The presentation has plenty of historical data going back to Roman times, including links to sites with debased currency, so I'd humbly suggest that you enumerate the "common errors" in the presentation. Moreover, experts in "monetary policy" have not exactly covered themselves with glory over the last few years (decades?).
As for Freicoin, it might be silly, but it just puts the Bernanke-ist inflation into the protocol and makes its purpose explicit: namely to break up long-term holdings of wealth, force spending, and discourage saving. The part that isn't silly about it is that said destruction of long-term wealth is distributed rather than centralized, and the wealth redistribution essentially provides increased transaction fees and thereby a reason for more people to validate transactions.
Bernanke-nomics or "monetary policy" constitutes the redistribution of wealth via inflation from the people to the banks. Hard to say that's crazier than Freicoin.
> I'd humbly suggest that you enumerate the "common errors" in the presentation.
That money exists to serve as an improved barter good, rather than barter being a degenerate form of trade that exists mostly in the rare cases when credit is impractical.
That quantity fixation or durability are particularly important properties of money.
That gold is particularly important, versus anything else that is pretty and value-dense.
That the only forms of money are commodity-backed and pure fiat.
That the USD switched from the first camp to the other in 1971.
Describing the USD without reference to the Federal Reserve at all.
The assumption that the debasement of coins over a 300 year period had any harmful effects other than making the coins less pretty 1700 years later.
That +200% wage and price inflation over 130 years is any kind of serious problem.
That hyperinflation and regular inflation are the same thing except in degree.
That Bitcoin limiting supply controls inflation.
That the problems with deflation are somehow non-obvious or not happening observably in Bitcoin right now.
Great. I hope you will agree most of these are differences of opinion ("particularly important", "serious problem") rather than empirical fact. Moreover, I hope you will agree that people with similar conventional beliefs on inflation & economics are in power, and the world economy is not doing very well. FWIW, here's a first cut at separating statements of opinion & fact to drill down to potential empirical differences.
That money exists to serve as an improved barter good,
rather than barter being a degenerate form of trade that
exists mostly in the rare cases when credit is
impractical.
Not sure about your disagreement here - are you saying that credit is more fundamental than barter? Money as an improved replacement for barter is hardly controversial. Credit is a third layer on top of money, which only comes into play when there are actual goods to be traded.
That quantity fixation or durability are
particularly important properties of money.
If you care about money as a long-term store of value, these are important characteristics. Paper notes from most countries that existed in the 1800s don't hold their value today. Gold coins do.
That gold is particularly important, versus
anything else that is pretty and value-dense.
Gold is important because it can't be mined as easily as paper is printed, and because it's an element and thereby difficult to truly counterfeit without an atom smasher. As such it limits the spending power of governments. It's also important for the same reason any network effect is important, namely other people use it (and have used it since historical times).
That the only forms of money are commodity-backed and pure
fiat.
This is possibly a factual disagreement. But either a paper note is exchangeable for a fixed quantity of a commodity like gold or it isn't. I suppose you can have some limits on redemption on a daily basis, but otherwise it seems like a reasonable boolean distinction. Please do elaborate on what you have in mind.
That the USD switched from the first camp to the other in
1971.
This also seems to be a factual claim. The US under Nixon did indeed abandon the gold standard fully in 1971, removing the $35 dollars per ounce peg (http://www.theatlanticwire.com/politics/2011/08/nixon-gold-s...). Most people both pro- and con- would refer to this as "going off the gold standard".
Describing the USD without reference to the Federal
Reserve at all.
I think that's implicit. Not sure this is a "common error".
The assumption that the debasement of coins over a 300
year period had any harmful effects other than making the
coins less pretty 1700 years later.
This is not an assumption but is explicitly argued. The underlying thesis is that governments that debase their currency by printing money eventually find their ability to compel obedience waning, as their official scrip is rendered useless.
That +200% wage and price inflation over 130 years is any
kind of serious problem.
Given that this period coincides with the decline and ultimate fall of the Roman Empire, I wouldn't call this a "common error" either.
That hyperinflation and regular inflation are the same
thing except in degree.
This claim is not made in the slides. But both of them do have the property in common that one's currency becomes less valuable. "Normal" inflation has devalued the US dollar 23.45X since 1913 (roughly $1 in 1913 buys $23.45 today; see usinflationcalculator.com). If that happened in one year we'd call it extremely strong inflation, if not hyperinflation.
That Bitcoin limiting supply controls inflation.
Please give a counterargument here. How can you inflate a currency if the supply is fundamentally limited?
That the problems with deflation are somehow non-obvious
or not happening observably in Bitcoin right now.
What are the problems? A rise in market cap to $1B over four years from nothing and adoption by millions in the face of government opposition looks like a smashing success. Fluctuations aren't unilateral seizures; everyone in Bitcoin has chosen to be in Bitcoin.
That flat-rate Demurrage fixes Bitcoin inflation.
I suppose you mean "fixed Bitcoin deflation"? Freicoin may not "fix" deflation but it's a currency which has regular inflation built into it. Because Kyle supports deflation he certainly did not claim that Freicoin is a "fix", but rather a technical embodiment of an alternate philosophy.
In short, I think most of the points you raise are not "common errors" but rather (at best) disagreements of opinion. Would appreciate any elaboration on the points of seeming factual disagreement.
Not sure about your disagreement here - are you saying that credit is more fundamental than barter? Money as an improved replacement for barter is hardly controversial. Credit is a third layer on top of money, which only comes into play when there are actual goods to be traded.
It's not controversial -- it's wholly wrong. Credit did not come after money, credit came before money. The IOU was the first form of credit and became the first form of money.
This is David Graeber's theory, it's not a bald statement of fact like "the US went off the gold standard in 1971". Graeber even admits this:
So really, rather than the standard story – first there’s
barter, then money, then finally credit comes out of that
– if anything its precisely the other way around.
So he knows he's pushing something counterintuitive here. Where's the evidence he's marshalled? He also identifies the "standard story" with "free market economists" and tacitly identifies himself as a chartalist. Now, I don't want to throw the baby out with the bathwater - there is something interesting about the idea of a general sense of indebtedness as important to the origins of economics - but it does seem like we've parachuted in two different modes of behavior from central casting. On the one hand, the chartalists/Graeber types who are in favor of consumption, debt, inflation, and the state. On the other the Austrians/Nakamoto types who are in favor of production, savings, deflation, and the individual.
I really just want the people in favor of infinite debt and bailouts to hold their own currency and transact amongst themselves, while we do the converse. I don't want to be part of a group of people who think of debt as more fundamental than production, and/or who favor (and historically stress) vaguer gift/debt economies over more quantifiable barter/money economies.
Small amounts of inflation in the 1 to 3 percentage range are generally considered good for the overall economy as it promotes investment and spending. The great depression demonstrated just how bad rapid deflation not just inflation can be, which just shows that money is more important as a medium of exchange than a store of value.
Inflation redistributes wealth from the people to the banks? You understand that inflation reduces the value of bank debt, which is almost always nominal. And surely you must know
that tight money has the objectively observed effect of rewarding capitalists and punishing earners (viz. the wealthy parts of the Eurozone, right now).
The bailouts represent money printed and deposited in the accounts of banks. Kind of a fusion of the worst of right and left ideology: devalue everyone else so that the richest get richer. The full magnitude of the money printing is actually much greater than the public has been led to believe, and came out quietly in late 2010.
The Federal Reserve made $9 trillion in overnight loans
to major banks and Wall Street firms during the financial
crisis, according to newly revealed data released
Wednesday. ...
The amount of cash being pumped out to the financial
giants was not previously disclosed. All the loans were
backed by collateral and all were paid back with a very
low interest rate to the Fed -- an annual rate of between
0.5% to 3.5%. ...
Sen. Bernie Sanders, the Vermont independent who had
authored the provision of the financial reform law that
required Wednesday's disclosure, called the data that was
released incredible and jaw-dropping.
"The $700 billion Wall Street bailout turned out to be
pocket change compared to trillions and trillions of
dollars in near zero interest loans and other financial
arrangements that the Federal Reserve doled out to every
major financial institution," Sanders said.
Your arguments seriously ignore and misstate what the Federal Reserve actually does.
1. The Fed/govt does not simply deposit money "in the accounts of banks." Under TARP and quantitative easing, the Treasury purchased securities or shares from the banks. Under quantitative easing, the Fed purchased Treasury securities and mortgage-backed securities from the banks. Yes, the Fed printed the money to buy those securities, but it't not like they just printed the money and gave the banks free money.
2. Overnight loans are almost irrelevant to your point because they're overnight. They have to be paid back within 24 hours. The $9 trillion dollar figure sounds impressive but that's just the value of all the overnight loans added up. If you make $8.2 billion in loans every day for 3 years (with the 8.2 billion paid back the next day and then another 8.2 billion loaned out again), you get $9 trillion.
Yes, the Fed printed the money to buy those securities,
but it's not like they just printed the money and gave
the banks free money.
That is exactly what they did, because otherwise those securities would not have had the same price on an open market. The Fed paid for worthless holdings and propped up banks by printing trillions, thereby devaluing everyone else's dollars. And they are still doing it, now printing $85B per month ($1T/year) to buy mortgage-backed securities and reinflate the housing bubble. Printing $100 to buy $1 of MBS toxic waste from the banks is direct depositing $99 into their pockets (and causing commensurate dilution of all other dollar holders).
Overnight loans are almost irrelevant to your point
because they're overnight.
Without printing $9 trillion to "inject liquidity" the banks would have gone bust when the capital call came. It was this overnight loan that allowed the banks to socialize the losses while privatizing the gains.
Inflation transfers wealth from savers and creditors to those with first access to newly created money. In our system it is the banks and the federal government that have first access to newly created money.
Actually, anyone can buy Treasuries direct from the auction at no fee. (The government even has a website for it.) Furthermore, the Treasury market is extraordinary tight, so it barely matters who has access to the Fed. Finally, the recent effect of the Fed announcing expansionary programs has been to lower Treasuries values through implied inflation. (Check the charts if you don't believe me.) So I'm not sure how you can be correct to any significant degree.
I don't see how access to the treasury market has bearing. The issue is seigniorage. In our system that mostly happens through fraction reserve banking, mostly independent of government debt.
A handful of anecdotes about hyperinflation do not amount to "plenty of historical data".
Inflation has the important role of decreasing the value of debt, which is something demurrage does not provide. Neither does a constant rate of 'inflation' via demurrage allow any kind of countercyclical policy.
"[inflationary monetary policy] constitutes the redistribution of wealth via inflation from the people to the banks"
As for Freicoin, it might be silly, but it just puts the Bernanke-ist inflation into the protocol and makes its purpose explicit: namely to break up long-term holdings of wealth, force spending, and discourage saving. The part that isn't silly about it is that said destruction of long-term wealth is distributed rather than centralized, and the wealth redistribution essentially provides increased transaction fees and thereby a reason for more people to validate transactions.
Bernanke-nomics or "monetary policy" constitutes the redistribution of wealth via inflation from the people to the banks. Hard to say that's crazier than Freicoin.