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Monday, October 30, 2006

Adam Smith To Appear On Currency In Britain

Adam Smith, the Scottish philosopher who was among the first to approach economics as a science and to promote free trade and capitalism, is being honored on the £20 note issued by the Bank of England.

He deserves it.  If there ever were a time when we needed to honor a stalwart of economic liberty and individualism, it is now.

Comments

Avatar for Robert Perry

Ironically, I believe that Smith was a proponent of real money--gold and silver--and would be appalled that his face would be used to adorn worthless fiat currency.

Robert Perry on October 30, 2006 at 08:58 am

"Real money” is whatever people will accept and use in trade and transactions.  Paper money is anything but worthless.  Good to see some recognition of Adam Smith.
In his day, hard money was a popular belief; which doesn’t make it so today.


"If the good men are silent only the wicked are heard.” - Edmund Burke

robert108 on October 30, 2006 at 11:37 am
Avatar for Robert Perry

I use a somewhat tighter definition; real money ought to keep its value over time.  Fiat money utterly fails that test, having lost something like 96% of its value since 1913.

Robert Perry on October 30, 2006 at 12:27 pm

Robert: So, in your view, the incredible increase in our GDP since 1913 is illusory?  We are no better off since then?


"If the good men are silent only the wicked are heard.” - Edmund Burke

robert108 on October 30, 2006 at 02:52 pm
Avatar for Robert Perry

Of course the economy has grown, but that wasn’t my point.  I was simply pointing out that the dollar has lost 96% of its value since 1913.  It has all sorts of implications, from tax policy to whether savers or borrowers are favored.

Robert Perry on October 31, 2006 at 06:23 am

There are problems with non-fiat money of course.

To argue that we aren’t better off would be rediculous.  My father told me that when he went to high school one student had a car.

Look at the high school parking lots today.


The Debate is over!  Global Whining has been confirmed.


The Whistler's signature
The Whistler on October 31, 2006 at 06:51 am

the dollar has lost 96% of its value since 1913.

Demonstrably not true.  How much would a laptop computer or a DVD player have cost you in 1913?

Our money is based on our productivity as individuals, not how much precious metal is in the possession of the govt.  Gold and silver have no intrinsic value; they are only worth what we are willing to pay for them.


"If the good men are silent only the wicked are heard.” - Edmund Burke

robert108 on October 31, 2006 at 08:03 am

Of course the economy has grown…

That growth is possible because we aren’t restricted by gold-backed currency.  When Hitler went into Austria and Czechoslovakia, he did it to loot their treasuries; his was empty, and he needed their gold to continue to finance his war.  That is the only way to grow in a strict hard money economy.  Unless you discover a new gold mine, of course.  Our present wealth is based on our overall economic activity, not some minerals.


"If the good men are silent only the wicked are heard.” - Edmund Burke

robert108 on October 31, 2006 at 08:08 am
Avatar for Robert Perry

It is a sophism to count new inventions as a proof that inflation has not occurred, sir.  Inflation is calculated on a basis of goods in existence--real estate, food and other commodities, clothing, wages, etc..  For a reference of what inflation has taken from us, look around for some penny candy.  On the other hand, a troy ounce of gold bought a nice men’s suit in Roman times.  It still does today.  However, try to buy a nice suit for the $20 it cost in 1913.  See what inflation has done?

And it is completely false to assume that a gold standard prevents economic growth.  If that were so, there would have been no growth from 1789 to 1913 in the U.S.--really 1935 when FDR illegally confiscated bullion--and only marginal economic growth until Nixon severed all ties with real money in the early 1970s.

And Hitler?  No, there was no great reserve of gold in the Sudetenland, only Germans and a bit of Lebensraum for der Fuehrer.

Robert Perry on October 31, 2006 at 08:39 am

I never said that inflation has not occurred; don’t put words in my mouth, please!
Your argument about suit prices makes my point about the inherent stagnation of a strict metal-based currency.  Store of value is only one of the five functions of money, as you well know.  If you value it so highly that you would sacrifice the growth potential of a production-based currency, so be it.
Inventions have mushroomed since 1913, but you would compartmentalize that and insist that the vastly increased value of our economy is based only on inflation?  Not hardly.

I never said that a gold standard prevents economic growth, so don’t try to put those words in my mouth.  A gold standard reduces the growth potential; it doesn’t eliminate it entirely.  Why do you think there was that mania for gold mining in the 19th century?
Hitler looted both the treasuries of Austria and Czech; it is a matter of history. It is one of the hallmarks of a metal-based currency, however, to need to acquire territory.


"If the good men are silent only the wicked are heard.” - Edmund Burke

robert108 on October 31, 2006 at 08:58 am
Avatar for Robert Perry

Exactly how is talking about “inherent stagnation” and “the only way to grow in a strict hard money economy” any different from saying that a gold standard prevents economic growth? 

Come on, the simple fact is that when you use such perjorative phrases to describe real money, you are in effect saying that it prevents economic growth.  Fortunately, the opposite is true; economic growth has stagnated as links to gold are severed. 

One would also expect this; fiat money is inherently inflationary, hence its implementation encourages spending, not saving--hence capital takes a huge hit with fiat currency.  A one ounce suit is not stagnation, but consistency--essential in a healthy economy.

And no, most modern wars are not fought for gold, and that includes the annexation of the Sudetenland and Austria.  Yes, Schicklgruber looted those lands--of everything really--but his purpose was Lebensraum, not money.  You don’t need specie in a command economy, and the Communist nations prove that--not a gold standard among them, but aggressive wars aplenty.

And again, Adam Smith would have been appalled that his face would be used on the fiat money he decried.

Robert Perry on October 31, 2006 at 09:24 am

Exactly how is talking about “inherent stagnation” and “the only way to grow in a strict hard money economy” any different from saying that a gold standard prevents economic growth? Your consistent need to “interpret” my statements is offensive; please stop!  I wrote what I wrote, not what you think I wrote.  Do you understand the meaning of “strict”?  The truth is that I said a metal-based currency restricts growth, not prevents growth.  Stop lying.

Come on, the simple fact is that when you use such perjorative phrases to describe real money, you are in effect saying that it prevents economic growth. Once again, I never said “prevents”.  You lie. Fortunately, the opposite is true; economic growth has stagnated as links to gold are severed. This statement is demonstrably false.

One would also expect this; fiat money A pejorative phrase. is inherently inflationary,Since inflation is an increase in price without a corresponding increase in value, it is produced by taxation and regulation, not the type of money.  You are wrong here. hence its implementation encourages spending, not saving Saving is strictly a function of the interest rates on savings accounts.  The fact is that investments pay better these days.--hence capital takes a huge hit with fiat currency. Also demonstrably untrue. A one ounce suit is not stagnation, but consistency--essential in a healthy economy.Your nostalgic belief in metal-based money is charming, but misplaced. The total value of our economy continues to increase. The function of money that has superseded the “store of value” is “unit of accounting”.

And no, most modern wars are not fought for gold,Not relevant.  In the time of strict metal-based wealth, wars were quite common.  We have made considerable progress since then.  One area of progress is to a production-based currency. and that includes the annexation of the Sudetenland and Austria.  Yes, Schicklgruber looted those lands--of everything really--but his purpose was Lebensraum, not money. Your opinion, but history says otherwise. You don’t need specie in a command economy,Not unless you want to do business with the rest of the world.  Since command economies are inherently stagnant, they must pursue a course of conquest. and the Communist nations prove that--not a gold standard among them, but aggressive wars aplenty.

I never said that metal-based wealth was the only reason for war; only that it was a factor.

And again, Adam Smith would have been appalled that his face would be used on the fiat money he decried.

I think AS would be thrilled at the success America has enjoyed from taking his ideas farther than he probably imagined.  In his time, the only economic systems were command-based.


"If the good men are silent only the wicked are heard.” - Edmund Burke

robert108 on October 31, 2006 at 09:51 am
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