I thought I better post this because austrian economics is so popular

[gastropod]

Quote from Random.Capital:

It didn't work. It didn't stop the business side of America from racking up enormous external debts, which cascaded into massive outflows of gold, which cascaded into extreme pressure on the US dollar, which cascaded into the Fed evolving along roughly along the lines we've come to know and love it.

Gold standard CANNOT work as the more ardent monetary theorists envision unless you outright ban all credit/debt.

Which is impossible.

All you end up with is (even) more violent economic dislocations than the one we are currently experiencing, on a more frequent basis.

Yes, the current system too will eventually fail in one giant ball of fire. But it's not because of the system, it's because of the nature of people. EVERY monetary system will fail.

Austrian economics only works well in one place - academia.

Cheers.

Interesting point RC! It may be that the best position is to stockpile on arable land (owned without a mortgage) and stockpile food, water, clothing, etc. - a position I am not against The big question is: When does it fail in the ball of fire? A week from now...a month from now..a year from now...how much time to prepare?

-gastropod

 

[hofficita]

Quote from Random.Capital:


Any economic system that does not start with an understanding that we humans have a fundamental and deep and strong tendency to "informed selfishness" (ie, like sinning with full knowledge) is doomed to fail.

You clearly know nothing about Austrian economics or Objectivism. What you mention is the very basis of both philosophies.

 

[Specterx]

Quote from Random.Capital:

It didn't work. It didn't stop the business side of America from racking up enormous external debts, which cascaded into massive outflows of gold, which cascaded into extreme pressure on the US dollar, which cascaded into the Fed evolving along roughly along the lines we've come to know and love it.

Gold standard CANNOT work as the more ardent monetary theorists envision unless you outright ban all credit/debt.

Which is impossible.

All you end up with is (even) more violent economic dislocations than the one we are currently experiencing, on a more frequent basis.

Yes, the current system too will eventually fail in one giant ball of fire. But it's not because of the system, it's because of the nature of people. EVERY monetary system will fail.

Austrian economics only works well in one place - academia.

Cheers.

It's easy to see why the old Gold Standard would have failed: the problem is fractional-reserve banking. Say the peg is $1=1 ounce of gold, there's $100 in circulation and 100 ounces of gold in the vault. If the banks magically create another $100 without having to come up with 100 ounces of gold, then the true value of your currency relative to gold has just changed, negating any benefits from the gold standard. Eventually the imbalances get so great that you have a crisis.

If banks were required to have 100% reserves on deposit accounts, all lending was in the form of bonds or CDs, and the interest rate was determined by some market mechanism rather than the Fed, it seems to me that extreme bubbles and severe financial crises would be a thing of the past. You would still have speculative bubbles and shocks, people would make bad investments and so on, but these processes wouldn't be nearly as self-reinforcing as they are now - either to the upside or the downside.

 

[makloda]

Quote from Random.Capital:which means it's not falsifiable, which means people will forever be able to convince themselves it could actually work.

In that, many economic belief models share many traits with religions, rather than with scientific theories.

 

[Martinghoul]

Quote from Specterx:

It's easy to see why the old Gold Standard would have failed: the problem is fractional-reserve banking.

I agree with RC on most of the points he made previously.

As to banning fractional-reserve banking, that's yet another completely unrealistic idea. As I mentioned in another post, the reason we have fractional-reserve lending is because people want to earn interest. Unless you somehow ban all yielding instruments, you're gonna have fractional-reserve banking (look at the origins of the system; it coming into existence is not a random coincidence). Moreover, even systems that ban interest (islamic banking) have found it virtually impossible to ban fractional-reserve lending in a capitalist system. It's just basic human greed and any hopes to eradicate it are completely misguided. Best you can hope for is regulate it to prevent "bi-polar" excesses.

 

[Daal]

Quote from Random.Capital:

It's "popular" for the same reason Ayn Rand's mutterings are "popular" - it is so far disconnected from reality that it can't be implemented, which means it's not falsifiable, which means people will forever be able to convince themselves it could actually work.

I disagree. The reason objectivism and austrian economics are popular, specially with young people, is because they promise a lot, objectivists think they know everything so do austrians regarding economics. As a result its very seductive for people to join, they can choose the normal world where they wont know a lot of stuff or join these cults where they will know everything and will be working towards a utopian world that is almost perfect(according to them)

 

[Specterx]

Quote from Random.Capital:

It's "popular" for the same reason Ayn Rand's mutterings are "popular" - it is so far disconnected from reality that it can't be implemented, which means it's not falsifiable, which means people will forever be able to convince themselves it could actually work.

Ayn Rand's stuff is unrealistic. No doubt about it. But IMO there are still some features of Austrian economics that can and should be implemented - namely removing the government's control over interest rates, banning fractional-reserve banking, and fixing (as nearly as possible) the quantity of money in circulation.

On that last point, imagine trying to build a skyscraper, ordering materials measured out in inches or feet, when nobody can agree on (and nobody really knows) exactly how much 'length' an inch or a foot represents. It would be inefficient, chaotic, and probably impossible - but that doesn't seem to stop us from trying.

 

[hofficita]

Quote from Martinghoul:

I agree with RC on most of the points he made previously.

As to banning fractional-reserve banking, that's yet another completely unrealistic idea. As I mentioned in another post, the reason we have fractional-reserve lending is because people want to earn interest. Unless you somehow ban all yielding instruments, you're gonna have fractional-reserve banking (look at the origins of the system; it coming into existence is not a random coincidence). Moreover, even systems that ban interest (islamic banking) have found it virtually impossible to ban fractional-reserve lending in a capitalist system. It's just basic human greed and any hopes to eradicate it are completely misguided. Best you can hope for is regulate it to prevent "bi-polar" excesses.

Reread Specterx's post. The desire to earn interest would still be fulfilled without fractional reserve banking. Lending would simply occur through bonds (MBS, CDO for example) or term deposits.

 

[hofficita]

Quote from makloda:

In that, many economic belief models share many traits with religions, rather than with scientific theories.

That is because economics is not a science.

 

[NKNY]

Quote from Mom0/pH0x:

could have sworn you were going to be shamelessly corny and say "austria"

haha, I was waiting for the same thing as I was reading....