Comments on Comments #1

December 28, 2007

I like the idea of “Reader Mail” which FSK writes regularly, allowing him an opportunity to respond to e-mails and comments without limiting to the confines of the “comments” section of the blog. I am going to start publishing “Comments on Comments” because I think it’s a good idea, too.

In response to my Quick Hits, KipEsquire asks (about government gold holdings):

$229.52 billion is a lot? Compared to, say, M2 or the total value of publicly traded securities?

Kip and I agree on many, many things, and I find his blog extremely insightful. One of the few things on which he and I disagree is banking, more particularly, fractional reserve banking. Kip has established firmly his point of view with regards to gold standards and gold bugs, and he usually leaves a comment in response to any inquiry or commentary I write about specie-backed currency. I consider this encouraging, because I’m a fan of discourse. I use the terms “gold standard,” “full reserve banking” and “specie-backed” pretty much interchangeably. In any event, I’ve been meaning for quite some time to post a response to many objections to the gold standard. Alas, today is not that day, but I do have a response to Kip’s question.

According to the numbers cited at CNN, there is approximately $4.5T worth of gold, worldwide in private & public hands. This amounts to about 1/3 of the U.S. Economy’s GDP. Although certainly not “a lot”, it is nevertheless a substantial amount. It is important to consider that there exists a tremendous amount of Real Assets which are non-fiduciary in nature. Just because the value of one particular real asset (e.g., Gold) does not equal the value of the world’s wealth (or more particularly, the volume of circulating paper currency) is no reason to discount that particular asset as anachronistic or insufficient to facilitate trade. Real wealth is embodied in goods and services. If every single Federal Reserve Note (or Euro, or Yen, or whatever) spontaneously evaporated tomorrow, the amount of real wealth in the world would not change for the worse. (There may be liquidity problems, but that’s another debate.) Similarly, if every single Federal Reserve Note (or Euro, or Yen, or whatever) spontaneously became two Federal Reserve Notes tomorrow, the amount of real wealth in the world would not change for the better. Creating money out of thin air does not create productive resources out of thin air, and is incapable of creating wealth. Reallocating, perhaps. But creating? No.

Kip, I promise that sooner or later, I’ll get around to writing a response to all of your gold objections.  I have an MS OneNote file full of snippets, links, quotes, and notes…

++

Matt++ and Ethan Lee Vita seem to like my “Property Rights” approach to smoking bans.

What I really like about the property rights approach is that the argument is bulletproof, once you can convince your opponent that property rights exist universally. Unfortunately, most people are perfectly willing to hold two contradictory positions, or some other subjective gobbledygook like “the workers’ right to be free from smoke trumps the right of the owner to establish his own work rules.” If your opponent doesn’t believe in property rights he can’t validly argue that he has a right to be free from second-hand smoke. Of course, the absence of a valid argument doesn’t mean he’ll agree with you. He probably will continue to disagree — I find it hard to trust these people. At this point, you’re on your own.

++

Speaking of anachronisms, some ass-hat at Harvard thought that the second amendment is just that sort of thing.

In the context of today’s society, the Second Amendment is outdated. Constitutional debates over its interpretation stand in the way of the implementation of pressing public policy. Instead of wasting time attempting to fix this anachronism, we should repeal this amendment and focus our efforts on legislation that will actually protect the “security of a free state”—a charge explicit in the Second Amendment.

I charge the anonymous author with four counts of Shitty Journalism in the First Degree. Tony comments that he’ll be busy not revering Harvard, as long as Harvard is busy not revering the rights of individuals. Of course the sad fact is that the Constitution hasn’t done a very good job protecting the people from the government. If anything is anachronistic, it’s the idea of a government which A) can be meaningfully restrained, B) doesn’t grow perenially and perpetually, per Higgs’ ratchet effect and C) is truly consented to by those it governs.

++

My friend Matt doesn’t blog, but he probably should. He said that “for every perceived problem which politicians aim to solve, the Left simply wants to throw money at it, and the Right holds that ‘if you work hard, you’ll accomplish great things’. For instance, the left wants to throw money at health care, and the right says ‘work harder.’ Christ, democrats think that they can cure the common cold by throwing money at it, and republicans could cure it by lowering taxes…”

++

I had a conversation with a friend the other day, it is not easy to convince people that they’re actually slaves. He told me I should vote. I told him I didn’t want to vote, I didn’t want to run people’s lives, and I didn’t want others to run my life. He started talking about democracy, and I punched him in the throat.

But no, seriously. I did not punch him. I just told him that “democracy approved of slavery for hundreds of years,” but that didn’t make slavery OK. There’s nothing magical about democracy. He thinks that the world would go to hell in a handbag if it weren’t for government, but by my count, we’re already well on our way.

+++

That takes us well back into November, which I think is far enough. I will post “Comments on Comments” intermittently, as quantity and timeliness necessitate.

It is snowing today. Big, light, fluffy flakes. It was supposed to rain. Now it is supposed to snow all night, but probably not much accumulation. I’ll be snowboarding again, tomorrow morning then.


Comments

4 Comments so far

  1. KipEsquire December 28, 2007 3:53 pm

    You can start by explaining how it’s legitimate to compare a stock value (total gold) to a flow value (annual US GDP).

    That would be like saying I have “lots of beer” while ignoring the rate at which you can drink it.

    Cheers! ;-)

    P.S. “Creating money out of thin air does not create productive resources out of thin air, and is incapable of creating wealth.”

    Yet gold-as-currency is also “creating money out of thin air.” Can I put gold coins in my gas tank and drive my car?

    A gold coin is only as valuable as someone else’s willingness to accept it in exchange. There is exactly zero “intrinsic value” in gold, or paper, or fig newtons or any other potential medium of exchange.

    Gold is not valuable because it’s gold; gold is valuable only because someone else considers it valuable.

  2. David Z December 28, 2007 5:16 pm

    M2 at something like $7T (or half of GDP) doesn’t much change my underlying argument, I probably should’ve looked that up instead of GDP. As wealth (i.e., output) increases under a commodity standard and a relatively unchanging money supply, prices tend to decline.

    Federal reserve notes are only valuable because a government declares that you must accept them as valuable, enforced by a gun; and people are generally prohibited from dealings in anything other than FRNs for the large majority of transactions.

    The absence of fiat money does not mean that money or exchange ceases to occur, only that people trade things mutually accepted as valuable for one another. Historically speaking, this has been gold, but it need not be gold. My advocacy for gold should be taken in this context.

  3. Francois Tremblay December 29, 2007 8:31 am

    Oops, you sure walked right into that one viz smoking. Since we’re against work hierarchies, the argument that employees rights are fundamental is correct because all businesses should be self-managed.

  4. Tony December 29, 2007 8:49 am

    One point within the gold standard (i.e. voluntary exchange) vs. fiat currency I’m interested in is efficiency. How does that factor in the former, since it clearly exists in the latter?

    P.S. I like this “Comments on Comments” idea.

Leave a Comment

If you would like to make a comment, please fill out the form below.

Name (required)

Email (required)

Website

Comments

Archives

Categories