Libertarianism versus Anarchism

headmuzik

There is a grain of truth in what asdasd is saying. But only a grain
Parecon (an economic system developed by Michael Albert and Robin Hahnel at Znet) proposes the idea that another class exists between the ruling and working classes, termed the "co-ordinator class". It seems to be this class to which asdasd is referring. It is probably obvious that most of working class bear more resentment and illwill towards members of the co-ordinator class, since this is the class that for the most part "gives the orders", the middle management layers etc.

However it seems that asdasd is suggesting that this coordinator class "holds all the cards" so to speak, and is the true class enemy. The actual ruling class may not interact as directly with the working class as the co-ordinator class but that hardly implies that the ruling class doesn't really exist or has no real power. Who do you think gives middle management their orders?

For a self-described "class warrior", I think you have a very confused notion of class!

Permabear

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Akrasia

donegalfella wrote: »

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because the world is not black and white and there were other factors to be taken into consideration.
Also, are your reference to 'free markets' ignores the fact that it's a free trade zone, but there were import tarrifs from outside the E.U.
Ireland benefited from international investment because we were within the Single market and external companies wanted access to it. If there were no trade barriers anywhere in the world, these companies would probably have skipped ireland and set up in a third world country instead.

Are you actually arguing that the Common Agricultural Policy has been a success? Surely you're aware that the largest beneficiaries of the CAP are large corporations and government departments, not small farmers? That the average family food bill in the UK is almost £400 per year higher due to the CAP—yes, that's £400 taken out of the pocket of "the worker" to subsidize landowning, 4x4-driving farmers! I wouldn't have thought that an avowed socialist would approve of such things?

Where are you getting your statistics from? It is impossible to know what food prices would have been if there wasn't a CAP, that is speculation at best. Also, It is irrelevant whether or not CAP is a good thing or not, You are talking about Irish economic development, and CAP was a net injection of billions of pounds into the irish economy which helped to stimulate growth. The structural funds were also a major reason why Ireland moved from a second world economy to an advanced one.

In reality, th Common Agricultural Policy benefits neither farmer nor consumer. Technocrats in Brussels pour billions of euros each year into a bureaucratic black hole, benefitting nobody but themselves.

the point of the CAP is to protect farmers from the fluctuations in the market prices of food, to allow them to plan and produce without the risk of going bankrupt everytime there is a glut of supply that drops prices below their cost of production.
The reasoning is that it's better to pay a little bit extra for food, and retain the capacity to produce food in the E.U., than to rely on markets, and be screwed if there was ever an international crisis that affected international trade (war for example)

What would happen in a libertarian situation where libertarianland is fully industrialised and imports all its food from abroad using the surplus from selling their wares, suffers a trade embargo as a result of international conflict or even the outbreak of infectious disease..

Permabear

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Akrasia

Why do companies invest in Switzerland?

for the skiing?

These statistics from the Taxpayers' Alliance were widely published in the British media about three months ago. Why do you believe that is it "impossible" to calculate the cost of agricultural protectionism to the British consumer?

So they were plucked out of the asses of a load of anti E.U. Tories and then 'widely reported' amongst the corporate media. Must be true so.
The reason it is impossible, is because the CAP is there and has been for 40 years, and if it hadn't been there, then european agriculture could have moved in any number of different directions and would look completely different to how it looks today. It's impossible to calculate in the same way that it's impossible to calculate how many storms there would have been over Dublin City in 2006 if we had painted all the roads in the country white.

Then why did you introduce it into the debate?

Because it was a large scale form of protectionism that affected Ireland's economic development and you were claiming that we only 'grew' because of all them free markets

The CAP has also helped to stimulate agricultural inefficiency and boost the cost of basic foodstuffs to astronomical heights. Naturally, you think our amateurish, uncompetitive agricultural sector is a good thing.

I don't think it is a good thing to compete on price alone when it comes to food standards and the rural environment. Because of CAP, irish farms are generally smaller and the food quality is exceptionally high by international standards. If you had your way chickens from thailand could be sold here on the exact same competitive basis as Irish high quality chickens, with no compulsary labeling or minimum standards and pumped full of as many chemicals as the farmers can get their hands on.

And the shift had nothing to do with the increasingly liberal policies adopted in the 1990s?

the shift towards a bubble economy( selling more and more houses to each other, reducing corporate taxes to attract transfer pricing) in the late 90s had a huge amount to do with the increasingly liberal policies. I fully agree with you.

Have you talked to any dairy farmers recently?

Yes, and they're pissed off, but thats because the CAP has moved from price supports to income supports, and it is now very difficult for dairy farmers to make a living in this country. Should all these farmers go out of business? That's what would happen in a libertarian world.

I presume that people would immediately turn to producing their own food? But why do you really think it's realistic that a peaceful libertarian island would become the target of an international food embargo? Why would this happen? Or is this just more scaremongering to justify state protectionism?

Anything is possible, and if you, as a nation, don't have contingencies for providing your own food in a time of emergency, you end up staring at a bucket full of earth and starving to death waiting for the potato to grow.

Permabear

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synd

It was fannie and fred

The refusal of bourgeoisie economists to describe the state - market in terms of a symbiotic relation is central to their propagandistic deception. The state hardly forces banks to make excessive loans - and to remove legislation that forbids it is clearly a liberal policy.

This was a prewar-style recession, a morning after brought on by irrational exuberance.

Irrational exuberance = de-regulation, entirely liberal. Eg The commodity futures modernization act passed through the senate enshrined de-regulated investment banking, expanded sub-prime mortgage lending, massive derivatives market and fusion of banking and insurance. Pre war style recession, eh yea - in that legislation moved away from the keynesian model to a more liberalized one. Do you even understand what you just copy pasted ?

According to your crackpot ideology un-regulated market transactions between consenting individuals can do no wrong. Its been proven however that the market, in specific the financial sector is highly unstable and requires regulation. Neo-classical and Austrian economic theory is the problem here - individuals are not ''rational actors'' with ''perfect knowledge'' - people act irrationally in order to make short term gains - a fact that flies in the face of your ideology. The market contains innumerable externalities. Most importantly asymmetry in info - neo liberalism is dead - get over it.


Free advice - copy pasting entire arguments without referencing indicates profound ignorance of the topic at hand - very bad form. Furthermore, quoting a known Keynesian hardly helps your case considering hes a staunch opponent of crackpot liberalism.

synd

in terms of the collapse the US is going through now the Austrian analysis is that the Fed is at the centre of this (as a tool of gov policy). As its mandate is to promote economic growth it has an incentive to underprice interest rates and issue too much credit.

The state allows bankers to meet the demand for credit by creating it. How could the state force bankers to expand credit by loaning more money than they have in savings The credit money created by banks would exist in absence of centralized banking. Heyek was thoroughly refuted on this in the 30s by Kaldor. Banks loan out more money than they possess in savings in order to increase profits.

The logical policy choice after dot com was to let the recession happen and not try pump up another bubble as Krugman was recommending in 2002, had that happened the US would have been well into a recovery by now.

Again more discarded nonsense spewed by that fool Heyek. Pending collapse in demand for goods and services, savings in the circumstance of recession would not be used for investment. What company would increase capital stock facing a fall in demand ? Deflationary policy lol. What silly creatures the austrians are

Synd tried to imply that things only went bad from the Regan era (keep you data set short enough and you can prove anything) The Austrians would go back to the creation of th Fed as a reasonbale year 0 on this , the next milestone was the new deal that prolonged the depression and the next one was the US coming off the gold convertability in the early 1970's

Actually the Austrians would go back to the time the state first contaminated the sanctity of the virgin market, in which case the history of economic reality is a sin ridden diatribe. These people are borderline schizophrenics, really not worth engaging with. Claiming the new deal was a bad thing after their disastrous policy caused the depression really illustrates just how delusional these poor fools are.

The second option, namely imposing a 100% gold reserve limit for banks is highly interventionist and so not remotely laissez-faire (why should the banking industry be subject to state regulation unlike the rest?). Its logic is simple, namely to ensure that banks do not make loans unless they have sufficient savings to cover them all. In other words, it seeks to abolish the credit cycle by abolishing credit by making banks keep 100% gold reserves against notes. This, in effect, abolishes banking as an industry. Simply put (and it seems strange to have to point this out to supporters of capitalism) banks seek to make a profit and do so by providing credit. This means that any capitalist system will be, fundamentally, one with credit money as banks will always seek to make a profit on the spread between loan and deposit rates. It is a necessity for the banking system and so non-fractional banking is simply not possible. The requirement that banks have enough cash on hand to meet all depositors demand amounts to the assertion that banks do not lend any money. A 100% reserve system is not a reformed or true banking system. It is the abolition of the banking system. Without fractional reserves, banks cannot make any loans of any kind as they would not be in a position to give their clients their savings if they have made loans. Only someone completely ignorant of a real capitalist economy could make such a suggestion and, unsurprisingly, this position is held by members of the "Austrian" school (particularly its minimum state wing). Anarchist FAQ

synd

But he can't explain (a) why protectionism often leads to stagnation, or (b) why free trade often does work. Look at Ireland, for instance.

Actually the central thesis is that the vast majority of first world nations developed via large scale protectionism - and that free trade in the purest sence leads to stagnation. His work is largely an attack on pseudo academic libertarian cults within the US - from David Friedman to the Austrian school of economics. To label Chang a member of the far left however is ridicules, he has worked as an adviser to the World bank, Asian development bank and UN.

synd

the children of the elites in Ireland are anti-capitalist because Ireland is not really a capitalist controlled society. The ruling classes are what the English call the Establishment - High level State, Managerial, and Professional. Some members of this class have - since 1968 - being fooling themselves on their radicalism. Their kids are getting even more delusional.

Ireland is a capitalist ruled society like any other only its dominated by foreign capital. The upper class the left refers to do exist although they arn't tangible, large overseas stockholders ect. The local power base however does consist of the class you refer to - and their role in the suppression of the working class is downplayed on the left.

I am hell bent on destroying those cartels. Asdasd is a class warrior.

Class warrior indeed

My "politcal theory" as to why the sons and daughters of the managerial elites would be anti-capitalist is simple - it deflects the light from the actual ruling classes.

Having been around the left a while, id say theres a fair bit of truth in this. Usually comes to light when the significance of the co-coordinating class is brought up in discussion - alot of heads tend to drop for some strange reason. Im of the opinion that this class need to be exposed and targeted in the proccess of socialist reform. The capitalist class are nothing without their lackys.;)

silverharp

synd wrote: »

The refusal of bourgeoisie economists to describe the state - market in terms of a symbiotic relation is central to their propagandistic deception. The state hardly forces banks to make excessive loans - and to remove legislation that forbids it is clearly a liberal policy.

Again context you seem to want to twist quite simple points. I will fully agree with you if there is a central bank and pro growth gov. policies regulate the hell out of he financial sector becuse they will get drunk on the free credit

synd wrote: »

Irrational exuberance = de-regulation, entirely liberal. Eg The commodity futures modernization act passed through the senate enshrined de-regulated investment banking, expanded sub-prime mortgage lending, massive derivatives market and fusion of banking and insurance. Pre war style recession, eh yea - in that legislation moved away from the keynesian model to a more liberalized one. Do you even understand what you just copy pasted ?.

If you have read anything about the Austrian position you would realise that their primary concern is the role of the Fed and a Fiat money standard. The Fed & the gov. made the great depression worse, it created the inflation of the 60's and 70's and created/facilitated the build up of imbalances from the same era. I have no problem being critial of Rubin who increased deregulation under the Clinton gov. by facilitating the OTC market or the roll out of the community reinvestment Act that was one of the prime reasons the subprime market started in the first place. Again if the Fed and gov intervention is the order of the day any element of liberalistaion of financial markets will not solve anything from an Austrian perspective.

synd wrote: »

According to your crackpot ideology un-regulated market transactions between consenting individuals can do no wrong. Its been proven however that the market, in specific the financial sector is highly unstable and requires regulation. Neo-classical and Austrian economic theory is the problem here - individuals are not ''rational actors'' with ''perfect knowledge'' - people act irrationally in order to make short term gains - a fact that flies in the face of your ideology. The market contains innumerable externalities. Most importantly asymmetry in info - neo liberalism is dead - get over it.

I have never heard the term "perfect Knowledge" in Austrian circles. The market if left to its own devies will send signals via interest rates etc. which will help guide resourses to be used in the most efficient manner but understands that people can make poor investment choices, the best way to mitigate the damage is for the poor choices to be exposed quickly so that the resources can be redeployed. Compare that to say the treatment of AIB etc which are being propped up and will keep the dysfunctional setup in operation longer then it needs to be. Feel free to watch the video link I posted and come back with any discussion points worth discussing

synd wrote: »

Free advice - copy pasting entire arguments without referencing indicates profound ignorance of the topic at hand - very bad form. Furthermore, quoting a known Keynesian hardly helps your case considering hes a staunch opponent of crackpot liberalism.

I like free advice but you misunderstood, the link and the part I posted was from Krugmans blog in 2002. I thought it was a clear example of disfunctional Keynsian advice to pump up a new bubble in property which was exactly what the Fed did.
The Austrian advice at the time was to let the recession play out, and not reduce interest rates to 1% or run gov deficits.

synd

Again context you seem to want to twist quite simple points. I will fully agree with you if there is a central bank and pro growth gov. policies regulate the hell out of he financial sector becuse they will get drunk on the free credit

Their are no distortions in my explanation. Naturally proponents of upper class rule prefer to have social conflict removed from economic discourse. Free market propagandists must also necessarily ignore the internal contradictions within capitalism that cause crisis and through ''what can only be described as pure deception'' claim the cause to be the attempted cure. For instance, cheap labor leads to over-investment in capital, and subsequently over-production in relation to commodity demand. Ensuing crisis is often offset by increasing working class debt - providing loose credit as stimulation.

Now, proponents of upper class rule have a tendency to lie and assert that crisis is caused by state attempts to stabilize the market - however crisis is clearly inherent to the market. The central point is that capitalism is a broken system, state control of money is inconsequential to the nature of capitalist crisis. Under the gold standard depression was far more frequent ie. 1807, 1837, 1873, 1882, 1893, 1920, 1933, and 1937. State control of money has been used to offset socially undesirable effects of crisis. For instance the recessions of 1945-46, 1949, 1954, 1956, 1960-61, 1970, 1973-75, 1980-83, 1990-92 where all prevented from turning into depressions.

If you have read anything about the Austrian position you would realise that their primary concern is the role of the Fed and a Fiat money standard. The Fed & the gov. made the great depression worse, it created the inflation of the 60's and 70's and created/facilitated the build up of imbalances from the same era.

The Fed doesn't cause inflation - ''right wing fallacy''. Inflation is typically a result of the bourgeoisie offsetting costs in form of price increases and wage reductions in times of high employment and labor organization. Prices rising in conjunction with wage stagnation creates decrease in demand. The Gov merely try to re-stimulate demand via credit allocation - failure to do this would likely lead to social unrest.

I have no problem being critial of Rubin who increased deregulation under the Clinton gov. by facilitating the OTC market or the roll out of the community reinvestment Act that was one of the prime reasons the subprime market started in the first place. Again if the Fed and gov intervention is the order of the day any element of liberalistaion of financial markets will not solve anything from an Austrian perspective.

Indeed, its an ideological inconsistency to advocate free markets in goods but regulatory policy in finance.The implementation of the gold standard by the gov would be regulatory in nature esp considering the degree to which the modern economy is built upon credit. A fact Austrians ignore.

The market if left to its own devies will send signals via interest rates etc. which will help guide resourses to be used in the most efficient manner but understands that people can make poor investment choices, the best way to mitigate the damage is for the poor choices to be exposed quickly so that the resources can be redeployed.

This claim rests upon the assumption of equilibrium - which is impossible in any real capitalist economy as proven by Kaldor in his refutation of Heyek. The material below is a most comprehensive destruction of the Austrian position.


Kaldor's critique was combined with an earlier critique by Piero Sraffa who noted that Hayek's desire for "neutral" money was simply impossible in any real capitalist economy for "a state of things in which money is 'neutral' is identical with a state in which there is no money at all." Hayek "completely ignored" the fact that "money is not only the medium of exchange, but also a store of value" which "amounts to assuming away the very object of the inquiry." Sraffa also noted that the starting point of Hayek's theory was flawed: "An essential confusion is the belief that the divergence of rates is a characteristic of a money economy. If money did not exist, and loans were made in terms of all sorts of commodities, there would be a single rate which satisfies the conditions of equilibrium, but there might be at any moment as many 'natural' rates of interest as there are commodities, though they would not be 'equilibrium' rates. The 'arbitrary' action of the banks is by no means a necessary condition for the divergence; if loans were made in wheat and farmers (or for that matter the weather) 'arbitrarily changed' the quantity of wheat produced, the actual rate of interest on loans in terms of wheat would diverge from the rate on other commodities and there would be no single equilibrium rate." ["Dr. Hayek on Money and Capital," pp. 42-53, The Economic Journal, vol. 42, no. 165, p. 42, pp. 43-4 and p. 49] Hayek admitted that this was a possibility, to which Sraffa replied:

"this is that his maxim of policy now requires that the money rate shonly under conditions of equilibrium would there be a single rate, and that when saving was in progress there would be at any one moment be many 'natural' rates, possibly as many as there are commodities; so that it would be not merely difficult in practice, but altogether inconceivable, that the money rate would be equal to 'the' natural rate . Dr. Hayek now acknowledges the multiplicity of the 'natural' rates, but he has nothing more to say on this specific point than that they 'all would be equilibrium rates.' The only meaning (if it be a meaning) I can attach to ould be equal to all these divergent natural rates." ["A Rejoinder," pp. 249-251, Vol. 42, No. 166, p. 251]

Continued

Take, for example, "Austrian" economist W. Duncan Reekie's argument that the business cycle "is generated by monetary expansion and contraction . When new money is printed it appears as if the supply of savings has increased. Interest rates fall and businessmen are misled into borrowing additional funds to finance extra investment activity." This would be of "no consequence" if it had been the outcome of genuine saving "but the change was government induced . Capital goods industries will find their expansion has been in error and malinvestments have been incurred" and so there has been "wasteful mis-investment due to government interference with the market." [Markets, Entrepreneurs and Liberty, pp. 68-9]

Yet the government does not force banks to make excessive loans and this is the first, and most obvious, fallacy of argument. After all, what Reekie is actually complaining about when he argues that "state action" creates the business cycle by creating excess money is that the state allows bankers to meet the demand for credit by creating it. This makes sense, for how could the state force bankers to expand credit by loaning more money than they have savings? This is implicitly admitted when Reekie argues that "[o]nce fractional reserve banking is introduced, however, the supply of money substitutes will include fiduciary media. The ingenuity of bankers, other financial intermediaries and the endorsement and guaranteeing of their activities by governments and central banks has ensured that the quantity of fiat money is immense."

asdasd

I have no idea what you are talking about? Ireland isn't a capitalist society?

Hmm. Well lets put is simply.

Let's say I am reading a text from 1980 about Ireland being a capitalist society.

Lets say that the "radical" is a priest, albeit one of the liberation theology variety.

What asdasd would say to said Priest, at the time ( and were he around), is that Ireland is a priest run society with little, or no, capitalist class. Ireland was run by priests, not capitalists. A capitalist society would have been a lot freer.

The same criteria applies to the anarchists whose "radicaism" is entirely upper middle class.

There is no Mr Google. There is no Mr Apple. We import capitalism, and anyway, capitalists are a diffuse set of shareholders. A retired employee of GM depends on the GM pension, which is given in dividends, and/or is dividend related.

Is he capitalist?
yes.

is he ruling class
No.

The ruling classes in Ireland are not the capialist classes, but the professional, upper civil servant, upper magagerial classes, the law and medicine cartel etc.

Just as a 1980's radical priest could ignore the Catholic Church ( which is ruling class no longer), the eites from the professional classes - which are utterly stratified - can ignore their classes which are the primary ruling classes in Ireland. And attack capitalism instead. How convienient.

We import capitaism, and the ownership is diffuse.

So lets go after the real ruling classes, shall we?

asdasd

On that subject asdasd supports affirmative action against anyone with a poncy D4 accent.

Thats a lot more radical, and achievable than any faux-radialism I have seen on this thread, so far.

Let the capitalists alone. Some of them come from Dublins inner city, after all. And that is really what gets your groat.

asdasd

Parecon (an economic system developed by Michael Albert and Robin Hahnel at Znet) proposes the idea that another class exists between the ruling and working classes, termed the "co-ordinator class". It seems to be this class to which asdasd is referring.

**** Parecon. What asdasd is saying is that the shareholders of AIB, Anglo Irish, and BOI were powerless dupes who are in no sense a ruling class. Certainly not in this country ( Capitalists are more powerful elsewhere).

Asdasd's lower middle class mother put money into AI?B, and lost it all. She was powerless, the managerial class was powerful. And that class lost her her money. And are, for some strange reason, not hanging from trees with their balls in their mouths. The same class - the fee paying schoolboy class - runs RTE, the Civil service, the Newspapers, the LAw, and the Upper Professsions. All inter-related.

We all know this. And this class isnt capitalist. That would involve trade which is a no-no. In fact a member of this class can be a radical all his life, and his connections will get him that nice little plush job in RTE. He can still have a framed photo of Chomsky on the wall. It might in fact, in certain circles, be necessary.

It is not the 19th century anymore. Owner-Managerial capitalists no longer exist.

Captialists are small time in Ireland, and can come from anywhere. Like that inner city guy on the Apprentice. That is what gets your goat about capitalism, unlike parts of Irish society, it is not stratified enough.


So lets look for the real ruling classes elsewhere, shall we.

Permabear

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synd

donegalfella wrote: »

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Im sure Iv read more Austrian theory than you DF - or perhaps iv just understood more. Now, care to actually respond to the argument framed in the post, rather than diverting attention onto whats quite clearly a typo - or is that to much ?

Permabear

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silverharp

synd wrote: »

Now, proponents of upper class rule have a tendency to lie and assert that crisis is caused by state attempts to stabilize the market - however crisis is clearly inherent to the market. The central point is that capitalism is a broken system, state control of money is inconsequential to the nature of capitalist crisis. Under the gold standard depression was far more frequent ie. 1807, 1837, 1873, 1882, 1893, 1920, 1933, and 1937. State control of money has been used to offset socially undesirable effects of crisis. For instance the recessions of 1945-46, 1949, 1954, 1956, 1960-61, 1970, 1973-75, 1980-83, 1990-92 where all prevented from turning into depressions.

The Fed doesn't cause inflation - ''right wing fallacy''. Inflation is typically a result of the bourgeoisie offsetting costs in form of price increases and wage reductions in times of high employment and labor organization. Prices rising in conjunction with wage stagnation creates decrease in demand. The Gov merely try to re-stimulate demand via credit allocation - failure to do this would likely lead to social unrest.

You need to look at each of those recessions/depressions more closely, for instance prior to the 1873 crash the federal gov had created the National Banking System under the Bank Acts 1863-65 , funnily enough the Democrats were against this as they were more supportive of a hard money system.
I dont think anyone is saying you will never get a recession under a gold standard, but they will be shorter then when any intervention takes place and there will have been less mal investment in the run up to them so the correction will be less severe.
As for your 20C examples by definition not all could have been depressions, you are sounding like a mouth piece for the Fed here, "look we keep saving the day" . The blow back from all these interventions apart from the inflation was the fact that a build up of non liquidating debt started to built up from the 70's onwards , this would not have built up under a gold standard.

I didnt understand what you wrote about the Fed not casuing inflation. Logically they must, given increasing productivity, prices have a tendancy to drop over time, ie if the average person spent X % on food at the turn of the 20th C , a smaller % of income would be required to buy the same basket of goods in the future due to productivity gains, same logic with air travel etc. Nominally prices should be falling, the fact they do not is because of inflation of the currency, effectively the unit of measure is clipped every year. The gold standard is offering a system of honest weights and measures which is less easily manipulted by gov.

synd wrote: »

Indeed, its an ideological inconsistency to advocate free markets in goods but regulatory policy in finance.The implementation of the gold standard by the gov would be regulatory in nature esp considering the degree to which the modern economy is built upon credit. A fact Austrians ignore.

No, The Austrian conclusion is that central bank policy to inflate the supply of credit with "confuse" the financial sector and the general public, under such a system the more transparancy the better but the regulation will probably fail as well as it will be co-opted by the money centre banks. Look at the US Treasury Secretary Geithner, he is as much interested in the fortunes of Goldman Sachs then he is the American public.

synd wrote: »

This claim rests upon the assumption of equilibrium - which is impossible in any real capitalist economy as proven by Kaldor in his refutation of Heyek. The material below is a most comprehensive destruction of the Austrian position.

I assume you picked that up from here http://www.infoshop.org/faq/secC8.html . Firstly you will need to explain to me why I need to consider equilibrium, the only thing I know that is in a state of equilibrium is dead.

I'll finish with 2 paragraphs from Human Action by Von Mises
http://mises.org/humanaction/chap12sec1.asp

"Yet, these facts do not detract from the efficiency of economic calculation. Economic calculation is as efficient as it can be. No reform could add to its efficiency. It renders to acting man all the services which he can obtain from numerical computation. It is, of course, not a means of knowing future conditions with certainty, and it does not deprive action of its speculative character. But this can be considered a deficiency only by those who do not come to recognize the facts that life is not rigid, that all things are perpetually fluctuating, and that men have no certain knowledge about the future.

It is not the task of economic calculation to expand man's information about future conditions. Its task is to adjust his actions as well as possible to his present opinion concerning want-satisfaction in the future. For this purpose acting man needs a method of computation, and computation requires a common denominator to which all items entered are to be referable. The common denominator of economic calculation is money."

synd

I dont think anyone is saying you will never get a recession under a gold standard, but they will be shorter then when any intervention takes place and there will have been less mal investment in the run up to them so the correction will be less severe.

Not only will recessions come about under the gold standard but taking the last era it was implemented into account - ''depressions'' will be far more frequent. Under fiat money Gov can combat unemployment through the contraction and expansion of supply. Besides, most major deposits of gold have been mined and in the absence of new discoveries the standard would be subject to a fall in commodity prices. This could of course be rectified via regulation in the quantity of gold defined as money

As for your 20C examples by definition not all could have been depressions, you are sounding like a mouth piece for the Fed here, "look we keep saving the day" . The blow back from all these interventions apart from the inflation was the fact that a build up of non liquidating debt started to built up from the 70's onwards , this would not have built up under a gold standard.

I have already illustrated the increased frequency of depression under the gold standard from a historical perspective. The great depression being a prime example. Increasing debt is one method of offsetting crisis. Austrians would be happy to see the massive unemployment and poverty that would invariably occur whilst prices re-adjust under gold. However in reality prices wouldn't even ''re-adjust''. Socialists on the other hand don't advocate crisis, it can altogether be averted under a planned system.

I didn't understand what you wrote about the Fed not casuing inflation. Logically they must, given increasing productivity, prices have a tendancy to drop over time, ie if the average person spent X % on food at the turn of the 20th C , a smaller % of income would be required to buy the same basket of goods in the future due to productivity gains, same logic with air travel etc. Nominally prices should be falling, the fact they do not is because of inflation of the currency, effectively the unit of measure is clipped every year.

Again your theory does not reflect the reality of the market, and you have ignored the central point, namely that inflation is a characteristic of the market. Inflation isn't caused by the gov, they merely attempt to manage it, nor is inflation purely monetary, its a by-product of class struggle.

In the event of increasing productivity, increasing wage and high employment prices should fall, however the bourgeoisie facing decline in the rate of profit offset expenditure on further capital investment through increasing prices and reducing wage. The subsequent increase in price and reduction in wage causes commodity demand to fall. Ensuing crisis can be approached in numerous ways - do nothing, stimulate demand by allocating loose credit, or expand the market in order to avail of cheaper labor (imperialism). Accumulation through dispossession - ie. using crisis as an excuse to virtually steal public property - turning it from a tax burden into a source of profit ect.

No, The Austrian conclusion is that central bank policy to inflate the supply of credit with "confuse" the financial sector and the general public, under such a system the more the transparancy better but the regulation will probably fail as well as it will be co-opted by the money centre banks. Look at the US Treasury Secretary Geithner, he is as much interested in the fortunes of Goldman Sachs then he is the American public.

Info provided by the interest rate is not sufficient to ensure rational investment. Austrian theory = fail. "this argument is flawed. It is not clear that the relevant information is communicated by changes in interest rates." This is because interest rates reflect the general aggregate demand for credit in an economy. However, the information which a specific company requires "if the over-expansion in the production of some good is to be avoided is not the general level of demand for credit, but the level of demand amongst competitors." It does not provide the relative demands in different industries (the parallels with Sraffa's critique should be obvious). "An increase in the planned production of some good by a group of competitors will be reflected in a proportional change in interest rates only if it is assumed that the change in demand for credit by that group is identical with that found in the economy as a whole, i.e. if rates of change in the demand for credit are even throughout an economy. However, there is no reason to suppose such an assumption is true, given the different production cycles of different industries." This will produce differing needs for credit (in both terms of amount and of intensity). "Assuming uneven changes in the demand for credit" between industries reflecting uneven changes in their requirements it is quite possible for over-investment (and so over-production) to occur "even if the credit system is working 'satisfactorily'" (i.e., as it should in theory. The credit system, therefore, "does not communicate the relevant information" and for this reason "it is not the case that we must look to a departure from an ideal credit system to explain the business cycle." [Op. Cit., pp. 135-6] Anarchist FAQ


Moreover, the suggestion that banks don't loan in the event that they have no credit on hand is paramount to advocating the end of banking as an industry, given how modern capitalism works. The implementation of gold standard would be a form of regulation - laughable coming from supposed proponents of free trade. Nor is it the case that the state ''forces money upon the banks'' - in reality its the other way around, the banking industry seeking interest on return looks for credit from the state, who merely facilitate the operation. Your entire position is based on a fallacy of division - the state and market are essentially symbiotic, this is how existing capitalism functions. The Austrian position amounts to describing the heart as a parasite of the body.

I assume you picked that up from here http://www.infoshop.org/faq/secC8.html . Firstly you will need to explain to me why I need to consider equilibrium, the only thing I know that is in a state of equilibrium is dead.

While you admit that equilibrium is dead - Austrian theory is rooted in both the credit market and labor market being in equilibrium. This is done in order to offset claims that ''pure capitalism'' would result in working class exploitation or that it would be susceptible to instability. Hayek himself argues that the cause of unemployment is a deviation of prices and wages from equilibrium and continues to assert that this would not occur under ''free market'' conditions.

It is not the task of economic calculation to expand man's information about future conditions.

Something we agree on

Its task is to adjust his actions as well as possible to his present opinion concerning want-satisfaction in the future. For this purpose acting man needs a method of computation, and computation requires a common denominator to which all items entered are to be referable. The common denominator of economic calculation is money."

While money is a medium of exchange it is also a representation of labor value. Value should not be equated directly with money-price. Furthermore value can and should be conveyed in terms of socially necessary labor time seeing as the inherent value of the commodity can be distorted via currency.

silverharp

synd wrote: »

Not only will recessions come about under the gold standard but taking the last era it was implemented into account - ''depressions'' will be far more frequent. Under fiat money Gov can combat unemployment through the contraction and expansion of supply. Besides, most major deposits of gold have been mined and in the absence of new discoveries the standard would be subject to a fall in commodity prices. This could of course be rectified via regulation in the quantity of gold defined as money

Firstly gold isnt a commodity in the strict sense as most gold ever mined is still in existance and not consumed, over time the growth in gold supply has generally matched the rise in population.
Why do recessions/depressions happen? Generally there has been an over/mal investment in some part of the economy. The mal investment will be worse in a Fiat economy as the central bank can create money out of nothing and lend it to the banks or the gov. thus magnifiying the boom. This cannot happen under a gold standard with a limited gov., if one economy runs a trade deficit the gold moves abroad and prices fall to bring the deficit back into balance.
Your faith in gov. is misplaced , by running deficits and printing money, inflation is created, interest has to be paid on the debt and the correction of the mal investment is dragged out. Statists would have us believe that we live in a world of known knowns hence all the economic levers can be tweaked to make the engine hum. The Austrian says no, we live in a world of known unknowns and even some unknown unknowns. Tweak or manage the economy at your peril.

synd wrote: »

I have already illustrated the increased frequency of depression under the gold standard from a historical perspective. The great depression being a prime example. Increasing debt is one method of offsetting crisis. Austrians would be happy to see the massive unemployment and poverty that would invariably occur whilst prices re-adjust under gold. However in reality prices wouldn't even ''re-adjust''. Socialists on the other hand don't advocate crisis, it can altogether be averted under a planned system.

again proving caustion you have not done, if you strip out the effects of prior wars, any gov. regulation or manipulation of banking and other trade policies or subsidies and prove that a gold standard was a core destabilzer, over and above the Fiat equivalent , then I'd be glad to hear it. I could run though history and show you Fiat systems that have fallen apart and caused depressions, the French experience with John Law makes for a great read on the dangers of introducing a Fiat money system.

synd wrote: »

Again your theory does not reflect the reality of the market, and you have ignored the central point, namely that inflation is a characteristic of the market. Inflation isn't caused by the gov, they merely attempt to manage it, nor is inflation purely monetary, its a by-product of class struggle.

you will need to explain this , what does "inflation is a characteristic of the market mean" inflation is an increase in the money supply in excess of the goods/services or capital of an economy. If 1oz of gold could buy a tailored suit in Roman times and today , the inflation rate in terms of gold over 2000 years is near 0 also explain why most major currencies are worth less then 90% of their value since the early 1900's compared to say price moves between the 17th and 19th C?, logically if Sterling had remained on a gold standard, prices would have been more stable. I can say inflation is a characteristic of a statist economy that inflates the currency to break agreements with its public, that seems closer to the truth.

synd

Firstly gold isnt a commodity in the strict sense as most gold ever mined is still in existance and not consumed, over time the growth in gold supply has generally matched the rise in population.

You have a habit of evading my points, the fact that ''growth in supply has historically matched the rise in production'' is negated by the fact we have now (mined most major deposits) ie. there is no longer a sufficient amount left to cover economic activity. Furthermore, gold used not to have much secondary use, however in the contemporary era technology has found numerous uses (electricity conduction ect) and industry is consuming more and more of it. This understood, it is increasingly susepible to price swings just like any other commodity.

Why do recessions/depressions happen? Generally there has been an over/mal investment in some part of the economy. The mal investment will be worse in a Fiat economy as the central bank can create money out of nothing and lend it to the banks or the gov. thus magnifiying the boom. This cannot happen under a gold standard with a limited gov., if one economy runs a trade deficit the gold moves abroad and prices fall to bring the deficit back into balance.

Over investment is inherent to the market, capitalists produce on future expectation. In order to increase profits they up investment and the rate of exploitation, however the amount of investment driven by competition invariably surpasses the quantity of potential profit on the market. This is what is known as the falling rate of profit. Over-investment leading to over production causes crisis, goods left unsold - factories close, unemployment ect

Your faith in gov. is misplaced , by running deficits and printing money, inflation is created, interest has to be paid on the debt and the correction of the mal investment is dragged out.

You have already been thoroughly refuted on this point, signals derived from the interest rate are not sufficient for making decisions with regards rational investment. Austrian theory = fail.

again proving caustion you have not done, if you strip out the effects of prior wars, any gov. regulation or manipulation of banking and other trade policies or subsidies and prove that a gold standard was a core destabilzer, over and above the Fiat equivalent ,

Fractional reserve banking occurs under the gold standard, as Smith explains "Though some of those notes [the banks issued] are continually coming back for payment, part of them continue to circulate for months and years together. Though he [the banker] has generally in circulation, therefore, notes to the extent of a hundred thousand pounds, twenty thousand pounds in gold and silver may frequently be a sufficient provision for answering occasional demands." [The Wealth of Nations, pp.257-8] Competitive banking in Smiths account did not inhibit speculation, demand for excess credit or the subsequent de-stabilization ect.

you will need to explain this , what does "inflation is a characteristic of the market mean" inflation is an increase in the money supply in excess of the goods/services or capital of an economy. If 1oz of gold could buy a tailored suit in Roman times and today , the inflation rate in terms of gold over 2000 years is near 0 also explain why most major currencies are worth less then 90% of their value since the early 1900's compared to say price moves between the 17th and 19th C?, logically if Sterling had remained on a gold standard, prices would have been more stable. I can say inflation is a characteristic of a statist economy that inflates the currency to break agreements with its public, that seems closer to the truth.

The argument that state control of money is the cause of inflation is fallacious and has been refuted. In general there is no relationship between money supply and inflation - as you would be aware if you read beyond outdated monetarist propaganda. In fact inflation often (falls) with increase in money supply, as occurred in the UK under monetarism. Austrians wrongly conceptualize the state as being external to the market and ''forcing'' money upon the economy, however as I have explained in the previous comment the state merely facilitates the markets demand for credit. In reality the state is inseparable from the economy. The right wing notion that in the absence of central banking and state money, fractional reserve will not occur is utter nonsense - ironically proven by Adam Smith.

silverharp

synd wrote: »

You have a habit of evading my points, the fact that ''growth in supply has historically matched the rise in production'' is negated by the fact we have now (mined most major deposits) ie. there is no longer a sufficient amount left to cover economic activity. Furthermore, gold used not to have much secondary use, however in the contemporary era technology has found numerous uses (electricity conduction ect) and industry is consuming more and more of it. This understood, it is increasingly susepible to price swings just like any other commodity.

The "volume" of gold is not an important issue, given that it can be monitized at any value from the start. It would make no difference to the operation of the standard if an oz of gold was valued at 1000$ or 10,000$
Also if you are accepting that a currency holding its value has valid reasoning, but dont like the idea of gold, there are alternatives, silver, oil even a computer algorithm would do it if is was not open to gov. manipulation.

synd wrote: »

Over investment is inherent to the market, capitalists produce on future expectation. In order to increase profits they up investment and the rate of exploitation, however the amount of investment driven by competition invariably surpasses the quantity of potential profit on the market. This is what is known as the falling rate of profit. Over-investment leading to over production causes crisis, goods left unsold - factories close, unemployment ect

Yep that happens, we live in world of uncertainty , it only gets worse the more central planning is involved. the best cure is for the resouces to be redeployed sooner rather than later.

synd wrote: »

You have already been thoroughly refuted on this point, signals derived from the interest rate are not sufficient for making decisions with regards rational investment. Austrian theory = fail.

No, see above point, over investment will happen from time to time, distorting the rate for political purposes will magnify the mal investment.

synd wrote: »

Fractional reserve banking occurs under the gold standard, as Smith explains "Though some of those notes [the banks issued] are continually coming back for payment, part of them continue to circulate for months and years together. Though he [the banker] has generally in circulation, therefore, notes to the extent of a hundred thousand pounds, twenty thousand pounds in gold and silver may frequently be a sufficient provision for answering occasional demands." [The Wealth of Nations, pp.257-8] Competitive banking in Smiths account did not inhibit speculation, demand for excess credit or the subsequent de-stabilization ect.

Could well do. But here is an example of where is doesnt, I have a goldmoney.com account I pay them a small fee to store my gold grams. I have on line access and can transact as I wish , the storage company has no right to lend against these savings. This is the free market running on a small scale. People should have the right to store their savings depending on their risk preference. looking at Ireland it made no difference if you had a post office account or you gave it all to Anglo. If people want to store their savings with a leveraged institution thats fine so long as they are being compensated and are aware of the additional risk (remember their would be no bailouts so savers would have to be more careful). On a macro level it would be up to the sum total of individual preferences as to how much leverage was in the system, but again I think an "Anglo" setup would be near impossible.

synd wrote: »

The argument that state control of money is the cause of inflation is fallacious and has been refuted. In general there is no relationship between money supply and inflation - as you would be aware if you read beyond outdated monetarist propaganda. In fact inflation often (falls) with increase in money supply, as occurred in the UK under monetarism. Austrians wrongly conceptualize the state as being external to the market and ''forcing'' money upon the economy, however as I have explained in the previous comment the state merely facilitates the markets demand for credit. In reality the state is inseparable from the economy. The right wing notion that in the absence of central banking and state money, fractional reserve will not occur is utter nonsense - ironically proven by Adam Smith.

this is from a bank of England publication, I think you would have to say that over time money supply and inflation have a high correlation.
The state is a very different market actor, it can monetize debt , it can borrow to pay public sector wage demands , it rarely pays back the debt so the economy has increasing amounts of non liquidating debt built into the system. To say that the state is just a facilitator of credit is an understatement.
Again the point of the Libertarian/Austrian approach is not to outlaw fractional reserve lending, its not to have a gov. mandated system that promotes increased borrowing for its own ends. In a pure market system if fractional lending develops it will be for profits motives not for the "good of the economy" if the bank/investor gets it wrong they will be bankrupted. The risks will be better priced which for example did not happen in the Post Office /Anglo refernce I made earlier, in effect Anglo got a fee ride as Anglo depositors didnt have to price in the additional risk

simplistic

Here it is all your questions answered:

http://www.youtube.com/watch?v=Z1EvGFGJGTk&feature=channel_page