NationStates Jolt Archive

I'm reading the Libertarian Party platform, and I consider myself a Libertarian, but I stumbled across their position on Inflation and Depression:

Inflation and Depression

The Issue: Government control over money and banking is the primary cause of inflation and depression.

The Principle: Individuals engaged in voluntary exchange should be free to use as money any mutually agreeable commodity or item, such as gold coins denominated by units of weight. We support the right to private ownership of and contracts for gold.

Solutions: We call for the repeal of all legal tender laws and of all compulsory governmental units of account, as well as the elimination of all government fiat money and all government minted coins. All restrictions upon the private minting of coins must be abolished, so that minting will be open to the competition of the free market. We favor free-market banking, with unrestricted competition among banks and depository institutions of all types. The only further necessary check upon monetary inflation is the consistent application of the general protection against fraud to the minting and banking industries.

Transitional Action: We call for the abolition of the Federal Reserve System, Federal Deposit Insurance Corporation, the National Banking System, and all similar national and state interventions affecting banking and credit. Our opposition encompasses all controls on the rate of interest. We also call for the abolition of the Federal Home Loan Bank System, the Resolution Trust Corporation, the National Credit Union Administration, the National Credit Union Central Liquidity Facility, and all similar national and state interventions affecting savings and loan associations, credit unions, and other depository institutions. To complete the separation of bank and state, we favor the Jacksonian independent treasury system, in which all government funds are held by the government itself and not deposited in any private banks. Pending its abolition, the Federal Reserve System, in order to halt inflation, must immediately cease its expansion of the quantity of money. As interim measures, we further support: a.) the lifting of all restrictions on branch banking; b.) the repeal of all state usury laws; c.) the removal of all remaining restrictions on the interest paid for deposits; d.) the elimination of laws setting margin requirements on purchases and sales of securities; e.) the revocation of all other selective credit controls; f.) the abolition of Federal Reserve control over the reserves of non-member banks and other depository institutions; and g.) the lifting of the prohibition of domestic deposits denominated in foreign currencies.


I'm unsure as to what this is actually trying to advocate. Is it allowing private parties to mint their own unique coins or allowing them to mint government coin?

The latter would make much more sense, but I can't get past the wording.

I'm sure many of you will ridicule the party for such an extreme view, but share your thoughts. If you want to see the rest of the party's position you can go here. (http://www.lp.org/issues/platform_all.shtml)

its my understanding that it would be private coins. much like your bank issues its own credit cards it would now issue its own money.

just one of the many reasons why the libertarians are too insane for me to support.

We tried this before - it is the exact reason the federal government took up minting currency and put restrictions on private minting. The Libertarians are far out to say the least.

This is where I say no to the Libertarian Party. If a bank or any other private institution were to issue money, coin specifically, you'd have differeing coins of differing values. It would merely complicate the situation. Eventually it may evolve into paper money which, if not backed by a commodity, would in effect become fiat money. If they're assuming the coin will be gold, then they clearly haven't been keeping up with the times. There isn't enough gold to do such a thing.

Yea, privatized money is a mistake. Don't get me wrong, I believe that two parties should have the right to perform an economic exchange in the manner of *their* choosing; but the government should still print money. I'd like them to go back to either the gold or silver standard though.

Yea, privatized money is a mistake. Don't get me wrong, I believe that two parties should have the right to perform an economic exchange in the manner of *their* choosing; but the government should still print money. I'd like them to go back to either the gold or silver standard though.
I don't believe we have enough gold reserves to have a gold standard.

Banks and companies printed their own currencies less than 100 years ago in the United States. Anyone want to explain what a great advantage this provided? Personally I wouldn't be too happy if my paycheck consisted of Microsoft Dubloons, or McDonald Pesos, or Haliburton chocolate coins.

isn't money non-profit to stop illegal counterfitting?

also what if one coin had a different exchange rate *shudders*

also what if one coin had a different exchange rate *shudders*
That's the problem. It would greatly complicate trade and simple transactions if the two individuals held currency from different institutions.

Unique money would definitely pose a problem to our economy, especially with different exchange rates.

However, is this the intended outcome of the LP's position?

Or would it allow private companies to mint US money? i.e., our currency wouldn't change, it would just be printed by private firms instead of the government.

Banks and companies printed their own currencies less than 100 years ago in the United States. Anyone want to explain what a great advantage this provided?
Well, for one thing, our economy was a ruthlessly efficient machine the likes of which no one on the planet had seen before [or since]. If you're prepared to ignore that, then I suppose nothing.

Unique money would definitely pose a problem to our economy, especially with different exchange rates.

However, is this the intended outcome of the LP's position?

Or would it allow private companies to mint US money? i.e., our currency wouldn't change, it would just be printed by private firms instead of the government.
i jsut reread the quote you posted from them. what a scary solution they propose. its a good thing they can never actually do it

what i took from reading it again is that the govt would be out of the money business and banks would mint their own gold coins. since all coins would be gold and gold has a fixed price (so to speak) the value of the coin would rest on the value of the gold in it, not on the strength of the US government and economy, as it is now.

Well, for one thing, our economy was a ruthlessly efficient machine the likes of which no one on the planet had seen before [or since]. If you're prepared to ignore that, then I suppose nothing.

Umm... Do you mean you had higher rates of economic growth one hundred years ago than now? Cause actually economic growth averaged quite a bit lower back then. And if that's what you mean, then it's China that has had the most most rapid economic growth in history, not the U.S.

I'm reading the Libertarian Party platform, and I consider myself a Libertarian, but I stumbled across their position on Inflation and Depression:




I'm unsure as to what this is actually trying to advocate. Is it allowing private parties to mint their own unique coins or allowing them to mint government coin?

The latter would make much more sense, but I can't get past the wording.

I'm sure many of you will ridicule the party for such an extreme view, but share your thoughts. If you want to see the rest of the party's position you can go here. (http://www.lp.org/issues/platform_all.shtml)
It would not be government coins. It would be legal to make such, but the government money is just ordinary paper and a fiat. If you remove the fiat and let anyone print money they are just so much tissue paper.

To be successful private money would have to be some comodity (like a precious metal) and the value of a coin would have to be the value of the comodity it represents (so a goldcoin weighing one gram would be worth one gram of gold). That way any minter would have to pay as much as his money was worth, which is the only secure protection against inflation.

To the problems raised later in this thread:
There is no such thing as not enough money in the whole economy. If gold is used as money, and if there is "not enough" gold, that just means that the value of gold increases. Not a problem. (actually it has already increased, you just can't ignore inflation when asking how much money we use)

And as to exchange rate problems, the only "exchange rates" would be prices, the "exchange rates" between different comodities. Is it a problem that butter and platinum has different "exchange rates"?

I'm not as worried about inflation right now, because our money supply is controlled by a good man, Alan Greenspan. However, I do see their point. The money supply is in the hands of a few people in government, and subject to political whims. The populist movement of the 1890s comes to mind. We could try a gold standard again, but then we trade in an old problem for a new one. We fix the money supply, and that could cause constant deflation.

I don't believe we have enough gold reserves to have a gold standard.
What about silver or some other semiprecious metal?

Umm... Do you mean you had higher rates of economic growth one hundred years ago than now? Cause actually economic growth averaged quite a bit lower back then. And if that's what you mean, then it's China that has had the most most rapid economic growth in history, not the U.S.
You're still counting nominal growth, aren't you? The value of the dollar was increaseing in those days, so the real growth was a lot higher than the nominal growth.

And China has the greatest inflationary boom in history, that has got nothing to do with real growth. Come back in fifty years (ten will probably be enough, but to be on the safe side) and we can discuss the real growth in China. Besides they are coming off a socialist system and greatly increasing their economic efficiency. Even if they didn't have an artificial boom (which they have) they should have a rather high rate of growth "from a low level". If they want to keep that they must keep improving.

And as to exchange rate problems, the only "exchange rates" would be prices, the "exchange rates" between different comodities. Is it a problem that butter and platinum has different "exchange rates"?

While it is true that prices are just the rate at which goods exchanged, you are so horribly wrong. Really, it's terrifying.

This system needs different currencies to operate properly, otherwise there is no check on banks in their minting activity. That also means that banks' currencies will be valued differantly.

Goods and services will have to be listed in several prices. People will naturally have to keep a number of different currencies on hand, to hedge against currency failure. A merger between banks will be horrible event. Eventually the merger of banks will lead to a handful of superbanks that, should they further merge or form a cartel, would become the de facto State.

All that so we can have a little less inflation, maybe.

What about silver or some other semiprecious metal?

Silver is too cheap; it would take 177,659,297,789 ounces of silver to cover our entire supply of currency at current prices (let alone other investments).

Silver is too cheap; it would take 177,659,297,789 ounces of silver to cover our entire supply of currency at current prices (let alone other investments).
The smartest probably is to have at least two different metals for different purposes. For example gold for savings and large transactions and silver or even copper for day to day shopping. Why? That was the way it was before fiat money, and it seems practical. But the point is not to device the perfect monetary system by fiat. The point is that the free market should provide money, just like all other things we need, without resorting to force.

Maybe you will find this interesting. From the case for a 100% gold standard by Murray Rothbard

http://www.mises.org/story/1829

The major objection against 100 percent gold is that this would allegedly leave the economy with an inadequate money supply. Some economists advocate a secular increase of the supply of money in accordance with some criterion: population growth, growth of volume of trade, and the like; others wish the money supply to be adjusted to provide a stable and fixed price level. In both cases, of course, the adjusting and manipulating could only be done by government. These economists have not fully absorbed the great monetary lesson of classical economics: that the supply of money essentially does not matter. Money performs its function by being a medium of ex*change; any change in its supply, therefore, will simply adjust itself in the purchasing power of the money unit, that is, in the amount of other goods that money will be able to buy. An increase in the supply of money means merely that more units of money are doing the social work of exchange and therefore that the purchasing power of each unit will decline. Because of this adjustment, money, in contrast to all other useful commodities employed in production or consumption, does not confer a social benefit when its supply increases. The only reason that increased gold mining is useful, in fact, is that the large supply of gold will satisfy more of the non--monetary uses of the gold commodity.

There is therefore never any need for a larger supply of money (aside from the non-monetary uses of gold or silver). An increased supply of money can only benefit one set of people at the expense of another set, and, as we have seen, that is precisely what happens when government or the banks inflate the money supply. And that is precisely what my proposed reform is designed to eliminate. There can, incidentally, never be an actual monetary “shortage,” since the very fact that the market has established and continues to use gold or silver as a monetary commodity shows that enough of it exists to be useful as a medium of exchange.

The smartest probably is to have at least two different metals for different purposes. For example gold for savings and large transactions and silver or even copper for day to day shopping. Why? That was the way it was before fiat money, and it seems practical. But the point is not to device the perfect monetary system by fiat. The point is that the free market should provide money, just like all other things we need, without resorting to force.

Right now you are not talking about private money but money backed by commodities. The government can also provide such money.

As I mentioned before, private minting of money requires mutliple currencies, that they are backed by commodities is probably even worse than if they were simply credit notes. It's worse because all money is backed by the same commodity and it's senseless to introduce various currencies representing the same commodity but at various values.

Furthermore, I have yet to see an effective argument on why private minting of money would smooth out the business cycle or reduce inflation.

Right now you are not talking about private money but money backed by commodities. The government can also provide such money.

As I mentioned before, private minting of money requires mutliple currencies, that they are backed by commodities is probably even worse than if they were simply credit notes. It's worse because all money is backed by the same commodity and it's senseless to introduce various currencies representing the same commodity but at various values.

Furthermore, I have yet to see an effective argument on why private minting of money would smooth out the business cycle or reduce inflation.
Sorry, I missed that post. No, you don't have to have multiple currencies. All you need is that the value of one unit of the currency is actually worth as much as its denomination. Then, if I don't like your currency I can still accept it as payment, because any jeweller will be happy to buy it and pay me a currency that I do like and make rings from the metal. And at equilibrium (which can and will actually be obtained) the cost to you of making coins will be exactly the value, so it is not profitable for you to inflate. (since with inflation you'd have greater costs for making coins than their value)

The reason why it would immediately rule out inflation is above (inflation is no longer profitable for anyone, but hurts those who create it). The business cycle is created by a phenomenon (is that correct spelling?) that includes inflation, so again it would hurt those who create it (instead of helping them at the expense of most everyone else).

Sorry, I missed that post. No, you don't have to have multiple currencies. All you need is that the value of one unit of the currency is actually worth as much as its denomination. Then, if I don't like your currency I can still accept it as payment, because any jeweller will be happy to buy it and pay me a currency that I do like and make rings from the metal. And at equilibrium (which can and will actually be obtained) the cost to you of making coins will be exactly the value, so it is not profitable for you to inflate. (since with inflation you'd have greater costs for making coins than their value)

I may be misunderstanding the proposed system.

In this hypothetical, why would you need to go to a jeweler to receive another currency that you prefer if there is just one currency?

And if there are mutliple currencies, and they are backed by the same amount of the given commodity, then why do you need differant currencies at all?

The reason why it would immediately rule out inflation is above (inflation is no longer profitable for anyone, but hurts those who create it). The business cycle is created by a phenomenon (is that correct spelling?) that includes inflation, so again it would hurt those who create it (instead of helping them at the expense of most everyone else).

But right now the only institution who can cause inflation is the government and it is a non-profit organization (well, that's arguable). Inflation can result from the business cycle and there is nothing you can do about that. I say result because, depending on the school you subscribe do, inflation is only a factor among many or no factor at all in the business cycle.

You're still counting nominal growth, aren't you?
Err... no.
The value of the dollar was increaseing in those days, so the real growth was a lot higher than the nominal growth.
Umm... Economic growth per year is how much more you economy can produce compared to a year ago. This can go up even if your currency has decreased in value and it can go down even if your currency has increased in value.

And China has the greatest inflationary boom in history, that has got nothing to do with real growth.
Um, no, not if you are comparing growth in China to growth in the U.S. one hundred years ago. Although you can't trust all of the Chinese government's figures, they have averaged over 7% growth for 20 years, beating the previous record holder Japan. The practical effects of growth are obvious when you compare conditions in today to conditions thirty years ago. (of course this rate of growth won't continue indefinately.)