More on currency, Part I

When I linked to the Iranian Oil Bourse article, I don't want to imply that dollars are backed by Oil, in some sort of 1 to 1 correspondence. I think the guy is overstating the case.

The economic fact of the matter as I see it is, if nothing is backing the dollar, then that means that everything is backing the dollar.

In other words, all the goods and services that can be bought with dollars are "backing" the dollar. Think about it. When you take a $20 out of the ATM, you do so because you expect that you can buy something with that. And you have a pretty good idea of what that something will cost. That's the only reason why you want that bill.

This adds a little more weight to the metaphor of wage slavery as well. Because our labor is being farmed by the banking system, in an indirect way. We're holding up the dollars that they are printing for themselves with our labor. In a real sense, we're backing up their debt with our labor.

This is why it is important to them to avoid deflation at all costs. The neo-classical economists will often claim that deflation would be a "disaster". Well, it would be a disaster for the ruling class. And in the economists' minds, what's good for GM is good for us, and vice versa. They have compressed that shortcut in their minds such that they don't really question it. Which is why they deserve the ridicule they get from skeptics... this is also why they constantly speak of "growth" without really going any further. Because in their minds, it is obvious that "growth" is a good thing for "the economy" (whatever that is).

But the question of distribution changes things a bit...
Consider this scenario. Imagine if you will (it's not too hard) that 5% of the population owns 90% of the wealth.
Now imagine that there are two policy options.
Option A will increase the amount of wealth by 3% across the board for 10 years.
Option B will decrease the total amount of wealth by 3% for 10 years, but will reduce the share held by the top 5% to 75%.
For 95% of the population, Option B is the better option.

Which option do you think the ruling class prefers? What do you think a mainstream economist would say about Option B? "A disaster!"

A name I was unfamiliar with...

Upaya quotes Virgil Storr today and it's worth a read:

Let me make the point another way. If I were to walk into a room full of people and rob them at gun point, it's unlikely that I'd be able to convince them that now, after my crime, we should respect each others property rights and only engage in voluntary exchanges going forward. And even if I were to convince them, perhaps by gun point as well, they're not likely to be happy about it. Certainly, any moral case for establishing a free market that I attempted to make in that room under those circumstances would be sensibly rejected.

The Enrons, the Bechtels, the WorldComs and their champions in the Republican Party want free trade even less than the Steel Workers Unions and the Greenpeaces do. Why? Because markets are the only effective check on corporate greed, corporate excesses, corporate profits and corporate power. Being pro-business is not synonymous with being pro-markets; in fact, those two positions are diametrically opposed to each other.

All the right notes

Got a hold of this link from Jomama, whom you should be reading, if you're really into this thing of ours.

This puts all the pieces together in an eloquent way, without any excess ideology needing to be trimmed:

The Proposed Iranian Oil Bourse

See the Mises quote in one of my previous posts for a concise statement of the mechanics of this.

And remember that the way our banking system is set up is fractal. And then all the weird, seemingly ad hoc political stuff clears up quite a bit.
That, and the "good cop, bad cop" mechanism are two good filters to look out from.

Another recommended read

Over at Austro-Athenian Empire (which by the way, is the home of a great library of links to stuff you really ought to read), Roderick Long happens to make a clarification in the fractional reserve banking issue that I think makes many good points, and an expansion of some things Brad Spangler and I kind of breezed over:
Platonic Bailments

In response to this post, I sent an email, which I'll quote here:

I agree that fractional reserve banking in and of itself is not objectionable, from a (natural/common) legal standpoint. I.E. there's no reason to ban it legally.
On the other hand it is taking advantage of the gullible on some level. If the level of reserves is high enough that there is a reasonable chance that you will get your money back when you need it, it's not so
bad.
In some ways it's kind of a form of gambling.

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The big problem is fractional reserve banking under a fiat currency, because under a fiat system, currency is relative, a kind of zero-sum game. Price levels float to adjust to the amount of currency in the economy because there's nothing to "check" the currency against.
As Big Bill Haywood sagely put it "For everyone who gets a dollar they didn't sweat for, there is someone who is sweating for a dollar they won't get". I think
he meant it in a different context, but it really applies amazingly well to the problem of a fiat currency economy.
For instance, if I get paid 5 "dollars" to do a certain amount of work on the free market, ostensibly I've created 5 dollars worth of value. (or no one would pay me that much) So everything evens out.
If I get paid 6 dollars, my extra bidding power is driving up the price of everything I spend it on, and everything the recievers spend it on, and so on.
Because there's only 5 dollars extra value in the economy, but 6 extra dollars.
Under a commodity-backed currency, these situations quickly correct themselves because someone somewhere will at least threaten to redeem their currency.

PS - I recommend that everyone who is interested in this thing of ours, and has some spare time, read Murray Rothbard's A History Of Money And Banking In The United States. Prof. Long's post is to some extent in reaction to Rothbard's idea of bailment.
But the book is a marvel in its clarity and focus on history within a theoretical frame. You will learn some really cool stuff you probably didn't know about, like the Suffolk Bank.

Made from Concentrate

Kevin Carson makes a great post: The So-Called Green Revolution which not only applies to agriculture, but in its general pattern, points out a lot of the myths that our modern age labors under.

It's admittedly a long read, but very much worth it. I think it's really the economic questions that need to be worked out in order to dispel the lie of necessity, which is really more fundamental to most people these days than the lie of legitimacy. The veil of legitimacy is worn very thin, and I think most people that try to assert it really hold onto it only because of fear.
Most people think of themselves as pragmatic utilitarians underneath it all. And nearly everyone has to know in some part of their mind, that these "leaders" are all a bunch of crooks, nothing more or less. But as long as people think this bunch of crooks is necessary to live a happy, healthy life, they will do whatever it takes, even lie to themselves, in order to preserve them.
It's the "good cop/bad cop" scenario taken to the next level, really.
But anyone who's had any experience at all can tell you - don't trust the "good cop".

some folks I found, while clicking around

This is right on the money.
So is this.
And this (don't mind the disclamation of "libertarians" please)
EDIT: dont want to forget this one either: Plugging the Single Tax

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and something else, too:
"I should note here that one of the most important, perhaps defining, tasks of the Libertarian Left is communication of the point that problems the conventional left typically blames markets for are in actuality the result of government coercion distorting those markets so that they take on an oligopolistic aspect."
- Brad Spangler

Not only direct coercion, but government cartelization of primary feeds into the economy, such as farming and financing.
Money is a good different from all others. This is because it is not a piece of capital, labor or land itself, but a placeholder that "translates" between all other forms of capital, labor and land so to speak. This is why it is called a "medium of exchange". The problem is that if anyone is given control over this medium itself, they can warp ALL economic transactions.
Financial crimes are the root crimes that enable the others to take place. I can't emphasize this enough. Murray Rothbard spent a lot of time harping on fractional reserve banking because he saw it as the elephant in the middle of the room, and so do I.

Second Edit: Brad brings up an important point, that fractional reserve banking per se isn't so much the problem as its protection by the state. Under a free banking system, competition and money arbitrage would reduce fractional reserves to the minimum necessary to function as a bank. And the reserves themselves could be anything: Land, Labor, Gold, Sea Shells, as long as people valued them universally enough to use as money.
Again this is a situation where "protection" by the state is actually protection of the ruling class.
But this doesn't invalidate the main issue, which is that bank fraud is the root of much (most?) of what we often perceive as "the Evils of Capitalism".

In an economy where money is no longer "translatable" into anything else, such as in a fiat currency regime, all value becomes relative in terms of money, bidding power. So by feeding money to the large corporations under their control/influence, they create bidding power for resources that creates cartels everywhere in the economy. To some extent, I can't compete with GM, because I can't possibly get enough funding to go into business against them, even if I have a design for the best car ever.

As I have said before, under an inflationary system, there is a universal robbery of everyone by those with the highest credit ratings.

If theft was legal, it would still be a crime.

When I say that government is just a kind of mafia, this is the kind of thing I'm talking about...

New York's Real Transit Crisis
by Robert Fitch

If you're going to talk about how business is corrupt, realize that the people who don't play along go out of business, unable to compete in that kind of situation, or even forced out by byzantine regulations, which are only enforced when they need to get someone out of business.

As Peter Schilling sang, it's a world of lust and crime, and people who aren't criminals have a hard time. When I talk about "they", it's no one tiny cabal in particular, it is all the real criminals, "legal" or otherwise, who have taken over the world.
No one else is going to fight them for us.
Anyone who would will be replaced by the criminals themselves.

If we don't learn to be skeptical and take risks, then we've handed the world to them.