The tight rope would be thread thin. He does not want to go there.

Constant fear-mongering is tiresome. It is all hype. Certainly some people will die, others will go hungry, wet, and cold, and still others will continue to plant seeds, raise livestock, drive trucks, build furniture, sew clothes, filter water, produce energy, and live their lives.

The fear-mongering is designed to make people believe that the world comes to an end because the bankers printed too much money. The exact opposite happens. The counterfeiters tyranny, democide, and poverty ends while liberty, peace, and prosperity ensue.

 

[Black Flag]

And all this because our economic eggs were collectivized into a single currency basket. As if that was a good thing.

Agreed.

Competition is good for any economic good - and money is no exception.

 

[Black Flag]

Constant fear-mongering is tiresome. It is all hype. Certainly some people will die, others will go hungry, wet, and cold, and still others will continue to plant seeds, raise livestock, drive trucks, build furniture, sew clothes, filter water, produce energy, and live their lives.

You jest.

It worked in the 30's when 80% of the people were rural and 20% in the city.

Today its 90% urban and 10% rural.

If you have an internet connection, you should download the first episode of the original "Connections" a BBC series of how things are interlinked.

He demonstrates perfectly what would happen if electricity was not available - and the unwinding stops at the point of the plow - in other words, you will live if you know how to hook an ox to a plow.

Even if you had an ox and a plow (which you probably don't) you do not know how to do this, and neither do I nor Steven nor anyone else here.

We would die.

Now, I do not believe this will happen as the biggest losers in this unwinding is the elite - the higher up the further the fall - but that does not mean it can't happen.

PS: You should also review the project called "Dark Winter", a scenario of a biological attack.

What is interesting about that was the massive disaster to the nation - assumed to be the attack itself - was minor to its consequence.

Everyone stayed home which collapsed the division of labor, and within weeks -even though death from the attack was small- the nation was in total collapse as the economy imploded.

So severly, that they ended the scenario experiment early, as there was no point in going on after the nation was wiped out....not by the bug, but by the starvation.

 

[Travlyr]

You jest.

It worked in the 30's when 80% of the people were rural and 20% in the city.

Today its 90% urban and 10% rural.

If you have an internet connection, you should download the first episode of the original "Connections" a BBC series of how things are interlinked.

He demonstrates perfectly what would happen if electricity was not available - and the unwinding stops at the point of the plow - in other words, you will live if you know how to hook an ox to a plow.

You do not know how to do this, and neither do I nor Steven nor anyone else here.

We would die.

Now, I do not believe this will happen as the biggest losers in this unwinding is the elite - the higher up the further the fall - but that does not mean it can't happen.

I grew up in Amish community. Their garden will thrive, their crops will grow, their generators will run, their furniture will be assembled, their butchers will butcher, their homes will be candlelit, and on and on and on. Sure, people who haven't prepared will struggle.

But we are not all going to die when the dollar dies. The dollar is virtually worthless now. When it dies completely the wealth of the world remains the same. The only thing that changes is who has control of it. The old golden rule... "He who has the gold rules."