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Originally Posted by Bigdaddydvo
I'm going to attempt to stake out a somewhat nuanced critique of the bolded above. If your intent is to mock elements of the hard money crowd who stay up at night, clutching their ten Morgan Silver Dollars while waiting and praying for the Great Pumpkin of U.S. hyperinflation, then I'm right there with you. But if, on the other hand, you're somehow suggesting that any critique of the post Bretton Woods, exclusively fiat money regime (and more broadly fractional-reserve lending) is tantamount to the admittedly warped world-view of the mouthbreathers I identified above, then we certainly must part company.
Of course not. There's a difference between a reasoned argument about the consequences of specific fiscal practices (whether right or wrong), which you've presented below, and the sort of view I was criticizing. I specifically think that libertarians should not do things like insist that fiat money is somehow intrinsically dishonest or argue that it is a manipulative attempt by the central bank to use inflation to expand production possibilities. These arguments are, at best, severely intellectually lazy. However, as is probably already obvious from my parenthetical comment there, I do not agree with your arguments below and would say that, if your views represent the stock libertarian stance, I do not consider myself a libertarian.
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Instead I'll offer what I identify to be the consequences of the U.S. government printing the world's reserve currency ex nihilo for the last 40 years:
-The privilege (or more accurately, curse) of printing the world's reserve currency has enabled the U.S. to run massive fiscal deficits--annual deficits of $1+ Trillion and total debt now north of $16 Trillion--since foreign central banks need to hold U.S. dollars and government debt as their reserves. The "privilege" element means that current government social and military spending maintains the appearance of sustainability; indeed free ponies and military adventurism have continued unabated for the last 4 decades. The curse, however, is that foreign countries (particularly China/Japan/the rest of E. Asia) have jumpstarted their economies/export businesses through competitive devaluation. While Americans have then enjoyed cheap, high quality imports, it has been at the expense of hollowing out our own manufacturing base, and by extension, the middle class. Huge, unsustainable current/capital account imbalances between the U.S. and Asia are the order of the day. If you heard the President or Romney waxing sourly during the campaign about China manipulating its currency, this is the reason: Despite the Fed's best efforts, the dollar won't depreciate fast enough! As the printer of the the reserve currency, we have a built in disadvantage when it comes to competitive currency devaluation. Of course, all central banks mathematically can't devalue in tandem, and all countries can't mathematically export their way out of this global slump.
I don't think this is correct. The ability to run a deficit in a national budget is a function of the availability of credit, not the money supply. It's not as though Congress approves an annual budget of, say, $5 trillion, realizes it only expects $4 trillion in tax revenue, and then orders the Federal Reserve to print up the remaining trillion. Further, I do not understand what role you think foreign banks' collective need for U.S. dollars qua reserve currency plays in the equation; the only impact of this fact is that the U.S. is, relative to other nations, able to achieve a lower cost of credit in foreign exchanges. While competitive currency devaluation may help other nations, I see no reason to believe this has many negative impacts on the U.S. middle class
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-Fiat money and fractional reserve lending were necessary preconditions to the 2008 global financial crisis. These two things enabled banks to lever themselves 30, 50, or even 100 times their capital bases. What, after all, could possibly go wrong? They are also to thank for the $100 Trillion derivatives complex which is utterly disconnected from the real economy. The tired counter to these problems has been "More regulation!" despite the obviousness of regulatory capture in both the Fed and SEC.
So? This seems to me like arguing against credit on the grounds that lending is a necessary precondition of bankruptcy. I don't see what's wrong with believing that regulatory improvements could have stifled some of the worst practices; certainly subprime mortgage loan origination wouldn't have taken place at the astronomical rates it did in a tighter regulatory environment.
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-I won't turn this into a thread about ABCT, but fiat money has only amplified the booms and busts of the global economy, as our central planners still hold the misguided belief that their models are superior to the free market in determining the price of money (which they now want to be zero). This has ruthlessly punished middle class savers/retirees who are forced to take on riskier securities for any semblance of yield, while the 1% who can lever and speculate have done exceptionally well in this ZIRP environment. Try saving/building wealth in this environment. It sucks.
This paragraph seems like more or less pure rhetoric to me, in that I do not see what your economic argument is. Why isn't fiat money a market outcome? How would a gold standard be different?
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The above critiques align with the point tomdemaine made in his OP, namely, that none of the above has any hope of changing due to the incestuous relationship between politicians of both parties and Wall Street; wars, free ponies, and big bonuses are pretty inextricably linked. This knowledge, while perhaps of limited utility for the libertarian movement, at least lets folks like me know what we're up against while planning for our own lives and futures.
I respectfully disagree. Your personal well-being probably will not be substantially affected by any of the forces you described above. To my mind, libertarian-minded people who are focused on these issues are the right-wing equivalent of Occupy Wall Street: vehement, upset, and politically strident, but ultimately lacking when it comes to a detailed understanding of the very enemy they've selected. You can't fight what you don't understand.