The Monetary Economics of Thurston Howell III 455
DLWormwood writes "In what has to be the Strangest... Essay... Ever... The libertarian Ludwig von Mises Institute website has posted an essay which goes way too in-depth over the topic of why the castaways of Gilligan's Island used Thurston Howell III's 'worthless paper' instead of gold or seashells."
What is the lesson learned from this essay? (Score:4, Funny)
Re:What is the lesson learned from this essay? (Score:3, Interesting)
More info at this Survival at Sea [caske2000.org] site.
Not bad (Score:5, Insightful)
The essay then goes on to discuss Swiss Dinara and Saddam Dinars which are both very much real, and quite comparable to money on the TV show.
I think the headline does a real disservice to the author of the essay.
Re:Not bad (Score:2)
Re:Not bad (Score:2)
I'd go with:"Cash is something that can be used to hold value, without government backing"
And I whole heartedly agree about the clueless part
Actually an awesome read, and either
-nB
Re:Not bad (Score:2)
on a side note, why do so many web developers turn writer? my friend pulled that shit. http://www.samhilliard.com/ [samhilliard.com]
That's cause (Score:4, Funny)
I smelt a slashdotting coming... (Score:4, Informative)
http://216.239.59.104/search?q=cache:f9Bdhed8_h8J
http://216.239.59.104/search?q=cache:8-dfbA5SWVwJ
Also i have to say this is a rather strange artical. I've taken a quick look at it and if im honest, im totally lost!.
P.S. Sorry for the untidy formatting, its late at night.
offtopic (Score:2, Funny)
This story is about cash, silly!
But Why... (Score:5, Funny)
OB Simpsons (Score:2)
Oh and don't forget the monkey butlers.
I tried to RTFA... (Score:4, Funny)
Mary Ann. (Score:2, Funny)
Re:I tried to RTFA... (Score:2, Insightful)
Re:I tried to RTFA... (Score:5, Funny)
If I had a million coconuts, I'll tell you what I'd do. Ginger and Mary Ann.
Re:I tried to RTFA... (Score:5, Funny)
Sicko (Score:3, Funny)
Re:I tried to RTFA... (Score:3, Funny)
/shudder
And more important than which one is... (Score:5, Funny)
Think about it. Gilligan, Mr Howell, the professor and skipper are all going to be interested in one thing before long and honestly, they were probably interested in that prior to ever getting shipwrecked. All four of them hadn't fantasised about banging Ginger or Mary Ann from the moment they stepped onto the boat. Once they get shipwrecked and they've been on the island for a couple weeks it's going to be a question of who's getting laid and not much else is going to matter.
Now obviously Howell is an old dude and his wife is there so he's going to be on a short leash. He'll keep up appearances but you know he's thinking he could bag one of these chicks if he could get away from the old ball and chain. Then again this was before Viagra so maybe not. If this took place today though Thurston would be knocking the bottom out of Ginger. I'm sure he'd go for Ginger. He's rich, she's famous. That's just the way it works.
But say Thurston hadn't the benefit of the little blue pill and was out of the mix. Then you've got Gilligan, the professor, and the skipper vying for two women. One of them is going to end up with the professor obviously because he's the only one of the three available guys who's both height-weight proportionate and not a complete idiot. Ginger probably goes for him and has little trouble staking claim to him.
This leaves Mary Ann to choose between the fat old sailor or the retard. Not a very appealing proposition but she doesn't have to make the choice. Niine weeks and a couple dozen screw ups from Gilligan later he goes looking for coconuts one day and mysteriously doesn't return. The skipper was of course fishing on the other side of the island when it happened and knows nothing about it. In truth though he buried his "little buddy" in a shallow grave so he could claim the sole remaining available piece of tail on the island.
Re:And more important than which one is... (Score:3, Funny)
Gilligan's Island is a "hook", not the contents (Score:5, Insightful)
Re:Gilligan's Island is a "hook", not the contents (Score:2, Insightful)
i sort of read it as people using a stable currency with no possibility of inflation, over something that could fluctuate wildly. This is why he was talking about a finite amount of money as apposed to the unknown amount of gold in the islands mine.
also
Re:Gilligan's Island is a "hook", not the contents (Score:5, Informative)
Re:Gilligan's Island is a "hook", not the contents (Score:2)
Real money is simply the most marketable commodity. Fiat money is a tax system.
Re:Gilligan's Island is a "hook", not the contents (Score:2, Insightful)
Re:Gilligan's Island is a "hook", not the contents (Score:5, Insightful)
Thurston Howell (Score:5, Funny)
Yeah, it's off topic, but so is the original post. So there.
Science? (Score:2, Interesting)
Re:Science? (Score:2)
Re:Science? (Score:3, Interesting)
There's a good deal of actual scientific research in psychology. The one that comes to mind is the Milgram experiment. If you don't know about it, you need to. There are also experiments in developmental psychology that tell us when children pick up concepts like the amount of liquid doesn't change when you pour it into a different shaped container.
Re:Science? (Score:2)
Re:Science? (Score:3, Informative)
Re:Science? (Score:4, Insightful)
Re:Science? (Score:3, Insightful)
Been done - it's called economics.
Diff-eq, etc. are common in Economics (Score:5, Interesting)
As you alluded, much of basic Econ can be described as a bunch of rules-of-thumb and ad hoc arguments, of the sort, "If we ignore all these things here, and assume that they are constant, we can pretend that this here happens." The problem is that economic systems are complex systems (analogous to the brain's neural network), and can't be modeled well using "billiard ball" physics models. Until recently the only alternative has been to use statistical, "gas law" models and other simplifications of the systems.
Example: a small town may have 1000 citizens, 200 businesses, and perhaps 500 formal and informal groups/organizations. Each of those individuals and organizations has over 1000 'inputs' and 1000 'outputs' - relations with each other and outside entities, that may be considered as economic factors. (Relations may be financial or other.) You have a social network with something like 10^13 relations/interconnections. And that's just a small town or neighborhood.
I'm embarking on a PhD in Econ shortly, after many years in computing, and my math skills are being stretched like they haven't in a long time. Differential equations is a prerequisite for several of the introductory graduate level courses, along with linear algebra and a bunch of statistics and game theory. Thomas Bayes' [gametheory.net] much appreciated Bayesian Theorem [gametheory.net] probability is a tool of economists. Vilfredo Pareto [gametheory.net] (Pareto-optimal" game outcomes [gametheory.net]) was an economist. Many elements of modern statistics, probability and game theory were developed by economists.
The problem faced by economists has been not that it was too simple, but that the systems under study have been too complex to delve into very deeply until both the mathematical tools and the computational power became available. It was necessary to drastically simplify the models in order to get any sense at all. And, of course, there is a strong philosophical and social-studies thread throughout economics.
Nowadays there is a strong thrust into new approaches to Economics, including complex adaptive systems [slashdot.org], agent based systems [iastate.edu], Neuroeconomics [typepad.com], Experimental Economics [ices-gmu.edu] (vis. Vernon Smith [ices-gmu.org], 2002 Bank of Sweden "Nobel" and social network economics [iastate.edu].
Often in addition to training and/or experience in biology, physics, systems theory and other disciplines, these approaches require a good understanding of differential equations, comfort in manipulating long chains of partial derivatives, and working with multi-layered irregular networks. Interestingly, even fluid dynamics equations are applicable in some cases.
Re:Science? (Score:4, Insightful)
Re:Science? (Score:3, Insightful)
Re:Science? (Score:3, Insightful)
How do your perform an controlled experiment in astronomy?
Can you prove anything palentology since there is only one general set of fossils made in one specific set of conditions we can study?
Or are these all non-science areas?
Re:Science? (Score:4, Insightful)
You observe a statistically huge number of events and see if the distributions match the theory. Most philosophers of science will, implicitly at least, add "statistical observation" to "controlled experimentation" as the methods of science.
And this differs from the methodology of economics in what way?
Re:Science? (Score:2, Interesting)
Keynes was a mathematictian, who tried to put the field of economics under the umbrella of math/physics and thus tried to make it a "hard" science.
Mises and others, notablely Rothbard, believe that economics belongs not under the science heading (because it is not reproducable, plus other reasons) but should be considered under the area of philisophy.
Re:Science? (Score:2)
Nope don't know him. But reasoning a priori is not science unless it is supported by emperical data. It is true that the gedanken is employed to great effect, but it must always provide testable hypotheses to be anything more than speculation.
Your assertion that economics is not a science is wrong. Economics as practiced by a vast majority of economists is not. But economics as performed by Austria
Read Mises and Rothbard (Score:4, Informative)
Your reasoning is positivist, which is debunked junk. Positivism states that we can only know something is true if we have empirical verification, and that everything else is meaningless. This is inherently self-contradictory, for that very statement can only be taken as an a priori axiom. Except, according to positivists, a priori axioms are meaningless tautologies. So, the question is, how do we know that that positivist statement is in fact true? We haven't verified it by experiments, so according to its own declaration, it is a meaningless tautology.
Austrian economists start from self-evident a priori axioms. These axioms do not need to be empirically verified. Indeed, they cannot be falsified empirically, and can only be illustrated. You cannot falsify the action axiom. You can only illustrate it (indeed, everything you do is an illustration of the action axiom).
I would suggest reading the following papers:- Social Sciences and Natural Sciences. Mises, Ludwig von. [mises.org]
- What is Austrian Economics? Mises.org [mises.org]
- Economic Science and the Austrian Method. Hoppe, Hans-Herman. [mises.org]
- Realism and Abstraction in Economics: Aristotle and Mises versus Friedman. Long, Roderick. [mises.org]
If you want to read more on Austrian economics, the best introduction is Man, Economy, and State with Power and Market. Rothbard, Murray. [mises.org] (MES). Man, Economy, and State with Power and Market was Rothbard's treatise on economics, also intended to be a textbook for introducing students to Austrian economics. Mises, Rothbard's mentor, wrote the great treatise on economics simply called Human Action. Mises, Ludwig von. [mises.org] (HA). Human Action is an extremely important treatise, although it is not as easily understandable as Rothbard's treatise. Rothbard, in his treatise, assumes that readers have much of the knowledge in Human Action, so reading MES is not a substitute for reading Human Action; however, Rothbard corrects Mises on a couple of issues (like monopoly) and expands upon Mises' analysis, exploring new categories.Praxeology and Understanding. Selgin, George. [mises.org]
In Defense of "Extreme Apriorism". Rothbard, Murray. [mises.org]
Re:Read Mises and Rothbard (Score:3, Interesting)
You also don't understand the nature of reasoning from a priori axioms. We don't need empirical evidence to know that a priori axioms are true.
Ok, so how do you know what's an a priori axiom and what's not? For thousands of years it was thought that the parallel postulate was thought to be a self-evident a priori axiom. There are things that appear to be self evident, but really aren't. This is why we need emperi
Re:Read Mises and Rothbard (Score:3, Interesting)
Responding to your questions...
" so how do you know what's an a priori axiom and what's not? For thousands of years it was thought that the parallel postulate was thought to be a self-evident a priori axiom. There are things that appear to be self evident, but really aren't. This is why we need emperical verification. An a priori axio
Re:Science? (Score:3, Interesting)
The essence of science is the construction of falsifiable theories whose falseness can, in principle, be established by experiment (or observation of a large number of systems, which admits astrophysics and quantum mecha
Ob. Gilligan's Island hell metaphor (Score:5, Funny)
Greed: Thurston Howell the Third, obviously.
Sloth: Mrs. Howell, rarely saw her lift a finger.
Pride: The Professor, had a bit of a superiority complex with his prized intellect.
Lust: Ginger, duh.
Envy: Maryanne, secretly covets Ginger's beauty/talent.
Wrath/Greed: The Skipper, he's both fat and mad all the time so he easily fits into representing both sins.
Gilligan? He's the Devil who is always wearing red, and always finding someway of foiling their attempts to get off the island virtually every single episode.
Re:Ob. Gilligan's Island hell metaphor (Score:4, Interesting)
How much did this guy's education cost? (Score:3, Insightful)
Obviously, the castaways believe they will one day be rescued. If they can do odd jobs for Mr. Howell in the meantime and he pays them money for doing those jobs they can keep the money and then spend it once they are rescued. In fact, in the end they were rescued and were able to use the cash that Mr. Howell had paid them to bring him coconuts and shit.
So all this guy's meanderings about governments and the true value of money are just a load of bullshit.
Re:How much did this guy's education cost? (Score:3, Insightful)
The whole point of the article, which you refute simply by calling it bullshit, is that conventional wisdom such as yours is wrong.
Thanks for the spoiler, A$$H*LE!!! (Score:4, Funny)
Mises Institute rails against fiat abuses (Score:5, Interesting)
Their point is that fiat currencies are subject to abuse as they are not secured to a physical entity which limits its growth.
Note that for for one hundred years prior to the existance of The Fed, the purchasing value of a dollar was virtually unchanged!
Post Fed, post gold standard, post secured currency, the value of the dollar's purchasing power has dropped 97%. With Greenspan's current uber-loose credit scheme and our fractioanl reserve (aka fractional safety) banking system, this has vastly increased the amount of money circulating even in the last decade, secured now mostly by residential real estate.
Re:Mises Institute rails against fiat abuses (Score:2)
Post Fed, post gold standard, post secured currency, the value of the dollar's purchasing power has dropped 97%. With Greenspan's current uber-loose credit scheme and our fractioanl reserve (aka fractional safety) banking system, this has vastly increased the amount of money circulating even in the last decade, secured now mostly by residential real estate.
Is that good or bad? W
Re:Mises Institute rails against fiat abuses (Score:5, Insightful)
1: Rapid increase in the price of gold - probably the least harmful possibilite, this would "only" cripple certain industries that need gold for it's chemical or electrical properties. Sure, the price of computers and electronics would quadruple, but hey, it's a small price to pay for a currency that's got real backing.
2: Using several commodities to back the dollar - the problem is that would put the government in the postion of having to fix a ratio between how many dollars can be backed by an ounce of gold versus how many can be backed by a cow. In effect, that means government is setting the price of cows by fiat. Nobody who distrusts government so much that they want a gold-backed currency would find this acceptable!
3: Massive deflation - There's not enough gold to back all the dollars, so we take most of the dollars out of circulation. Bad bad bad news. If the value of a dollar suddenly went back up to 30 times it's present value, no borrowers would be able to pay off debts they carry now. Virtually every loan would be defaulted. Sayonara, banking industry.
Now if you combine any of those with a ban on fractional-reserve banking, you have a recipe for economic depression on a scale that hasn't been seen since the plague wiped out a quarter of europe's population.
Re:Mises Institute rails against fiat abuses (Score:5, Insightful)
The answer is, IMO, you get both #1 and #3 occurring. There aren't, as you point out, enough ounces of gold in the world to cover the dollars in circulation, nevermind all the other currencies out there. The result is that in order to cover all those dollars, the dollar-denominated price of gold shoots through the roof. All the people who currently own gold suddenly get very, very rich - whoopee for them, but not so good for the rest of us. Of course, you could avoid this by instituting a fractional reserve system, but if you talk to the goldbugs for a very long, you'll soon discover that fractional reserve is a close second on their list of monetary evils, right behind "fiat" paper money, mainly because it doesn't give you that magic immunity from governmental policy that gold is supposed to bring - at the very least, the state can diddle with the reserve requirements and dictate monetary value that way.
The reason it's bad news for the rest of us is because, contrary to the goldbugs absurd claims that gold is somehow immune to inflationary pressures, gold simply doesn't track consumer prices - i.e., there's no magic inflation-fighting power inherent in a gold currency. You can see this quite easily by comparing consumer prices to the price of gold. Since 1971, when the US finally abandoned the partial gold-standard for good, the dollar-denominated price of an ounce of gold has risen tenfold. The problem is that, if you look at the CPI for the same period, consumer prices have risen only about four-and-a-half-fold since 1971. In other words, the price of gold has far outstripped the price of consumer goods since 1971 - a dollar today will buy you 1/4'th as much "consumer goods" now as it did in 1971, but a dollar today will only buy you one tenth of the gold it bought in 1971.
What's the result of this failure to track consumer prices, where the value of the currency outstrips the value of the stuff you want to buy with it? Deflation. Massive, sustained deflation, which, for those of you who've forgotten your intro microeconomics, is very very bad. In a hyperinflationary environment, people can't buy stuff because until their wages catch up with prices, they can't afford it. In a sustained deflationary environment, people can't buy stuff because they largely don't have jobs any more - spending gets awfully rare once people realize that, no matter what they want to buy, they're better off not spending it because whatever it is they want to buy, it's going to be cheaper in real terms tomorrow. You're better off just hanging on to your money than you are in trying to use it to, say, build stuff. That's bad, because everyone who has a job here is relying on someone else to part with their money, which gets less and less frequent as deflation mounts. Borrowers, like me with my college loans - heh - are especially screwed, because they borrowed cheap dollars yesterday, but get to pay back their loans with expensive dollars tomorrow. Wheee - sign me up, you betcha. And as a result, anyone with half a brain simply refuses to pay back their loans as deflation gets more and more severe. Fuckem, is the thinking - you're better off in bankruptcy than you are trying to pay off absurdly expensive loans. On the other hand, you might get to see the amusing (!) phenomenon of negative interest rates if deflation becomes bad enough, where your credit card company offers to pay you if you spend money, so as to cut their own losses over time ;)
No, a gold standard is a recipe for disaster, as you rightly note, and that's just the economics of it - the political end is just as bad. Most of the gold being produced comes from places like Australia and South Africa and Russia. All fince places, full of lovely people, I'm sure, but as an American, I'm not exactly keen on a monetary system that gives the South Africans a say
Re:Mises Institute rails against fiat abuses (Score:3, Insightful)
I'm afraid I might be responding to a troll, but I can't help myself. It's my nature, I guess.
You seriously need to read What Has Government Done To Our Money on the Ludwig von Mises institute web site. That post was so completely mixed up, I don't know where to begin to refute it.
If we go back to a classical gold standard, the price of gold in dollars will go sky-high. That doesn't matter unless you use gold for something. Yeah, jewelry will become expensive, but so what? It already is. The idea
Re:Mises Institute rails against fiat abuses (Score:3, Insightful)
Been there, done that, bought the t-shirt. If you want to refute me, refute me - don't send me to the library to read something I already read fifteen years ago.
If we go back to a classical gold standard, the price of gold in dollars will go sky-high. That doesn't matter unless you use gold for something.
Errr, but we would be using gold for something - a currency, remember? You may not think t
Re:Mises Institute rails against fiat abuses (Score:3, Insightful)
Check. [pamp.com]
Any money standard backed by a physical commodity will have a detrimental effect on some industry, unless that physical substance had truely no useful qualities beyond scarcity (and durability). More than 100 or so years ago, gold was like that, in that there was nothing practical you could do with it. But with today's modern technology, we've found a way to make productive use of almost everything.
wrong... (Score:3, Insightful)
1. There are substitutes for gold. Obviously, if gold were used as money, it would be uneconomical to use it as computer parts.
2. As Rothbard explains, a "commodity basket" is extremely flawed and utopian in the worst sense
Re:Mises Institute rails against fiat abuses (Score:3, Informative)
Re:Mises Institute rails against fiat abuses (Score:3, Informative)
I was always wondering how could he take his current job...
Paul B.
fallacies (Score:3, Interesting)
Are we better off (to the extent that we're bet
Mind trick values currency (Score:2, Funny)
"No, they wont!"
Re:Mind trick values currency (Score:2)
>
>"No, they wont!"
Keep the duped credits [yale.edu] from Star Wars Galaxies out of it.
MMORPGs are great economic simulators. You can tell when a credit dupe appears because overnight, prices on items/resources whose quantities are fixed will skyrocket. The best defense against credit dupes is to accumulate loot whose value is unlikely to diminish.
Wow. (Score:3, Funny)
I suspect (Score:4, Insightful)
Money in MMORPGs (Score:5, Insightful)
Or maybe it's not so odd...MMORPGs are the most likely exposure /.ers have to widespread currency exchange, I guess.
Mystery solved (Score:4, Funny)
Skipper's reasoning flawed (Score:2)
And later we see:
Right now, the Skipper is willing to trade one of his fish for two coconuts...
What is wrong with the Skipper, why didn't he ignore Gilligan and go straight to Ginger, the source of the premium coconuts?
Paper Money Is Accepted Because... (Score:3, Interesting)
As long as all merchants on the island accept paper currency, it is money. Barter is a hassle, since the medium of exchange is determined in, say 5 pies for 1 shirt. You may have pies and need a shirt, but no one has a shirt to trade. You may have a shirt to trade, but Maryanne ain't bakin' pies today. Money, however, can be used more flexibly.
Had one island merchant refused to accept paper money, the currency system might have crumbled. Imagine if you went to buy beer, and the merchant said "sorry. we only accept shells." How will the merchant employ shells as currency without a dollar-to-shell exhcnage around the corner?
Also, a key premise to the show was that they would be rescued. The acceptance of paper currency showed optimism as much as anything. They obviously did not expect to be unable to use the paper currency ouside of the island.
Inflation and Gold (Score:4, Interesting)
I always chuckle when I read a story about the riches that could be generated from asteroid mining. Let's assume that I snag an asteroid and recover several thousand tons of gold and platinum. What is that going to do to the market price of gold and platinum?
A few things... (Score:2)
No, they wouldn't have used his money. They would have gone into survival mode and just helped each other regardless of getting anything in return.
For the suspenders of disbelief...
When they get rescued, his money will still be worth something back home.
For everyone else...
There's an essay to read...it's not about Gilligan's Island.
Barring reality. (Score:4, Funny)
any decent thinking man would have, forced thurston howell to sign over his money to them, and then berried the asshole. clubbed of killed all of the other men and tied up ginger and marianne for use as alternate sex slaves.
Re:Barring reality. (Score:4, Funny)
I think he missed a couple of points. (Score:2)
The idea that the Professor could print money and say will use this to trade commodities is stupid, and he would be voted off the Island real quick. However if he some how said that I will hold something for you and I will give you this dollar which you can trade back for this item.
what about soldiers buying old dinars? (Score:4, Informative)
When I left people in the shops were still selling large quantites of former regime currency for prices ranging from $1 per bill to $20 for a bundle of identical bills. There's a good chance I just wasn't in touch with the local economy, but when the locals are consistently selling their old bills for loose change over the course of a year I have trouble seeing their dead currency as picking up value.
Gilligan's Island: A Communist Model (Score:4, Funny)
Good timing (Score:5, Interesting)
"US Dollar, n: A politician's promise to pay nothing on demand."
This is one of the few government promises you can be ABSOLUTELY CERTAIN will be kept.
What the article is talking about is, indirectly, that the paper money you use every day has no inherent value, so why on earth would anyone accept it as money? A currency that is unbacked by anything, but is decreed by law to be a medium of exchange, is called a 'fiat currency', because it obtains its value from executive fiat (decree). Basically, the government is forcing you to accept the US Dollar at gunpoint. If you do not, they can arrest you. (seriously, they can!)
At one time, money was mostly gold, and to a lesser degree, silver. The way it basically worked was this: you, the gold miner (or perhaps, trader with foreign gold currencies), brought your gold to the government mint. In exchange, they gave you a certain number of gold coins, less some percentage to cover the costs of coinage. Gold must be alloyed with other metals, generally copper, to have enough hardness to last through day-to-day wear, and coins were rated based on their 'fineness', or how much actual gold they had in them. Offhand, I think an 8% copper mix was fairly common, and I believe it was often the case that a 1:1 trade was executed; for every ounce of gold you brought in, you received
Well, over time, monarchs and governments figured out that they could increase that percentage a very great deal; for every one ounce of gold they took in, they only had to give out, say, half that much gold, if they mixed in enough copper. Historically, this has been a major sign of economic distress, sometimes presaging the complete failure of the government. Henry VIII is often cited as an egregious example; his 'silver' coins were actually copper with a very thin coat of silver. The high points would often wear off, leading to his nickname of 'Old Copper-Nose'. He did terrible damage to England's economy through this practice. There is a specific word for this form of taxation, but I cannot remember it or find it with Google right now. But it is very, very lucrative; the more you debase your currency, the more of the real value in the economy you can extract through deceit. Over the long haul, the strongest economies were always the ones with the strongest currencies, likely due to the fact that more of the money stayed in the hands of the population. A hidden tax is still tax, and taxes are bad, on the whole, for an economy.
Now, consider what we have now. Instead of anyone doing (a great deal of!) work to mine gold or some other metal out of the ground, instead, the governments of the world can simply wave their hands and create new currency at will. This is absolutely wonderful for the governments in question, because it allows them to extract, at zero cost, value from their own, and other economies. By printing up bills marked '100', they can extract 10 times as much value as from bills marked '10', at zero extra cost. The US is taking huge advantage of this; we are importing vast quantities of goods from all over the globe, and in exchange we're shipping back worthless green paper, to the tune of over a billion dollars a day. This is great for us, but foreign readers... you and your countries are being RAPED. If you think the US is hated now, wait until the world figures out out just how bad it's been rooked.
As a quick aside, I got my very first 'flamebait' mod awhile back for observing, in a discussion about using ink-jet printers to print money, that of COURSE the government hates that! They don't want anyone muscling in on their turf. Printing fifties on your inkjet and spending them
Re:Good timing (Score:3, Informative)
Re:Good timing (Score:5, Informative)
Basically, the government is forcing you to accept the US Dollar at gunpoint. If you do not, they can arrest you. (seriously, they can!)
I'm at least as anti-fiat money as yourself (being an anarcho-capitalist, I do not believe the government should engage in any decrees of value for any item; means of exchange can be developed by the free market), but you are actually wrong on this point. Nobody is required to accept the US Dollar. Unlike taxes, you will not be shot for refusing to particpate. :)
This is actually a common misunderstanding arising from the phrase legal tender [ustreas.gov]. Check out that link and you'll find the following:
And you find one, once and a while (Score:3, Interesting)
I've been in situations where I won't take money either. I've done service for service trades, my computer skills for some skill they have. I'm not interested in cash, I want them to do something for me. I mean I suppose realisticly I'd do it for en
My wealth is in bits... (Score:3, Interesting)
For some reason, Money reminds me of the observation about calculators that my High School kid just passed on to me "they get to use all the time. Just like in the real world." I've always told my kids, if you face a world without calculators, you've probably been studying the wrong thing anyhow [e.g. you would be better off knowing how to kill things with pointy sticks.]
Money is like that too; If my bits become worthless, the bullets in my closet will be all of a sudden be worth a lot!
Rescue? (Score:3, Interesting)
It's a promisory note, and for all the castaways knew, the US government would still back up their dollars when they returned. In fact, thanks to the Professor's radio and the occassional island visitor, they *knew* the US was still A-OK.
That's reason enough to horde cash and gold to me...
Re:I liked it, but... (Score:5, Informative)
The word fiat, IIRC, comes from the Italian word for "in faith." You're taking it on faith that the $20 bill you slap into a stripper's t-back, for example, is actually worth $20, even though you will never see the gold that backs up that $20 bill.
Re:I liked it, but... (Score:3, Insightful)
Ah, but Gold suffers the same problem as fiat money.
It only has a value because we agree that it does.
When you get right down to it the only things that have REAL value are the things required to support life.
Air. Food. Water. The land required to create food. Sunlight.
Other than that, everything else is negotiable.
Not quite. (Score:2)
Paper money only has value in a transaction if the seller believes he can use it again to make purchases. Gold, however, can have value because the seller will use it for jewelry, or to electroplate his video cables, or even to pound flat and put on an office window.
Now, you're correct that the value of gold would be less if it were only used in this fashion rather than as an easy way smooth out the difficulties of a barter economy. But paper money would be, for all intents, worthless--after all, how often
Re:I liked it, but... (Score:2, Interesting)
Re:I liked it, but... (Score:2)
Past a certain point, you get the 'network effect', where everyone accepts something because everyone
Re:I liked it, but... (Score:5, Informative)
Re:I liked it, but... (Score:2, Informative)
Libertarian alert.... (Score:4, Interesting)
"The word fiat, IIRC, comes from the Italian word for "in faith."
Sorry, fiat means the same in economics as in regular English: by degree. It is from a Latin word, 'fier', meaning 'to decree'. It has a slightly negative connotation in English, showing the essay author's bias when he uses it to refer to the fact that U.S. Federal Reserve Notes are legal tender. His bias is completely exposed when we find that the two outside sources referenced are 1. Ludwig von Mises, the economist whose works were used to found Libertarianism and 2. Murray N. Rothbard, the founder of Libertarianism
The essay is rife with flaws from the mainstream economic point of view; its Libertarian slant is hard to wade through. I hate loaded language like 'fiat money' used to refer to legal tender. Just for fun, I'll address one point. Pointing out all the problems would make a good final exam essay at Bachelor level econ class:
The what-if example about the Professor deciding to make money leaves completely misses the point. Here's the way that would need to play out: The Prof would have to offer some kind of service or good that at least one of the other residents of the island wanted. In order to perform that service or hand over that good, the Prof would declare that he would only accept genuine ProfLeaves. In order to get ProfLeaves in the first place, the other resident(s) would have to perform a service or provide a good to him. The Prof can simply demand that others accept for no reason but that's not practical.
This is typically (note: 'typically' is not 'always') how currency gets its start; the government issues the money in return for services and goods from the citizens. The govmt declares that it will be demanding payment in its money as a tax payment. Soon, the money is in general circulation, as somewhere along the line, most of the participants are needing to pay for taxes and the government, as the largest purchaser and provider of new money, can set prices and supply.
For US Currency, it wasn't always legal tender. Indeed, many states and banks issues their own money. This caused a lot of confusion. Imagine travelling to another state and needing to change your money. A major reason the Europeans adopted a common currency is to make trade so much easier. In the US, to cut out all the confusion of all the competing currencies, the Federal government made Federal Reserve Notes legal tender. This means that you can print up your own JoeBucks but can't legally require anyone else to accept them. If they do, that's fine, if not, you have to pay in Fed Notes.
Re:Libertarian alert.... (Score:3, Insightful)
Please, feel free to print up anoncowardbux. If you get enough merchant to sign on, you can have your own money supply. The airlines inadvertantly did this with frequent flier miles. Those things are ubiquitous enough that they act as a type of money these days. There's nothing illegal about it. I bet that if you were determined enough, you could operate your finances completely
Re:I liked it, but... (Score:4, Insightful)
Which is precisely why Austrian-school economists (the Mises Institute is dedicated to the study of Austrian-school economics) and Libertarians derisively refer to dollars as "fiat currency." Prior to Nixon's 1971 withdrawal of the U.S. from the Bretton Woods agreement, U.S. Dollars WERE redeemable for gold (at least for settlement of large international transactions). Since then, the dollar has been essentially nothing more than a glorified IOU (like all other currencies in the world today).
This, combined with out-of-control deficit spending and monetary inflation policies (which essentially constitute a hidden tax on the spending power of working folks), is the cummulative result of almost a century of the dominance of Keynsian economics. Nose around the Mises Institute's site a bit more, folks. It should be an eye-opener.
Re:I liked it, but... (Score:2)
No, he should check here [fiat.com] instead.
(Is it just me, or does the blue in their logo on their site look somewhat Windows XPish? Is that a consequence of them teaming up with Microsoft, as mentioned on their home page?)
(And, no, it doesn't stand for "Fix It Again, Tony", it stands for "Fabbrica Italiana Automobili Torino".)
Re:interesting (Score:2, Insightful)
Perhaps for the layman, to whom an economics essay based on Gilligan's Island might be able to convey concepts that might otherwise be ignored (ie, oooh, economics - boring!)
I thought that the most interesting point was that fiat currencies can exist in the absence of the government that backs them.
Re:interesting (Score:2, Interesting)
Re:Money implies poverty (Score:3, Insightful)
Something is scarce when there isn't enough of it.
Enough of it for what exactly? To satify (as far as we can tell) infinite human demand.
As a result it's unlikely any society will ever completely overcome scarcity.
Re:Money implies poverty (Score:2)
Re:Slashdot moderator admonishment: (Score:2)
When you quote the entire article text, post as anonymous coward.
This is to stop people posting text in anticipation of a slashdotting in order to gain Karma, rather than to "provide a service."
What the mods did was correct. If the first poster made a mistake, he should have reposted a reply to his own post, with the same text, as AC.
Re:What an idiotic article (Score:2)
Re:What an idiotic article (Score:5, Insightful)
Fiat money is a hijacking of that natural process to give the government a great deal more control over the economy and a nearly-infinite ability to tax, without approval or even KNOWLEDGE of the people being taxed. Past a certain point, this will destroy an economy, of course, and cause the failure of the government. And last I checked, central planning of an economy was not a very good idea; the more control goes into the hands of a few people, the less well things tend to run.
Money needs to be both a store of value and a medium of exhange. We're doing fine on the exchange part, but we're failing dismally on the store-of-value front. See my signature.