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    (Original post by JakePearson)
    Yes I know you get lots online at mises.org/books but I didn't see the Fed one.

    There is a huge distinction made between the gold reserves and fractional-reserve, considering one is based on an elaborate form of fraud. If you want to become economically literate ( ) then check out "Man, Economy and State" by Rothbard too. That linked version comes with "Power and Market." Beware though - it's long! :yy:
    Will do

    And they are both elaborate systems of fraud if you ask me
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    (Original post by AnarchistNutter)
    Will do

    And they are both elaborate systems of fraud if you ask me
    I don't see how the gold standard can be classed as "fraud".
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    (Original post by JakePearson)
    I don't see how the gold standard can be classed as "fraud".
    Bankers were able to print more notes than they had gold reserves and loan out credits that were backed by the gold other people had deposited to extract profit by interest. Because of the rise in money supply, prices would go up by inflation, devaluing the credits. When people became suspicious and there was a bank run, the bankers weren't able to return all of the gold supplies to the people who had initially deposited the gold (because they had loaned out more money than there was gold). The only reason why such practices weren't criminalised were because there weren't enough gold supplies in the economy so people had to take loans. The federal reserve system is a fairly crooked one as well. At least there is a reserve requirement of 10%, though.
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    (Original post by AnarchistNutter)
    Bankers were able to print more notes than they had gold reserves and loan out credits that were backed by the gold other people had deposited to extract profit by interest. When people became suspicious and there was a bank run, the bankers weren't able to return all of the gold supplies to the people who had initially deposited the gold (because they had loaned out more money than there was gold). The federal reserve system is a fairly crooked one as well. At least there is a reserve requirement of 10%, though.
    That's not the gold standard, that's a form of fractional reserve banking. Any system whereby the printing of money deviates from the actual reserves, whether it be through money as a debt rather than a bailment (and it is the latter under the gold standard) is not a return to the principles of the gold standard itself. Bank runs are a very bad thing for the reserve system because only a fraction of the money in supply is in reserve - thus, when people redeem their "tickets" - money - they find that the bank only has, say, 10% of it. When they loaned out more money than gold, this was not the gold standard! Obviously the more money-printing banks there are in existence the more risky and less profitable it is to bank by fractional reserve, so the existence of a monopolistic central bank such as the BoE or the Fed will only make matters worse.
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    (Original post by JakePearson)
    That's not the gold standard, that's a form of fractional reserve banking. Any system whereby the printing of money deviates from the actual reserves, whether it be through money as a debt rather than a bailment (and it is the latter under the gold standard) is not a return to the principles of the gold standard itself. Bank runs are a very bad thing for the reserve system because only a fraction of the money in supply is in reserve - thus, when people redeem their "tickets" - money - they find that the bank only has, say, 10% of it. When they loaned out more money than gold, this was not the gold standard! Obviously the more money-printing banks there are in existence the more risky and less profitable it is to bank by fractional reserve, so the existence of a monopolistic central bank such as the BoE or the Fed will only make matters worse.
    I see.

    But the economy had to resort to a fractional reserve banking system because there was not enough gold in the system to back the money supply and there certainly isn't enough today. How would you propose we possibly return to the gold standard? How do we know whether or not bankers are lending out more money than there is gold unless there is some sort of community banking system (mutualism) or government regulation? How do you stop more money being printed out? Come to think about it, what if someone wants a loan from a bank to pay for a mortgage, car, etc. and we are using the gold standard?

    To top it off, gold is in finite supply (there is not an infinite supply of gold to dig up) and requires time, energy and money to dig up and transport.

    Also, I already knew that bank runs meant people lost all/most of their money, hence why I mentioned the minimum reserve requirement which I believe is roughly 10%?
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    (Original post by JakePearson)
    Are you guys familiar with the works of Austrian economists on things like fractional-reserve banking and the business cycle. There's a great book by Rothbard that sets out how they both work and how they are against the ideals of freedom and the market. I don't know if there's a copy online but the cover looks like this so keep an eye out (maybe look on Amazon if you're going to get it?)...
    I've not seen that before but thanks for the link. I think a free version is posted later by AnarchistNutter so I'll try and take a look at that when I've got a minute. Sorry about the short post here; I'm quite caught up with work at the moment.
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    (Original post by AnarchistNutter)
    I see.

    But the economy had to resort to a fractional reserve banking system because there was not enough gold in the system to back the money supply and there certainly isn't enough today. How would you propose we possibly return to the gold standard? How do we know whether or not bankers are lending out more money than there is gold unless there is some sort of community banking system (mutualism) or government regulation? How do you stop more money being printed out? Come to think about it, what if someone wants a loan from a bank to pay for a mortgage, car, etc. and we are using the gold standard?

    To top it off, gold is in finite supply (there is not an infinite supply of gold to dig up) and requires time, energy and money to dig up and transport.

    Also, I already knew that bank runs meant people lost all/most of their money, hence why I mentioned the minimum reserve requirement which I believe is roughly 10%?
    Of course there wasn't enough gold - that's the point! The GS was in place to prevent the inflation of money which is pretty much exactly why fractional-reserve was implemented - so the central bankers could profit from counterfeiting money and devaluing everyone else's. I would recommend reading that Rothbard book but I'll try and explain it here.

    1) The purpose of the GS was to limit the money supply. Once enough money is in supply, whether it be backed by gold, silver, sugar or shoes (the former two being more valuable and more scarce) then it is at its optimum and no more money needs to be printed. As Rothbard says in the book, "Money, after all, can neither be eaten nor used up in production. The money-commodity, functioning as money, can only be used in exchange, in facilitating the transfer of goods and services, and in making economic calculation possible. But once a money has been established in the market, no increases in its supply are needed, and they perform
    no genuine social function."


    2) If someone wants a loan then this can happen under the GS. The purpose is to keep the money supply stable and pegged to something of value rather than having a fiat currency. I don't see why there'd have to be an increase in the money supply for people to loan things. The purpose of a loan is to give away money for it to be returned with interest in the future.

    3) The fact that gold is in finite supply is a good thing, for if it were in superabundance then it'd have no value and couldn't be used as a currency or standard for a currency. The fact that it is costly to find new gold (which will run out) means that the currency will retain a stable value over the years rather than suffer from a disastrous run of inflation, which you seem to be in favour of when you say things here although I may be wrong.

    4) Yes, the minimum reserve requirement under the Federal Reserve system is 10%, which is disastrous.
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    (Original post by JakePearson)
    ...
    I see. That makes more sense then. I will look into that Rothbard book and get back to you...if I ever finish it

    3) The fact that gold is in finite supply is a good thing, for if it were in superabundance then it'd have no value and couldn't be used as a currency or standard for a currency. The fact that it is costly to find new gold (which will run out) means that the currency will retain a stable value over the years rather than suffer from a disastrous run of inflation, which you seem to be in favour of when you say things here although I may be wrong.
    Lol, no.

    As you say, it would be a bad thing if gold was in super abundance since due to supply and demand, its value would be very low but if it were to run out or be in very low supply, it's value would also be too high, surely, so the fact that gold is finite is not entirely a good thing, surely?

    How would you reform the current banking system though and cover the vast money supply that already exists with the shortage of gold?
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    (Original post by AnarchistNutter)
    As you say, it would be a bad thing if gold was in super abundance since due to supply and demand, its value would be very low but if it were to run out or be in very low supply, it's value would also be too high, surely, so the fact that gold is finite is not entirely a good thing, surely?

    How would you reform the current banking system though and cover the vast money supply that already exists with the shortage of gold?
    I don't think that gold in a high value would be a bad thing either, all it would mean is that £10 could buy you a house as opposed to a cinema ticket. I'm not entirely sure what I'd do with the current banking system - I haven't finished the Rothbard book yet so I'll see what his ideas are.
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    (Original post by JakePearson)
    I don't think that gold in a high value would be a bad thing either, all it would mean is that £10 could buy you a house as opposed to a cinema ticket. I'm not entirely sure what I'd do with the current banking system - I haven't finished the Rothbard book yet so I'll see what his ideas are.
    Cool. I noticed on another thread that Aeoleus recommended you the article about the rise of mercantilism/early state intervention from the anarchist FAQ. You were going to let him know about your thoughts. If you have the time could you give me a run up on it as well - I'd be interested in your opinion, cheers.
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    (Original post by AnarchistNutter)
    Cool. I noticed on another thread that Aeoleus recommended you the article about the rise of mercantilism/early state intervention from the anarchist FAQ. You were going to let him know about your thoughts. If you have the time could you give me a run up on it as well - I'd be interested in your opinion, cheers.
    (Original post by JakePearson)
    x
    How does a gift economy work in international trade?! :eek3:

    P.S. I like the ideas you give on the gold standard; it seems to make sense to me. However, how does it apply in the stock market (was that created after Rothbard anyway?)?
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    (Original post by ANARCHY__)
    How does a gift economy work in international trade?! :eek3:
    Lol, I don't think Jake would approve of a gift economy! In any case the syndicates would probably use the gift economy internally (i.e. the members inside the system would share goods) and members inside the syndicate would probably arrange the trade of goods and services with other syndicates on a national/internaional basis. Alternatively, we could use a community banking system (mutualism) that uses the gold standard. Those are just a few ideas.
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    (Original post by AnarchistNutter)
    Lol, I don't think Jake would approve of a gift economy! In any case the syndicates would probably use the gift economy internally (i.e. the members inside the system would share goods) and members inside the syndicate would probably arrange the trade of goods and services with other syndicates on a national/internaional basis. Alternatively, we could use a community banking system (mutualism) that uses the gold standard. Those are just a few ideas.
    Those seem like good ideas to me. I thought it might be an idea to have a commune of importers and, on the basis of a gift economy, those guys are given a voucher book by their community, verifying their trust in the guy and then they simply trade on that basis. How about stock markets? Do you think they should exist?
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    (Original post by ANARCHY__)
    Those seem like good ideas to me. I thought it might be an idea to have a commune of importers and, on the basis of a gift economy, those guys are given a voucher book by their community, verifying their trust in the guy and then they simply trade on that basis. How about stock markets? Do you think they should exist?
    Shares are essentially a hand in the ownership of a company. Businesses sell them (shares in the ownership of the company) to raise money so they can expand the business (e.g. buying new land/property/technology, hiring more staff, etc.) rather than borrowing money and getting into debt. People buy them so they can either (a) wait for the value of the shares to rise and sell them, hence they are effectively gambling since they could also drop in value, (b) buy them in the hope of getting dividends - but no business is legally obliged to hand out dividends to its stock holders or (c) simply have another way of investing money so they don't lose money when inflation goes up.

    Stock markets allow people to get rich at other people's misery, so no. Most rightists argue that they act as a good way for businesses to raise funds but...

    "[s]upporters of the system . . . claim that stock exchanges mobilise funds for business. Do they? When people buy and sell shares, 'no investment goes into company treasuries . . . Shares simply change hands for cash in endless repetition.' Company treasuries get funds only from new equity issues. These accounted for an average of a mere 0.5 per cent of shares trading in the US during the 1980s." [Apostles of Greed, pp. 157-158] This is echoed by David Ellerman:

    "In spite of the stock market's large symbolic value, it is notorious that it has relatively little to do with the production of goods and services in the economy (the gambling industry aside). The overwhelming bulk of stock transactions are in second-hand shares so that the capital paid for shares usually goes to other stock traders, not to productive enterprises issuing new shares." [The Democratic Worker-Owned Firm, p. 199]
    Essentially, in the majority of cases of buying and selling shares, we merely have a changing in hands of the claim to cash. Its basically a gambling trade.

    Another argument is that the stock market needs to exist to put a value on the market capitalisation of a company.

    "Socialist firms," he notes, "are routinely attacked as being inherently inefficient because they have no equity shares exposed to market valuation. If this argument had any merit, it would imply that the whole sector of unquoted closely-held small and medium-sized firms in the West was 'inherently inefficient' -- a conclusion that must be viewed with some scepticism. Indeed, in the comparison to large corporations with publicly-traded shares, the closely-held firms are probably more efficient users of capital." [Op. Cit., p. 200 and p. 199]
    Coincidentally, 90% of businesses are closely-held firms (where there only a few shareholders in the business), so the argument that without the stock market, the economy would crash because there would be no means to value businesses is rather an absurd one.

    Most importantly, co-operatives can't exist with shares (or at least not shares that can be sold) since each worker wouldn't have an equal stake in the business if she could sell her shares.

    To finish my argument with a successful example of co-operatives...

    the Mondragon co-operative complex in the Basque Country indicate that a libertarian socialist economy can exist and flourish. Perhaps it will be suggested that an economy needs stock markets to price companies, as Mises did. Thus investment is "not a matter for the mangers of joint stock companies, it is essentially a matter of the capitalists" in the "stock exchanges". Investment, he asserted, was "not a matter of wages" of managers but of "the capitalist who buys and sell stocks and shares, who make loans and recover them, who make deposits in the banks." [Socialism, p. 139]
    http://anarchism.pageabode.com/afaq/secI1.html#seci11

    Yeah, the stock market is pretty bad.

    Edit - oh yeah, the system also results in managers having to lie to the market...

    In terms of the impact of the stock market on the economy there is good reason to think that this hinders economic efficiency by generating a perverse set of incentives and misleading information flows and so their abolition would actually aid production and productive efficiency).

    Taking the first issue, the existence of a stock market has serious (negative) effects on investment. As Doug Henwood notes, there "are serious communication problems between managers and shareholders." This is because "[e]ven if participants are aware of an upward bias to earnings estimates [of companies], and even if they correct for it, managers would still have an incentive to try to fool the market. If you tell the truth, your accurate estimate will be marked down by a sceptical market. So, it's entirely rational for managers to boost profits in the short term, either through accounting gimmickry or by making only investments with quick paybacks." So, managers "facing a market [the stock market] that is famous for its preference for quick profits today rather than patient long-term growth have little choice but to do its bidding. Otherwise, their stock will be marked down, and the firm ripe for take-over." While "[f]irms and economies can't get richer by starving themselves" stock market investors "can get richer when the companies they own go hungry -- at least in the short term. As for the long term, well, that's someone else's problem the week after next." [Wall Street, p. 171]

    Ironically, this situation has a parallel with Stalinist central planning. Under that system the managers of State workplaces had an incentive to lie about their capacity to the planning bureaucracy. The planner would, in turn, assume higher capacity, so harming honest managers and encouraging them to lie. This, of course, had a seriously bad impact on the economy. Unsurprisingly, the similar effects caused by capital markets on economies subject to them are as bad as well as downplaying long term issues and investment. In addition, it should be noted that stock-markets regularly experiences bubbles and subsequent bursts. Stock markets may reflect the collective judgements of investors, but it says little about the quality of those judgements. What use are stock prices if they simply reflect herd mentality, the delusions of people ignorant of the real economy or who fail to see a bubble? Particularly when the real-world impact when such bubbles burst can be devastating to those uninvolved with the stock market?

    In summary, then, firms are "over-whelmingly self-financing -- that is, most of their investment expenditures are funded through profits (about 90%, on longer-term averages)" The stock markets provide "only a sliver of investment funds." There are, of course, some "periods like the 1990s, during which the stock market serves as a conduit for shovelling huge amounts of cash into speculative venues, most of which have evaporated . . . Much, maybe most, of what was financed in the 1990s didn't deserve the money." Such booms do not last forever and are "no advertisement for the efficiency of our capital markets." [Henwood, After the New Economy, p. 187 and p. 188]


    (Original post by JakePearson)
    ...
    Quoted for attention. What do you think?
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    (Original post by AnarchistNutter)
    x
    Hey man, I don't think it works if you edit in a quote. I tried doing it before and it didn't seem to register but maybe I'm wrong.

    So I read all of the quotes and I agree with what they're all saying. It seems like the stock market kind of forced its way in as a necessary middle man when really, nobody needs it. If you're going to have a stock market, I think we should relegate back down to some kind of betting ring because the kind of power it's got now is dangerous and harms people.
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    (Original post by ANARCHY__)
    Hey man, I don't think it works if you edit in a quote. I tried doing it before and it didn't seem to register but maybe I'm wrong.

    So I read all of the quotes and I agree with what they're all saying. It seems like the stock market kind of forced its way in as a necessary middle man when really, nobody needs it. If you're going to have a stock market, I think we should relegate back down to some kind of betting ring because the kind of power it's got now is dangerous and harms people.
    I'm not entirely sure what you mean here but I would definitely advocate the complete abolition of the stock market, yes.
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    (Original post by AnarchistNutter)
    I'm not entirely sure what you mean here but I would definitely advocate the complete abolition of the stock market, yes.
    I mean you bet on it the same way you bet on a horse. So what I'm saying is you make it worthless if people still want it.
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    (Original post by ANARCHY__)
    I mean you bet on it the same way you bet on a horse. So what I'm saying is you make it worthless if people still want it.
    But there wouldn't be any equity shares exposed for market valuation so how could you bet on them?
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    (Original post by AnarchistNutter)
    But there wouldn't be any equity shares exposed for market valuation so how could you bet on them?
    Guess you're right there man. I was going to suggest just betting on the commodity of an item, but like you say, there wouldn't be any valuation so that'd be useless. How would you think of getting rid of it?
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    (Original post by ANARCHY__)
    Guess you're right there man. I was going to suggest just betting on the commodity of an item, but like you say, there wouldn't be any valuation so that'd be useless. How would you think of getting rid of it?
    The share itself literally is an embodiment of private property; it is a legal contract that provides a private individual with private ownership over capital. So, to abolish the stock market, you simply don't enforce legal contracts that provide the individual with private capital rights! In other words, the words on a piece of paper that say "I own x amount of land" will be irrelevant without backing of the armed forces. During an illegal occupation of the means of production, however the state will subsequently enforce the capitalist's legal right over private property through the military, which is why it is important to break up core military units and legalise arms as part of the revolution.
 
 
 
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