Why “Monetary Policy” Will Always Distort the Free Market

By Richard M. Ebeling – Re-Blogged From Savvy Street

Money is not a creation of the State. A widely used and generally accepted medium of exchange emerges spontaneously.

Carl Menger (1840-1921), the founder of the Austrian School in the 1870s, explained in his Principles of Economics (1871) and his monograph on “Money” (1892), that money is not a creation of the State.

A widely used and generally accepted medium of exchange emerges “spontaneously”—that is, without intentional government plan or design—out of the interactions of multitudes of people over a long period of time, as they attempt to successfully consummate potentially mutually advantageous exchanges. For example, Sam has product “A” and Bob has product “B”. Sam would be happy to trade some amount of his product “A” for some quantity of Bob’s product “B”. But Bob, on the other hand, does not want any of Sam’s “A”, due to either having no use for it or already having enough of “A” for his own purposes.

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Bitcoin Myths

By Keith Weiner – Re-Blogged From Gold Eagle

“Money is a matter of functions four: a medium, a measure, a standard, a store.”

Most of the talk was structured around discussing these functions. Medium is pretty obvious: the dollar is the universal medium of exchange. It is basically frictionless, trading at zero spread (with perhaps a fee to wire dollars internationally). Bitcoin claims to be a medium, but it’s slow, can be expensive due to limitations of the blockchain. And as later confirmed by bitcoin proponents, bitcoin’s bid-ask spread is wide and can widen unpredictably for large orders. Like $5,000.

Even in cases where bitcoin is a medium, there is a third-party currency exchange broker who finds a fourth party who wants to buy bitcoin. The merchant gets the dollars he really wants, the customer pays in bitcoin, and the fourth party buys the bitcoin and provides dollars to the merchant. All for a fee charged by the broker.

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Money And The Theory Of Exchange

By Alasdair Macleod – Re-Blogged From Goldmoney

Evidence mounts that the global credit cycle has turned towards its perennial crisis stage. This time, the gathering forces appear to be on a scale greater than any in living memory and therefore the inflation of all major currencies to deal with it will be on an unprecedented scale. The potential collapse of the current monetary system as a consequence must be taken very seriously.

To understand the consequences of what is likely to unfold requires a proper understanding of what money is and of the purpose for its existence. It does not accord with any state theory of money. This article summarises the true economic role of money and how its use-value is derived. Only then can we apply the lessons of theory and empirical evidence to anticipate what lies ahead.

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Motte And Bailey Fallacy

By Keith Weiner – Re-Blogged From Gold Eagle

This week, we will delve into something really abstract. Not like monetary economics, which is so simple even a caveman can do it.

A Clever Ruse

We refer to a clever rhetorical trick. It’s when someone makes a broad and important assertion, in very general terms. But when challenged, the assertion is switched for one that is entirely uncontroversial but also narrow and unimportant. The trick is intended to foreclose debate of the broad assertion, not really to retreat to the narrow one.

The essence is bait-and-switch, or equivocation.

So let’s start with a simple example: diversity in a corporate board body is good. Suppose you demand why. The predictable answer is that it would be a boring world with less creative solutions if everyone on the board had the same background and perspective. Most people would agree with this, of course.

And that is the trick.

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The 2 Faces Of Inflation

By Keith Weiner – Re-Blogged From Gold Eagle

We have a postscript to last week’s article. We said that rising prices today are not due to the dollar going down. It’s not that the dollar buys less. It’s that producers are forced to include more and more ingredients, which are not only useless to the consumer. But even invisible to the consumer. For example, dairy producers must provide ADA-compliant bathrooms to their employees. The producer may give you less milk for your dollar, but now they’re giving you ADA-bathroom’ed-employees. You may not value it, but it’s in the milk.

On Twitter, one guy defended the Quantity Theory of Money this way: inflation (i.e. monetary debasement) is offset by going to China, where they don’t have an Environmental Protection Agency. In other words, the Chinese government does not force manufacturers to put so many useless ingredients into their products as the US government does.

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Monetary Innovation In The Ancient World

By Keith Weiner – Re-Blogged From Silver Phoenix

We think we are the only generation to be smart. In the 19th century, they did not have the internal combustion engine. In the 18th century, they did not have the railroad. In the 17th century, they did not have the piano. So, most people assume, they were dumb. They did not know about smart phones, so they would not have understood anything. Such as money.

So let’s tell the story of the ancient city of Orinthus. They were innovators in money, millennia ahead of their time…

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Division of Labor

Orinthus was inhabited by the first people to settle down with agriculture and fishing. Soon, a new class of evolved: those who crafted goods out of riverbank clay, animal hides, and even stone quarried from the local hills. With the advent of real production and trade, they soon discovered it’s terribly inefficient if the guy who made leather needed to find a fisherman who needed shoes whenever he was hungry. They realized they needed money.

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On Board Keynes Express To Ruin

By Keith Weiner – Re-Blogged From Gold Eagle

Last week, I ranted about the problem with our monetary system and trajectory: falling interest rates is Keynes’ evil genius plan to destroy civilization. This week, I continue the theme—if in a more measured tone—addressing the ideas predominant among the groups who are most likely to fight against Keynes’ destructionism. They are: the capitalists, the gold bugs, and the otherwise-free-marketers. I do not write this to attack any particular people, nor indeed as an attack at all. My purpose comes from my belief that to fix a problem, one must understand the nature of the problem.

I highlight these groups because, if there is ever to be a real movement to reform our monetary system, it would come from one of these groups, or ideally an alliance among all three. However, that is not in the cards today. Let’s look at why not.

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