i have read that rothbard claimed that there was no 'social benefit' from adding additional money to an economic system.
if i recall correctly his reasoning was that the additional money-units would decrease the purchasing power of existing money stock - and this would be a drag.
are there other social benefits than that of purchasing power that would lead so many people to aquire so much gold and silver over the centuries. were they ignorant of money?
i have read at coinfacts.com that some coin designs had to be changed because of the properties of casting gold at very small amounts. i assume this coins grew smaller due to exchange flexibility?
would say a gold plated paper not meet the durabilty and storage (assay dificulties, etc) standard (market preference) of a small coin...prompting additional mining for money to take place?
are there social benefits that occur by adding to the gold/silver money-stock other than the purchasing power aspect?
gold can be used in teeth, cables, and many other things. even if it causes extremely slow inflation(since the supply is already so big), there are other things to use it for.
Money is just the "fancy name" we give to something when it is used as a medium of exchange. Any real world object can be used as a money if at least two persons agree on using it. Usually the object or objects used as money are the most marketable items in an environment. At least, to be used as an exchange medium a high marketability is required. An exchange using money is a threeway barter. First you buy money by giving away, say your labor for an hour. You work for an hour and you accept 10$ in exchange for your work. Now you want to buy a book for 10$. You sell your 10$ to the bookstore owner in exchange for the book you want.
In the whole process you and the bookstore owner take the exchange value of your 10$ for granted. 10$ was worth an hour of your labor and 10$ was worth the book.
Now if you had a very rare money like a grubberygrub (very rare) and there was only one grubberygrub in the world. you would request and get the grubberygrub for one hour of your work and sell it for the book. Same story so far. Now what happens if, suddenly by the appearance of the little green men, another grubberygrub would emerge in this world? Now there are two of them. Because the money supply has doubled (the FED is even better than the little green men) now your one hour labor all of a sudden would have to be sold for 2 grubberygrubs to reflect the same amount of value,no? and the book now would cost 2 grubberygrub as well. Because the grubberygrub is just an intermediate tool to compare different items in terms of value, increasing the amount of grubbergrub does nothing to increase wealth. The only way to increase wealth is production, not comparsion.
Bottom line there is no social benefit in adding gruberygrubs to the money stock. You do not really get an increase in puchasing power at all. All you get is the need to adjust your "prices" to the new facts that all of a sudden there are more grubberygrubs around and your products have to be sold for more grubberygrubs accordingly only to stay at the same exchange ratio with whatever you want to exchange.
In the begining there was nothing, and it exploded.
Terry Pratchett (on the big bang theory)
yeah i know gold has some other uses than money jewelery probobly be second behond money usage.
but i was specifically speaking to rothbards assertion of no additional social benefit of mining additional MONEY. i thought that was clear in my post.
if 100 (~3100 grams) ounces of gold are operating in an economy and an additional 5 ounces is added via mining....and there are some 1800 people exchanging gold for goods...the coins cant be less than 2 grams...coins below 2 grams are problematic to manufacture. is there additional benefit to adding additional gold MONEY even though purchasing power may decrease, "coin-ness" at 2 grams and above is increased?
was this ever a consideration in inflating the gold/silver money supply? or was it just simply a "mine gold until until you cant make any more money mining it the way we are" ethos? was this superior to a non central bank system?
anything above the commodity requests just went into coin?
sthomper: i have read that rothbard claimed that there was no 'social benefit' from adding additional money to an economic system. if i recall correctly his reasoning was that the additional money-units would decrease the purchasing power of existing money stock - and this would be a drag.
This is correct, why maintain prices with money production when you can decrease them without it....
sthomper:are there other social benefits than that of purchasing power that would lead so many people to aquire so much gold and silver over the centuries. were they ignorant of money?
Unless you are talking about adding cold coins to the money supply, which would not have an effect on the value of the currency so much as adding more paper, if this paper was backed by gold, it would have similar effects as to adding gold coins, not so much...
sthomper:i have read at coinfacts.com that some coin designs had to be changed because of the properties of casting gold at very small amounts. i assume this coins grew smaller due to exchange flexibility?
Yes
sthomper:would say a gold plated paper not meet the durabilty and storage (assay dificulties, etc) standard (market preference) of a small coin...prompting additional mining for money to take place?
Gold plated paper?
sthomper: are there social benefits that occur by adding to the gold/silver money-stock other than the purchasing power aspect?
As I said, adding gold is not like adding paper money backed by nothing....
It sounds like the ocean, smells like fresh mountain air, and tastes like the union of peanut butter and chocolate. ~Liberty Student
sthomper: i have read that rothbard claimed that there was no 'social benefit' from adding additional money to an economic system. if i recall correctly his reasoning was that the additional money-units would decrease the purchasing power of existing money stock - and this would be a drag. are there other social benefits than that of purchasing power that would lead so many people to aquire so much gold and silver over the centuries. were they ignorant of money? i have read at coinfacts.com that some coin designs had to be changed because of the properties of casting gold at very small amounts. i assume this coins grew smaller due to exchange flexibility? would say a gold plated paper not meet the durabilty and storage (assay dificulties, etc) standard (market preference) of a small coin...prompting additional mining for money to take place? are there social benefits that occur by adding to the gold/silver money-stock other than the purchasing power aspect?
Not sure I understand your question - it seems like you're asking "Why go after gold if it's not beneficial to society?" I know you're probably not asking that, but.. People go after gold because gold is agreed to be a store of wealth. That it's rare to find and difficult to mine and refine means that it's not counterfeiting to go dig it up. Usually, an economy's total number of offered goods and services will increase faster than the supply of gold - the rate of g/s rising being greater than that of gold supply means prices will fall (relative to gold).
An ounce of gold buys about the same amount of "Stuff" now as it did 100 years ago - the difference certainly doesn't compare to the $20/oz -> $1000/oz increase (50x) we see vs the dollar. This seems to contradict my above point of prices falling - but remember that demand for gold is very low since people are becoming detached from it as money. Gold ownership, let alone trade, is discouraged by the tax structure and the history of confiscation. If demand for gold were higher, then prices of goods would have to be lower in order to get people to part with gold. So let gold be $2000/oz or $5000/oz, and see that now, prices are 1/2 or 1/5 what they were 100 years ago.. Admittedly, there are many more distortions, but this is the general idea as I see it.
Besides use in manufacturing, and generally agreed upon use as a medium of exchange / intermediary for barter, I would say the social benefit is irrelevant. With the above stated - that prices would fall - then a consistent $5/hr wage this year and next year would in effect be a raise, and money kept in your mattress would appreciate - all because you cannot produce gold for free or instantaneously.
Due to the distortions in the system, the "common man" has no secure way to store the product of his labor today for use later - that labor productivity is robbed from him or skimmed by banks which are the only way he now understands to maintain his purchasing power.
sthomper:but i was specifically speaking to rothbards assertion of no additional social benefit of mining additional MONEY. i thought that was clear in my post.
Rothbard was simply wrong. Read Block and Barnett for a refutation.
sthomper: yeah i know gold has some other uses than money jewelery probobly be second behond money usage. but i was specifically speaking to rothbards assertion of no additional social benefit of mining additional MONEY. i thought that was clear in my post. if 100 (~3100 grams) ounces of gold are operating in an economy and an additional 5 ounces is added via mining....and there are some 1800 people exchanging gold for goods...the coins cant be less than 2 grams...coins below 2 grams are problematic to manufacture. is there additional benefit to adding additional gold MONEY even though purchasing power may decrease, "coin-ness" at 2 grams and above is increased? was this ever a consideration in inflating the gold/silver money supply? or was it just simply a "mine gold until until you cant make any more money mining it the way we are" ethos? was this superior to a non central bank system? anything above the commodity requests just went into coin?
No increase in the money supply will have a general social benefit. It will devalue the existing supply. The real question, then, is why add more money at all? The answer, of course, is that the increase benefits the first user of the new money, as the first user spends the new money at the current exchange rate, before the market adjusts to the inflation.
However, when dealing with a commodity as money such as gold, the mining of new gold and subsequent minting of new coins, while increaseing the money supply, also introduces more of a particular good, ouces of gold, to the market. Gold is valued on the market as a commodity, as well as the medium of exchange meaning along with the an increase in the money supply, there is also an increase in the total goods available on the market, if such a thing can be quantified.
Ah, this one.. interesting:
http://mises.org/journals/qjae/pdf/qjae7_1_4.pdf
Barnett on the optimum q
i read the block and barnet paper...what i got from it was that when new gold entered the economy as money it facilitated new purchases and that this was somehow optimum.
but if the new gold money facilitated purchases wouldnt it also diminish purchasing power of existing gold money and prevent some purchases from being made?
the block barnet paper didnt mean much to me or i didnt understand it well enough.
my main question was, outside of purchasing power aspect was their any social benefit from inflating a gold/silver money supply.
if a coin is a good, albeit different than consumer goods, would inflating gold coin (even though it would diminish the purchasing power of existing gold coin) provide some 'social benefit' - such as a specific size of coin for flexible trade (where the properties of the metal and coin manufacture have limits)? was tihs a consideration when new gold was mined specifically for money ?
scineram:Rothbard was simply wrong. Read Block and Barnett for a refutation.
Which articles?
'It is difficult to imagine any normal person wishing to meet Marx for a third time.' - Alexander Gray, The Socialist Tradition
it's rare to find and difficult to mine and refine means that it's not counterfeiting to go dig it up. Usually, an economy's total number of offered goods and services will increase faster than the supply of gold - the rate of g/s rising being greater than that of gold supply means prices will fall (relative to gold).
it would seem that social benefit is relevant if mining isnt counterfitting and counterfitting has bad social implications.
Which was linked above by Saiphos.
sthomper:but if the new gold money facilitated purchases wouldnt it also diminish purchasing power of existing gold money and prevent some purchases from being made?
How would it? Coinage does not interfere with otherwise planned transaction in any way.
sthomper:my main question was, outside of purchasing power aspect was their any social benefit from inflating a gold/silver money supply.
What they said. The benefit is exchanges can take place that otherwise could not.
sthomper:such as a specific size of coin for flexible trade (where the properties of the metal and coin manufacture have limits)?
Yes, this is a benefit too. But this might be related to the previous point.
sthomper:it's rare to find and difficult to mine and refine means that it's not counterfeiting to go dig it up.
In which universe is counterfeiting in any way related to the difficulty of production?
scineram: sthomper:it's rare to find and difficult to mine and refine means that it's not counterfeiting to go dig it up. In which universe is counterfeiting in any way related to the difficulty of production?
I suggested the same - apparently a leap without basis. I hadn't actually thought about what counterfeiting is... only that it seems to be manufacture of money in a way that allows one to continue doing so indefinitely with virtually no effort.
If I recall correctly from discussions of the rise of FRB, a better concept of counterfeiting is that of receipts which represent goods; actual commodities cannot be counterfeited. Thank you for helping me clarify that.
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