In historical terms, fiat money has been around for no time at all. Certainly not long enough to draw any sort of "if it really sucks, how come everyone has it"?

wow this thread

depressing that ppl cant recognize evil

Couldn't it be possible that backed currency is better for the long-term (1000 years) while central bank controlled fiat currency is better for the short term(50-100 years)?

This would explain how both camps can be correct.

A black swan event could dismantle a fiat currency. As long as such an event doesn't happen a fiat currency allows for faster growth. A commodity currency can survive a big disaster but restrains an economy to the point that the people in power might wish to replace it. ??

Did you mean to post this in this thread?

ok

ok

1)This gigantic, humongous, Jupiter-sized assertion doesn't just require its own post, it requires its own novel (make sure to have it co-authored by Malthus);

2)Assuming arguendo that 1) is entirely accurate, it is most certainly not empirical confirmation of the Austrian theory, since correlation is not causation;

3)The whole point is that not only are you not qualified to judge most of what you do see, but that mainstream economics, being based on mathematics, is something you are inherently not seeing in the first place (would you know its mathematical accuracy if you saw it in a sense other than "well, this contradicts my worldview, so it must be wrong"? do you even subscribe to the relevant journals that have the underpinnings of the theories you dislike expressed in mathematical notation?)

3.5)Austrian theory, however, has its underpinnings in the "rational actor" theory of human behavior, something that *is* "seeable" and predictable by a non-mathematician...and the rational actor theory is getting more and more threadbare by the day in any number of fields that use it.

I believe Kublai Khan was the first to use fiat money after conquering China. Let's see, a quick search of Wiki....confirmed.


"Kublai decided to invade Japan, Burma, Vietnam and Java, following his Mongol officials. These costly conquests along with the introduction of paper currency, caused inflation. From 1273 to 1276 war against the Song Dynasty and Japan made emissions of paper currency explode from 110,000 ding to 1,420,000 ding."

Yeah, a huge advantage for its citizens, and a huge disadvantage for its government. Which are you referring to when you say country?

Even more money to be made in convincing a country it's a good idea to create and spend trillions of dollars.

Ehhh, this chart does not show what you think it shows. It actually shows the opposite. You may want to look into this one further.

The whole point is that "the marketplace" for economists is driven in large part by government funding. Sure, there is demand for good economists from other sectors of the economy as well, but given the huge presence of the government, your approach here is obviously flawed, and it's surprising that you wouldn't see that.

You mean like Thorstein Polleit, chief economist at Barclay's Capital?

Clearly there are experts with very strong knowledge of the full range of economics on both sides of this debate. The numbers of economists are on the side of the mainstream, but are the arguments? As an exercise for PB or fly or adanthar, etc., in the next debate you have about Austrian economics on this forum, why don't you guys really sincerely try to not make any appeals to authority. Just stick to the arguments themselves and let them stand on their own merits. We all get that you guys feel contemptuous of Austrian economics, think it's like a religion, think it's full of conspiracy theories, think posters here aren't capable of understanding sophisticated mainstream theories, whatever. That's great, and perfectly irrelevant, just like, as you've noted, it's irrelevant when an Austrian dismisses mainstream theory without offering any suport. This is all just posturing BS and distracts from the real discussions where we might actually learn something.

Do mainstream economists really see fiat money as a great or even neccessary innovation? Do they really see commodity money as a bad thing? I think people are making some unwarranted assumptions. Governments like fiat money for a lot of reasons but not because economists convinced them it was a great thing. Most economists I would think would acknowledge fiat money as a political necessity but I think they would also agree that commodity money could be as good or better. Please correct me if I'm wrong. Greenspan said we'd be fine with commodity money but it was not possible politically and really that says a lot to me.

200 years ago? What are you talking about? Surely you arent attributing today's economic growth to the fiat money system. Money is just a medium of exchange. Of course all things being equal you would be better off with commodity money if we assume Austrians are correct that fiat money leads to bubbles. However, its obvious that fiat money can only do so much harm. You should ponder why it is that we have fiat money (governments realize it benefits them, we arent living in a modern economists theoretical utopia or something) and why we are having such fast economic growth now as compared to 200 years ago (expotential growth in technology)

Horrible.

What about the recent massive HPI in the UK? Even with the recent falls houses in my area have inflated circa 350%+ in the last 6 years.

Massive house price inflation and its heinous distorting effect on the entire Uk economy has been massively damaging to Uk plc, and a major cause was poor and politicized monetary policy. If you throw in how the banking system creates money via debt you have the entire cause.

However the central planner of the price of money (BOE) does not even count HPI as a metric when considering the price of money, what could possibly go wrong?

What has been the response to the crises of unsustainable inflation (in assets) and debt caused by cheap money, more and more cheap money.


The stated point of mainstream economics is to smooth the bumps of the business cycle so we have steady sustainable and predictable growth.

You might want to ask yourself then why the solutions to the mini recession caused by 9/11 and the dot com bust have led to the current even worse crises the solutions to which will lead to an even worse crises in short order.

The outcomes are in direct contrast to the stated aims.

Mainstream economics fails ontologically imo.

Is this name supposed to mean something to somebody?

lol @ 'house price inflation'. There is ONE GOOD (housing IN YOUR AREA) that has increased in price significantly and this is proof of the failure of mainstream economics?

Explain how this is an example of a 'distorting effect' please (I'll be surprised if you even know what price distortion means).

Cite for 'a major cause' for the 'massive house price inflation' was 'poor and politicized monetary policy'?

Central Banks use Consumer Price Index, not House Price Index to determine the price levels.

lol @ 'HPI as a metric when considering the price of money'.
Price of money is the interest rates paid when borrowing. I don't know what this has to do with any House Price Index.

lol @ crisis of unsustainable inflation.

Yeah, CPI barley broke 5% about a year ago and now it's below 2%.
You have no idea how the the economy would have behaved without the monetary policy actions taken by the Federal Reserve, the BOE, and all the central banks around the world, so please do not pretend you do.

Your assertion that we will have an 'even worse crisis in short order' is pure speculation on your part.
ldo.

Quick comment, I'd be careful about making too generallized of statments about the world's central banks (not saying you are necissarily) because there are a lot different approaches to managing the currency.

I agree. Like I stated earlier Bernanke's strategy is only half implemented. I think the risk of Bernanke not executing the other half (Fed's exit strategy) were too great so Obama was basically stuck with Bernanke. I don't think it's beyond the realm of possibility that Obama might have viewed the choice as picking between the lesser of two risks.

Economists are asked to make informed guesses so perhaps it's not pure speculation but I basically agree with the sentiment you express.

Sigh, all to easy and predictable.

Rises in my area were in line with the national average.

HPI radically distorted the economy of Uk PLC. That you even dispute this is laughable. So in your opinion the fall out of the house price bubble has no negative effects on the uk economy. GTFO.

This is still ignoring all the massive levels of mal investment made by the British public, who have the largest private debt in the world, incurred to get on the housing ladder because house prices only go up amirite. Yea perhaps they could have invested in something productive that adds value, but nah.

Asking for a cite on how poor monetary policy was helped cause the housing bubble is like asking for a cite that the sky is blue, however that given you can say the following with a straight face:

Its not suprising.

Are you seriously telling me that you can make the association between the price and availability of a mortgage and the resultant price of housing. Hint, if mortgages are relatively cheap and available, the price of housing will go up as there will be more buyers chasing a relatively fixed amount of product, thus bidding the price up. It will be a sellers market.

The rest of your post makes my point for me. I specifically criticize the BOE of not using the price of housing to centrally price money and you then make a whole post about how it does not do that. I KNOW THATS MY WHOLE POINT.

If the cost of money (borrowing) is set too low, and this leads to a bidding up and consequent inflation in the price of housing which then leads to a distortion in the economy as everyone piles into housing creating a bubble, the BOE is literally powerless to do anything about this, as it does not consider the price of housing in its inflation target, thus the price of money will remain to low as determined by lol CPI and the problems caused by rampant asset price inflation will be exacerbated untill it all goes pop and we find ourselves where we are today.

However this must all be lost on you because you are capable of saying:

What do you think a bubble is? Unsustainable inflation perhaps. Has there been a crises caused by a unsustainable level of inflation in housing, of course there has.

Oh I missed this.

I do know that Eddie George the former bank of England is on record as saying that he inflated his way out of the 9/11 dot com bubble bust by artificially lowering interest rates.

What was the result of this. Cheap money piling into housing and investing in derivatives thereby creating a huge housing bubble/debt and resultant credit crunch.

I know, its shocking that when the govt decides a single good is the best way to boost the economy and then subsidizes that market that prices rise.

lol at using CPI with a straight face.

So? You really don't have any idea either. Are you saying without a doubt things would be massively worse without all the intervention?

What is UK PLC? You claimed the the HPI had 'heinous distorting effect on the entire Uk economy'.

Where did I claim "the fall out of the house price bubble has no negative effects on the uk economy"?
What I said was 'Explain how this is an example of a 'distorting effect' please (I'll be surprised if you even know what price distortion means).'

Nothing to do with my post

I guess we will just have to take your word for it then.

You did not mention anything about the availability of mortgages in your original post ITT.
You simply complained about how "(BOE) does not even count HPI as a metric when considering the price of money"

So mocking your claim of an inflationary crisis and your idea of how the world's economy would behave without the actions of central banks makes your point?

Inflation is a rise in the general price level, not a rise in the price of housing specifically.

Are you suggesting the BOE should have raised overnight interest rates solely to prevent a rise in the price of housing?

That's not what the BOE's mission is, its mission is to meet the target Retail Price Index of 2%.

I think you are simply misusing the word inflation.

A bubble is a rise in asset prices due to irrational exuberance (like the tech bubble of the late 1990s and the housing bubble of the mid 2000s).

Inflation is a rise in the general price level.

The BOE did this?


lol @ loling at using CPI with a straight face.


I'm not the one claiming to know what would happen in the absence of central banks.

Gargantuan hand waves itt.

1. Eddie George is the former Bank of England?
2. Yeah, Central Banks tend to lower overnight rates during economic downturns.
3. I understand that you are very unhappy with the housing bubble but to put all the blame on the BOE for instituting interest rates lower than you wished is foolish.

You must be being obtuse on purpose.

Is it unrealistic to hope that if we are going to have centrally planned pricing of money, that planning will consider asset bubbles/ inflation. I am not claiming that HPI should be the only metric, I am just saying that it should be not completely ignored and the sole focus be lol cpi.

I am claiming that if it is ignored then there will be damaging results a claim totally vindicated by recent events.

You're begging two questions.

1) government agents always act to maximize long-term benefits and never think about short-term political ramifications

2) government agents always act to maximize benefits "for a country" and not for politically connected special interests

This isn't tin-foil-hat conspiracy stuff, this is pretty obvious political behavior.

vhawk 4 king

I want to see an answer to this. Will the cake be had or eaten?

You should know that the BOE's focus is not CPI, but RPI.

You should also know that CPI does include housing.
http://www.bls.gov/news.release/cpi.nr0.htm

Wrong on both counts.

The guv of the Boe has to write a letter to the PM everytime CPI goes above target of 2%.

You refer to the American measure of CPI, the British one does not count house prices.

RPI includes mortgage repayment costs which is ******ed imo as it creates the situation that by lowering interest rates you lower the measure of inflation.