no third solution

Blogging about liberty, anarchy, economics and politics

Category Archives: gold bugging

Comments on Comments #25

October 14th, 2008

About a month’s worth of comments!

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Kip Esquire responds to my 401(k) conundrum:

I would hope that your 401(k) has a money-market option.

There is a money-market option. I should have allocated more to that, several months ago. I didn’t. In any event, my 401(k) is rebalanced as of this evening.
http://1955design.com/journal/
1955Design follows up with,

Your fund family that your 401k is in probably has a gold or precious metals fund.

Although I am not sure that now is the time for that investment, either

I looked for this before, admittedly, I did not look very hard. I did not see anything that appeared to be a gold or precious metals fund. Some of these are ETFs or other things, and from what I understand are also highly leveraged. Many of these funds also are insolvent in a technical sense, meaning that they operate on a fractional reserve basis, too.

But, the market is up some 1,200 points since I wrote that. Go figure.

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Responding to my comments on anarchism and authority, Damaged Justice says

When a person possesses greater than average knowledge and/or experience regarding a given subject matter, we refer to them as “an authority on the subject.”

This accepted definition is a far cry from the “authority” who presumes to command others solely by the supposed virtue of superior muscle and firepower.

Agreed. This is why I find these discussions to be particularly difficult. Semantic confusion runs rampant when ideology is at stake. Franc has a new post at his blog addressing the immorality of hierarchies, but I haven’t had a chance to read it yet.

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Kip responds to my post, Gold is NOT a fiat currency:

You’re still tap-dancing around the core issue: gold only has value because people say it has value (or expect other people to say it has value).

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The debate is instead whether it is better, in an advanced global economy to argue for a government that cannot debase gold or one that will not debase its currency. I continue to support the latter because I believe the former is simply unworkable.

I will respond to this comment in a stand-alone post, shortly. In the meantime, frequent commenter, Jeff Molby steals my thunder:

No, he’s specifically stating that that isn’t the core issue. Fiat currency has value solely due to government coercion. If the government disappeared tomorrow, so would the value of its currency. Gold would retain a strong value sans government.

You forgot the third possibility: a government that will debase its currency as often and as much as it thinks it can get away with.

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Tony, 1955Design, and Kip congratulated me on my marriage. Thanks everyone. Someday I’ll post some pictures maybe to my Flickr account.

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Shayou Wang left a comment on Gresham’s Law is Wrong.

In addition, it also works in the presence of Bimetalism fixed exchange rate or face values (also enforced by governments).

Exactly. The proper application of Gresham’s Law is not really an economic law of its own, it’s simply a case-specific formulation of general economic theory with regards to price floors or price ceilings. When a commodity is artificially over- (or under-) valued with regards to other commodities, bad things happen.

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Kip and I have a long-running dispute over the subject of jury nullification. In the most recent installment, Kip says,

I just find it utterly preposterous to suggest that it’s the “libertarian” thing to do.

Circumstances dictate the appropriateness of jury nullification. View individuals as moral agents, they are qualified to determine the justness (or injustice) of laws, and should render verdicts in accordance with proper morals. To use the fact that some people have a lousy moral compass as an objection to nullification on libertarian principles is a red herring.

Clay S Conrad comments:

You wrote that “An unjust law is a necessary condition for any appeal to nullification. ” I’d disagree.

Even the best laws can be misapplied, or unjustly applied. …

Clay’s point is that most laws, at one point in time or another, will eventually be used in such a manner that renders their application unjust. Point conceded.

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Thanks to No Treason for plugging my post, How Much Will The Bailout Cost You?.

In response to the same post, Azrael comments,

I am at the point where I expect this insanity and just do not see the point in getting angry anymore. As far as I am concerned our whole debt and monetary system is illigitimate because it is forced on us.

I’m not apathetic, yet. I try not to get upset over such things, but they do chap my ass, so-to-speak. There’s nothing I can do, per se, to stop these things from happening. The goal of libertarians, anarchists, agorists, etc., is to find a way to minimize the external costs imposed by this illegitimate system.

Jeff Molby comments:

Assuming that at least some of the assets are performing, some of the $700b will be recouped at some point.

Perhaps. But we, as taxpayers, who are ostensibly funding the TRILLION DOLLAR BAILOUT will never recoup a dime.

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Self-described “former AIG customer,” Louis left a comment on On Being Too Big To Fail:

there goes the proverbial credibility of the free market, the big fish falling in the safety net,saved from bankcrupcy by the the little guy…then ill’be dammed if i hear them talk about economy resilience again; help from the little guy, they will call it solidarity, expression he never heard in the mouth of those big fish when HE was in turbulent waters.

Louis! THE USA IS NOT A FREE MARKET, despite loads of rhetoric and propaganda to the contrary. What we see happening in the market right now is a textbook example of government interference gone wrong. But you’re right on the money with the second half of your comment: when the big fish goes bankrupt, we have to bail them out. When we go bankrupt, they take our houses.

The entire financial system is broken, beyond salvation.

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Ryan left a comment on If You Don’t Like it, Get the Fuck Out!

I agree but I feel that, especially following this coming election, we will have a certain population of Americans taking these people’s suggestion and “getting the fuck out” not because they bail on the ideals of this great country but rather because they feel that those ideals have been forsaken by the likes of whom you speak of and consequently feel threatened by the infringement on their personal freedoms and the consequences of similar ignorance. What do you think?

It seems that Ryan supposes that this year, many people will be exercising their right to “vote with their feet.” I’m not sure this year is any different than any others. And I think voting with ones feet is simply one more iteration of the “lesser of two evils” game. Where are they going to go? Some other country that sucks just as bad in some areas, worse in others, and is marginally better in maybe a few areas?

The point of my post was to challenge the notion that one is obliged to leave if he doesn’t like the system. I don’t think anyone should have to make that choice. It’s unfortunate, if it’s coming to that.

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My friend Brad left a comment on Of Greed and Charity

I remember the same conversation we had with Garrett in Grand Bend. Remember how he felt it was okay that rich people (or average income people) should have to be taxed more to help the less fortunate out. This guy Ryan feels the same. Nobody should be taxed on their income.

Mike Gogulski at NoState.com has an excellent post on the topic of this loser mentality, The Golden Rule is Insufficient. According to Mike, some people say,

I want to be taxed to provide essential services for other people. I want this because I know that I, like others, am greedy, and would not otherwise contribute to their well-being. This is especially important with respect to the well-being of others incapable of providing for themselves.

That sounds exactly like what Garret was saying. Mike responds to this idea, probably better than I ever could:

The Golden Rule is a poor ethic to apply when your morality legitimizes violations of yourself. Until you are possessed of a morality which regards other people as ends in themselves, rather than means to be exploited for whatever grand goal the day demands, using the Golden Rule as your ethical yardstick admits all manner of horrors.


Very, very, very well said. I love Mike’s writing.

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That’s all for now.

‘Smart People Are Realizing the Banking System is Broken’

October 9th, 2008

DJIA down something like 700 points, that’s the lowest it’s been in over 5 years. Looking at the chart, it’s a veritable cliff at about 3:30pm. General Motors trading at levels not seen since the 1950s. Their dividend yield is 13% and nobody is buying. This kind of gives you the impression that nobody believes there will be a dividend!

So much for that surprise 50bp rate cut yesterday…

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I hope the FED plans on buying a lot of commercial paper, hell, let’s just nationalize the entire goddamned economy, while we’re at it.

The Treasury Department is considering taking ownership stakes in many United States banks to try to restore confidence in the financial system, the White House said on Thursday.

NYT also reports that this is happening even though it is at odds with President Bush’s “free-market” philosophy.

There is no free market philosophy in the current administration, nor is there a free market philosophy in any administration which seeks to impose systematic, top-down controls on the entire economy. A free market abhors the idea of nationalizing industry, of bailing out lenders, too big to fail. The free market did not cause the current economic Vesuvius, because the U.S. economy is not a free market.

There is no shortage of ideas, ranging from the partial nationalization proposal to a guarantee by the Fed of all lending between banks.

Translation: there is no shortage of ideas, ranging from bad, to worse.

Like, further inflationinjecting more liquidity into a broken economic system, or nationalizing more banks. Oh well, as the saying goes, when the only tool you have at your disposal is a hammer, sooner or later, everything starts to look like a nail.

But neither the individual corporate bailouts nor the Fed’s enormous emergency lending programs — including up to $900 billion through its Term Auction Facility for banks — have succeeded in jump-starting the credit markets.

‘The core problem is that the smart people are realizing that the banking system is broken,’ said Carl B. Weinberg, chief economist at High Frequency Economics. ‘Nobody knows who is holding the tainted assets, how much they have and how it affects their balance sheets. So nobody is willing to believe that anybody else isn’t insolvent, until it’s proven otherwise.’

That’s right. A TRILLION DOLLARS has not been enough to assuage people’s fears. Nobody wants to be holding toxic assets, at any price.

The more money the Government prints into the economy, the more distorted become the price signals, and the more impossible it becomes for people to accurately assay the values of anything. This isn’t quite Econ 101, but it’s not Ph.D. Thesis material, either.

Meanwhile, the price of gold is soaring – not because it’s becoming more valuable, but rather, because the currencies against which it trades are becoming all the more apparently less valuable. The chart of gold essentially is the inverse of the DJIA chart, at top…

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Gold is NOT a Fiat Currency

October 8th, 2008

Some libertarians are prone to argue, against the so-called “gold bugs” that gold is essentially a fiat currency. Reiterating the common accusation, Tony proposes that, “Gold has value for the same reason a dollar isn’t a mere piece of ink-stained paper: someone else values it,” and continuing: “During a famine, would you accept gold for a loaf of bread? A loaf of bread for gold?”

Whenever I see this sort of argument, I’m compelled to respond. It’s a sickness, I know.

During a hyperinflation, would you accept a billion Zimbabwe Dollars for a loaf of bread? A loaf of bread for a billion Zimbabwe dollars? That’s a straw man argument, if ever I’ve read one. Perhaps more importantly, the “Diamond-Water Paradox” was thoroughly destroyed over a century ago, based on the theory of subjective valuation, to which I believe Tony refers in the previous sentence.

The peculiarity in the argument is that libertarians are apt to complain when government interference in the market for (e.g.) sugar, artificially overvalues sugar as compared to other goods, or when government interference in the market for (e.g.) automobile manufacture, makes autos more expensive than they otherwise would be. But many libertarians turn a blind eye to the outright interference in the market for nik-stained scraps of linen and cotton, which government compels everyone to accept under penalty of law.

I responded thusly:

And the only reason anyone values an ink-stained greenback, is because behind it is a government gun. Labeling hard-money proponents as fetishists is kind of off-the-mark. What we want is not to impose “gold” or anything for that matter, we just want to be free to trade in any medium which is mutually accepted, without being penalized by the government.

The fact that fiat currencies are imposed and maintained by violence, deception, fraud, and theft, is *always* overlooked by people willing to apologize for fiat currency. *ALWAYS*

Until and unless you’re willing to defend that idea, you can’t – with any consistency or conviction – complain about specie advocates.

Tony redeems himself in closing, suggesting that we can argue “for gold” and “against fiat”, but bearing in mind that they are “separate issues.” I’d tend to agree with him, at least in part, in this conclusion. I write occasionally about gold, and its merits, but my real complaint is against fiat. As with every other arena, individuals should be free to choose, without a market distorted by government manipulation. I object to fiat, and use gold to illustrate the likely alternative.

Gold is free market money, or at least my best estimation as to what the market might choose, given freedom, based on the simple fact that gold has continually been valued by nearly every civilization during 5,000 or more years of recorded history.

no third solution

Blogging about liberty, anarchy, economics and politics