Does This Commenter Want To Revive Bimetallism? Greenbackism?

Does This Commenter Want To Revive Bimetallism? Greenbackism?.

I have had someone called “Silver Account” posting on some of my articles recently. I want to post their comments and my replies, all of which have to do with the Gold Standard and the Federal Reserve. Judging from their chosen username and what they said, I would say they are somewhere slightly to the left of William Jennings Bryan on more than a few issues. That’s just fine by me, home grown American Leftism is usually preferable to most imported varieties, although I have developed a soft spot for mutualists of late.

Comment from my piece Why I Am Writing In Paul And Not Voting For Johnson:

She [a voter quoted in my article] should stay in it [voting this election] and vote for the president [Obama]. Real people know the repubs are being swayed by the racist teabags. Paul has a good idea, but the resultant people elected (repubs) would be a disaster for working folks.The banks would take your houses like in the 1890′s, women and blacks would not be able to vote. And the copper(aka, robber)-barons would be back in charge of owning (stealing) stuff. And the ignorant south would be worse-off than they are now. There would be no subsidies the blue states are giving them.

My response:

For Obama? I doubt she would even consider it. If only the Republicans WERE being swayed by the Tea Partiers! All they are doing is using empty rhetoric to get the Tea Party to vote for them. The Republicans were listening to half of what the Tea Party was saying, they would at least have some credibility. But even if they did all of what the Tea Party wanted, it wouldn’t truly be enough in my opinion.

I take it you are referring to the Long Depression (1873-1896) and the ill effects of the hastily adopted Gold Standard? The Gold Standard actually improved the overall economic situation, and this period was the best, economically that the country had ever known. Unfortunately, the implementation of the Gold Standard after so many years of fiat greenbacks made the situation of debtors even worse. This was unjust. But what bimetallists and silverites won’t tell you is that the same thing would have happened with a silver standard or a gold-silver standard, just to a lesser degree.

In any case, no Gold Standard (see this post) should be implemented from on high. Not only does this grant a monopoly to those who already have the most gold, but you may see a repeat of some of the goings on in the 1890s. You are correct on that count. That is why I support competition in currencies. Those whose debts are in fiat dollars won’t be forced into harder to pay off debts because they won’t be forced to use a gold standard currency. Commodity backed currencies will eventually beat out fiat currencies, but ideally at a slow enough rate that debtors in the fiat system won’t have their situation worsened. Everyone wins. No one is pitted against somebody else. Debtors, industrialists, lenders, depositors, etc. It is not a zero sum game.

And the women and blacks statement is absurd. No one jumps all over themselves, disgustingly so, to appease women and blacks more than the Republican party. Real racists and sexists will never have a real voice in the GOP. They can’t afford to be bludgeoned by the Democratic party. Besides, it was historically the Republican party that stood for equal rights for all races and genders, at the same time that they were the party of corporatism and corruption.

And for your information, the robber barons of today are much worse than the ones around the turn of the last century, and they are already in control. Most of the robber barons were monopolists and thugs, but at the same time, they brought many good things to this country, to all classes, races, and genders. Maybe not as good or as cheap as a more free system would have, but still faster than bureaucrats, populists, proletarian revolutionaries, or simply “nobody” could have.

The South is full of ignorant people to be sure, but no more so than most other regions. But you are on shaky ground to label an entire region or its entire population ignorant. The patronizing collectivism inherent in your statement is in fact responsible for most of the ignorance you allude to. Do you know why the South needs subsidies? Because it STILL hasn’t recovered from the Civil War. White and black alike are still suffering from Reconstruction, and exploitation from Carpetbagging Yankees. They are both kept on the two-party plantation. They have both been utterly destroyed by the public school system, in both the segregation and integration eras.

Comment from my piece Let Us Not Be Crucified Upon A Cross Of Gold:

The Fed’s performance since 1991 has been unquestionably superior to its record at any time since 1913. However, the larger, long-run question remains: Can the Fed as an “independent” central bank maintain price stability contrary to the wishes of an executive branch that seeks to use its fiscal powers to manage the federal government’s burgeoning long-term debt?

My response:

I am not sure what metric you are using to say the Fed is doing a good job, but I really beg to differ.

From 1913 (actually 1915) to 1917 was the Fed’s best era. This was before they were allowed to trade bonds, which is when the fiat currency really got off the ground.

Its policies from 1917 to 1919 led to two depressions, one lasting from 1920-1921 and the other 1929-1945. This latter Depression was the worse of the two, and obviously worse than anything we have experienced since. Having said this, the Fed’s main role was to trigger it. The length was more the result of the Federal Government’s reaction to the Depression, though the Fed did have something to do with it as well. Keynesians and Monetarists claim that the Fed didn’t expand the money supply enough. They are wrong. While contracting the supply of money would have its own problems, expanding it was what caused the problems in the first place. The best thing to have done would have been nothing, whether by the Federal Reserve or the Federal Government. During this period, the price of gold was fixed. One of the reasons the dollar didn’t collapse in this period is because gold (including that which was stolen from the American public) was used to prop it up.

But because price fixing eventually leads to shortages, this arrangement couldn’t last either. Hence Bretton Woods, which increased the flow of and access to gold. But just as before, this could only last so long. Shortage was still inevitable. At the same time the money supply was increasing. Hence the Nixon Shock.

As if the money supply wasn’t increasing at an insane rate before, taking the dollar completely off of gold only accelerated the process. Now the only thing holding the dollar up is its reserve status, something which coincided with the period between 1945 and now because of the United States’ increased influence after World War Two, which had greatly diminished the other powers.

Fed Policy didn’t really change much in these early years. But as it was no longer constrained by a scarce commodity, it could let lose. We saw the effects of this with stagflation, the dot com crash, and the housing crash. I put it to you that the Fed actions that caused these three things have only gotten worse since 1991, and continue to go down that path.

Price stability is only good in the short run or relative to increased prices. Decreased prices are not evidence of a recession, they are the result of deflation, which is a natural economic trend that has nothing to do with monetary policy.

The debt can not be managed. It can only grow until default. Default will occur whether hyperinflation happens or not. So you either have a default without Fed involvement (the better option) or default with Fed involvement (instead of just “austerity”, it will be austerity AFTER currency collapse).

A Debate On Usury As A Rough-And-Tumble

A Debate On Usury As A Rough-And-Tumble.

One day, maybe a half-dozen weeks back, I was reading up on a group of people I was up till then unfamiliar with. I thought they had died out in the late 1880s. They are the Greenbackers. I was checking out some blogs, of their proponents and of their detractors. On one Greenbacker blog (and these guys were frigging nuts, downright slanderous, so I won’t give the specific site, here on WordPress, any extra publicity, by linking to it), they were getting all worked up on the subject of interest, which they like to refer to as “usury”. I just couldn’t help myself. I had to throw down the gauntlet:

Hey guys, interesting stuff.

Here you are talking about interest seemingly rejecting the notion (unless it never even crossed your minds) that it is no different than any other price paid to use someone else’s property.

Why is it not arbitrary to decry interest but ignore all other charges?

Why is it not arbitrary to consider money as somehow different than any other useful tool?

If you want to use my hammer I should be able to ask for something in return. If you want to use it indefinitely, I should be able to charge more or raise the price.

Why is it somehow different or immoral when you want to use my money?

I ask these rhetorically, but if there is some non-arbitrary reason why charging a fee for the use of money but not the use of a hammer, I would greatly appreciate it if someone gave it to me.

I am not saying that interest and fraud never overlap, but this is true with any economic transaction.

Sure enough, before I could make my escape, somebody took a swing at me:

Usury in the “scriptures” is considered stealing. It is considered unjust gain. And if you think about it, interest steals from a man’s future earnings. So not only is the usurer committing the crime, but you could say that a man steals from himself by compromising the profit from his future work.

If usury is unjust gain, then it is stealing. Stealing violates God’s commandments so it should never be a part of any economy. If we removed usury from all economic systems, things would work just fine.

And since most economic systems use interest, you can see the failure. You don’t need to analyze it too much, because it was the interest that brought upon the ruin. This is why we have so many boom and bust cycles. Interest destabilizes everything in an economy. It is evil, and it get evil results.

At this point, it would seem this guy had the upper hand. I mean, he’s going back to the scriptures! How could I, a man of faith myself, wriggle out of this choke-hold? Well, turns out he didn’t actually quote the Bible. And a good thing, too, because he would have had little to nothing to back him up. Knowing this, I came down hard on him:

How is it stealing if the person in debt entered the contract voluntarily?

Say I voluntarily decide to give all my food and money and shelter away. Then say I die of exposure and starvation. Are the people I gave my stuff to guilty of theft and murder?

Let’s look at Leviticus 25:35-37.

“If your brother becomes poor and cannot maintain himself with you, you shall support him as though he were a stranger and a sojourner, and he shall live with you. Take no interest from him or profit, but fear your God, that your brother may live beside you. You shall not lend him your money at interest, nor give him your food for profit.”

Seems like a there is caveat (he must be poor, unable to maintain himself, and a “brother”) on interest, not a prohibition on it.

But if I interpret it rather as a broad prohibition, I must interpret the rest of the passage in the same manner. Therefore, it must be criminal to sell food to not just poor people, but to anyone that is hungry.

How about Exodus 22:25-27?

“If you lend money to any of my people with you who is poor, you shall not be like a moneylender to him, and you shall not exact interest from him. If ever you take your neighbor’s cloak in pledge, you shall return it to him before the sun goes down, for that is his only covering, and it is his cloak for his body; in what else shall he sleep? And if he cries to me, I will hear, for I am compassionate.”

More caveats. “My people” and “who is poor”. And how about the cloak. What if he has more than one?

And Deuteronomy 23:19-21

“You shall not charge interest on loans to your brother, interest on money, interest on food, interest on anything that is lent for interest. You may charge a foreigner interest, but you may not charge your brother interest, that the Lord your God may bless you in all that you undertake in the land that you are entering to take possession of it.”

Interest sounds perfectly legal to me. And we could argue all day about who constitutes a brother, and who a foreigner in the modern era.

Nehemiah 5: 6-13

“Now there arose a great outcry of the people and of their wives against their Jewish brothers. For there were those who said, “With our sons and our daughters, we are many. So let us get grain, that we may eat and keep alive.” There were also those who said, “We are mortgaging our fields, our vineyards, and our houses to get grain because of the famine.” And there were those who said, “We have borrowed money for the king’s tax on our fields and our vineyards. Now our flesh is as the flesh of our brothers, our children are as their children. Yet we are forcing our sons and our daughters to be slaves, and some of our daughters have already been enslaved, but it is not in our power to help it, for other men have our fields and our vineyards.”

“I was very angry when I heard their outcry and these words. I took counsel with myself, and I brought charges against the nobles and the officials. I said to them, “You are exacting interest, each from his brother.” And I held a great assembly against them and said to them, “We, as far as we are able, have bought back our Jewish brothers who have been sold to the nations, but you even sell your brothers that they may be sold to us!” They were silent and could not find a word to say. So I said, “The thing that you are doing is not good. Ought you not to walk in the fear of our God to prevent the taunts of the nations our enemies? Moreover, I and my brothers and my servants are lending them money and grain. Let us abandon this exacting of interest. Return to them this very day their fields, their vineyards, their olive orchards, and their houses, and the percentage of money, grain, wine, and oil that you have been exacting from them.” Then they said, “We will restore these and require nothing from them. We will do as you say.” And I called the priests and made them swear to do as they had promised. I also shook out the fold[a] of my garment and said, “So may God shake out every man from his house and from his labor who does not keep this promise. So may he be shaken out and emptied.” And all the assembly said “Amen” and praised the Lord. And the people did as they had promised.”

This has a bit more detail. It definitely comes down a lot harder on interest and mortgages. But it is still within the context of “brotherhood” not only in lineage but in faith. It also speaks literally of slavery. Are debtors enslaved today? Surely in a sense they are, but not in a truly “biblical sense”. Also notice the purpose of these mortgages. They were taken out to pay the king’s tax. So is the root of the evil in question interest or taxation (which is real theft)?

And Ezekiel 18:5-9.

“If a man is righteous and does what is just and right—if he does not eat upon the mountains or lift up his eyes to the idols of the house of Israel, does not defile his neighbor’s wife or approach a woman in her time of menstrual impurity, does not oppress anyone, but restores to the debtor his pledge, commits no robbery, gives his bread to the hungry and covers the naked with a garment, does not lend at interest or take any profit, withholds his hand from injustice, executes true justice between man and man, walks in my statutes, and keeps my rules by acting faithfully—he is righteous; he shall surely live, declares the Lord God.”

This may be ideal. But it is still a tall order. The command to feed the hungry and clothe the naked comes before the prohibition against charging interest. If it should be illegal to charge interest, should it not also be illegal to NOT share every spare piece of bread and article of clothing you have with every hungry and naked person one comes across?

But then another one came at me from behind:

Your argument makes sense if money is one commodity among all other commodities. But if money is a convention to mediate the exchange of favors, IOUs for favors owed – then to allow a banking authority to monopolize it (either by tying it to a monopolized metal or by monopolizing the issue of special paper money or electronic data entry of number magnitude creating deposits of certain numerical amount) is inefficient and unreasonable. No one should charge for the simple recording of a tally of favors owed, of favor units owed. Rather than a commodity I believe society benefits when money is viewed as an exchange mediation token — rather worthless in and of itself — that should be supplied to facilitate the most mutually beneficial exchanges that are possible. Deflation is harmful and keeping exchange mediation tokens too scarce so one can exact rent from the private arranging of an artificial scarcity is wrong. That said, I favor banks lending money, as long as there is someones unspent money backing the loan — interest to the savings depositor and greater interest paid by the borrower from the bank — as long as fractional reserve banking is not going on. But lenders should not be the suppliers of new money. They should only lend what they have saved, not what they pull out of thin air. The “thin air trick” should be a public utility delivered at cost.

Luckily, I was ready for him. So I gave him the old one-two:

If the exchange of money is nothing more than a tally, isn’t there a simpler way to do it? Like actually using a pen and ledger?

I agree with you that monopolization is harmful. Can we accept that premise and have you address what I said again? Why is money a convention? Who gets to decide whether it is or not and then enforce that decision without monopoly powers? Why is convention any different than the arbitrariness I mentioned earlier?

Is all deflation harmful? You seem to be talking about deflation originating from removing money from the economy, but what about deflation associated with increased productive capacity within the economy?

Why is the scarcity you mention artificial? Why are other levels of scarcity or abundance, whether they deflate, inflate, or cause stability not artificial?

As of yet, there is no counterpunch. I really didn’t think I hit them that hard. Perhaps they are unable to answer my last questions. Or perhaps they just prefer to agree to disagree. Either way, they are down for the count.

Okay. For this next one, I’ll dispense with the cheesy fight metaphors. I have this online friend that I met through our mutual support for Ron Paul’s candidacy. He’s all for ending the police state, repealing big government, and altering/abolishing the Federal Reserve. But he approaches things from a more progressive-populist stance. He’s always on about the big banks, and would like to see what they are doing over in Iceland be done here. (This goes back to the whole Socialist versus Neoliberal versus Free Market debate I touched on about two weeks ago) This time, his target was the charging of interest (AKA usury, to him). In an attempt (which was well received, despite his lack of a thorough response) to set him straight, I wrote:

Usury is charging your “brother”, who is in need, interest for a loan. It has nothing to do with loaning money to people who are not in need but just want to consume more or build up their productive capacity. The one is charity, and should not be done for profit. The other is sound business practice that increases both production and efficiency. Read the texts carefully. I oppose usury by this more narrow definition, but I do not oppose the concept of interest. Cheap credit (engendered by fiat currencies) is a separate issue that in my book is even worse than usury. The Bible also addresses this. I wouldn’t be surprised if the Koran did as well.

Please understand that just because I am a man of faith and that the scriptures define usury, however narrowly defined, as a sin, it does not mean I think that banks should be prevented from loaning money to the poor. I think Banks should only look at the risk/reward ratio when loaning money. If they were truly allowed to do this, without the perverse incentives and moral hazard present as they are in todays financial system, there is no reason to believe that they would make loans to people that can’t pay them back, i.e., the poor, in the first place. Even though loaning money to those that can’t pay back could conceivably give you power over them, it is also an incredibly risky venture to embark on while trying to stay solvent and thus attractive to other customers, be they depositors, borrowers, or investors.

On the other hand, I think that “brothers”, be they co-religionists, friends, neighbors, or simply like minded persons should be all too willing to make a loan to someone in need, interest free. Perhaps without ever getting paid back. Not that there should be some sort of law regulating it one way or the other. And guess what we call this?

Charity.