Economics Questions

Re: inflation(gold) - no additional social benefit?

Tue, 07 Jul 2009 05:24:19 GMT

In MES, Rothbard defines inflation on page 990 note 106. His definition of inflation excludes increases in the stock of specie (gold and silver). I consider it impossible to find "inflation" in a 100% gold reserve standard market. One of the logical differences between increases in fiat currency and increases in the supply of gold and silver is: increases in the money supply due to new (gold and silver) money on the market do not cause the Austrian business cycle. Increases in the money supply due to the government printing excessive quantitities of paper money does cause the ABC.

You are right that gold and silver have nonmonetary utility. People use these metals to make jewelry. When the supply of gold and silver increases due to mining, some people benefit because of the nonmonetary utility the metals have. These people are those who appreciate jewelry. However, regarding monetary issues, the increase causes no net social effect, and the only people who obtain wealth from gold mining are the mining company owners, employees, stockholders, etc. Likewise, the only people who gain from issuance of new fiat currency are those who spend it before it causes a general fall in the purchasing power of money.

Re: inflation(gold) - no additional social benefit?

sthomper — Tue, 07 Jul 2009 04:29:35 GMT

What You Should Know About Inflation......"Shows that inflation is always an increase in the supply of money, which results in price inflation...."

http://mises.org/hazlitt/hazlittbib.asp

if you cant use the term in this context in this post , post elsewhere

Re: inflation(gold) - no additional social benefit?

sthomper — Tue, 07 Jul 2009 04:20:54 GMT

i said inflating the gold/silver MONEY supply not unmoneyed gold or silver.

"Every supply of money is always utilized to its maximum extent, and hence no social utility can be conferred by increasing the supply of money."

http://mises.org/rothbard/mes/chap11a.asp

"increasing the supply of money...." in rothbards words. i guess you don not consider that inflation.

if not reply no more.

i use inflation to mean increasing the supply of money as do many others i have read at mises and lrc. rothbard speaks of gold and silver as being a money (.Thus, consider a free-market society where gold is the money..... http://mises.org/story/3480 )

rothbard states above "no social utility can be conferred by increasing the supply of money." would you disagree if the statement said "no social utility can be conferred by inflating the supply of money. "?

do you consider a 'goldMONEY supply' impossible to 'inflate' ?

"An increase in the money supply, then, only dilutes the effectiveness of each gold ounce; on the other hand, a fall in the supply of money raises the power of each gold ounce to do its work. We come to the startling truth that it doesn't matter what the supply of money is. Any supply will do as well as any other supply. The free market will simply adjust by changing the purchasing power, or effectiveness of the gold-unit. There is no need to tamper with the market in order to alter the money supply....."

http://mises.org/money/2s8.asp

would saying "inflating the money supply only dilutes the effectiveness of each gold ounce....." have no meaning to you?

Re: inflation(gold) - no additional social benefit?

Tue, 07 Jul 2009 02:40:26 GMT

You wrote: "was this ever a consideration in inflating the gold/silver money supply?" Check your definition of "inflation." Rothbard does NOT define inflation as just any increase in the money supply, as you seem to think.

When a gold miner produces gold, he is NOT "inflating." Inflation is currency debasement. Currency is paper money, not gold coins/bullion. Not all money is currency. I hope this answers some of your questions.

Re: inflation(gold) - no additional social benefit?

sthomper — Fri, 03 Jul 2009 03:50:16 GMT

i guess counterfitting a gold coin would be akin to goldplating a nickel and tin alloy and having the result look and fell like a gold coin?

as counterfitting a banknote or dollarbill (with ink and fancy paper) woulnt be representative of the payent claims of each.

Re: inflation(gold) - no additional social benefit?

sthomper — Fri, 03 Jul 2009 03:47:40 GMT

"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."

this seems to make sense to me for some reason as to why adding more physical goldmoney into an economy would take place.

i will try to look into this more.

thanks

Re: inflation(gold) - no additional social benefit?

sthomper — Fri, 03 Jul 2009 03:45:24 GMT

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."

if i planned to purchase something two weeks from now and goldmoney enters the economy diminishing my existing goldmoney stock wouldnt that prevent or delay my planned purchase requiring more golmoney?

Re: inflation(gold) - no additional social benefit?

Saiphes — Fri, 03 Jul 2009 01:54:00 GMT

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.

Re: inflation(gold) - no additional social benefit?

scineram — Fri, 03 Jul 2009 00:10:27 GMT

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?

Re: inflation(gold) - no additional social benefit?

scineram — Fri, 03 Jul 2009 00:08:14 GMT

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.

Re: inflation(gold) - no additional social benefit?

sthomper — Thu, 02 Jul 2009 21:24:02 GMT

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.

Re: inflation(gold) - no additional social benefit?

Laughing Man — Thu, 02 Jul 2009 21:19:42 GMT

scineram:
Rothbard was simply wrong. Read Block and Barnett for a refutation.

Which articles?

Re: inflation(gold) - no additional social benefit?

sthomper — Thu, 02 Jul 2009 21:12:50 GMT

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 ?

Re: inflation(gold) - no additional social benefit?

Saiphes — Thu, 02 Jul 2009 15:33:45 GMT

Ah, this one.. interesting:

http://mises.org/journals/qjae/pdf/qjae7_1_4.pdf

Barnett on the optimum q

Re: inflation(gold) - no additional social benefit?

JackCuyler — Thu, 02 Jul 2009 15:31:49 GMT

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.