Forest For The Trees

2008-3-3 13:51:00

Larry quoting JJ:

"Now I am sure you will agree that balance and internal integrity are necessary to maintain a stable money system, but you overlook the purpose of the parable..."

Larry then wrote:

"It is precisely basic principles that I am questioning.

"For example, your parable/plan/whatever requires the government to assess what the national productivity will be each year in order to determine how much new fiat money to create (remove with taxes in some situations).

"In principle your parable presents a scenario that would create a need for government intrusion into people's lives through minute accounting of their productivity to insure fairness and prevent people from 'gaming the system.'"


I thought you said you were questioning the basic principles of the parable and then you question details that have nothing to do with the basic principles it teaches.

The parable was designed NOT -- let me repeat -- NOT, to present a plan but to give the opposite of a plan. The people and government in the parable represents NOT my plan but a microcosm of the current flawed system and how it works. I thought the interpretation was pretty obvious but let me encapsulate.

The creation of the money system in the parable represents the creation of our money system. The printer represents the bankers and the Community Reserve Board represents the Federal Reserve Board.

I said at the beginning that the correspondences are not exact so if you are looking for exactness you will not find it. Our money system is too complicated to reduce it to a parable with exact correspondences.

Many people just can't seem to grasp the basic principles of our money system, where the problems are or how to go about correcting them. The parable presents a microcosm of our situation in such a way that some will be able to, with greater clarity, see why we are in our current situation and how to correct it. As I said the important point to come away with is that the system needs to maintain the proper balance between the money supply and goods and services and secondly those issuing the money need to be held accountable so people of integrity are in that position.

I hope others did not so greatly misunderstand the purpose of the parable. If they did I guess I'll have to rewrite it with even greater simplicity.


"Like I have said before, we can only hope that your ideas never become popular for economics."


My economic thinking is very close to the famous (and my favorite) economist, Milton Friedman. So it looks like my thinking on economics is already out of the bag and extremely popular among those who want some constructive change to the system. Your worst nightmare is already here.

Here is just one sample if what he says about money:

"Anything can be money: stones, iron, gold, tobacco, silver, shells, cigarettes, copper, paper, nickel, etc. What makes these things money is not what they are, but what they are used for. They may have value in themselves, like gold ('commodity' money), or they may not ('credit' money, which means banknotes, bank deposits, tokens, markers, etc.); but their value as money is separate from their intrinsic value. What gives money value as such is that it is, or can be, used for exchange, replacing the original human system of trade, which was barter. The value of money is thus the value people attribute to what they want to exchange, no more, no less. As a medium of exchange, all money is in effect 'credit' money: credit on an incomplete barter, like an IOU. An IOU can also be anything, as long as it is recognized as a contractual obligation on an incomplete exchange. Commodity money was originally the most natural money, but the value of money is not always the same as its value as a commodity."

(From his book "Money Mischief")

My philosophy on money is not new. There is not too much new one can say about it. Even when I come up with something that is from my own thinking I discover someone else has already been teaching it. I have just been attempting to clarify a number of principles that many economists already accept. The important thing is to see the true principles.

Who is your favorite economist, Larry? Give me someone besides Ayn Rand, who was more of a philosopher than an economist.


"I particularly like Ludwig Von Mises, the Austrian School; and even Alan Greenspan."


That explains a lot.