----- Original Message ----- From: <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Friday, May 30, 2003 5:50 PM Subject: Re: [SOCIAL CREDIT] another view on paper currency
Mises defined inflation as any increase in the supply of money. He opposed credit expansion of any type. The collapse period of the trade cycle is the result of credit expansion. Hi Bill and other readers, I see a note about opposition to credit expansion. If two private parties engage in a contract in which one provides a good or service in exchange for credit, that is, a promise for a future good or service, I do not think that in any way conflicts with any statement of Mises. Private, free-market expansion and contraction of credit (as in billing by invoice or reducing a credit line) is precisely what Mises seems to favor, by my reading. The capital college, as a social credit proposal, seems to fit quite well with the preferences of Mises, if that matters. When there is a contraction of credit based on the contracting of private parties in the free market, that is not a collapse. If it is the middle of harvest season, a farmer might not be extended much credit if the other party sees that the yield is poor. If there is a late freeze or something and or the whole region suffers from drought, some non-farmers might extend credit all the more to famers for the purpose of helping the farmers make it through the next 18 months even without much yield. When you refer to a collapse period in reference to Mises, what are you referring to? Currencies and credit bubbles collapse, but that is the only thing that bubbles can do- to my knowledge. Manias come to an end. Devalued currencies eventually are replaced with more functional media of exchange, but transitions, evolutions, revolutions, and contractions are not collapse. Socialist, coercive political economies may collapse, or is that really just the penetration of a free market into the abscence of a functional market? If there is a collapse of a financial system- be it Japan or Mexico or Argentina or Germany or the US- Mises offers an idea. If banks make bad loans and then use political privilege to get government guarantees and bail-outs, then they will offer more bad loans until the government refuses to help because of international currency issues. What is a bad loan? That is a loan to consume instead of a loan to produce. That is my comment, but it may fit. Of course, if producers produce something that the public does not demand (that doesn't sell well enough to pay back the lender), that is also a bad loan. In other words, as banks compete, if one of them over-extends itself and collapses, that is not a recession. When folks deposit (invest) money in a back- especially for interest (meaning that the depositor is loaning the bank money), they must assess the integrity of the bank. However, if the government says- hey any account less than 100K will be guaranteed, so banks can be as irresponsible as they want (perhaps within certain other restrictions), that means small depositors can also be irresponsible; they don;t need ot assess the bank's credit or credibiliity- they can just count on the government's credit and assume that all FDIC-insured banks are equal. The problem is, the government may or may not be able to fulfill those guarantees. To do so may require hyperinflation, which reduces the value of all existing debts, which may lead to more bail-outs, and eventually the government will say what governments have often said- we take back our promise. Any corrections to this? Any comments at all? If this be a collapse, it is a market correction. The problem is not a bank failure or currency collapse, but the initial mishandling of lending privilges and/or the state's intervention into private contracts. Of course, the depositors of an irresponsible bank may "demand" state intervention, but the intervention helps the bank in the short run and fosters a depression eventually. See Japan. I oversimplify FDIC-like insurance as the only intervention a government can make. That is not actually the only form of intervention, but a rather obvious one. Frankly, the various interventions that governments use tend to bewilder me. Japan creates credit to buy debt from a bank that is already defaulting so that the bank won't collapse. The IMF lends Brazil more money because Brazil needs the money to pay off its previous debts. On the other hand, maybe those other interventions aren;t very obscure. Welcoming curiousity, Jeff -- --------- Original Message --------- DATE: Fri, 30 May 2003 09:50:06 From: Jeff <[EMAIL PROTECTED]> To: [EMAIL PROTECTED] Cc: > > Hayek's refutation is easily refuted, however. > > Please elaborate. I am not particularly familiar with Hayek or the easy refutation you refer to. > > Keep in mind that in that time neither accounting nor > calculus were required elements in the economists' > curriculum--so Douglas, who used both in his > analysis, was beyond their comprehension.-- > > > I know that some folks were very skeptical about statistics- especially government statistics or those of the Federal Reservists. As I have been reading about Mises' perspective on money, yes he would seem to take a skeptical view even of conventional accounting. In the last few years, accounting fraud has been in the news rather often. Mises might suggest that much of conventional accounting is deceptive- especially the accounting of governments. > > > > If the assumptions (and seasonal or inflation-adjustments) are not clearly stipulated, those assumptions tend to be taken for granted and that might constitute propaganda. For instance, if one measures by spending, the US is wealthy. If one measures by production (not consumption based on borrowing), the indication varies. > > > > So, while I got a C in my last calculus class, feel free to try me. Further, I see no conflict between Mises and Douglas in reference to "capital colleges." > > > > As for requirements in economic curriculum, neither Douglas nor Mises seem to be prominently featured in mainstream, publicly-funded institutions. What a shock. > > > > However, while Mises seems to explain much of what is happening now, Douglas does not seem as relevant to explaining current events, but more of a visionary. Perhaps this is how the two can be linked without conflict. I am clear that they overlap in certain analysis of current (inclduing 20th century) events. Again, I do not know Hayek's comments on Douglas, but I know Hayek was a student of Mises. > > > > Jeff Hunn > > > > --------- Original Message --------- > > > DATE: Thu, 29 May 2003 17:38:56 > From: Keith Wilde <[EMAIL PROTECTED]> > To: [EMAIL PROTECTED] > Cc: > > > Thanks for this notification. I read the first chapter of North's Mises book and found it persuasive. > > Keith > ----- Original Message ----- > From: Jeff > To: [EMAIL PROTECTED] > Sent: Thursday, May 29, 2003 12:22 PM > Subject: [SOCIAL CREDIT] another view on paper currency > > > I don't like what the following article suggests, but that doesn't make it less provocative.... > > "THE MYTH OF THE GOLD STANDARD" > http://www.gold-eagle.com/editorials_03/north052903.html > ____________________________________________________________ Get advanced SPAM filtering on Webmail or POP Mail ... 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