Libertarianism Declared Dead

[geni]

Sure but what private organization are you giving the power to print money?

Well normaly people fall back on goverments saner than their own.

Sure they say that they have the gold, oil or what have to you back it, but you only have their word.

It seems that money goes against libertarian principles.

There have been various company backed non official currencies that have appeared from time to time. Both deliberate (workers get paid in tokens they can spend in the company shop) and less planed (vouchers become a low level currency).

 

[SaulOhio]

Once again you are creating a straw man by shoehorning libertarian ideals into my argument. First off, the ladle/bucket analogy is completely inappropriate. An economy can expand or contract, a bucket cannot significantly do so.

This is true, an economy does exapand and contract, as capital accumulates, making people more productive. However, the government taxes and mandates like minimum wage and OSHA type regulations are not capital accumulation. They are forced spending. So you are right. The analogy is wrong. Its like taking water out of the bucket, and not putting it back.

Second off, it is your own assumption that wages will be reduced by these measures. A government that is willing and able to improve working conditions would also be willing and able to construct subsidies and safety nets to minimize the effects of the measures on wages and poverty.

Where does the government get the money for these subsidies and safety nets? Taxes and inflation. The first takes away cash that would be spent on wages, and the second robs the wages of buying power. Its not an assumption. Its a fact.

I'm not so naive to think such a safety net would be perfect. Even in developed nations people still fall through. You seem to be convinced that no matter what the government does, it's not going to be effective because they won't see it through to completion.

Not because they won;t see it through. Because the money they divert from productive uses is consumtion spending, not capital spending. Because government is stupid, and an economy is a vastly complex system, liek the weather. It is said that if you disturb the movements of a butterfly in Peking, you will affect storm patterns over New York. Government interference will have unintended consequences the same way, even more so. Some of them are predictable, and predicted by free market economists, yet government officials who interfere in the economy in such ways keep blaming the free market. See Four Thousand Years of Price Controls. Many of the interferences have unexpected outcomes, as people find creative ways to get around the regulations.

This all is the result of impatience with the pace of economic progress and a desire to get something for nothing.

Do you care to back up that claim?

I would have thought it obvious. In an economically free society, progress solves these problems, as capital accumulates and productivity increases, parents can afford to keep their children home, and send them to school instead of making them work to help support the family, workers are able to choose between employers that offer higher wages or better working conditions, and competition between employers for the best workers drives wages up. People who demand government interventions don't seem to want to wait forthis process to take place. And they criticize the 19th century for its poverty, compared to today's prosperity which took a hundred years to achieve. You expect feudal peasants to go from mud huts to air-conditioned luxury conominiums overnight?

And it is an attemot to get something for nothing. Just have the government do it. Is there a problem? Government should do somehting about it! Governemnt is not a creative force. It is destructive. Its working end is a man with a gun, a cop or a soldier. Everything else about government is about deciding where that man is going to point his gun. You expect guns to provide people with higher wages and better working conditions? You expect a gun to get employers to produce money they didn't have before to spend on wages and improving working conditions? As for the subsidies, government has no money it doesn't first take out of the economy, or print, which causes inflation, and the effect is the same. Asking government to solve problems that require resources is asking for something for nothigng.

 

[Mister Agenda]

More straw men and false dichotomies. Nobody is proposing banning sweat shops and then simply leaving people to fend for themselves. The point of government intervention is to prop up a better alternative, one that given enough time will result in a more robust and vibrant economy and larger tax base than could ever have been achieved with a sweat shop economy. What that better alternative is depends on the needs of the economy in question; there is no panacea.

You're leaving some things out, like how do you raise enough taxes for subsidies in a Third World country and why a corporation should invest in a country a long way off with no skilled labor if they have to pay higher wages. Companies too seek the best alternative from among their options, and investing in a truly impoverished country always has a lot of drawbacks. You may think it's a false dichotomy but your plan would only succeed in driving out investment. A country with sweatshops has made a breakthrough: they've made their country safe and stable enough that a few companies will take a chance on investing there even though the only other thing it has to offer is cheap unskilled labor. Funny though, how many formerly Third World countries become Second World countries a decade or three after being ruthlessly exploited for their cheap labor. It's almost as though those laborers were fully human beings capable of learning how to run factories and businesses on their own given a chance to see how it's done.

I truly understand the wish to skip people up from abject poverty and backbreaking labor in the fields to $10.00 an hour jobs in clean, safe factories in a week. A wealthy charity might be able to accomplish this feat on a very limited scale, but businesses have to make money to stay in business, and it's businesses that have historically brought entire nations out of poverty. That means baby steps from villages to modernity. Right now the best thing a country can do to transition out of poverty is to attract foriegn investment by providing stability, safety, and an enforceable legal framework. Teaching a European language in grade school would be a good idea, too, if they have them. That doesn't mean they have to sell out the property rights of their citizens as has happened in some arrangements with big corporations, just make sure they have a reasonable expectation their employees won't get murdered and that they can take someone to court if they suffer damages.

I believe anyone who truly cares about the abject conditions found in so many countries in the world should be giving generously to organizations like Oxfam or any number of other global charities. There's no better investment I'm aware of measured in number of lives saved or improved.

 

[Mister Agenda]

'Snip' A government that is willing and able to improve working conditions would also be willing and able to construct subsidies and safety nets to minimize the effects of the measures on wages and poverty. I'm not so naive to think such a safety net would be perfect. Even in developed nations people still fall through. You seem to be convinced that no matter what the government does, it's not going to be effective because they won't see it through to completion. 'Snip'

Most of the citizens of Third World countries are a bad season away from famine and can't afford what we would consider basic farm implements. Subsidies and safety nets under these conditions are a fantasy. A government can't make up resources out of thin air, it gets them from its tax base, one way or another. Collecting enough taxes from your citizens to build some fancy buildings: easy. Collecting enough to subsidize wages and provide welfare when most of them are already barely subsisting? It's like building a hydroelectric dam that depends on water running uphill.

 

[Mister Agenda]

Well normaly people fall back on goverments saner than their own.

There have been various company backed non official currencies that have appeared from time to time. Both deliberate (workers get paid in tokens they can spend in the company shop) and less planed (vouchers become a low level currency).

I think the idea of having private or local currencies is that those currencies would be in competition with each other and people would gravitate toward the most stable currencies, given a choice. Multiple currencies seem to always occur provided they aren't illegal.

 

[drkitten]

I think the idea of having private or local currencies is that those currencies would be in competition with each other and people would gravitate toward the most stable currencies, given a choice.

Which, of course, contradicts centuries of experience. Like most Libertarian theory, in fact.

It's a well-enough known phenomenon to have a specific name. Gresham's Law (Bad money drives out good.) The formulation as Gresham's Law dates bad to the 16th century, but the concept is at least as old as Aristophanes.

 

[Francesca R]

I think the idea of having private or local currencies is that those currencies would be in competition with each other and people would gravitate toward the most stable currencies, given a choice. Multiple currencies seem to always occur provided they aren't illegal.

So the idea of having multiple currencies is so that by quick trial-and-error you can ditch all of them except the best one? Sounds a bit like Rafael Nadal accepting three balls and tossing two back a couple of seconds later. Or rather, having done that already, doing it all over again out of concern that "the gubmint" did it the first time

 

[SaulOhio]

Francesca: Again, you are unable to raise an argument against what someone actually said.

How you turn "gravitate towards the most stable currencies" into "quick trial-and-error you can ditch all of them except the best one?" is beyond me.

"Gravitate toward" is lightyears from "ditch". And he said "currencies", pleural. You said "the best one", singular.

Try arguing against what someone actually said, not what it is convenient for you to claim he said.

 

[Francesca R]

Nope. The "theory" does not happen. The bad money wins. You'll like this . . . the ultimate "bad" money in this definition is the fiat money you loathe. That is why it overwhelmingly dominates other "currency" such as commodities.

Private, competing currencies is another bust idea from the libertopian (gated and electric-fenced) ivory tower.

 

[UnrepentantSinner]

Oh I just love when Libertarian mythology conflicts with actual history and even serves as a static generator that confuses idealoges to the point where they don't respond to the actual words written in a BBS post.

It was taken out in 1933, and the Great Depression lasted another decade. If gold was the problem, why didn't getting rid of gold solve it?

You really need to read what I wrote, not a few things here and there. Private ownership of gold was abolished in 1933, not the gold standard. Tying the dollar to gold wasn't abolished, as I noted earlier (though I was off by two years) by the Nixon Administration in 1971. Private gold owndership was reauthorized during the 1980s with the advent of Gold Eagles.

Where in what I posted did I ever say that gold was the problem or that getting rid of it should have solved your phantom problem? I was merely noting that gold was still a part of circulated currency until 1933 - four years after the Crash and that the U.S. maintained the Gold Standard until 1973 (actually 1971 as I corrected immediately above).

And why didn't FDR's New Deal solve the problem? {snip}

There's a great deal of bandwidth and ink used by some Conservatives and all Libertarians to make the point that the New Deal didn't end the Great Depression, it actually exacerbated it. The only consensus opinion I've seen on that opinion is amongst some Conservatives and all Libertarians. I haven't read much of their writings, but IIRC, most seem to ignore the Dust Bowl and Prohibition which occured during that time... well, that and how the world economy was in the absolute crapper, and that Japan's agression began in 1933 with the invasion of Manchuria, etc. etc. It's also interesting to hear these same Conservatives and Libertarians claiming that the New Deal was a total failure because the U.S. didn't come out of the Great Depression until... wait for it.. the massive governmental spending during WW II.

{snip WND link}

Heheh. I'm sorry, but WND is a worthless source. If something they post has any validity it will appear on NRO or the Washington Times, WSJ or Fox News websites.

Just a couple?
From A History of Recessions:

Looks to me like the frequency of recessions was the same after the Fed was founded as after. In fact, you said before the Fed, it was about once a decade. This looks like closer to twice a decade.

Oh bravo. Great example of what I mentioned at the top of the post. You're so myopically focused on target you missed the fact that I specifically used words that have meanings you're not arguing against. And no thanks for the history of Recessions since I've lived through a number of them so I didn't need your link or list to be aware of them. I specifically used the words Panic* and Depression since I was referring to specifically... Panics and Depressions which occured about every ten years from the founding of the Union, but occured only once since the establishment of the Fed.

Recessions are not Depressions or Panics. And the "just a couple" reference were to bubbles in the economy that burst like S&L issue in the 80s, the gas crisis in the 70s and the housing market this year. It wasn't referring to recessions per se.

* The Wiki search for Panic redirects to that entry.

Since economic libertarianism has never been implemented, especially in banking, how can you blame it for the problem? Especially seince that problem has gotten even worse since the founding of the Federal Reserve and the abandonment of the gold standard?

Since you failed at making the case that economic libertarianism has never been implimented, especially in banking, in the U.S. or that "the problem" has gotten worse since the founding of the Fed or the establishment of the gold standard, the rest of your comments are based on a false premise and therefore aren't worthy of consideration.

{snip}

 

[Mister Agenda]

Which, of course, contradicts centuries of experience. Like most Libertarian theory, in fact.

It's a well-enough known phenomenon to have a specific name. Gresham's Law (Bad money drives out good.) The formulation as Gresham's Law dates bad to the 16th century, but the concept is at least as old as Aristophanes.

Gresham's Law applies specifically to competing commodity-based currencies that are both subject to legal tender laws. If one is debased and the other is not (or less so), people will tend to hang on to the 'good' currency and spend the 'bad' currency, taking the good currency out of circulation. Presumably the competing currency folks imagine that without legal tender laws to back it up, bad currency won't be used, that is, people will refuse to take it when there's no law requiring them to accept it. They may be incorrect about that, but clearly Gresham's law was not formulated with this scenario in mind.

It could still be the case though, that everyone will hoard the 'more valuable' money, leaving ONLY the 'bad' (as Gresham defines it) money to circulate. One could argue that the international money market is an example of this, as it is nearly entirely composed of what Gresham would deem bad money.

It is not my intent to advocate for competing currency systems, I am merely trying to explain the reasoning behind them. My guess is that if tried in the US any commodity-based currencies would be hoarded, leaving the government-backed greenback as the most viable currency, and other currencies mainly used in an attempt to avoid taxes. In other words I think it would be a disruption without significant benefits except to black and gray marketeers.

 

[Mister Agenda]

So the idea of having multiple currencies is so that by quick trial-and-error you can ditch all of them except the best one? Sounds a bit like Rafael Nadal accepting three balls and tossing two back a couple of seconds later. Or rather, having done that already, doing it all over again out of concern that "the gubmint" did it the first time

The problem isn't necessarily how quickly it happens, but, as Dr. Kitten points out, the risk that the 'best' currencies will simply disappear from circulation. Of course currency that doesn't circulate becomes a store of wealth and arguably lacks an important quality that would really be necessary to consider it an ideal currency: liquidity.

 

[The Central Scrutinizer]

Heheh. I'm sorry, but WND is a worthless source. If something they post has any validity it will appear on NRO or the Washington Times, WSJ or Fox News websites.

I don't really read SaulOhio's posts, but stop to presses! He's using World Net Daily as a reliable source? OMFG!!!!

 

[SaulOhio]

You really need to read what I wrote, not a few things here and there. Private ownership of gold was abolished in 1933, not the gold standard.

A gold standard means that the money is convertible from cash into gold. If you are not allowed to own gold, how are you supposed to convert your cash into it? Yes, this is a pretty strict definition of the term, but you said "If I recall correctly, gold wasn't taken out of our system until 1933...", which is what I was referring to.

Tying the dollar to gold wasn't abolished, as I noted earlier (though I was off by two years) by the Nixon Administration in 1971. Private gold owndership was reauthorized during the 1980s with the advent of Gold Eagles.

And the 1980's had only one recession, not till 1991.

You were arguing with my claim that we didn't have a 100% reserve gold standard. Just proving that there was some loose connection between the dollar and gold does not prove me wrong in saying we did not have a 100% gold reserve. The post you were responding to whas this:

You are claiming that libertarianism was tried in 1929? You mean the Fed was abolished, and we had a 100% reserve gold standard? I didn't know that!

Within that context, what I said was relevant and true.

Where in what I posted did I ever say that gold was the problem or that getting rid of it should have solved your phantom problem?
I was merely noting that gold was still a part of circulated currency until 1933 - four years after the Crash and that the U.S. maintained the Gold Standard until 1973 (actually 1971 as I corrected immediately above).

You were arguing with my sarcastic admission that we had a 100% gold reserve in 1929. If all you are asserting is that we were still on a gold standard, though greatly weakened by fractional reserve banking and the Federal Reserve, you are arguing entirley beside the point.

There's a great deal of bandwidth and ink used by some Conservatives and all Libertarians to make the point that the New Deal didn't end the Great Depression, it actually exacerbated it. The only consensus opinion I've seen on that opinion is amongst some Conservatives and all Libertarians. I haven't read much of their writings,

Then do so. I strongly recommend it.

but IIRC, most seem to ignore the Dust Bowl and Prohibition which occured during that time... well, that and how the world economy was in the absolute crapper, and that Japan's agression began in 1933 with the invasion of Manchuria, etc. etc.

Those can have a strong effect. But the Dust Bowl was caused, in part, by a government program to have people settle in and farm areas of the country that were not suitable for it, or only appeared suitable because of unusually wet weather for a couple of years. And of course, you can't blame Libertarian policies for the effects of wars, or Prohibition.

It's also interesting to hear these same Conservatives and Libertarians claiming that the New Deal was a total failure because the U.S. didn't come out of the Great Depression until... wait for it.. the massive governmental spending during WW II.

They do not say WWII ended the Great Depression. Many of them say that it continued through the war, and ended only once the war ended. The war itself took politicians' minds off trying to regulate the economy, and the optimism and soldiers coming home to get to work helped to rebuild. I know of one who said that the war didn't end the Depression, just covered it with a high fever.

Oh bravo. Great example of what I mentioned at the top of the post. You're so myopically focused on target you missed the fact that I specifically used words that have meanings you're not arguing against. And no thanks for the history of Recessions since I've lived through a number of them so I didn't need your link or list to be aware of them. I specifically used the words Panic* and Depression since I was referring to specifically... Panics and Depressions which occured about every ten years from the founding of the Union, but occured only once since the establishment of the Fed.

What we are experiencing now isn't a panic? The Dow just dropped another 300 points. It has lost half of its value in the last couple of months. We have a Federal Reserve now. Why isn;t it preventing a crisis? Why didn;t it prevent the one in 1929?

Since you failed at making the case that economic libertarianism has never been implimented, especially in banking, in the U.S.

How have I failed to prove that? I have listed one government intervention into the markets after another, ad infinitum. The Federal Reserve, the GSE's, "Open Space" laws (though I didn't mention that in this thread), HUD, the CRA, thousands of pages of new regulations added to the Federal Register. How is that failing to prove that libertarianism was never implemented? What libertarian has argued for those measures. In fact, name me a libertarian that has not argued for their repeal! That is what libertarianism is all about, repealing all those government interventions in the market. None of them has been repealed. All there is that can be presented contrary to all this is one regulation repealed that kept two sectors of the banking industry separate. One little, obscure regulation removed, against all I have named.

...the rest of your comments are based on a false premise and therefore aren't worthy of consideration.

What false premise?

 

[soylent]

Have you been paying attention?

We have the GSE's Fannie Mae and Freddie Mac, we have the CRA, we had Clinton and Bush pushing for an "ownership society", and on top of that we had central banking, which is a government attempt to regulate the economy in order to promote stable, continuous growth. (Intentions and actual consequences don't always go together)

Do you believe that Gavrilo Princip caused the first world war?

The housing market was pumped up overwhelmingly by Mortgage Backed Security junk bonds, in which the bad debt was sliced up into tranches and obfuscated from the buyer; Fannie Mae and Freddy Mac was peanuts in comparison.

The housing crisis is not what made the capital markets almost grind to a halt, it's not what toppled AIG, Lehman, Bear Sterns, it's not what did in Icelands banking system. It was the massive market of completely unregulated Credit Default Swaps which allowed these institutions to take on a lot more leverage than they should have; if they'd have been regulated like insurance, which it is, the leverage would have been limited and the housing crisis would have been contained.

If you call all of this deregulation, I need to know how you define deregulation.

It's not deregulation, it's failure to regulate in the first place.

 

[Francesca R]

The Dow just dropped another 300 points. It has lost half of its value in the last couple of months.

Correction--a quarter (25%), since 22/8/08.

 

[WildCat]

Really now, which regulation caused the banks and hedge funds to issue tonnes of junk Mortgage Backed Securities and ~$60 trillion of completely unregulated Credit Default Swaps?

On the other hand, nothing was deregulated to allow it either. In this March 2007 speech, he talks about the growth of the secondary market:

Besides discrimination a variety of economic and institutional factors help to explain the relative unavailability of credit in lower-income neighborhoods.2 Thirty years ago, the secondary market for mortgages was rudimentary at best, which limited local loan originators' access to capital and reduced their ability to diversify credit risks geographically.3 Informational problems also inhibited lending in some urban areas. For example, relative to higher-income neighborhoods, lower-income areas tend to have fewer home sales and more-diverse housing structures, making accurate appraisal more difficult4. Similarly, credit evaluations tend to be more costly for lower-income borrowers,

Of course, since this was all seen as a good thing at the time (pre-real estate/banking bust) he credited the CRA with stimulating the creation of the secondary market. A point, I well know, disputed by most people here...

Because that's what turned this minor problem in the housing market into a global problem.

Indeed. But this wasn't the result of deregulation, but of regulations falling behind changing market environment and technology. What I think we can agree on is that the secondary market allowed the original lenders an easy way to sell their loans, and because of that there was little incentive for them to be prudent in writing loans.

It is in this area where new regulations are appropriate. I think it would also be wise to review the approval process for bank mergers. When a big bank goes bust it brings down so many smaller ones with it. Maybe it's better to have more diverse bank ownership.

 

[Mister Agenda]

Oh I just love when Libertarian mythology conflicts with actual history and even serves as a static generator that confuses idealoges to the point where they don't respond to the actual words written in a BBS post.
Snip
Since you failed at making the case that economic libertarianism has never been implimented, especially in banking, in the U.S. or that "the problem" has gotten worse since the founding of the Fed or the establishment of the gold standard, the rest of your comments are based on a false premise and therefore aren't worthy of consideration.

It IS a virtue to be able to let go of ideas that aren't useful.

It is difficult to say what would actually constitute implementing libertarianism in banking. A return to the gold standard? Ending fractional-reserve banking? Market-based interest rates? Libertarians (of which I are one ) have a variety of ideas about banking, most of them bad or, at best, unrealistic, but forcefully advocated on the internet. I have not met a big-L Libertarian who thinks policies that actively encourage sub-prime loans and suppress interest rates are a good idea. I suppose what de-regulation in the financials there has actually been could be considered libertarian, but frankly, financials are an area many libertarians consider to be a legitimate target for careful government oversight-it's not regulation per se that is an evil for libertarianism (though it seems to be for many people who consider themselves libertarians) but over-regulation and regulation that causes undesireable unintended consequences.

At any rate, you can choose to believe that libertarianism was implemented in the banking industry, but I don't think you'll find any libertarians who agreed with that assessment, even before the 'meltdown'. Believe me, we wouldn't have been shy about pointing to specific policies of ours and saying "Look how great our policies are working now that they've been implemented! This is evidence that applying more of our policies will also be good!". Internet libertarians have been predicting doom for the economy for some time and now that it has finally arrived (allowing for a fair amount of hyperbole in the use of the word 'doom'), you want to put the blame on them? That's usually the way it goes, I suppose.

It's too bad, really. This would have been a great time to declare the death of neoconservatism, but I guess since libertarians are much better represented on this forum than those guys it wouldn't have been an entertaining argument.

 

[SaulOhio]

Correction--a quarter (25%), since 22/8/08.

OK. For once you corrected me on a fact. For some reason I was thinking the Dow had been up to 20 thousand, instead of 12 thousand.

 

[Francesca R]

Ending fractional-reserve banking?

Please explain what is libertarian about doing that. It outlaws voluntary lending and borrowing.

Market-based interest rates?

You mean a free-market in overnight interest rates and no monetary policy? Since monetary policy is demonstrably counter-cyclical, and policy rates tend to "do what the bond markets tell them" (except with a lot of smoothing and lower volatility), how do you think a more stable economy would result?

it's not regulation per se that is an evil for libertarianism (though it seems to be for many people who consider themselves libertarians) but over-regulation and regulation that causes undesireable unintended consequences.

And so it is for everyone. So that means "regulations that we like", no?