Ron Paul schools 'the Bernank' on inflation, 'real money', and preserving value:

[deroyale]

http://www.youtube.com/watch?v=o_Qqh-xXIeA

Dr. Paul asks 'the Bernank' if he does his own grocery shopping...  LOL!!

Somebody start a poll - I think Dr. Bernanke just committed perjury.

[edit] This link provides much better context: http://www.youtube.com/watch?v=7sFLcLD1vPM

[Etlase2]

If the US didn't have to pay $700bn in interest every year, it would be much easier to balance the budget. Silver & gold backed currencies are not the answer, imo, but government-issued debt-free currency is much closer. The two biggest empires in history did not use fully backed currency. The romans used copper coins worth 8-10x their metal value, gold coins worth 2-4x, and the British used wooden sticks for crying out loud. Gold and silver can be manipulated by the wealthy just like central banking can with fiat. Although I realize he is arguing for competing currencies, he has also stated he wants to return to the gold standard.

[deroyale]

I agree that debt-based currencies are BAD and we should adopt some sort of tally-like system (bitcoin, maybe?)...

If the US didn't have to pay $700bn in interest every year, it would be much easier to balance the budget.

I believe the central banks colluding with the federal government - and their practice of fractional reserve lending - are also at fault there...

"Until we stop talking about deficits and Government spending and start talking about who controls how much money we have, it's all just a big shell game, a complete and utter deception. It won't matter if you pass an iron-clad amendment to the constitution mandating a balanced budget; our situation is only going to get worse until we root out the cause at its source."

-Bill Steer from The Money Masters

Gold and silver can be manipulated by the wealthy just like central banking can with fiat. [emphasis added]

Helicopter Ben is manipulating the 'price' of dollars; just because gold and silver can be manipulated (and it is being manipulated at the moment, it is artificially low thanks to paper-shorts) doesn't mean (imo) you should not use them to preserve wealth. If you're saving in debt-based currencies because you don't like the alternative (not the best alternative, just the most likely)...    you're cutting your nose off to spite your face.

I am an idealist at heart and fully understand Bryan's 'Cross of Gold' - this is one of the reasons I have embraced BTC.

I'm also a realist and am hedging against the forseeable future fall of fiat by holding physical gold and silver (in addition to BTC).

[Etlase2]

I agree that debt-based currencies are BAD and we should adopt some sort of tally-like system (bitcoin, maybe?)...

I really don't see bitcoin solving the problem of currency being manipulated. It basically begs to be manipulated by having absolutely zero recourse to combat hoarding. This is the main problem with gold-backed currencies. The upper echelon of the wealthy can call in loans, sell investments, etc. and hoard currency and cause the markets to panic/crash, thus making cheaply available property and investments and giving them the power to control even more real wealth than they did before. There is evidence that this is what JP Morgan and his buddies did on purpose to get the Federal Reserve Act passed, so that the public can be slowly bled dry instead of causing major recessions.

I believe the central banks colluding with the federal government - and their practice of fractional reserve lending - are also at fault there...

There's no real "belief" necessary, it is a fact. Once the government gives private entities the power over money, the people have no recourse except to eventually try to elect people like Ron Paul. Unfortunately, since politicians are so easily swayed in their actions by money, very few politicians will use their power to take that power away even though it is hardly in the best interest of their constituents.

I disagree in part about fractional reserve though. I believe it gets a bad rap because of how it has been abused and how that abuse has been sanctioned by world governments. Fractional reserve can be a very good thing for economic growth, but it can be a catastrophic thing when it is abused, and historically it has always been abused.

"Until we stop talking about deficits and Government spending and start talking about who controls how much money we have, it's all just a big shell game, a complete and utter deception. It won't matter if you pass an iron-clad amendment to the constitution mandating a balanced budget; our situation is only going to get worse until we root out the cause at its source."

-Bill Steer from The Money Masters

Switching to a debt-free currency issued by the people (government) would make this a relative non-issue. But the two presidents who made this a big part of their presidency were assassinated. Of course, even if the currency were debt-free, there would still be an amalgamation of large corporations with too much influence and we would probably fall back into some other cycle of manipulation. This is one thing bitcoin certainly does fix, though not adequately, imo as it only removes government corruption from the equation, it doesn't solve the underlying issue of money manipulation.

Helicopter Ben is manipulating the 'price' of dollars; just because gold and silver can be manipulated (and it is being manipulated at the moment, it is artificially low thanks to paper-shorts) doesn't mean (imo) you should not use them to preserve wealth. If you're saving in debt-based currencies because you don't like the alternative (not the best alternative, just the most likely)...    you're cutting your nose off to spite your face.

Oh I don't disagree with you. It's just the fact that everyone who didn't save in gold and silver gets screwed, and those holding gold/silver profit because of it. I have moral issues with this. I'm not accusing anyone of being immoral for being ahead of the curve, but I just wish there weren't a curve anyone had to be ahead of. Money should be neutral. Let productivity and ingenuity decide how wealth is allocated, not manipulation. Multiple currencies is a hack, not a solution.

[deroyale]

Thank you for your insight.

I just wish there weren't a curve anyone had to be ahead of. Money should be neutral. Let productivity and ingenuity decide how wealth is allocated, not manipulation.

Well put, brother.

[lonelyminer (Peter Šurda)]

I really don't see bitcoin solving the problem of currency being manipulated. It basically begs to be manipulated by having absolutely zero recourse to combat hoarding.

All money must at all times be in someone's possession. There is no scientific way of distinguishing "hoarding" from other possession of money.

The upper echelon of the wealthy can call in loans, sell investments, etc. and hoard currency ...

Why should any of such action have any effect on Bitcoin?

... and cause the markets to panic/crash.

Even if it worked this way, there is no reason to conclude that this would somehow benefit the perpetrators. They could just as well lose and make some Bitcoins speculators incredibly rich.

There is evidence that this is what JP Morgan and his buddies did on purpose to get the Federal Reserve Act passed, so that the public can be slowly bled dry instead of causing major recessions.

Even if this was correct, this only could have worked with legal tender. If JPM had crashed the pound rather than dollar, again there would be no effect. Like Soros when he shorted the pound in 1992. It made the BoE angry but there's no reason why US public or politicians should be affected by that.

I disagree in part about fractional reserve though. I believe it gets a bad rap because of how it has been abused and how that abuse has been sanctioned by world governments. Fractional reserve can be a very good thing for economic growth, but it can be a catastrophic thing when it is abused, and historically it has always been abused.

The problem is not fractional banking per se, rather elasticity of the money supply. While they typically do go hand in hand, it depends on other features of the monetary system. Furthermore, while credit is beneficial to the economy, this can be done without affecting the money supply.

Oh I don't disagree with you. It's just the fact that everyone who didn't save in gold and silver gets screwed, and those holding gold/silver profit because of it.

As long as there are different goods, some of them will be more suitable as a store of value and some less. And, some people will be able to predict this more accurately than the others.

I have moral issues with this.

But it's unavoidable.

I'm not accusing anyone of being immoral for being ahead of the curve, but I just wish there weren't a curve anyone had to be ahead of.

It's still unavoidable.

Money should be neutral.

Here is what Ludwig von Mises says:

But in any case I must protest against the belief that it has to be a goal of monetary policy to make money neutral and that it is the duty of the economists to determine a method of doing so. I wish to emphasize that in a living and changing world, in a world of action, there is no room left for a neutral money. Money is non-neutral or it does not exist.

[Etlase2]

All money must at all times be in someone's possession. There is no scientific way of distinguishing "hoarding" from other possession of money.

Sure there is, by its velocity. If you allow those with lots of money to control a significant portion of its velocity, they can control its value. Assuming the actual supply is stable, slow velocity will always cause deflation, high velocity will always cause inflation.

Even if it worked this way, there is no reason to conclude that this would somehow benefit the perpetrators. They could just as well lose and make some Bitcoins speculators incredibly rich.

You aren't seeing the big picture, I'm afraid. The bitcoin speculators are probably already wealthy. The panic/crash scenario would work differently as it is currently a side currency, but if the stock market were denominated in bitcoins, the wealthy would stand to make a great deal. I'm not talking about the value of BTC crashing; on the contrary, it would rise assuming it was widely accepted.

Even if this was correct, this only could have worked with legal tender. If JPM had crashed the pound rather than dollar, again there would be no effect. Like Soros when he shorted the pound in 1992. It made the BoE angry but there's no reason why US public or politicians should be affected by that.

I don't know where this legal tender argument has spawned from, but it is simply flat out wrong. Is gold legal tender?



Just because it is or isn't legal tender does not mean that lots of people can't lose money by the commodity being manipulated.

Here is what Ludwig von Mises says:

But in any case I must protest against the belief that it has to be a goal of monetary policy to make money neutral and that it is the duty of the economists to determine a method of doing so. I wish to emphasize that in a living and changing world, in a world of action, there is no room left for a neutral money. Money is non-neutral or it does not exist.

Here is what Mises also said, Human Action:

The notions of inflation and deflation are not praxeological concepts. They were not created by economists, but by the mundane speech of the public and of politicians. They implied the popular fallacy that there is such a thing as neutral money or money of stable purchasing power and that sound money should be neutral and stable in purchasing power. From this point of view the term inflation was applied to signify cash-induced changes resulting in a drop in purchasing power, and the term deflation to signify cash-induced changes resulting in a rise in purchasing power.

However, those applying these terms are not aware of the fact that purchasing power never remains unchanged and that consequently there is always either inflation or deflation. They ignore these necessarily perpetual fluctuations as far as they are only small and inconspicuous, and reserve the use of the terms to big changes in purchasing power. Since the question at what point a change in purchasing power begins to deserve being called big depends on personal relevance judgments, it becomes manifest that inflation and deflation are terms lacking the categorial precision required for praxeological, economic, and catallactic concepts.

He is stating that money can't be neutral in the sense that inflation and deflation don't exist as a function of money itself either. You say potato, I say Milton Friedman.

[lonelyminer (Peter Šurda)]

Sure there is, by its velocity. If you allow those with lots of money to control a significant portion of its velocity, they can control its value.

I did not say that people (rich even) cannot affect value of Bitcoin. But you're concentrating on aspects of influence which do not have any particular significance. Since all money must always be in a possession of someone, it is useless to select an arbitrary group of those possessors and ascribe them some power other than that of possession of Bitcoins.

Assuming the actual supply is stable, slow velocity will always cause deflation, high velocity will always cause inflation.

This is the quantity theory of money. It's also not necessarily true.

You aren't seeing the big picture, I'm afraid. The bitcoin speculators are probably already wealthy. The panic/crash scenario would work differently as it is currently a side currency, but if the stock market were denominated in bitcoins, the wealthy would stand to make a great deal. I'm not talking about the value of BTC crashing; on the contrary, it would rise assuming it was widely accepted.

But this makes even less sense. If the value of Bitcoins rises, all the holders of Bitcoin become wealthier. In the extreme, the "bad guys" would end up having all the Bitcoins, and all the prior owners of Bitcoin would have the wealth (in dollars, goods, company shares, etc.). Then Bitcoin will become impossible to transact (since the "bad guys" won't sell) so people will start a new blockchain. I fail to see how this is either a problem or beneficial for the "bad guys". It sounds like a really silly plan.

I don't know where this legal tender argument has spawned from, but it is simply flat out wrong. Is gold legal tender?

Your argument here was that "the bad guys" can manipulate the laws (e.g. to create a central bank) by fabricating a panic, not that they can affect the price. Your objection makes no sense.

Just because it is or isn't legal tender does not mean that lots of people can't lose money by the commodity being manipulated.

All value of everything changes all the time. Being rich merely increases your range of options. It does not make you able to predict the future more accurately.

He is stating that money can't be neutral in the sense that inflation and deflation don't exist as a function of money itself either.

He said that the labels "inflation" and "deflation" are not economic terms. Economists can talk about increase/decrease of the quantity of money, or increase/decrease of exchange-value of money.

You say potato, I say Milton Friedman.

Well Friedman advocated central banking.

The problem isn't who holds the wealth, but who holds the guns.

[Etlase2]

But this makes even less sense. If the value of Bitcoins rises, all the holders of Bitcoin become wealthier.

And all the bitpoor, comparatively become poorer. Bitcoin either needs to effectively be able to replace existing currencies, or someone is going to get left holding the bag. If the latter is the case, the eventuality of bitcoin is failure since there is no actual commodity except transferring money over the internet. And people can do that without risking their wealth.

Conflating issues like legal tender laws only make your stance weaker, not stronger. But you can believe what you want because I know I won't be able to make any sense for you.

[finway]

lol

[lonelyminer (Peter Šurda)]

And all the bitpoor, comparatively become poorer.

Obviously, that was my argument.

Bitcoin either needs to effectively be able to replace existing currencies, or someone is going to get left holding the bag. If the latter is the case, the eventuality of bitcoin is failure since there is no actual commodity except transferring money over the internet. And people can do that without risking their wealth.

In your scenario, it will be the "bad guys" left holding the bag. Which is why it makes no sense, it's a self-defeating strategy.

Conflating issues like legal tender laws only make your stance weaker, not stronger. But you can believe what you want because I know I won't be able to make any sense for you.

I addressed specific points you make, you're trying somehow to wiggle out of it by jumping between the points. You said that the "bad guys" can influence laws by creating a panic. Even if it was true, this only works if it affects the people and/or politicians in the country where you're trying to influence laws. That is why your argument makes not sense with respect to Bitcoin.