And even though Bryan was an inflationist, he, like virtually all inflationists of his day, at least still wanted money to be backed by precious metal! They wanted silver in addition to gold (bad idea), but just think how far we’ve come when even the inflationists of old are radical anti-inflationists by today’s standards.

I do like reading economic history to look for the—-

“WHO BENEFITS?”

I find it goes straight to the motives of a particular group or individual whenever they want to advance some idea, cause or laws.

It’s like reading the list of beneficiaries from a life insurance policy.

Kings used to shave off their treasuries gold coins in ancient times and the result was rising prices in the realm.
The practice of debasement is ancient and not so hard to understand even though creating money out of thin air today
is nothing more than a blip at the NY Feds trading desk.

But the question—– who benefits?

I dug up something about William Jennings Bryan written by William L. Anderson —–

William Jennings Bryan and Woodrow Wilson pushed for the income tax, inflation trough debasement of the money supply and the internal protectionist device known as Jim Crow laws which attempted to shield white workers from competition from blacks.

Is this the person?

To be fair, Anderson also wrote that the Republicans and Democrats vied with each other to see who could more thoroughly expand the state. Republicans led by Theodore Roosevelt and Senator LaFollette of Wisconsin, pushed for high tariffs, government ownership of natural resources, anti trust regulation and imperialistic adventures abroad.

And we call Karl Marx a socialist.

Thank Mr Z

Yes, that is right. But Austrians are also interested in the redistributive element of inflationary monetary expansion — something the Chicago School and monetarists largely (or entirely) ignore.

“Theoretical control of a bank’s creation of money in a given economy?” applies in general to any central bank. The Fed tries to accomplish its purpose in the macroeconomic sector as does the European Union, the Banco de Mexico, the Saudii Arabian Monetary Agency and many more. You can check on which one you are most specifically interested, and then see their policies, etc. http://www.bis.org/cbank.html. The overall purpose may be the same – stability, ggrowth, inflation, employment – yet the means to achieve those may be very different.

Whether “Your money is your private property. Taking away its purchasing power is theft.” is certainly a normative question, rather than an objective one, that could be discussed endlessly. It depends on so many different variables, including law, ethics, religion, etc., ultimately depending on your own outlook rather than objective proof.

Different governmental systems would have different ideas on the rights of citizens to their money and the responsibility of that government.

The issue of the use of gold in the U.S. was (and in some circles, remains) a major issue in history. Look back over William Jennings Bryan and his famous “Cross of Gold” speech of 1896 and read about the various issues that surrounded it.

Go back even further to Alexander Hamilton and the origin of the first central bank of the U.S. to provide you with a fascinating insight to the history of money and banking, not simply in the United States, but throughout the world.

And no, I don’t think one question is more important than the other to ask with all due respect.

Your money is your private property. Taking away its purchasing power is theft. That’s not theory. I believe that.

When the US government took away Americans money (gold) and hoarded it at Fort Knox to move us to a fiat monetary system, I doubt if they sat down and addressed
its consequences.

J.D.—
I may be off here, but I think the Austrians believe that if the stock of money in circulation remains constant relative to the economies increasing output, money will simply buy more goods. And increasing the stock of money circulating will simply produce the opposite. Do I have this right? Thanks.

http://tinyurl.com/4t7gtx

The Austrian theory of the business cycle is that it is government manipulation of the money supply that causes booms and busts. The business cycle is unnatural and the result of government intervention. The Austrian view is much more hardline laissez-faire than the Friedmanite view.

For example, if we take Congressman Ron Paul as a spokesman for Austrian economics – even though he’s not an economist – the Austrians seem to be more “radical” and in the present financial crisis would have advised the government to “do nothing” as far as monetary policy goes. Let the banks fail. Let the adjustments/corrections happen. That way we’ll have a severe recession for a year, but it won’t lengthen into a depression.

Whereas the monetarists would have advised the central bank to increase liquidity by lowering the interest rate. But Austrians would argue that this is worsening the problem by creating more malinvestment in the future. They would prefer tax cuts instead, as the least harmful way to stimulate the economy.

Overall, Austrians seem to be more distrustful of fiat money, and want it to be “backed” by gold (to prevent rampant inflation) or, alternatively, they want free banking, where there’s no government central bank and private banks are responsible for issuing money.

You’d have to correct me, but it seems to me that Von Mises, especially, accepted the theory of the quantity theory, even after the Friedman elements were introduced.

If one denies the effectiveness of mathematically analytical (econometric) proofs, then any dicussion between the two schools of thoughts is effectively moot.

If one denies the desirability of fractional banking, a logical discussion of alternatives becomes simply an academic one, returning at once to my fundamental recurring assumptions on the nature of mankind.

A more important question: in today’s pragmatic world how could one actually institute the return to a metal standard (gold) with the very finite world-wide supply of the metal?

What would be the effects of a return to the gold standard on convertibility and immediate impact on gold prices? How would it effect existing financial infrastructure? What dislocations of people in general might occur? What might be the consequences on political systems?

Who would control inflows and outflows of gold? How would heightened demand for gold during times of war affect the country or countries in question?

The questions are endles, and in too many cases purely academic.

You might even find that many of the answers would severley impact the very existence of political systems as we know them.

Your second question raises almost as many.

Go back to your thoughts on fractional banking system… then decide whether or not you suscribe to the theory of a Fed, charged with money creation …

How do you react to the theoretical control of a bank’s creation of money in a given economy … will you accept tangible or only theoretical proof?

Friedman sugests that a monetary system would be able to achieve theoretical price stability in an economy by simply keeping fixed the rate of monetary growth. Whether or not this would effectively maintain stability again depends on people, rather than theoretical economic systems…. and people, it has been argued by many, do not do well in following a virtually automatic system such as a 100% gold standard or relatively siimple growth in money supply.

My basic answer returns to my simple question: what is the naature of mankind in both short and long run.