Price Deflation is "bad"?

You may not wish public police protection, but if they come into your home and take your stuff, that is stealing.

Likewise, you may not like the centralization of money in the hands of government, but when they use that power to dilute the value, that is indeed stealing.

Either a compound or sub-crime of the original injustice.

 

krazy kaju:

Let us assume that we barter for your labor. I will give you 10 apples per an hour of work, we agreed. However, there is an apple orchard down the road that grows apples. In essence, they are increasing supply, thereby decreasing the value of your apples (we'll temporarily assume apples are nonfungible). Is there anything immoral about that? No. Likewise, under a gold standard, is there anything illegal about mining gold and thereby reducing the value of gold? No.

Likewise, printing money, and thereby increasing the supply of money, is not a crime in itself.

Except that printing fiat money is not the same thing as producing more apples, gold or any other commodity. It's true that printing something on a piece of paper is not a crime. However, the system based on printing money is a fraud. Okay, it's not 'stealing', it's just fraud, which is more classy...

Your analogy is of policemen taking things. When the government prints money, it doesn't take away whatever worthless paper you already have. Forcing you to trade for paper money is what's stealing.

Friend, How is in not stealing?  When kings would collect taxes in Gold they would debase them by taking gold from the coins, and mixing the rest with lesser metals. Inflating the economy.  Counterfiting."Fractional" gold coins were passing as pure gold coins. Fast forward to when gold certs came into play. When you print more paper (Note that certs are contracts. a promise for what the free market chose as money; Regression Theorem-Mises) than there is redeemable money, and that paper is acting as genuine gols certs within the economy, you are stealing. AKA Fractional Reserve banking. It is communicating to the the free market that there is more capital within the economy than there is. Sound fimiliar? That disrupts intertemporal market coordination (Hayek). Unilarterally shifting consumer time preferences. Causing malinvestments. Misallocation of money. Yes, in one sence a printing press cam creat more "paper", but cannot create wealth. Production brings forth goods which is our real measure of wealth. Money is just a facilitator to attaining these goods (Mises) (also Im not forgetting that money is a good itself-though not a consumption or production good). But printing more money beyond the pool of goods brought about by actual savings accompanied with real production brings about the booms. Think of the time lags that Mises talks about. The new money is spent by its first holders, they get to aquire goods and services at todays prices. That is only possible by creating new money. This drives up prices.Those who get it last pay a higher premium on goods and services.

Rothbard wrote: What has government done to our money. A smash hit. Its a good read.

anonnymous:

krazy kaju:

anonnymous:

Say the government bypassed the Fed and started printing silver certificates to pay its debts, at what point would it become better to hold silver certificates than Federal Reserve notes/ Also, if the government chose to do such a thing would it be inflationary and if so would it result in higher inflation than if the Fed had printed Reserve Notes?

 

 The Fed wouldn't be able to print silver certificates willy nilly since they'd have to back it up with silver when people want to exchange the certificates for silver.

What I'm saying is that printing money isn't stealing any more than creating any good is stealing. Every good created devalues all the other goods of the same type since supply becomes higher than it otherwise would have been. In your example, silver mining would slowly depreciate the value of silver and therefore the silver standard (or silver certificates). There's nothing wrong or illegal about this and there shouldn't be anything wrong or illegal about it. In a free market, the expansion of goods outstrips the expansion of credit anyways (since precious metal mining is a relatively long process), so price deflation occurs anyways. Also, monetary expansion outside the banking industry doesn't have the same negative consequences (boom-bust cycles) as monetary expansion inside the banking industry.

All in all, I'm not justifying the Federal Reserve or any other central bank since they all impose their currencies on their citizens under the punishment of law. I disagree with that. But I also disagree calling money printing illegal. You just as well might illegalize gold mining under a gold standard because of this principle, or even the creation of any good (even perishible goods like food and clothing)!

 

I did not suggest the Fed print silver certificates. The premise was to replace the Reserve Note with silver certificates printed for the government by the treasury in an effort to forgo paying intrest on the debt.. As for housing, to me the most likely way for houses to depreciate in value is if there were an overproduction at price levels the potential home owner could not afford resulting in a surplus of houses thereby causing price deflation on newly built homes but minimal price deflation on existing homes which have mortages which are current. Building houses does not compare to printing money

 

Friend, How is in not stealing?  When kings would collect taxes in Gold they would debase them by taking gold from the coins, and mixing the rest with lesser metals. Inflating the economy.  Counterfiting."Fractional" gold coins were passing as pure gold coins. Fast forward to when gold certs came into play. When you print more paper (Note that certs are contracts. a promise for what the free market chose as money; Regression Theorem-Mises) than there is redeemable money, and that paper is acting as genuine gols certs within the economy, you are stealing. AKA Fractional Reserve banking. It is communicating to the the free market that there is more capital within the economy than there is. Sound fimiliar? That disrupts intertemporal market coordination (Hayek). Unilarterally shifting consumer time preferences. Causing malinvestments. Misallocation of money. Yes, in one sence a printing press cam creat more "paper", but cannot create wealth. Production brings forth goods which is our real measure of wealth. Money is just a facilitator to attaining these goods (Mises) (also Im not forgetting that money is a good itself-though not a consumption or production good). But printing more money beyond the pool of goods brought about by actual savings accompanied with real production brings about the booms. Think of the time lags that Mises talks about. The new money is spent by its first holders, they get to aquire goods and services at todays prices. That is only possible by creating new money. This drives up prices.Those who get it last pay a higher premium on goods and services.

Rothbard wrote: What has government done to our money. A smash hit. Its a good read.

krazy kaju:

anonnymous:

Say the government bypassed the Fed and started printing silver certificates to pay its debts, at what point would it become better to hold silver certificates than Federal Reserve notes/ Also, if the government chose to do such a thing would it be inflationary and if so would it result in higher inflation than if the Fed had printed Reserve Notes?

 

 The Fed wouldn't be able to print silver certificates willy nilly since they'd have to back it up with silver when people want to exchange the certificates for silver.

What I'm saying is that printing money isn't stealing any more than creating any good is stealing. Every good created devalues all the other goods of the same type since supply becomes higher than it otherwise would have been. In your example, silver mining would slowly depreciate the value of silver and therefore the silver standard (or silver certificates). There's nothing wrong or illegal about this and there shouldn't be anything wrong or illegal about it. In a free market, the expansion of goods outstrips the expansion of credit anyways (since precious metal mining is a relatively long process), so price deflation occurs anyways. Also, monetary expansion outside the banking industry doesn't have the same negative consequences (boom-bust cycles) as monetary expansion inside the banking industry.

All in all, I'm not justifying the Federal Reserve or any other central bank since they all impose their currencies on their citizens under the punishment of law. I disagree with that. But I also disagree calling money printing illegal. You just as well might illegalize gold mining under a gold standard because of this principle, or even the creation of any good (even perishible goods like food and clothing)!

The difference is that fiat money does not contain any intrinsic value.  If you double the supply of houses, the increase of the standard of living increases in proportion to the decrease in the value of any one person's house.  However, when you double the supply of fiat money, there is no increase of the standard of living, but the decrease of the value of any one person's money is decreased.

Therefore, if you are able to afford 10 units of value, and the value of your house decreases by 1 unit of value, you can now afford 11 units of value.  This effect is not immediate, but nothing has been stolen from you.  In the case of the printing of money, that 1 unit of value is not returned to you.

banned:

And in order to provide the right incentive, a small amount of inflation is nessecary, so people are more likely to consume now rather than save.

 

There is a more fundamental problem here with your teachers’ fallacious assertion, and it has to do with the purpose of the market (or the economy, for that matter). 

 Is the purpose of the market to satisfy the demand of the consumer, or is its purpose something else?  If it is to satisfy consumer demand, then why do we need any incentive to buy or to abstain?  Our behavior, absent of any coercive interference, reflects our exact (present) personal desires and goals.  Why does your teacher assert that the individual must require some external "incentive" to realize what he really wants? 

In fact, the opposite is always true.  Any deviation from what the individual would have done, absent of any coercive interference (such as inflation), means his “wants” are less satisfied.  You cannot increase the satisfaction of the individual by not allowing him to reach that satisfaction.

Your teacher, like all Keynesians, does not understand markets.