[miljacic]

Very nice to see some systematic comparison of hyperinflation numerics. What I’ve seen elsewhere is a sort of total inflation estimates, the ratio between monetary unit’s value before and after hyperinflation. Here they show the dates when a hyperinflation began and when it ended, and they know which particular month is was the largest, so they have all other months to compare. One assumes they could have come up with such estimates of the total before-vs-after too. Of course if a money actually died, that ratio goes to infinity (division with zero).

What I mean – some hyperinflations were slower but lasted longer, so… what would be a “total effect estimate”?

Also, I’ll be more reticent about hyperinflation numbers if a country if stuck in a war, especially civil war, like Bosnia/Republika Srpska were. In such episodes, government might be but a ghost with its money only locally applicable (if at all), with “the government” actually meaning nothing more then a few opposing seeds of future governments caught in existential power struggle, evolving from local military formations. Everything seems a bunch of singular events, as opposed to something continuous, smooth and analytical.

It is quite different, I guess, then a situation where one has a “clean” hyperinflation, with the state structure (and it’s monopoly on money) largely defined and unbroken throughout.

[miljacic]

When talking hyperinflation people always discuss the German one. I wish someone sometimes writes a decent analysis of a worse case of hyperinflation that occurred quite recently in my then country Yugoslavia, in 1993. This is what I, not too clearly, remember…

In 1991 Yugoslavia fell apart, with partial civil wars raging until 1995, and with international economic sanctions imposed. Perfect setup for a hyperinflation.

After some period of progressively worsening inflation, the hyperinflation happened kinda suddenly, very nicely agreeing with what (I think) Mises said: governments create inflation, the people create hyperinflation. When economic sanctions got imposed in 1992, people’s reserves lasted for about a year, and then in 1993 people really ran out of stuff, and seeing that the money is being printed and that they won’t stop printing it, and that we are under sanctions till god knows when, the panic built up fast.

I remember there was a sort of game of cat and mouse between government and the people – people trying to leave the official money (dinar) and the government trying to see in which direction they are moving and catch them before they get there. For years we had the German mark as, informally, secondary money since many of our people worked in Germany and send those marks home – government prohibited the usage of German marks. If they caught you exchanging marks on the street, you’d go to jail for a sleepover. People started stacking expensive cigarettes (in nearby regions caught in war, cigarettes became money) – government secretly assumed monopoly on foreign cigarettes trade… etc.

If you stayed too long inside a store, prices would change with you inside. Everyone was rushing to spend their salaries immediately – it was very obvious that if you hold on to cash you’re being very stupid. Yet, helped no doubt by the fact that all “exits” were kept tight by the government (the barter never really took off, quite rudimentary if at all), the official money never completely collapsed – it all came to the very edge and then… they stopped. They brought a fresh face to be central bank’s governor who was supposedly a monetary genius to solve all our problems (a very old Winnie-the-Pooh looking guy nicknamed “grandpa Avram”, a real theater it was), he introduced a new dinar strictly bound to German mark, they made a great media hoopla of it all, with the all important unspoken message – enough, enough, we are not going to do it anymore really, really, really, trust us, trust us, trust us… and then… they stopped printing money. And people, cautiously, believed. And they did stop printing. And the hyperinflation was over just like that.

[miljacic]

Samgheb, I’d think that a question here (besides all that prof. Herbener already wrote more abstractly) is – can robots replace all human interactions? Would you marry a robot? Would robot’s smile move you the same way as human’s? Can you have a robot for a friend? Can robot perform a song or entertain you like a human can? Can you talk to a robot and feel better afterwards like you can with a person, even a stranger?

For example, it is known among street musicians that the more a performance touches the performer himself, the more performer enjoys his own playing, the more money he gets from passers-by, on a daily basis. People here respond to something decisively non-robotic.

If robots can not replace all human-to-human interactions, there will be an economy and a market on what remains unfulfilled by robots. This includes all IQ levels, high, average and low, since people do not interact only within +-1 IQ point around themselves. Think of a simple old lady selling flowers on a town square… she does not need high IQ yet her charm cannot be replaced by a robot.

The robots would, in theory, simply replace the tasks where human-to-human interaction is not necessary, and free people from having to waste time on them, and concentrate on tasks where human interaction is irreplaceable, and so more money will pour into such tasks.

But before all this, who will direct the robots to what tasks?? If people suddenly change their minds as to what they need/want, all the robots automatically become a bunch of scrap metal. One cannot say that only a very few smart people will be needed to operate all the robots since this again amounts to centrally planned economy and big time Socialism… and from here on it’s all Mises and the boys.

But before even all this, what about the fundamental issue of change? Life is way beyond human control (and desire) in constant change, and “economy” also means constant responding to unexpected change. When there is no change, robots can take over a lot. When change happens, people are again called to notice the change, react to it, and eventually teach the robots. In doing so, people need people since each person of whatever IQ is useful in noticing and informing others and reacting to change. But when are these unexpected changes actually happening? All the time on all the levels, in general. So people of all IQs are very beneficial all the time.

Robots will always and always be just the means people use to interact better among themselves. They are not fundamentally different from shovels.

[miljacic]

DMurphy, I actually (partially) disagree with your conclusion… bear with me for a second and judge if this sounds reasonable.

First, if Angel, together with the money left a note to each person saying: “here’s some money for you, and I did just the same for every person in this country”, then everyone will be aware of the new global situation, the next morning ALL the prices will automatically double, and noone will either gain or lose. The Angel’s overnight action will amount to exactly no effect.

But I guess the “Angel Gabriel” model assumes no such note, and so each person has no clue about what happened to others. OK. Then…

Since each and every person in economy is a “seller” in some way (for example a school teacher sells his time and effort and receives a salary), and at the same time each and every person is a “buyer” since he has that Angel’s extra money, all the people will, initially, be exactly the same: they will all have extra cash in their pockets AND the prices of what they all sell will stay the same.

With extra money people will buy more goodies, but not all the goodies equally. All tomato sellers might suddenly sell 5 times as much tomatoes, while schoolteachers (as a group) might not be suddenly asked to teach any new children, simply because no new children were suddenly born. Some teachers may actually lose their jobs because parents will use new money to move kids to better schools – they are sellers who now sell even less then before.

So what kind of persons will gain the most? The ones who spend Angel’s money the fastest (before prices rise), AND those lucky sellers who are getting that extra money via selling more. So ALL early buyers and SOME OF early sellers.

For example, some particularly lucky seller will sell 100 times more because of that Angel’s money. He will become rich no matter if he is quick or slow, whether the prices doubled or not yet.

And who will be the biggest loser? The one who didn’t spend Angel’s money, and whose sales did not increase so he wasn’t able to raise the price. He is both early and late seller.

So:
1. as a buyer – if you spend early you gain, if you spend late you don’t gain (not actually lose, just don’t gain).
2. as a seller – it depends on how much will your sales increase. You may lose or gain.

Conclusion:
Angel’s action will hurt the sellers who will sell less, the same, or more-but-not-enough then before, and will benefit everyone else. In the beginning this redistribution of capital will be large, then it’s amplitude will slowly decrease toward the new equilibrium.

[miljacic]

“The very idea of absolute perfection is in every way self-contradictory… the dead is not perfect because it does not live.”

It seems to me that, for Mises, “perfection” is simply the perfection of an acting entity, perfection as a state that someone acting (in a human way) could or could not experience or at least conceive. It’s a book on human action, after all, so “the perfection of a pinball machine” would be just irrelevant and empty mental concept, as vapid as “perfection of the flying spaghetti monster”.

So “perfection in death” seems to stand outside of his very definition of the word “perfection” as used in the book. At least, that’s how I read it.

And, of course, a living person can not be perfect, even if our state would somehow miraculously become perfect for a millisecond, because life itself (us being alive) would push us out of it. We would need to become non-living to make life stop pushing us out of being perfect, but then we would be pushed out of the very definition of “perfection” by not being alive (to be human actors, if needed). So we can’t win, alas. The whole thing seems to boil down simply to “life on earth is, for humans, never perfect”.

This would also mean that the only way for, for example Buddhist monks, to potentially reach such “perfection”, would be to leave “human life on earth” by acting in a non-human way, that is, by living some fundamentally different life while staying alive on earth. Of course, they might potentially reach some other kind of perfection by simply dying to earth, but Mises wouldn’t care to cover that option, so he delineated his concept of “perfection” accordingly. At least, that’s how I read the book.

[miljacic]

Hi osgood401,
well, hmm… here’s another quote from that book, to kinda summarize what I meant to emphasize:

“When dealing with people, let us remember we are not dealing with creatures of logic. We are dealing with creatures of emotions, creatures bristling with prejudices and motivated by pride and vanity.”

And that’s that. People are not creatures of logic. And who would thought – neither are me or you. Not even the ones with very high IQ’s, and the very intellectual ones, and the very intelligent ones, and even the very intelligent intellectuals with very high IQ’s. So you try to live in a world like this one is! We need wisdom often even more then the power of the constructive critical analysis.

Everything that you said about criticism stands in terms of technical truth. But that’s not enough.

Or let me put it differently…

“criticism when it feels needed” is infinitely better then “no criticism at all”
BUT
“criticism when it feels needed + wisdom of its delivery” is infinitely better then “criticism when it feels needed”

This is what, I think, the long term experience shows, no, screams at everyone: if one wants to learn the truth and then debate with people, it is foolish and wasteful (even extremely wasteful) not to take the “wisdom of delivery” part seriously. That’s a whole different subject that needs to be studied also.

From yet another angle, if people are like this, why torture them with our own ways of thinking of how they should approach truth? Why not bring them closer to truth using their own ways of dealing with life? Lion eats meat, sheep eats cabbage… feed them with their own food and only then you’ll be able to lead them, otherwise they’ll starve and won’t be able to follow you even if they wanted to.

[miljacic]

As much as I would like to see Libertarian ideas and viewpoints spread across the globe (at least to be understood, if not agreed upon), even more would I like to see the widespread of quality communication tools, like the classic book: “How to Win Friends and Influence People” by Dale Carnegie. That one is an old-fashioned but universal bag of goodies!

Maybe check it out on youtube, multiple people posted its audiobook? You might learn a lot about how to approach people, just like I learned a bunch.

A few illustrative quotes:

“Criticism is futile because it puts a man on the defensive, and usually makes him strive to justify himself. Criticism is dangerous, because it wound’s a man’s pride, hurts his sense of importance, and arouses his resentment.”

“If a man’s heart is rankling with discord and ill feeling toward you, you can’t win him to your way of thinking with all the logic in Christendom.”

“Remember the other man may be totally wrong, but he doesn’t think so. Don’t condemn him, any fool can do that. Try to understand him.”
—

It may seem I’m changing the subject, but the original post in this thread was not about ideas and logic and technical truth, but exactly about dealing with people. So I think my post is right on the topic.

Here’s a fresh example of how the book helped me. Just the other day I started talking to a colleague at work (who thinks he knows everything and is always right) about fractional reserve banking, and to my great surprise he managed to make me unsure about what I thought I understood well (that it’s inflationary). That is one very intelligent, technical person, by the way. However, I used all the stuff I learned from Dale Carnegie book, and our discussion was pleasant and creative. So, next day, I ask a question here on this board, and Mr. Herbener answers it in a way to make it clear again. But in the process I got excellent shakeup, I realized I wasn’t as solid in my understanding as I thought I was, that in some aspects I was shaky.. and now I benefited with a new understanding. I’ll talk to that guy again and it’s likely he’ll see eye to eye with me now. So, you see, effort in keeping the communication friendly and flowing totally paid off.

These things, especially when people already have set opinions, often require wisdom more then technical knowledge.

[miljacic]

Got it. I now have to thank a friend of mine who is a skeptic and who managed to confused me the other day. But all this now pushed me to a new level of understanding.

It’s kinda interesting to look at this from a sort of temporal aspect. Fiduciary media “appears” for a millisecond and then immediately “disappears”, confusing the observer to think that money supply has not been expanded.

What I mean is the following…

In the naive (very old-fashioned) way of thinking, if I deposit $10 in the bank, and the bank lends 90% of it to someone else, then (if this was really-really money) I should not be able to use it anymore. The money is simply physically gone from my account.

But that’s not how things work… I deposit $10, nine dollars go to someone else, but I can still use all of it at any moment! I can still buy that $2.50 croissant using the money that is not there!

So what happens, from my point of view as a consumer and a customer, when I go to bakery and ask for $2.50 croissant, offering my debit card while supposedly having only $1 “really present” in my “$10 account”? The fiduciary money “springs into existence” for a millisecond, just enough for the machine to write “approved” and other related electronics to flicker things through, and then it disappears from the realm of physical phenomena.

This “quantum of fiduciary media” has to spring into existence (to start a physical chain of events) at least for a very short while (millisecond, nanosecond, depending on the electronics involved). But in the old-fashioned, naive viewpoint, since the money is not there it could not spring into existence even for that nanosecond, since it is not physically present, and so the exchange of goods and serviced can not happen.

All this is very confusing to a common, uninformed mind. This “brief springing into existence” of fiduciary media makes the temporary (yet substantial, effect-producing) increase in total money supply.

There is an interesting analogy in Physics. We all know that the total energy of a closed physical system is conserved, and that nothing can ever break that law, right? Energy can change its form but not the total amount. Well… until quantum theory arrived. In this theory, brief quantum fluctuations can “spring into existence” without costing any energy, cause observable effects, then disappear, remaining unobservable. This is pretty much how I now see these.. how to call them.. “fiduciary-money fluctuations”.

So, the fact that banks must hold only a fraction of a deposit as reserve and can lend the rest is not the reason money supply is expanded. So blaming just the fractional-reserve-requirement is not correct. The real reason is that commercial banks are allowed to use these deposit-receipts (IOU’s) among themselves as if they were money. Something that is totally-not-money is used as money, and they have a sort of monopoly on this (granted by the government).

This was very helpful to me, thanks again.

[miljacic]

Thank you Mr Herbener.

So, to make sure I got it, all that a commercial bank needs is some sort of “buffer monetary reserve”, that will make sure that daily fluctuations (money from the bank’s deposits moving to other banks) can be temporarily covered.

Such fluctuations are many for banks having hundreds of thousands of customers, and they will tend to cancel out. Maybe at the end of each day only small offsets remain…. let’s say about a billion of $ leaves a bank, about a billion comes in, and maybe only a few millions are a daily offset, for which banks have well prepared reserve buffer. Am I correct?

If so, then my question is answered, commercial banks are able to increase money supply in such roundabout ways. In my example from the post above, the initial $1000 deposit can originate $10,000 in various deposits, which can safely change hands between commercials banks, following the exchange of real (physical) goods and services.. just what these dollars would do if they were “printed out of thin air”.

[miljacic]

Mr. Herbener,

One of the main Indian religious texts, Bhagavad Gita, advocates as a high spiritual achievement the “action in inaction and inaction in action”, that is, action without regard for the result. If a human being would achieve this goal of acting not for any particular result but simply staying inside a flow of spontaneous movement, being aware in a normal human way but not at all caring and simply following “a spontaneous flow of inspiration” – would that be then “not a human action”?

Let me be a bit more precise… if such a human moves around doing things spontaneously, without regard of any conscious result, like whether he lives or dies. feels pleasure or pain, comfort or discomfort… and while doing that his natural/unconscious instincts (or some unaccountable metaphysical miracles) bring about a result of him actually putting some nearby food in his mouth and eating it automatically, without conscious regard of eating-to-stay-alive-or-avoid-hunger, would that than be “not a human action”?

[miljacic]

Hmm, I at the moment have trouble answering the following simple question: why did American colonists self-organize and start the war in the first place? British were not killing anyone, nor forcing anyone to become or stop being British – they mostly wanted to get their taxes, just like with any State of today.

Why would a rational adult choose to go to a war and bear a tremendous risk (of death or, even worse, horrific mutilation) for what? To get a tax break?? I know it’s a silly question, but right now I’m stuck on it.

Relevant for this thread – if a neighboring State tries a “gentle” takeover of an anarchic territory, by simply saying – we are here just to collect some taxes and that’s mostly it, then what incentive would anarchists have to fight and maybe lose their lives… it seems they would need to value their anarchy very dearly. Regular soldiers (conscripts of a State) do not need to value much of anything, many of them fight because they are forced to.

In the softest case, a libertarian State might want to extend its territory to include a neighboring libertarian anarchy territory. (If you think that the libertarian State would not do that – than what exactly is its territory and how they got it? How can any State see an empty area next to it and not extend itself into it? Obviously a State will always care for its geographic size and try to expand – otherwise it could just as well shrink to zero size.) Would then anarchists still risk their lives to fight the libertarian army that wants to introduce only a minimal coercion of no taxes and just the requirement to serve in its army?

I’m still searching for a way to express my doubts more clearly. There should be some simplistic point of view, some better theoretical modeling, from which to ask the right questions.

[miljacic]

Thank you for the answer Mr. Casey, I’ll think and read about it some more and maybe post an opinion here. It seems to me that this question has to be resolved, or very seriously addressed, in one way or another.

Both Mises and Hayek seemed not to be believers in a good anarchy being practical, and as D. Friedman said that difference of opinion between Milton and him was that one thought it might work but probably can’t while other thought the opposite. All these extremely bright (and largely well meaning) people are like a dark cloud hovering above the whole idea… why wouldn’t Mises be more explicit and say clearly why he thought some state remainder is necessary? Anyway, this national defense question maybe the watershed.. for one to make a final opinion on the matter.

[miljacic]

Mr. Casey,
after reading the book I have a question about organizing the army (aka national defense). David Friedman called this “the hard problem” in his Machinery of Freedom. What’s your take on this, you seem to have avoided addressing this question (or I missed that part on the first read)?

To be more specific. Let’s imagine some people get enthusiastic after reading your book and decide to abolish their own state and organize libertarian anarchy paradise. Then, a neighboring state notices this new state-less territory and of course immediately moves on to incorporate it into itself.

How shall state-free people react to it? Will they be able to protect themselves against the trained army of the neighboring state?

Will it not be that whoever decides to abolish their own state, will be left exposed to an (even a quite peaceful and purely formal) takeover by another state? Is keeping a state apparatus of defense the only protection against other states? Or not so?

If a state is a wolf, and if every nook and cranny of the planet is filled with roaming and ever-hungry wolves, how can one have a piece of land with no wolves, unless one has its own wolf that barks: “hey brother-wolves, this particular territory is mine, stay away”?

[miljacic]

Why then Austrians reject such optimization, would Mises not say that maximizing utility is the basis of human action? Is it because such models assume some too large degree of objectivity, that in effect utility is less subjective then it really is? Is that the problem?

[miljacic]

I just found this youtube audio book of some self-help classic from 1930ies I didn’t know of before: http://www.youtube.com/watch?v=C2pRKGRbsZQ

After listening to part 1 (out of 9) it seems it could be relevant for this issue (about stop worrying etc). Maybe check it out.

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