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jmherbener
ParticipantJust like any other good, money will be arbitraged for profit by moving it from where its price (i.e., its purchasing power) is low to where it is high. The arbitrage stops at the point where the purchasing power of money is the same everywhere. There is no more reason to think that gold money would not be distributed across the face of the earth according to the demand people have for it than that gasoline is distributed across the face of the earth in the same manner.
If people in a country had insufficient demand for gold money to attract gold there, then they would adopt another more common commodity like silver. The free market monetary system is one in which people are free to choose what to use as money and entrepreneurs are free to produce what money they wish. So even if there wasn’t enough gold to serve as money, it would be no argument against private enterprise money.
ParticipantHere’s a simple breakdown of the balance of payments account:
http://www.newyorkfed.org/aboutthefed/fedpoint/fed40.html
As it explains, since 1993 merchandise and services are combined into the trade deficit or surplus, which is calculated as exports minus imports. So the two calculation you refer to give the same result.
ParticipantStandards of living refer to the quantity and quality of consumer goods we have. We are wealthier if we have more and better consumer goods. We have consumer goods produced in the past and newly produced consumer goods. The spending on newly produced consumer goods during the year is consumption expenditures (C). Consumption expenditures are included in GDP. So C does not indicate our wealth. It only refers to additional consumer goods purchased this year. It also does not tell us the quantity and quality of consumer goods, but only how much was spent to buy them. So C can be larger without the quantity and quality of consumer goods rising.
ParticipantThe purchasing power of money is the inverse of the prices of goods. So if the government sets general maximum prices this is equivalent (since it applies to all prices) to a minimum PPM.
ParticipantThe government has legal privileges for some monies and legal disabilities for others. Legal tender laws are one type legal privilege. Here is a statement by the Treasury on legal tender:
http://www.treasury.gov/resource-center/faqs/currency/pages/legal-tender.aspx
On the legal disability side, U.S. courts will not enforce gold contracts:
http://www.treasurydirect.gov/instit/statreg/fraud/fraud_adams.txt
Without such legal support, fiat money would not be chosen by people over commodity money.
ParticipantGross Domestic Product includes only final goods produced, i.e., goods in the hands of their final users. Consumer goods make up 70 percent of GDP while Investment goods make up 15 percent.
GDP does not include intermediate goods produced. For example, the production of cars are included in GDP, but the production of iron, steel, rubber, tires, and so on are not.
Obviously, consumption is a much smaller portion of overall production than it is GDP. Treating GDP as overall production in the economy exaggerates the importance of consumption to overall production in the economy.
ParticipantA Balance of Payments Account simply records the transactions between people in one country and people in other countries. In the unhampered market, such accounts would indicate the differing preferences of people. For example, if Americans preferred foreign made goods relative to Chinese preferences for American made goods, then the BoP Account would show a Trade Deficit (i.e., net inflow) for the U.S. and a Trade Surplus (i.e., net outflow) for China. To take another example, if Americans have high time preferences and the Chinese low time preferences, then the BoP Account for the U.S. would show a net inflow in the Capital Account and the BoP Account for China would show a net outflow in the Capital Account for China. These are examples of natural and healthy results of the division of labor.
A BoP Account always balances. The account is split into the Current Account and the Capital Account. Any deficit in the Current Account is balanced exactly by a surplus in the Capital Account. Here is a brief discussion of the BoP:
http://www.econlib.org/library/Enc/BalanceofPayments.html
The problems we face are created by government policy, at most the BoP are a symptom of bad policy. The BoP are always “settled,” i.e., always in balance. The government has to settle its own financial affairs, not the BoP.
If interest rates rise back to historical levels, capital values will collapse. This will reveal the extent of mal-investments and set in motion a liquidation and reallocation process. Whether this process is smooth and quick or rough and prolonged depends on the extent of government interference with it.
If the dollar were redeemable for gold again, foreigners would have incentive to drain our gold reserves if the government undervalued the dollar in terms of gold. If the government redeemed an ounce of gold for $35, then its gold hoard would be quickly redeemed. But if the government redeemed the dollar at the current ratio of currency outstanding (which is around $1 trillion) to its gold hoard (which is 250 million ounces), then an ounce of gold would be redeemable at $4,000. Given gold’s current price of around $1,600 an ounce, it would be ruinous to redeem.
Take a look at Joe Salerno’s article on BoP:
March 26, 2013 at 10:08 am in reply to: Value Differences Among Consumer Goods when Economizing #17712ParticipantIt would mean that the MU of the 4th unit of A, the 3rd unit of B, 7th unit of C, and 8th unit of D are roughly the same. In other words these units are ranked close together on his preference rank. Close enough together that he does not choose a different configuration.
Pref. Rank
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4th unit of A
3rd unit of B
7th unit of C
8th unit of D
5th unit of AWith the preference rank above, he is unwilling to give up the end attain with the 8th unit of D to get the end attain with the 5th unit of A.
ParticipantWhat evidence does your brother have for his claim? For a fuller treatment of monopoly, take a look at Dominic Armentano’s book, Antitrust and Monopoly.
Here is an article by Armentano discussing various arguments about monopoly:
Here is Thomas DiLorenzo on the idea of “natural” monopoly, which in the jargon of economics is the claim your brother is making:
ParticipantTake a look at Joe Salerno’s articles in his debate with Richard Timberlake:
http://www.thefreemanonline.org/featured/inflation-and-money-a-reply-to-timberlake/
If it is still unclear, you might consult Timberlake’s articles in the debate.
ParticipantThe reason for the dichotomy is that monetarists, who are otherwise favorably disposed toward the free market (like Friedman) because of their microeconomic analysis, accept the Keynesian aggregate demand framework in macroeconomics. If one presupposes that aggregate demand determines production and employment it seems to follow that war spending must lift an economy out of depression.
Here is Roger Garrison’s article on Friedman and Keynes:
Check the references in Robert Higg’s seminal article for fellow travelers with the Austrians against the claim of war prosperity:
ParticipantIndeed, that is the case. Thailand, Malaysia, Indonesia, and other southeast Asian countries over-inflated their domestic currencies on top of the reserves provided by dollar inflation.
ParticipantHere is a limited historical analysis of capital flows from the World Bank:
http://siteresources.worldbank.org/INTGDF2000/Resources/CH6–118-139.pdf
Since the mid-1800s governments have set up and attempted to manage an international monetary system. The classic gold standard of the second half of the nineteenth century was designed by governments to manage monetary inflation by punishing countries that inflated their currencies excessively. The fatal flaw of the system is that it required redemption of each currency into gold and yet governments continuously inflated their currencies faster than the gold stock increased through production. When their monetary inflation produced booms and busts, they blamed markets and the free-flow of capital. Governments destroyed the classic gold standard to inflate their currencies to pay for spending during the First World War. They cobbled together the gold exchange standard in the 1920s. but their inflation destroyed it in the early 1930s. After the Second World War, governments erected the Bretton-Woods System, in which all other currencies were redeemable into the dollar and the dollar was redeemable into gold. Their inflation destroyed this system in 1971 and ushered in the miserable decade of the 1970s. The U.S. government cobbled together another dollar reserve standard, without gold, in the 1980s. We will see if this system will survive the inflation, and consequent boom and bust, governments generated in the last decade.
Of course, markets always constrain government activity whether they are international or not. In these international monetary systems, capital flows are a means of punishing wayward governments. A more recent example of this was the fall of the Asian tigers in the 1990s. Thailand over-inflated its currency, the baht, in response to the Fed’s inflation of the dollar after the recession of 1990-91.
Rothbard has written about some of this:
Also, consult James Grant’s book, Money of the Mind.
Finally, government borrowing has dominated bond markets throughout this entire period. Today, for example, bond markets in the U.S. are $70 trillion and $40 trillion of that is government debt at all levels. Governments want to support bond markets because they are the biggest borrowers of all. The Federal government wants to borrow from foreigners, so its demand helped create and support international bond markets. Complaining about how such markets constrain its financing is not objective science but merely special interest pleading.
ParticipantAs you imply, the term neoliberal is practically useless since it is defined differently by various groups. It’s often associated with Prime Minister Margaret Thatcher in England, who famously held up a copy of Hayek’s The Constitution of Liberty declaring “this is what we believe” as she slammed it down on a table. Reagan is often taken as her American counterpart.
Reagan cut the capital gains tax in his tax reform bill of 1981 to 20 percent and then raised it again in his tax bill of 1986 to 28 percent. The tax burden during the Reagan administration shifted from upper-income to middle-income taxpayers, mainly because of the sizable increase in payroll taxes in 1983 to fund social security.
There was some re-regulation during the Reagan years. Politicians are willing to sell legislation and regulation to the highest bidders, so naturally there is re-regulation in every administration. But to characterize Reagan’s administration as reducing regulating is dubious. The Garn-St. Germain Act, often cited as “deregulating” the S&Ls in the early 1980s, for example, is clearly re-regulation. Here’s the FDIC page on it:
http://www.fdic.gov/regulations/laws/rules/8000-4100.html
In contrast to new regulations whose net effect on the regulatory state is controversial, the Monetary Control Act of 1980 increased the regulatory power of the Fed.
ParticipantThe effect Intellectual Property has on the overall extent of invention and innovation is unclear. What we can conclude from economic theory is that the composition of invention and innovation will be different in a world with IP compared to one without IP.
In a world without IP, the monetary gain from invention and innovation will accrue to entrepreneurship instead of being imputed to patented machines or copyrighted works. Inventors and innovators earn profit from their creativity in the period before other entrepreneurs enter the field and to the extent that they cater their products to satisfy consumer preferences more fully than those of other entrepreneurs.
In a world with IP, the monetary gain from inventions and innovations will accrue to the goods receiving IP protection. But this extra monetary value will not stimulate production of the same goods by other entrepreneurs, since IP makes doing so a crime, but on alternative inventions and innovations that do not violate IP but produce similar goods that attempt to satisfy the same consumer preferences.
You might take a look at the Mises Institute wiki on IP:
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