Libertarians! An Electoral Adventure

It's not so much a symbiotic/parasitic thing as a "differing interests" thing. Similarly with Seattle and the area west of the Cascades and Spokane and the area east of the Cascades, in Washington state. These are the two most populous cities in the state of Washington, and their economic interests could hardly be more different. It's not that one area is leeching off the other, it's that the eastern side of the state has more in common with similar parts of Idaho, Oregon, and even British Columbia and Alberta than it has in common with the western side of the state. Different population densities. Different economic bases. Different climate. You name it.

That's not to say that there aren't good effects from having diverse interests governed together. It can provide a kind of balance that might be lacking if everything were portioned up by similarity.

But it's easy to see that there are in fact different needs for different areas, without needing to characterize the relationships in those sorts of terms. While there may be a history of that sort of speech about the issue in the case of Chicago, NathanialG certainly didn't talk that way about it. He just observed that there are great differences.

Hypatian wrote:
It's not so much a symbiotic/parasitic thing as a "differing interests" thing. Similarly with Seattle and the area west of the Cascades and Spokane and the area east of the Cascades, in Washington state. These are the two most populous cities in the state of Washington, and their economic interests could hardly be more different. It's not that one area is leeching off the other, it's that the eastern side of the state has more in common with similar parts of Idaho, Oregon, and even British Columbia and Alberta than it has in common with the western side of the state. Different population densities. Different economic bases. Different climate. You name it.

That's not to say that there aren't good effects from having diverse interests governed together. It can provide a kind of balance that might be lacking if everything were portioned up by similarity.

But it's easy to see that there are in fact different needs for different areas, without needing to characterize the relationships in those sorts of terms. While there may be a history of that sort of speech about the issue in the case of Chicago, NathanialG certainly didn't talk that way about it. He just observed that there are great differences.

At least people on the west side here seem to feel condescendingly fond of Spokanistan... and we store all the hydro dams and wind turbines over there. Does Cook County feel like they need the rest of the state?

Hypatian wrote:
While there may be a history of that sort of speech about the issue in the case of Chicago, NathanialG certainly didn't talk that way about it. He just observed that there are great differences.

Yes. The "you/you're" was by no means directed at him, but rather the rhetorical separatist from either side. I saw nothing in his post suggesting any endorsement of isolationist rhetoric, just the mention of the difference of values and interests between areas.

NathanialG, if it wasn't clear, I'm not taking you to task for a damned thing.

clover wrote:
Does Cook County feel like they need the rest of the state?

They probably need it for the tax revenue in order to pay for various entitlement programs.

And I have relatives that live in rural Illinois, a little burg with a population of 1,179. From talking to them they would be ok if the Chicago metro area became it's own city-state.

MacBrave wrote:

They probably need it for the tax revenue in order to pay for various entitlement programs.

And I have relatives that live in rural Illinois, a little burg with a population of 1,179. From talking to them they would be ok if the Chicago metro area became it's own city-state.

Chicago's economy drives a huge chunk of the state's. 2010's gross metropolitan product for Chicago was $532 billion; meanwhile, the gross state product was $630 billion. From all I've seen, the non-values wail from downstate tends to be about state and federal dollars Chicago "grabs" from them which they wouldn't see without its presence and ignores the region's provision of goods and services. My take has always been that the people favoring this talk are arguing from values but since values are so subjective, it's to their benefit to claim the city folk are "stealing" from them somehow. As always, it's more complex than that, and hence my earlier unfocused tirade about ignorance of the symbiotic relationship the metropolitan area has with their would-be West Indiana.

MacBrave wrote:
clover wrote:
Does Cook County feel like they need the rest of the state?

They probably need it for the tax revenue in order to pay for various entitlement programs.

And I have relatives that live in rural Illinois, a little burg with a population of 1,179. From talking to them they would be ok if the Chicago metro area became it's own city-state.


People from the city don't care in any way about the rest of the state. Good or bad we just sort of ignore it. I seriously doubt rural Illinois is paying more for entitlement programs than they get payed out. Looking at ianunderhill's numbers I am guessing it is close to impossible for that to be the case.

I suppose this is as good a place for this as anywhere else:
Ron Paul and Paul Krugman debate economics

ianunderhill wrote:
MacBrave wrote:

They probably need it for the tax revenue in order to pay for various entitlement programs.

the non-values wail from downstate tends to be about state and federal dollars Chicago "grabs" from them which they wouldn't see without its presence and ignores the region's provision of goods and services. My take has always been that the people favoring this talk are arguing from values but since values are so subjective, it's to their benefit to claim the city folk are "stealing" from them somehow.

I don't know if I'm seeing conflicting impulses within libertarianism or just between libertarianism and tea-partyism, but I've seen two hard-to-resolve points of view: The small(er) vs. big(ger) government impulse coming from rural areas, and the vote-with-your-feet, go-where-the-market is attitude expressed by the Cato Institute dude who said on NPR, "No one's holding a gun to your head and making you live in rural Montana."

Is it a personal/governmental micro/macro thing? On the individual level, if you aren't making what you feel you're worth, move to the big city. But on the government level, change things so that harvesters from the big cities can't come harvest rural johngaltium deposits to give to their entitled poor.

H.P. Lovesauce wrote:
I don't know if I'm seeing conflicting impulses within libertarianism or just between libertarianism and tea-partyism, but I've seen two hard-to-resolve points of view: The small(er) vs. big(ger) government impulse coming from rural areas, and the vote-with-your-feet, go-where-the-market is attitude expressed by the Cato Institute dude who said on NPR, "No one's holding a gun to your head and making you live in rural Montana."

Is it a personal/governmental micro/macro thing? On the individual level, if you aren't making what you feel you're worth, move to the big city. But on the government level, change things so that harvesters from the big cities can't come harvest rural johngaltium deposits to give to their entitled poor.

It's a Libertarianism-as-a-consistent-ideology thing vs. Libertarianism-as-a-brand-name thing, where both of the impulses you're seeing are just brand name Libertarianism. According to the Principle of Non-Aggression, neither rural nor big city governments should be harvesting jonhgaltium deposits to give to anyone's entitled poor. The government's only business is assisting people in defending themselves from unprovoked aggression, and the only harvesting of resources by the government that is legitimate for a Libertarian would be for financing government actions that address unprovoked aggression.

H.P. Lovesauce wrote:

I don't know if I'm seeing conflicting impulses within libertarianism or just between libertarianism and tea-partyism, but I've seen two hard-to-resolve points of view: The small(er) vs. big(ger) government impulse coming from rural areas, and the vote-with-your-feet, go-where-the-market is attitude expressed by the Cato Institute dude who said on NPR, "No one's holding a gun to your head and making you live in rural Montana."

Yeah, I don't quite get, it either. If I were to guess the next line of dialog, I'd figure there'd be something about big government regulation preventing the person in Montana from pulling themself up by their bootstraps, but that's veering towards cynical parody, and I'm genuinely interested in where these things meet even if I am predisposed to disagree.

Yeah, that whole idea that the Federal Reserve can pick one interest rate that's perfect for the whole economy is absolutely insane. Money is supposed to have supply/demand pricing like everything else, and when you screw with the supply side, you end up with horrifically imbalanced economies. They grow fast for awhile, but they grow wrong, and then get sick. Then the bank and the government meddle some more, and they seem to get better for awhile, and then get even sicker. The more meddling is done, the worse they ultimately do. This is precisely what has happened to the US -- the ridiculous government deficits, the wild trade deficits, and massive debt accumulation by the commercial and private sectors are all inevitable consequences of expansionist Federal Reserve monetary policy.

We're at freaking zero percent -- free money! -- and have been for years. If you have surplus cash, you can't get any interest for your savings, because you're competing with unlimited supplies of the same thing from the Fed, for free. So people save less and consume more, hurting overall real economic growth.

As I've said many times, using monetary policy this way is exactly like using recreational drugs to feel better. It works for awhile, but only for awhile, and then has consequences that are wildly disproportionate to the benefit gained. It's best to just let the economy muddle through, and fix its own problems.

The one thing you want to get rid of, to whatever degree possible, is lies. Always, always, always, you get better economic results the more truthful everyone is. And the fundamental assertion that "this worthless paper has value" is a whopper. Down at the foundation of the economy, it spreads rot slowly but inexorably.

It's no accident that personal incomes peaked in real terms right about the time we went off the gold standard, and have been dropping ever since. I ran the numbers a few years ago, and if you'd personally stayed on the gold standard, where you took the average wage in 1970 as measured in gold coins ($35/ounce), and then received that many coins each year instead of a regular wage, selling them for the average gold price that year, there wasn't even ONE year where you'd have done worse than the average wage in dollars, even when gold was at its nadir. It got pretty close a couple of years, during the peak of the false-foundation 90s boom, but even then you were still a tiny bit ahead.

And, of course, for the last few years, you'd be clearing something like $150K/year. And keep in mind that this is the wage, in gold coins, for low-skill labor, the average worker in 1970. $150K+/year in today's money. When I first pointed this out, everyone was all, "pshaw, gold bubble", but it's still at about $1650/oz a couple of years later.

Okay, I just reran the numbers for 1960, 1970, and 2010. Gold was $35/oz in 1960, and it looks like gold was averaging about $1200/oz in 2010. (it started at about $1150, and ended at $1350, but didn't really start to increase until past the halfway point of the year.) I'll also use the gold price right now, $1662, as another comparison point.

In 1960: average wage $4,007.12, or 114 ounces of gold, roughly.
In 1970: $6186.24, or about 175 ounces.
In 2010: $41,673.83, or about 35 ounces.

If you were being paid 1970 average ounces in 2010, your income would have been about $210,000.

At today's price, 1970 wages would equate to $294,350/year. Even if you cut that in half, on the assumption that gold is overpriced, and should really be about $830, that would still be $147K. And if you assume that gold is wildly overpriced, and should really be at a QUARTER of the present value, that's $73,587, close to twice the current average wage.

And if you assume that the 1960 wage is more accurate, as 1970 wages may have been overstimulated by the Federal stupidity with the money supply, you're still talking $189K/$95K/$47K.

In other words, only if you assume that 1970 wages were about 50% too high, and that gold should be valued at a quarter what it is now, do you even reach approximate parity with the current average wage. And you'd still be ahead if you were being paid in gold.

Pretty good for a barbarous relic, eh?

Malor wrote:

In 1960: average wage $4,007.12, or 114 ounces of gold, roughly.
In 1970: $6186.24, or about 175 ounces.
In 2010: $41,673.83, or about 35 ounces.

If you were being paid 1970 average ounces in 2010, your income would have been about $210,000.

Why would anyone in 2010 pay you the same number of ounces of gold as they were in 1970?

Because you're producing more real value in 2010, having the advantage of 40 years of progress. If you were worth 175 ounces of gold in 1970, you should still be worth 175 ounces today.

Remember, wealth is supposed to increase. Living standards, by and large, should be improving. Instead, this is a data point showing that real wages have been eroding steadily. Even if you completely stack the deck against the evidence on display, you STILL get wealth erosion.

while I'm not disputing your numbers, i'd be curious to see that comparison beginning when we went off the gold standard in the first place. If I recall, gold was fairly stable at about 20 bucks an ounce until the mid 30s.

Malor wrote:
Because you're producing more real value in 2010, having the advantage of 40 years of progress. If you were worth 175 ounces of gold in 1970, you should still be worth 175 ounces today.

You don't get paid according to what you're worth. You get paid according to what price you can negotiate with the buyer of your labor for that labor. What you are worth is a factor, but it's only one of many factors.

Remember, wealth is supposed to increase. Living standards, by and large, should be improving. Instead, this is a data point showing that real wages have been eroding steadily. Even if you completely stack the deck against the evidence on display, you STILL get wealth erosion.

Just because the amount of wealth in society increases doesn't necessarily mean real wages/living standards should increase. Real wages are a function of how much workers can get owners to pay them for their labor, and that is what creates the living standards.

edit: in other words, just because the pie is bigger doesn't mean your slice will contain more pie.


And, of course, for the last few years, you'd be clearing something like $150K/year. And keep in mind that this is the wage, in gold coins, for low-skill labor, the average worker in 1970.

In 1970, there were about 78,000,000 people in the labor force. Let's assume they were all paid in gold coins at 175 ounces per year, as you suggest. That's about 13.6 billion ounces of gold.

Now, there were about 145 million people in the labor force in 2008. So that's what, 25.4 billion ounces of gold to be expended on wages alone.

The US gold reserve is about 261.5 million ounces. Hmmm, that's thousands of times too small. Even the entire amount of gold estimated to have been taken out of the ground over all of history totals about 5.3 billion ounces. That's a bit over a third of what would have been needed to pay every worker in the US day laborer rates in 1970, much less today with nearly twice the working population. And that's just for the US! And it does not include industrial uses, jewelry or anything else - it's *all* gonna be coins.

There is not enough gold in the world to pay everyone at the rate a day laborer earned in 1970, in gold. There was not enough gold *then* to do it, not by a long shot. So where in the world does this idea come from that if we'd just somehow kept making gold coins, we'd never have inflation and we'd all be rich? It's physically impossible. You can't maintain even an economy of day laborer's economic status in the US alone in 1970 with gold.

Either the amount of gold everyone gets would be tinier and tinier every year, or there would be no fixed relationship between currency value and gold weight. This is not economic theory, this is *physics*. The gold we have in the world is not enough to sustain anything like the economy we have IF you assume that workers paid in gold weight will receive the same weight of gold every year for their wages.

And you've made it clear that's the assumption:


Because you're producing more real value in 2010, having the advantage of 40 years of progress. If you were worth 175 ounces of gold in 1970, you should still be worth 175 ounces today.

Robear wrote:

And, of course, for the last few years, you'd be clearing something like $150K/year. And keep in mind that this is the wage, in gold coins, for low-skill labor, the average worker in 1970.

In 1970, there were about 78,000,000 people in the labor force. Let's assume they were all paid in gold coins at 175 ounces per year, as you suggest. That's about 13.6 billion ounces of gold.

Now, there were about 145 million people in the labor force in 2008. So that's what, 25.4 billion ounces of gold to be expended on wages alone.

The US gold reserve is about 261.5 million ounces. Hmmm, that's thousands of times too small. Even the entire amount of gold estimated to have been taken out of the ground over all of history totals about 5.3 billion ounces. That's a bit over a third of what would have been needed to pay every worker in the US day laborer rates in 1970, much less today with nearly twice the working population. And that's just for the US! And it does not include industrial uses, jewelry or anything else - it's *all* gonna be coins.

There is not enough gold in the world to pay everyone at the rate a day laborer earned in 1970, in gold. There was not enough gold *then* to do it, not by a long shot. So where in the world does this idea come from that if we'd just somehow kept making gold coins, we'd never have inflation and we'd all be rich? It's physically impossible. You can't maintain even an economy of day laborer's economic status in the US alone in 1970 with gold.

Either the amount of gold everyone gets would be tinier and tinier every year, or there would be no fixed relationship between currency value and gold weight. This is not economic theory, this is *physics*. The gold we have in the world is not enough to sustain anything like the economy we have IF you assume that workers paid in gold weight will receive the same weight of gold every year for their wages.

And you've made it clear that's the assumption:


Because you're producing more real value in 2010, having the advantage of 40 years of progress. If you were worth 175 ounces of gold in 1970, you should still be worth 175 ounces today.

That was a very interesting post and makes the gold standard all the more laughable.

You know, you might want to think through your arguments all the way.

You say that there's no way that a gold-based money system could work, because there's not enough gold. But you also directly say, right there in print, that there already wasn't enough gold in 1970. Yet, somehow, that system worked.

Huh. Maybe your theory is wrong. Maybe people don't get paid in gold and then just hang onto it. Perhaps they spend it back into circulation.

As an aside: the US would also have been adding to its gold reserves, if we were still backing dollars with gold. That's how the economy prospers, in fact... we manufacture stuff, we trade it for gold, we create new dollars. If we start importing too much stuff from overseas, going out of balance, then gold flows out of the country, and dollars disappear from the economy. This puts a squeeze on the economy, automatically rewarding the people exporting, making them stronger, and repatriating the gold again.

It's okay if the money supply isn't expanding that much. Mild deflation is not a problem at all, any more than mild inflation is. The natural state of an economy that's using solid money, in fact, seems to be a very broad, very slow deflation.... everything slowly gets cheaper, because everyone gets more efficient at making goods. This is very healthy, and it makes for long-term stability.

Now, if you get STRONG deflation, you can crash the economy, but you usually only see that when people have been making big promises without real backing, and then others treat those promises as money, much like many modern financial instruments. Unless there's some large-scale fraud involved, you don't typically get strong deflationary events. And that goes back to the thing about Truth Uber Alles in economics.

There is not enough gold in the world to pay everyone at the rate a day laborer earned in 1970, in gold.

Again, this is just silly, because people keep trading the stuff around. Or they deposit it in banks, and the banks put it back into the economy as loans. The same dollar can circulate again and again and again, like magic.

The gold we have in the world is not enough to sustain anything like the economy we have IF you assume that workers paid in gold weight will receive the same weight of gold every year for their wages.

Again, they don't keep it. The reason you have solid money isn't to actually put 175 ounces in every house, it's to guarantee that all the money in the economy represents a real good, which you COULD go get if you wanted.

What's happened with fiat money is that all the wealth in the world is now concentrated around the people who print money, and the industries that serve them, Wall Street. Main Street, the people actually making the wealth that Wall Street manipulates, is being eaten alive.

In a token-based monetary system, with no anchoring in the solid world, the rich get obscenely wealthy, and the poor get ground into the dirt. This is because the economy reorients itself to serve the people who create wealth tokens, not the people who create wealth.

You should read this week's Credit Bubble Bulletin, The Many Facets of Roro, to get an inkling of just how destructive the policies created by fiat money have become. (Roro = Risk On, Risk Off).

I mean, the only reason that banks are now something like 15% of the entire economy (I'm not sure what the actual number is, but it's very large) is because of fiat money. No matter what they do, the Fed will be there with unlimited supplies of free money tokens from thin air. So of course they're becoming immensely powerful.... they get to create wealth tokens, and take whatever they want out of the economy, without putting value back in.

Malor. Your scenario was workers paid in gold coins - ounces of gold. That didn't happen in 1970. And there was not physically enough gold to pay every worker in the US in 1970 in gold coins in the amount you postulate. There was enough to pay them about 2% of that. About one week's worth. Sure, it's going to circulate again, and again, and on and on. But that number does not allow any other use of gold. It doesn't allow any other country to use it for any reason. And if anyone is saving it, or hoarding (a definite threat in these scenarios), the available amount will drop. And in fact, that's what happened in the past, under metallic standards. Gold will not save us, it's a bad example, and there are many reasons that countries moved away from a direct fixing of currency value to gold (or silver, or whatever).

So gold coins are right out, as are "ounces of gold".

Now, you can switch back to dollars if you like, with gold in reserve - say, at one ounce per dollar, which would be about $3.75 a week for our day laborer. Okay, the amount of currency does not really matter. But that introduces a host of problems you'd rather avoid. You're trying to have it both ways - you tell a story that depends on 1-1 gold to money ratio (essentially, gold coins), then you switch to currency to avoid the shortages, then you say "of course, you can get the gold any time you want". Well, actually, if people *got* the gold, the economy would crash. They *can't* hold it, because holding it will prevent anyone else using it. Also, that gold reserve becomes the ceiling for the economy. And if people actually trade their dollars for gold, and hold it, out of fear in an economic crisis say, the entire economy can grind to a halt. Very quickly, very easily.

Going back to the 18th century won't help us maintain a modern economy. In order to solve the issue of not enough metal to go around, you end up with the same kind of system we have now, or had earlier in the 20th century; one where the fixed metallic standard is replaced by a currency that is not directly tied to the reserves. If the amount of currency can change to accommodate growth, it's fiat currency, and the government can choose to change that value as it needs. (Might as well use that ability to smooth out rough patches, is my takeaway...) If it can't, then again, hard limit to the economy.

It's telling that your ideal economy is one that *doesn't* grow - it gradually deflates over time. But that's *not* stable - everything gets cheaper over time, and guess what? Companies don't let that happen. They *raise* prices. But oh, wait. The money supply is limited. Not every company can grow, and there's no give in the economy after the max is hit. At that point, it's a zero-sum game - or it would be, if there were no savings and no desire for growth. But people save, and companies want to grow, and people want to make more money to buy more things. So... money supply drops, investment slows, production drops, people get fired, they stop spending what they don't have to... Economic gridlock. And no fiscal tools to help fix things.

And this has happened in the past. Repeatedly. Once the size of an economy exceeds the reserves of the money supply, fiat money is the only solution. Fractional reserve banking with all it's issues and benefits comes into play.

Malor wrote:
You know, you might want to think through your arguments all the way.

You say that there's no way that a gold-based money system could work, because there's not enough gold. But you also directly say, right there in print, that there already wasn't enough gold in 1970. Yet, somehow, that system worked.

Huh. Maybe your theory is wrong. Maybe people don't get paid in gold and then just hang onto it. Perhaps they spend it back into circulation.

Perhaps, but do you have a source on that? Everything I'm reading indicates it worked because we only had fractional gold reserves to back the amount of currency in circulation, not full gold reserves.

IMAGE(http://i1094.photobucket.com/albums/i453/czpv/goldcurrency.jpg)
SOURCE

The year 1970 was the crucial turning point, because foreign arbitrage of the U.S. dollar caused governmental gold coverage of the paper dollar to decline from 55% to 22%.
http://en.wikipedia.org/wiki/Nixon_S...

edit for clarity:

Again, this is just silly, because people keep trading the stuff around. Or they deposit it in banks, and the banks put it back into the economy as loans. The same dollar can circulate again and again and again, like magic.

In August 1971, when the United States officially went off the gold standard, the money stock, as measured by combined demand and time deposits plus currency outside of banks, was $454.5 billion. The US gold reserves were then valued at $10.2 billion. This meant that the money stock of the country had been multiplied more than sixty times over that of 1914, and the gold reserve against this money stock had fallen to only 2.24 percent. Put another way, there was then $44 of bank credit issued against every $1 of gold reserves.
http://mises.org/daily/3560