We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.
Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]
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Samizdata quote of the day – money isn’t wealth “If money is infinite, why is there poverty?”
Because money isn’t wealth. It’s a claim on wealth.
You can print claims. You can’t print the goods and services those claims are supposed to buy.
Give everyone $10 billion and nothing gets richer. Prices just explode until that “wealth” buys nothing.
Poverty isn’t a shortage of paper.
It’s a shortage of production.
Printing money doesn’t solve that. It hides it for a moment, then makes it worse.
– Rock Chartrand
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Who Are We? The Samizdata people are a bunch of sinister and heavily armed globalist illuminati who seek to infect the entire world with the values of personal liberty and several property. Amongst our many crimes is a sense of humour and the intermittent use of British spelling.
We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
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Money always starts off as something that people value before-and-apart-from its use as money – that is why (for example) silver was used as money in the Middle East for many centuries BEFORE the invention of coins. Gold (normally imported from lands under Egyptian control) and even salt were also used as money. Honest money remains something (some commodity or other – it need not be gold) that people value before-and-apart-from its use as money.
Carl Menger pointed out the above – and also how governments (and business enterprises that depend on governments – such as banks) try and subvert money, for their own corrupt purposes.
Credit Money systems allow governments to spend vastly more than they would otherwise – at least for a time, and allow certain private parties to enrich themselves at the expense of everyone else – the “Cantillon Effect” named after the early 18th century economist Richard Cantillon.
Yes mostly. The mere paper claim is wealth to the extent that others will give you actual stuff in exchange for it. And the German government of the early 1920s substantially financed itself from these paper claims.
As with everything else the value of paper money is in the eye of the beholder. Most people most of the time behold it as useful. And they’re right. Barter is very tiresome.
And I would argue that money usable as a means of exchange is actually an accretion to the aggregate wealth if the community, over and above that represented by real stuff.
But as the Germans found out you can destroy that value by making money unusable as a means of exchange. Which is in substance the policy of the nee mind just print more mob.
On the post itself – yes indeed increasing the amount of money does NOT increase the amount of wealth.
It should not be necessary to say this – but it is necessary, as there have been people such as Hobson and Keynes who argue that increasing the amount of money, and spending it, DOES make everyone better off – they are called “under consumption” theorists – although “Monetary Crank” is a more accurate description.
Sadly almost every university economics department in the world is in the hands of such Monetary Cranks (the “economics” they teach is not economics at all) – who argue that creating more money (from nothing) “stimulates the economy” and makes people better off.
Not all the people who support such policies are morons – some are highly intelligent, but corrupt.
They know very well that such policies will NOT make most people better off – indeed will make most people WORSE off, but they also know that if they get the Credit Money first (the Cantillon Effect) such policies will make them personally better off – at the expense of everyone else, because they (or someone connected to them) will be able to buy real assets, such as land, before the price goes up.
FWIW, what he says isn’t quite true. Printing a lot of paper money redistributes wealth (depending on who you give the money too.)
For example, if wealth is 1000 gold bars and there are 10,000 dollars printed as claims on this, each gold bar is $10. Now if I have $1000 (100 gold bars) and you have $9000 (900 gold bars) then the claims on the gold bars are distributed unevenly. If the government now prints $10,000 more dollars then each gold bar is now valued at $20 so I only have a claim on half as much gold, as do you. The key is who gets the new dollars.
Scenario 1: If it is split evenly I have $6000 worth 300 gold bars, and you have $14,000 worth 700 gold bars. So I am richer and you are poorer. Very unlikely.
Scenario 2: If I get $100, you get $8000, and the government keeps $1900, then I have $1100 or 55 gold bars, you have $17,000 or 850 gold bars, and the government gets $1900 or 95 gold bars. Which is to say that by “giving me” money I am actually 45 gold bars poorer, you are 50 gold bars poorer and the government takes both our losses and expects us to thank them for their generosity.
So if the money is printed it redistributes the wealth based on where the new money goes and of course politicians and rich people are the ones who decide this.
Inflation and money printing is a silent form of taxation on wealth. We see this in action every day. Five years ago there was a huge todo about increasing the minimum wage from $7.50, and Bernie made up this idea of doubling it to $15. And, defacto, the minimum wage most places is about $15 right now. Are McDonalds workers any richer? Of course not because although they have twice as many dollars, they are worth half as much. So it is just a big shell game.
Right now there is a lot of talk all over the place about taxes on unrealized capital gains. This is nothing new, money printing and inflation already does this every single day.
FWIW, I use gold to represent value here but that isn’t true. Gold isn’t value any more than paper money, it just has some characteristics that make it slightly better money, specifically, that you can’t print more of it. A much better currency would be kW.Hr being a much fairer measure of actual wealth production.
FWIW, though, I think in the next five to ten years we are going to see massive amounts of deflation (in my example, like the Spanish shipping massive amounts of gold back from the New World), so I am actually a lot more hopeful about the future of the national debt than I have been for the past thirty years. Why? Because AI and robotics are going to generate MASSIVE amounts of ACTUAL wealth.
My reply to that claim was: You can’t eat money.
Yes, that’s the essential point of Say’s Law, which Keynes tried to discredit by stating it inaccurately.
That’s the entire premise behind inflation:
You have more pieces of paper representing wealth than you have wealth for it to represent. Each piece of paper represents a smaller percentage of the wealth it represents and therefore becomes less valuable.
Wealth isn’t measured in pieces of paper, it’s measured in value. The pieces of paper are just a communication mechanism that enables value of different types (goods, services, knowledge, skills, risk, etc) to be traded freely under a common standard.
Wealth also can’t be created by printing pieces of paper. Wealth is created by people who take things of lesser value (iron ore, crude oil, muscle power, raw intelligence) and multiply their value by combining them and converting them into things of much higher value (gasoline, fuel oil, clothing, plastics, automobiles, satellites, rockets, etc).
If government or banks (which are joined at the hip with government – “banking” is light years away from honest money lending, being a “Shylock” or “Loan Shark” – i.e. lending out money that actually exists, rather than creating “money” from thin air, and being determined to get that real money, Real Savings – the actual sacrifice of consumption, back) are allowed to create money from nothing – they will, to serve their corrupt interests.
Saying “I support fiat money – but in moderation” is like saying “I want to be a little bit pregnant”.
But some libertarians fall for this con trick (for “confidence” trick it is) – for example there was a generally pro liberty person (name – I can not remember his name, he died in 1978) who wrote, in the early 1900s, a work called “Banking and the Social Question”.
There is no “Social Question” – there is POVERTY, and there has always been poverty (contrary to 19th century thinkers who falsely thought that there was more, rather than less, poverty in their own time than before their own time – and thought this poverty was a “Social Question” which could be “solved” in some way or other), and “Free Banking” will NOT reduce poverty. Allowing lots of people to produce “money” from nothing (without a “banking license” or whatever) will NOT increase wealth.
What will happen is that these “free banks” will go bank-rupt – their Credit Bubble will burst, unless government courts intervene (as they often did in Scottish “Free Banking”) to order a “suspension of cash payments” – i.e. let the banks off from producing the cash (the gold or silver – or whatever the commodity is) that they have promised to pay.
In which case “Free Banking” would not be “free of government” at all – it would be utterly dependent on government, and would be revealed to be a SCAM – just like openly government licensed banking.
As the old saying had it “free trade in banking is free trade in swindling”. Unlicensed (“free”) fraud is just as much fraud as licensed fraud.
“But Paul – vast cities such as New York are utterly dependent on such practices – they have little industry any more”.
Yes I know – and I would strongly advice getting a long way away from such places as New York.
We live in a world where the “banker” is considered respectable – and the “Shylock” or “Loan Shark” is considered a criminal. It should be the other way round.
And it is not just banking – many markets are now dominated by people who do not have what they claim to be trading in, for example the gold and silver markets.
More reasons to get far away from cities dependent on financial services Credit Bubbles.
“The Loan Shark breaks my legs if I do not pay him back – the banker is much more civilized”.
It is much less difficult to be civilized if you are dealing with “money” that never really existed in the first place – i.e. if you are not making a sacrifice.
A money lender who is lending out their Real Savings must get this money back – or they will starve. And if they are lending out the Real Savings of other people, entrusted to them, they must also get this money back – or these people will break THEIR legs (or kill them), and understandably so.
However, modern Progressives believe that, far from being too open handed, even modern bankers are too restrictive.
For example, Mayor Mamdani of New York City (with his weird mixture of Islam and Marxism – two logically incompatible philosophies) says that the city government will lend out money to small business enterprises, such as corner shops, with no checks at all – no being called in to prove you are of good moral character (i.e. likely to pay the money back), nothing like that.
His agenda is hardly a mystery – he WANTS the small business owners to take out loans and default on them, then the city government will own the corner shops and so on.
The increase in Property Tax has the same purpose – to make both commercial and residential owners sell-up to the city, in order to pay their taxes.
The World Economic Forum agenda springs to mind – “you will own nothing – and you will be happy”.
You will be happy – or they will throw you out and you will die on the streets.
The rich people at the WEF thought this would only apply to ordinary people – Mayor Mamdani wants to do it to everyone, including people who are now rich, but soon will not be.
Quite a few rich (very rich) people supported Mr Mamdani – and other Progressives in other places.
For some reason rich leftists never think socialism is going to apply to them – apply to them personally.
I have looked it up – my old brain being a bit of Swiss cheese these days.
The name (of the libertarian who, unfortunately, went down this rabbit hole) was Henry Meulen and the books were – “Banking and the Social Problem” (1909) – there is no “Social Problem” there is POVERTY and poverty is NOT reduced by pushing out more credit-money (“broad-money”) any more than by printing more money.
And “Industrial Justice through Banking Reform” (1917) – there is no “industrial justice” or rather it is the same as justice in any other field, justice is to each-their-own, NOT some “distribution” or “redistribution” of money, wealth or ownership.
If you are doing a gig in a 100-seat bar, you can’t expand your audience by selling 100,000 tickets. You can still only make 100 people happy.
You can certainly expand your bank balance that way, Bobby. You just have to hope that 99,900 ticket holders don’t turn up.
Mel Brooks “hold my beer”