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Answering Tom Woods

by on October 18, 2012
Tom Woods

Recently Tom Woods has been on a crusade ‘debunking’ the critique on Austrian Economics by Wayne Walton and myself. Yesterday he reasserts his faith in deflation in an article also posted on Lew Rockwell. In this article we not only, again, disassemble the breathtakingly ‘naive’ Austrian view on deflation, we throw in a challenge too.

Yesterday Woods wrote an article, also posted at Lew Rockwell’s, regurgitating the same nonsense about deflation and basically claiming victory. Apparently assuming nobody would find out about what actually happened, because he didn’t provide the link to the Facebook debate Wayne Walton and I were having  with him earlier, that led to this article of his.

Of course we’ll point out the obvious (for the readers of this blog) once more, by analyzing his article, but before we do, let me say this.

It’s high time for a full blown, man to man debate with some of these Austrians. I’m willing to meet Tom Woods, Gary North, Anthony Wile, Ron Paul, Lew Rockwell or any other Austrian of standing any time in a Skype debate. I have a few simple conditions, which will be as favorable to them as possible:
1. They can choose the discussion leader. There is a gentlemen’s agreement that this man will facilitate the debate in a civilized way, only somewhat favoring his own side. The public will be there to see if this gentlemen’s agreement is honoured.
2. The discussion is posted both on our sites (Makow, Truthseeker, Real Currencies, Daily Knell and all others who see fit to post) and on the Austrian outlets, with a mutual link to the analyses of the debate.
3. I will not go into the elite build up of Austrianism: I will just take out their stand on usury, deflation, Money Power and the State.
4. If anybody is ready to cover the costs, I’ll fly to the US, notwithstanding my fear of flying, which I will manage with a couple of stiff Gin-Tonics, and my utter disgust of the TSA. I’ll face them all on their own home turf any time, any place.
5. This offer will stand indefinitely.

Having said that, let’s get to the issue, which, in this case, is deflation.

More BS on Deflation
In the first place, Tom Woods refers to ‘us’ as ‘some in the End the Fed Movement’. That’s his prerogative, of course, but I prefer Activist Post’s Eric Blair’s 2010 framing of the debate, when it started with North’s assault on Brown and my rebuttal at the time.

It’s the Interest Free currency crowd against the Goldbugs. Basically a struggle that started in the late 1800’s. According to Blair, ‘this may indeed be the most important discussion of our lifetime’, and although I can think of one or two even more important issues, it’s still pretty important and ‘we’ are not just ‘some in the End the Fed movement’.

‘We’ are those who have tolerated the Austrians in the Truth movement, because they, at a superficial level, seemed to support some of ‘our’ positions, most notably their opposition to the FED. Meanwhile ignoring, downplaying or outright denying 9/11 ‘conspiracy’, like Kokesh, Paul, Paul, North, Rockwell and so many other Austrians infiltrating the real deal, facilitated by that traitor Alex Jones.

But, as I’ve shown elsewhere, their take on the FED has been taken from the populist movement and used to propose the insidious ‘Gold Standard’ (nowadays packaged as a ‘free market for currencies’) as the solution to FED usurious fractional reserve banking.

Secondly, in a speech that Tom Woods refers to in his article, he ‘debunks’ the notion that the Gold Standard was a disaster by quoting the Industrial Revolution. According to Woods, this was a great success while on a Gold Standard. This, obviously, is in the eye of the beholder. During the ‘Industrial Revolution’, the common man was relegated to 80 hour working weeks in the sweatshops, making just enough to feed himself (but not his family) on a spuds/grains only diet. His wife AND children were working long weeks also, just to feed themselves. From the point of view of those holding gold, those we call the Money Power, this was indeed a great success. This is capitalism at its best: all owned by a ‘happy’ few, with the many licking their boots in exchange for a horrorjob.

During the non-usurious age of plenty, called the ‘dark ages’ by the Money Power apologists, a working man worked 15 weeks per year to feed not only himself, but also his massive family.

Third, in this same talk (by the way, for some very, very well off individuals, while complaining Austrianism gained so little traction with the elite) Woods does the same thing that many Austrians do and which he tried to pull of in the mentioned Facebook discussion also: he tried to downplay the relation between deflation and depression by quoting the (in)famous Atkeson/Kehoe study which famously denies a relation between the two. There are two rather major problems with this study though. In the first place, it was commissioned by…………yes, you guessed it, or you knew: by the FED.

Now, I’ve said this before and I’ll say it again, because I like to rub it in: how disingeneous is this: our Austrian Fed busters quoting a Fed study when it serves their purposes, in this case defending deflation. The Fed, tirelessly exposed by valiant Austrian Knights for hiding their messing up the volume of money. When they mess up the volume in terms of inflation, that is. But when it comes to hiding their deflating the money supply it’s all of the sudden a trusted source and ally?

To be honest: these kinds of antics are typical of Austrians.

The second thing I have a MAJOR problem with is this: in this study deflation is defined as ‘declining prices’. And ‘t is true: in this day and age of obscuring truth about money, inflation is often defined as ‘rising prices’ and deflation as its opposite. But everybody with even negligable awareness of what is going on in terms of slanting definitions and hiding truth through wordgames in economics knows that inflation really means ‘a growing money supply’ and deflation ‘a dwindling money supply’. Sure, nowadays it’s hip to say there are two definitions. But Tom Woods is a ‘senior fellow’ of the ‘reputable’ Mises Institute, so I’m not going to give him ANY slack here. He’s just playing the game of make believe.

Fourth, Woods calls Walton ‘tone-deaf’ to the financial world, as, according to Woods, the financial world is paranoid about deflation and apparently fears nothing more than just that.

This is where we enter the, what I like to call, ‘ultra naive’ parts of the Austrian paradigm. It’s amazing how many Austrian positions are both utterly naive to the real world and simultaneously incredibly comfortable to the Powers that Be and this is a typical case in point. Obviously, the elite does not fear deflation. However, it is keenly aware the masses (us) absolutely deplore deflation. We hate it, because it broke our back in the thirties and many other depressions. So of course the Money Power and its shills cater to this by being very busy pretending they hate deflation too.

That’s why Ben Shalom Bernanke is very comfortable being called ‘helicopter Ben’, because he will be dumping cash on a deflated economy, calming the gullible. Of course the not so gullible clearly see his QE1, 2, 3, x do nothing to reflate the economy (and thus nothing to end deflation) but is solely focussed on allowing the ultra rich in unloading their busted ‘derivatives’ like Mortgage Backed Securities and other silly financial ‘products’ at full nominal value at the expense of the ultimately taxpayer backed Federal Reserve Bank.

Fifth, continuing in the same ‘naive’ vein, he then addresses Wayne’s very, very solid point that “Monetary deflation benefits the private bankers who wish the People to default in order to seize collateral with, or without govt force.”, saying that this is ‘clearly incorrect’, because banks surely would not want to get their hands on ‘potentially illiquid assets’.

Ahum………yes. Right.

He continues by saying: ‘When asset prices are falling, why would banks want to grab assets?’

Well Tom, let me explain this to you: not everybody is surviving from month to month. There are individuals and organizations that are actually capable of long term planning. And I’m not talking a year here. I’m talking not even several years, but decades. Centuries even.

So while I, and maybe even you, live day by day, the banks actually realize that at some point the deflation is going to end and their newly acquired assets are bound to gain a lot in value……. Yes, it’s called speculation and banks and their owners have shown to be quite good at that.

But this argument Woods apparently expects and he proceeds to say: “Ah, but couldn’t the banks coordinate the deflation together, and then when it hits bottom, grab all the assets at that moment, when their prices have nowhere to go but up? Even assuming that bankers would adopt such a far-fetched strategy, there is no way for them to know at what point in the deflationary process the defaults are going to occur.”

Ah yes…. far-fetched……….Like I said, their is a certain ‘naiveté’ to Austrianism  that would even be quite touching, would one be unaware of the untold billions poured into disseminating these childish ‘mistakes’.
Nowadays, it’s a mainstream science matter of record that all the banks own each other and are one major cartel, no, monopoly.

So no this is not ‘far-fetched’. What IS far-fetched is Woods’  statement that ‘there is no way for them to know at what point in the deflationary process the defaults are going to occur.”

Utterly ‘oblivious’, probably because of the same ‘naiveté’, that the banks are causing the deflation willfully and know exactly when it will end. Because it will end when they will start lending again.

Conclusion
Tom Woods made a fool of himself. He comes up with the same nonsense and then some that Austrianism is now becoming famous for as many in the Alternative Media are waking up to their stupid ‘ideas’, that were generated at such a massive cost to the Money Power by Tom Woods’s employer Lew Rockwell and his Volker Fund buddies.

But of course we’re far too polite and far too interested in maintaining cordial relations with everybody even pretending to oppose the banksters. That’s why we  propose a debate ignoring Austrian financing: just aiming at the issues themselves.

In this article we have not even mentioned that during deflation debts become worse in real terms, as do the interest costs related to them. We have not mentioned its disastrous effects on economic growth.

That’s because Deflation Apologist Tom Woods chose to ignore these rather important issues……

Discussing Gold and Interest with the Daily Bell
Austrian Economics, Apostles of Austerity Defending Deflation
the Austrian ‘Free Market for Currencies’ Hoax
The Inflation vs. Deflation Dialectic
Who is Ed Griffin?
Faux Economics

104 Comments
  1. REN permalink

    Here’s another period in history Austrian theory has no answer for. I’ve searched, but cannot find their answers. The real answer is a form of debt free currency that was matched to labor.

    How did Germany go from being the poorest country in Europe in 1932 to the richest by 1938? They must have had lots of the shiny metal…GOLD. No, they didn’t. The answer to this question is not taught in history books.

    In 1932 Germany was flat on its back, busted out from Weimar hyperinflation, which in turn was a function of the Versailles treaty. A triangular flow of debts had occurred post WW1. England and France paid the U.S. Treasury for inter-ally debts; England/France then turned around and squeezed Germany. Germany depleted itself of gold and was disallowed from exporting goods to the U.S. A country in debt should be allowed to export to acquire the foreign currency needed, but this wasn’t allowed. Instead, Wall Street Private Banks, created credit (made cheap by the FED) and loaned to Germany, mostly to municipalities.

    So, credit bank money was formed in Wall Street and traded for a German municipal bond. The credit money (dollars) flowed to German cities, found their way to a German central bank, and then ultimately to England/France. From there, said credit dollars vectored to U.S. treasury to pay down inter-ally debts.

    In effect, money came out of Wall Street Banks as a debt instrument (banker credit money), and then triangular flowed back to the U.S. treasury at the government level. It came out of one pocket in the U.S. and went into a different pocket. But, the bonds now resident in Wall Street continued to grow with their inexorable mathematically precise usury. This put downward pressure on the Mark, as bonds demanded to be paid usury. Eventually Germany currency collapsed as foreign bear raids against the currency (shorting it down by borrowing more bank credit). Note it was German PRIVATE Banks that created new “credit” Marks to gamble with in Germany, and PRIVATE Banks that were mal-factors in the U.S.; especially the FED which kept credit rates ultra low. It was not a mythical German Government bank issuing a flood of Marks that lead to hyperinflation as in the popular imagination.
    ———————
    Here’s a quote for the period in question:
    http://www.sweetliberty.org/issues/wars/witness2history/5.html

    “The reproach that world trade is declining as a result of the German method of barter trade can, if it is correct at all, only be addressed to those who are to blame for this development. They are those countries who by means of their currency manoeuvres arbitrarily destroy every fixed relationship between individual currencies in accordance with their own egotistical requirements.

    “In these circumstances however the German system of exchanging something that has been turned out as an honest job of work for something equally honestly produced is a far more straightforward way of doing business than by payment in foreign currency, which a year later is devalued by so much percent.” (Adolf Hitler. 6th Anniversary Speech)

    “Joining with Samuel Untermeyer in calling for a war against Germany, Bernard Baruch, at the same time, was promoting preparations for war against Germany. ‘I emphasized that the defeat of Germany and Japan and their elimination from world trade would give Britain a tremendous opportunity to swell her foreign commerce in both volume and profit.” – – Samuel Untermeyer, The Public Years, p.347

    Notice the illuminist attack against Germany, especially when Hitler used a new form of debt free money. Illuminists use their CAPITAL gains from USURY to start wars and control populations. Federer money and MEFO bills were a mark of labor, and carried little to no debt. To use them, workers had to give an honest amount of labor.

    This is how Germany went from being poor to rich in only 6 years. Putting aside our distaste for “German supermen” and those who think of themselves as God (Satanic Illuminists) we can learn something from this money system. Everything about it refutes Austrian dogma. While this is a Fascist system, the action of the money in the system behaves as debt free. This money had no relationship to gold.

    Don’t howl like a baboon, a real money system can redound to the people and not to a fascist state. Social credit and debt free can be spent into the public commons or directly to people, so we the people can use it as money, thus the antithesis of Fascism.

    An important link:
    http://www.fourwinds10.net/siterun_data/history/european/news.php?q=1316198013

    • REN

      I’m not surprised you haven’t found an Austrian answer since you’ve never read an Austrian text in your entire life.

      There were many factors behind Germany’s rise, but the repudiation of their war debt certainly was one of the most significant ones. On the other hand, many people overestimate the German economy. Like in the Soviet Union, resources were directed into government programs like large infrastructure programs. Most importantly, of course, was the military build up. However, the lives for ordinary Germans weren’t that great.

      Contrast that to the West German Miracle after the WWII, especially when the Marshal Plan had been phased out. Having gotten rid of the controls on the economy imposed by the Nazis and the war, the Wes German economy boomed for real, but this time, the West German people were the beneficiaries. Their standards of living rose dramatically, because the resources were not diverted to war production, but to the production of consumer goods.

      • REN permalink

        Where is the Austrian data on the 1932-1939 period. Curiously absent. Please produce the wonderful Austrian scholarship on this period, and maybe you will be taken seriously.

        Cherry picking history and evading the hard questions seem to be evidence of some aversion to the truth. Perhaps there is a game afoot to confuse initiates? Let’s trap innocent new comers into Austrian mind control, and because they are innocent, they cannot withstand the subtle propaganda. This is what I object to about Austrian advocates, their reality distortion field to promulgate propaganda. I was a libertarian in the Austrian orbit many years ago, I’ve taken up the field of study again. You really shouldn’t have wished that upon yourself.

        Just a curious romp through history, nothing on Peleanors, nothing on Canadian Banking, nothing on Postal Banking; Guernsey Island…nothing. Chirp Chirp. For a group of economists that claim special knowledge, it is pretty lacking. Listening to a speech recently by Rothbard was sickening…

        By the way, the post WW2 miracle was because German debts were jubileed. It was easy to cancel german Nazi debts, leaving the producers unshackled. Their economy was essentially debt free.

        In your ignorance you make my points for me. Thanks!!

        • REN

          Cherrypicking what exactly? My point was that during the Hitler years, the supposed economic growth didn’t benefit the German people nearly as much as the West German miracle did after the war. Much of the Naz Germany’s supposed wealth went to government programs and war production, so there really isn’t very much to celebrate there.

          Mises gives a good overview of the German economy in “Omnipotent Government” and Reiman’s “Vampire Economy” is also very much worth reading, to name a few.

          There is absolutely nothing in your post that can be responded to, it’s just a continuous rant of ad hominems. That, if anything, is sickening. But then again, it has become evident that you, like so many others here, are just shills for the Rockefellers and the banks, you’re just pretending not to so no one will know.

        • marxbites permalink

          Here ya go REN, see if it makes sense to you.

          I defy you to find anything untrue in it, but please do knock yourself out.

          “The Gold-Exchange Standard in the Interwar Years” from Part 4 of Murray N. Rothbard’s book, ‘A History of Money and Banking in the United States: The Colonial Era to World War II.’

          I suggest all you dupes who believe anything but free markets of money can level the field and doesn’t give banksters and lackey govts huge freebies via taxpayer impoverishment.

  2. inflation really means ‘a growing money supply’ and deflation ‘a dwindling money supply’
    Jct: And that’s where they catch you because you don’t know about Shift B inflation. Like your opponents in this debate, you’re just as fooled into thinking there’s too much money in circulation and that’s the only cause of inflation. Har har har. How many years have I been telling you inflation is not: a growing money supply. Sure there were wheelbarrows full of money chasing the goods in empty store shelves under the orthordox versions but I don’t see any wheelbarrows these days, I see full stores shelves and empty wallets. But as long as you accept inflation is too much money, you’ll never be much better than they are at solving it. Har har har. I’m the only person in the world who knows about, let alone understands, the other possible inflation. And I don’t expect the hypnotized to figure it out even after being told about the other possibility. Do you really think the option is up over there? Can’t be down over here? Too bad you’re as wrong as the Austrians are.

    • Lol! That’s good John.

      No, prices these days rise because of ever mounting cost for capital as a result of ever growing money, which must grow for ever because P+I>P

      That’s a basic point of interest free economics, is it not?

      So the money supply grows, but this is NOT what is causing rising prices, harharhar🙂

      • Tell me, what exactly were the capital costs that sent the housing prices through the roof in the mid-2000s, at the same time the prices for electronics and plastic surgery were and still are going down?

        What are the capital costs that have sent all prices through the roof in Zimbabwe?

        What were the capital costs in Germany?

        • and/and, not or/or Kai.

          John is right: in a not excessive usurious fractional reserve banking prices rise not because of inflation but because of growing cost for capital, it’s simple mathematics.

          But of course: if you inflate the money supply 10, 100, 1000 fold, prices will explode.

          • So what you are saying is that the growing money supply DOES NOT raise prices, but an exponentially growing money supply DOES raise prices?

            • No, what I’m saying is, that if the Money Supply grows about as quickly as cost for capital do, this growth does not lead to extra price rises, as the extra money is needed to pay off interest. The net amount for real economic activity remains the same.

              Rampant printing press inflation DOES lead to exploding prices.

              • Prices fell from 1776 to 1913. During all this period, banks and others were charging interest on loans. There was fractional-reserve banking, though nowhere close to the magnitude of today.

                How do you account for the fact that prices did not rise during this period, that they in fact fell dramatically, especially towards the end of the 19th century? In your P+I>P theory, this shouldn’t be possible, yet it happened. Can you explain that?

                I’m glad you admit that rampant money printing leads to exploding prices though. However, interest is actually a capital cost. The more producers have to borrow to invest, and the more interest they have to pay, the more expensive the capital becomes. That puts an upward pressure on retail prices, so it is very unclear why moderate money growth would not lead to higher prices, and why the increased cost of capital isn’t considered a cost (price) at all.

                If building a paper mill costs 400 million when it previously cost 250 million, paper will cost more too.

                • Yes, because with paper the banks can print more and more. With gold this is more difficult, although not impossible. The banks want scarce money (I know you don’t agree with this, but they do, it makes debts worth more and the monopolist always wants scarcity, that’s why they love gold as currency so much). So under gold they don’t inflate to correct for ever higher interest costs.

                  That’s why Gold is so strongly deflationary, as I analyzed in the article of the same title, that you can find in faux economics.

                  thats why populists forever clamored for paper money and for at least silver to added to the monetary base (for instance Bryant with is ‘don’t crucify labor on a cross of gold speech).

                  • I can’t believe what I’m reading, we almost seem to agree on things🙂

                    You’re exactly right that moneyprinting is more difficult with gold, but it can be done. The same goes for credit expansion, which is a very different thing. Gold only limits the potential, that is why it is preferable to paper. But it is far from enough, you need to abolish both central banking and fractional-reserve banking too. Even then, obvious fraud is of course possible, but at least it won’t be legal as it is now.

                    You can’t say that the banks want scarce money. This is not a matter of opinion, it is a matter of fact. Had they actually wanted scarce money, they would not only have pushed for abolishing the FED and the introduction of free-market money (or even a government mandated gold standard), they would also have pushed for FULL-reserve banking. However, they have done the exact opposite and that completely disproves your claim that “banks want scarce money”. The exact opposite is true, which is why we have trillions upon trillions slushing around in the economy today.

                    Gold makes the money supply more stable, that is not deflationary. A stable money supply and a dwindling money supply are two VERY different things. Austrians advocate STABLE money supply, which over time will lead to a falling price level as production increases. And that it did from 1776 to 1913, although the money supply was far from as stable as it could have been.

                    The idea that banks don’t “inflate to correct for higher interest costs” doesn’t make much sense to me. The level of interest in a free-market setting is determined by the amount of savings available. The more savings, the lower the interest rate. Like everything else, the interest rate fluctuate with the ebb and flow of supply and demand.

                    Fractional-reserve banking and central banking distorts this very important price mechanism, invariably pushing the interest rate to below its market level.

                    • marxbites permalink

                      Kaj: But it is far from enough, you need to abolish both central banking and fractional-reserve banking too. Even then, obvious fraud is of course possible, but at least it won’t be legal as it is now.

                      mb: yes fraud took places when banks issued notes in excess of specie reserves, and the Suffolk was a free market system of discounting and clearing those notes.

                      In spite of bank nationalization [FED crooks foot in door] once greenbacks were redeemed 14yrs later, the American ecomnomy was even better than the Jacksonian era when ole Hickory paid OFF the nat’l debt and even rebated the over collection of taxes.

                      The decade of the mono-metalic Au std [they had demonetized silver] 1880’s was America’s GREATEST period of economic betterment at 3.8% growth annually. Prices dropped then of mass produced goods just as today’s computers do more and cost less.

                      THAT is the DEFLATION of the GOOD KIND, the kind we’ve been robbed of for 100yrs now.

        • REN permalink

          The FIRE sector (finance, insurance, real estate) work together and attack land.
          Credit money in general likes land/housing because it can be grabbed in a downturn.

          Insurance got in on the game, insuring crap loans and making them AAA. Thus the
          bankerster rip off. Asset inflation of housing is too much credit money chasing that sector.

          70 percent of all new credit money (bank money) goes after housing.

  3. >>>>>It’s just a troll Memehunter. Just like the elves he’s 🙂
    And ye wanted to debate ?….

    >>>> Would it be reflating, it would give interest free credit
    No; it would be spending notes into circulation, for useful projects, for which people would be willing to pay a user fee (if necessary) after completion; and it would be re-directing government expenditures from war and socialist programmes to productive and beneficial programmes (there is enough money in existence, it just circulates in the wrong neighbourhood)

    Neither debt nor credit should circulate as currency; both are banker-invented concepts

    ====
    a question to ye hunters of meme:
    who ownes the banks that constitute the system of federal reserve?
    who owns the banks in Europe ?
    In Canada and U.S. teacher federations, public employees unions, and federal pension plans are very large holders of bank stock; they are also the largest holders of government bonds…..
    The whole entire pension system is dependent on an ever increasing national debt….

    • I don’t mind name789, I penned a few thousands words, Memehunter another few thousand. The usual running around in circles!

      I understand what you’re saying with the debt free notes. But to my mind it is interest that is the problem, not the debt.

      for instance: the treasury notes that Lincoln’s predecessors circulated. What were they? Debt free notes, or interest free credit? It’s not so clear. One can see them as both (they were retired by the treasury, after all, which basically amounted to ‘repayment’). In fact: one could argue that ‘debt free notes’ are just debts never repaid. They don’t need to be repaid because they are a debt to self (whomever ‘self’ may be in this context) and don’t cost anything.

      The great advantage of interest free credit over debt free is that debt free money can be spent once. Interest free credit can be spent as often as it is repaid.

      • (wish we could cut these wordpress blogs into smalles installments)

        >>>Treasury notes pre-1861
        They paid 5-6% and promised to pay coin, they were evidences of debt, and in the government’s book they were listed as debt. But it is not against the nature of Treasury notes not to bear interest –as the Meat Market Notes were, or the Muscle Shoal Notes, suggested by Henry Ford, could have been.
        Non-interest-bearing Treasury notes would have been just as well received…. In the 1840s 1850s 1-300million interest-free treasury notes could have circulated at par –and, like Henry Clay said, they would have put banks out of business.

        Historical example:–
        400million greenbacks (promising to pay coin, and listed as debt) produced inflation, but –after prices levelled off– it also produced prosperity, people and businesses were out of debt, 95% of business was conducted on cash basis (without the use of credit and banks). If $35/per capita in 1864-5 could do this, it could also do it at other times. The governmnet didn’t open up some credit office where people could borrow interest-free notes; the government spent money into circulation, the money did the rest

        =====
        Interest and principle are equally the problem.

        • Interesting!
          But who was the interest paid to? I assumed (realizing only a posteriori that ‘assumption is the mother of all fuckups’) that the treasury notes were just spent into circulation.

          Where do you get the 95% number from (for business transactions without debt)? Is this a guess or statistics?

          I’m sure impressed with this number and it does imply that plentiful debt free notes effectively finance the productive economy. Of course, this does not address mortgages for non business people.

          • >>>>(realizing only a posteriori that ‘assumption is the mother of all fuckups’)
            the interest was paid to the person who held and presented the note at the time of redemption

            issued for war:
            http://www.yamaguchy.com/library/uregina/act1812june.html
            “SEC. 4. And be it further enacted, That the Secretary of the Treasury be, and he is hereby authorized, with the approbation of the President of the United States, to cause to be issued such portion of the said treasury notes as the President may think expedient in payment of supplies, or debts due by the United States, to such public creditors, or other persons, as may choose to receive such notes in payment, as aforesaid, at par”

            issued to relieve the money panic:
            http://www.yamaguchy.com/library/uregina/act1837.html
            “SEC. 4. And be it further enacted, That the Secretary of the Treasury is hereby authorized, with the approbation of the President of the United States, to cause to be issued such portion of the said Treasury notes as the President may think expedient, in payment of debts due by the United States to such public creditors or other persons as may choose to receive such notes in payment, as aforesaid, at par.”

            for the war against the mormons:
            http://www.yamaguchy.com/library/uregina/act1857.html
            “SEC. 4. And be it further enacted, That the Secretary of the Treasury is hereby authorized, with the approbation of the President, to cause such portion of said treasury notes as may be deemed expedient to be issued by the treasurer <b.in payment of warrants in favor of public creditors, or other persons lawfully entitled to such payment, who may choose to receive such notes in payment at par. ‘

            These were different from the assumption. In 1835 the federal debt was paid off. The federal government did not assume the debt of member States that they incurred from 1835 to 1841. The 1837, 1857 notes were issued by a practically debt-free federal government.

            Anyhow I wasn’t referring to these notes regarding reflation between 2008 and 2012

            ========

            The greenbacker book that is worth reading, William Berkey, The Money Question
            http://www.yamaguchy.com/library/berkey/berkey_06.html
            “In 1865 and 1866, after the termination of the war, industry, by reason of the abundance of money in circulation, was rife throughout the country, and production went on as it had never done before. During the years 1863, ’64, ’65 and 66 the failures throughout the country, as reported in Hunt’s Magazine, averaged only 545 a year. In 1867 they run up to 2,386, and continued above that number until 1873, when they reached 5,181, with liabilities to the amount of $228,490,000.

            “In 1865 general prosperity prevailed, and as McCulloch himself has since admitted, the people were individually out of debt. Business then was done for cash.”

            Mr. Berkey was in business himself and operated his furniture factory during those years

            Other contemporary, and worth reading, Mr. Brice:
            http://www.yamaguchy.com/library/brice/brice_05.html
            “The whole volume of the currency was thus employed. The people had paid the government a full and valid consideration for all that it had issued, and it injustice belonged to them. Believing that they would be permitted to use that which they had paid for, they formed their plans for the future, and based their contracts, as they had a right to do, on the amount of money then in circulation, which would have resulted, had it not been arrested by the act of the government, in the grandest development of national wealth which has ever occurred in the history of the world.

            “There was no over-production, for every description of the products of American enterprise found a ready and remunerative market. There was no wild speculation, for legitimate business was sufficiently remunerative to satisfy the aspirations of business men, and prevent them from entering into any schemes of speculation not established on a safe basis. There was no extravagant indebtedness, for there was money enough to fill all the channels of trade, so that there was no need of substituting individual obligations, for money.”

          • “To show how lack of money paralyzes industry, impedes the circulation and exchange of productions, increases bankruptcy, and inflicts incalculable suffering on the debtor and working interest, the following table is given by the same authority. The mercantile failures in the Northern States, from 1862 to 1870, inclusive, which we copy from Hunt’s Magazine and Year-Book for 1870, were”:–

            http://www.yamaguchy.com/library/harvey/harvy_07.html

          • “Previous to 1863 a contraction of from twenty-five to eighty millions of dollars would produce a commercial crash and money panic; but in 1873 it required a contraction of hundreds of millions of dollars to produce such a result, for the obvious reason that from 1820 to 1862 the business of the country was carried on under the credit system forced on it by bank currency requiring redemption in lawful money. The basis being limited and insufficient for the wants of trade, commodities had to be bought and sold on credit; consequently business men were in debt, and then a small contraction would produce a crash and a panic; whereas, in 1866 there was an abundance of circulating medium, enabling commodities to be bought and sold for cash. Business men were mainly out of debt, and therefore it required a large contraction of the circulating medium to force the credit system on the country; and as contraction was carried on, credit was substituted for the cash withdrawn from circulation, resulting in 1873 in such an expansion of credit as enabled a crash and money panic to be produced; once more piecing labor and the wealth producing industries of the country at the mercy of note-shavers and dealers in ‘credit-currency.’ ”

            http://www.yamaguchy.com/library/root/root_04.html

            • there is a reply between these two, stuck in awaiting moderation; also, I think there was a reply on Monday that did not go through

              • name, do you know where I can find that quote from banker magazine where they say when they are going to call in loans to create depression?:Do you know the one I mean? I”ve been looking for it for ages. Or is it a bogus quote too?

                • Do you mean this ?:

                  “Dear Sir : It is advisable to do all in your power to sustain such prominent daily and weekly newspapers, especially the agricultural and religious press, as will oppose the issuing of greenback paper money, and that you also withhold patronage or favors from all applicants who are not willing to oppose the Government issue of money. Let the Government issue the coin and the banks issue the paper money of the country, for then we can better protect each other. To repeal the law creating National Bank notes, or to restore to circulation the Government issue of money, will be to provide the people with money, and will therefore seriously affect your individual profit as bankers and lenders. See your Congressman at once, and engage him to support our interests that we may control legislation.”

                  or this?:
                  “Dear Sir: The interests of national bankers require immediate financial legislation by Congress. Silver, silver certificates and Treasury notes must be retired and the national bank notes, upon a gold basis, made the only money. This will require the authorization of from $500,000,000 to $1,000,000,000 of new bonds as a basis of circulation. You will at once retire one-third of your circulation and call in one-half of your loans. Be careful to make a money-stringency felt among your patrons, especially among influential business men. Advocate an extra session of Congress for the repeal of the purchase clause of the Sherman law and act with the other banks of your city in securing a petition to Congress for its unconditional repeal, per accompanying form. Use personal influence with Congressmen and particularly let your wishes be known to your Senators. The future life of national banks as fixed and safe investments depends upon immediate action, as there is an increasing sentiment in favor of government legal-tender notes and silver coinage.”

                  —Unlike the Hazard and Buell circulars, the “Panic Bulletin” may not as yet have been absolutely traced to its source. But in this instance such technical authentication is of no consequence, the whole programme having become a ghastly fact which has proved itself.

                  Mr. Clark took the trouble of looking up the sources of popular quotes (in 1894 when eye witnesses were still alive):
                  http://www.yamaguchy.com/library/clark/shylock_12.html

                  (The quote that Sarah Emery popularized, and blamed on the Bankers Magazine, deals with the demonetization of silver, and is NOT in the Bankers Magazine)

                • New York Tribune, January 10, 1878:–
                  “The capital of the country is organized at last, and we shall see whether Congress will dare to fly in its face.”

                  http://chroniclingamerica.loc.gov/lccn/sn83030214/1878-01-10/ed-1/seq-1/
                  turn to image 4, top of 3rd column
                  the copy is real bad, but worth the trouble
                  Front page, top right corner: “United Against Silver — the banks joining hands for defense”

                  New York Tribune January 11, 1878:–
                  “The machinery is now furnished by which in any emergency the financial corporations of the East can act together at a single day’s notice, and with such power that no act of Congress can overcome or resist their decision.”

                  (As we know, the Tribune was leading Whig/Republican organ)

          • Annual Report of the Secretary of the Treasury, Hugh McCullouch,
            December 6, 1865.

            http://www.nytimes.com/1865/12/06/news/national-finances-annual-report-cecretary-treasuryestimated-surplus-111682818.html

            The present inflation following the suspension of 1861, is the result of heavy expenditures by the government in the prosecution of the war and the introduction of a new measure of value in the form of United States and Treasury notes as lawful money. The country, as a whole, notwithstanding the ravages of the war, and the draft which has been made upon labor, is, by its greatly developed resources, far in advances in real wealth of what it was in 1857, when the last severe financial crisis occurred. The people are now comparatively free from debt: the banks, with their secured circulation and large investments in government securities, although not in an easy condition, and doubtless too much extended, are, it is believed, generally solvent; but the same causes are at work that produced the evils referred to. There is an immense volume of paper money in circulation — under the influence of which prices, already enormously high, are steadily advancing, and speculation is increasing — which must be contracted it similar disasters would be avoided.

            It is undoubtedly true that trade is carried on much more largely for cash than was ever the case previous to 1861, and that there is a much greater proper demand for money than there would be if sales were made, as heretofore, on credit. It is also true that there is a larger demand than formerly for money on the part of manufacturers for the payment of operatives. But, making the most liberal allowances for the increased wholesome demand arising from these causes and from the advance of the country in business and population, it is apparent from the foregoing statements, if the advance in prices did not establish the fact, that the circulating medium of the country is altogether excessive.

  4. Memehunter permalink

    Reply to Kaj:

    Are you working for the Daily Bell, by any chance? Your arguments sound so similar to what they kept repeating over and over when I was commenting there.

    KG: “Yes, after Volker’s death, the Fund degenerated badly. Subsequently, Rothbard was fired.”

    The DB always insists on Rothbard being fired from the Volker Fund, or his disagreements with CATO. However, Rothbard still worked for the Volker Fund for 11 years (1951-1962), so he must have found it convenient for a while, no? Why should I focus only on his firing and not mention that he worked there for 11 years? Hmmmm…..

    KG: “I know the Mont Pelerin society yes. Mises famously stomed out of one of their meetings labelling them all a bunch of socialists.”

    Yes, we hear this anecdote all the time, on the DB and elsewhere. The problem is that this happened at the initial meeting in 1947:

    en.wikipedia.org/wiki/Ludwig_von_Mises#Criticisms

    “The story I remember best happened at the initial Mont Pelerin meeting when he got up and said, “You’re all a bunch of socialists.” We were discussing the distribution of income, and whether you should have progressive income taxes. Some of the people there were expressing the view that there could be a justification for it.”

    But why do the people telling us this story always omit that Mises was a regular participant to the MPS meetings until at least 1961, giving talks or chairing sessions in 1947, 49, 50, 51, 56, 57, 58 (he gave the opening address, as mentioned by Hülsmann), and 1961? There were no (official) meetings in 1948, 52, and 55, so it’s not like Mises missed several meetings.

    Again, hmmmmmm….

    KG: “It and its proponents have been the most vocal and by far the most scientific critics of what you call the Money Power elites.”

    I think the problem is that you do not understand that some of these elites are actually actively promoting these views. As explained in the video on the Daily Knell (“A street conversation between a Ron Paul fan and the Daily Knell”), there is always a mainstream side and an alternative side. Austrian economics and Libertarianism are on the alternative side. That does not automatically mean that they are not just another type of elite propaganda. Ron Paul is supported by Bilderberger Peter Thiel, for instance.

    As Anthony explained, the point is not that everything about Austrian economics is wrong. But it is important to see what is wrong about it because so many people (including you, it seems) are convinced that Austrian economics and Libertarianism are “the way”. There are many articles on Anthony’s blog explaining what is wrong about Austrian economics, and I invite you to read them. I have also discussed some aspects here:

    thedailyknell.wordpress.com/2012/09/24/analyzing-austrian-economics-memes-who-benefits-from-the-anarcho-capitalist-utopia/

    Finally, you still do not understand that one does not need “controlled experiments” to model natural or social phenomena, and that this has nothing to do with “central planning”, even though I already gave some examples. And saying that you remain “utterly unimpressed” with someone’s work is not exactly a convincing argument.

    • Memehunter

      It would be pleasant if you for once could drop the ad hominems and focus on the subject matter, but no, I don’t work for the Daily Bell.

      Yes, Rothbard worked for the Volker fund during those years. Then he was fired. I ask again: so what?

      Yes, Mises attended the MPS. I ask again: so what?

      You seem to think that by pointing out these things you’ve uncovered a great scoop that no one has ever heard of before, and that this scoop is somehow of great importance and relevance to the teachings of the Austrian School. I can’t for the life of me understand why.

      Some of the elites promoted the AS, huh? Even if we assume that is true, how exactly did it benefit the AS? And more importantly, how did this purported support impact AS theory? In what way can any of the books on money and banking written by any Austrian be interpreted as an advocacy for the FED-based monetary and banking system? Or for any position taken by the so called elites?

      This is the key question, and you’ve done your best to ignore it. But I want an answer to this question, because without an answer, all you’ve ever said in this vein is proven to be the white noise I’ve always said it is. The fact that you keep ignoring all the evidence against your claim that the Austrians are somehow part of some elite is of course all the proof anyone can need to see that all you say is, in fact, white noise that is completely falsified by easily verified evidence.

      But I agree that it is important to discuss flaws in economic theory. However, neither you nor Anthony have yet been able to state one single Austrian position correctly. Not a single one. I’m not interested in reading your “critique” of a made up position. If I was, I could just read Krugman’s musings. When you have shown that you can state the Austrians positions, any Austrian position, correctly, then I’ll be happy to read your criticisms and respond to them. That would be a good place to start, don’t you think?

      I repeat:

      Explain how you do a controlled experiment on humans, or just admit it can’t be done.

      Then you can try to explain how you’d go about modelling humans. Then you can let us all know how well these models have worked in the past. I’ve already given you a few examples of what absurdities they’ve led to, not to mention that our current economic problems is to a large part the consequence of central planners trying to use economic models to manage the economy.

      I wasn’t trying to make an argument about Mike’s work, I just said I was familiar with it and wasn’t impressed by it.

      • Memehunter permalink

        First you don’t believe my claims, then you argue for hours about them, then finally you pretend that it does not matter. That’s an interesting argumentative strategy… If it does not matter, I wonder why you did not believe my claims at the beginning, or said that you would only believe Hülsmann. Now that you can’t refute them, you conveniently choose to ignore them. Hmmmm…

        Ad hominem? Why is it ad hominem to claim that you work for the Daily Bell? They should be one of your favorite publications. On the other hand, you claimed that I was “childish” and suffered from “pathological dishonesty”. Hmmmmmmmm…..

        KG: “The fact that you keep ignoring all the evidence against your claim that the Austrians are somehow part of some elite”

        What evidence???

        For the rest, there is enough information on Anthony’s blog. I just don’t see the point of repeating things that have been analyzed to death on this blog. These articles were written to be read by people like you, after all. Don’t forget Recovering Austrians as well.

        Many aspects of Austrian/Libertarian philosophy are questionable, including their support for a gold standard (Mises supported it vehemently, so don’t give me the usual answer that some Austrians want a “free market” for currencies since you always focused on Mises – you can’t use that argument both ways🙂 ), the idea that any voluntary contract is fair, the extreme focus on individualism, and the implicit support of globalization and free trade. But the most important thing to me, would be their acceptance and justification and usury. This, in itself, is proof that Austrianism is a tool of the Money Power elite.

        • Memehunter

          You should be more careful what you write. I vehemently disagreed with your initial Rockefeller/Rothschild conspiracy, and you subsequently dropped it to pursue the Fertig/MPS/VF charge.

          I have no problem with any of those three, which is why I don’t care about them. And again, you still haven’t explained why it matters that Mises received some support from Fertig, or why it matters that he participated in the MPS, or why it is relevant to anything that Rothbard worked for the VF.

          In other words, you’ve gone to great lengths to prove something that nobody has denied. Now, when asked why these things are relevant, you have no answer. That is indeed something hmmmmmmmmm about, isn’t it?
          It is ad hominem to claim that I work for Daily Bell because it is utterly irrelevant whom I work for.

          “What evidence???”

          Are you for real? You claim to not know what evidence I speak of. Well, let me repeat it for you then:

          The only thing that matters is what the Austrian school argues for. Regarding money and banking, it argues against central banking, fractional-reserve banking, credit expansion, fiat currencies, the bank-state cartel. It and its proponents have been the most vocal and by far the most scientific critics of what you call the Money Power elites.

          All you need to do to verify this is, besides actually reading their books, is to look at their careers. Of all the Austrians in the US, only Hayek has had a somewhat successful career, even though he never came close to the prominence of Friedman, Samuelson and Hansen, not to mention Keynes and Fisher.

          The two most prolific Austrians, Mises and Rothbard, never even got paid positions at a decent university, let alone a posh job at the Ivy Leagues which were reserved for the true establishment economists. No Austrian has ever had any leading position at the Fed, for instance, if indeed any Austrian has ever held any job at the Fed. Nor have Austrians been chosen to the Council of Economic Advisors to the President.

          The only politician who the past half-century who has advocated the Austrian school is Ron Paul. Before him, Barry Goldwater comes the closest, and he was of course thrown out in favor of the Rockefeller Republicans. Ron Paul himself has been shunned, ignored, sidestepped and ridiculed throughout his career. Despite serving 12 terms in Congress, he never received a chairmanship of a full committee in the House, being passed over by lesser and more junior colleagues instead. Only in his last term was he given a chairmanship, that of the subcommittee of domestic monetary policy.

          For us who followed Dr. Paul in the 2008 elections, we were horrified at how he was treated. Not allowed to speak, sometimes even shut out of the debate. But that was nothing compared to the 2012 primaries. The lengths to which the Republican Party went to shut out not only Paul, but all his supporters, is quite likely the biggest scandal in American electoral politics. And again, the entire establishment media did its best to ignore Ron Paul out of existence, or smearing him to death whenever they had to acknowledge him.

          The very fact that someone can equate the Austrian school with the keynesians, neoclassicists and other mainstreamers as part of some sort of false dichotomy defies all reason, especially since a large part of this outrageous view is based on the fact that some obscure journalist, since long dead, gave some support to Mises half a century ago.

          I can’t for the life of me understand how anyone can look at these facts and hold on to the claim that the Austrians are just shills for the bankers. Every single text ever written by an Austrian on the subject of money and banking has been vehemently against everything the so called Money Elites stand for and rely upon. The obscurity in which the Austrians have had to labor and still are laboring in is a consequence of their opposition to the current FED-based system.

          For all your lengthy quotes, you still haven’t even tried to reconcile your ridiculous conspiracy theories with the very unpleasant reality the Austrians have had to live with for over a century. Maybe it is time you asked yourself why that is the case.

          Neither you nor Anthony have yet been able to state one single Austrian position correctly. Not a single one. I’m not interested in reading your “critique” of a made up position. If I was, I could just read Krugman’s musings. When you have shown that you can state the Austrians positions, any Austrian position, correctly, then I’ll be happy to read your criticisms and respond to them.

          As for the gold standard, that is one type of sound and stable monetary system if implemented completely, which is to say with full reserve banking. Gold has been the market’s choice for thousands of years. I’d be happy to have a discussion with you about the gold standard. But out of curiosity, if the gold standard would be so favorable to the Elites, how come they’ve always fought tooth and nail against it, ridiculing all the opponents? In fact, on this issue, it is you who are in agreement with the Money Elites. Another thing for you to hmmmmmmm about, isn’t it?

          The support for free trade isn’t implicit, it is very EXPLICIT, which you’d know had you actually read the Austrians. What exactly is wrong with that remains a mystery. Should we ban international trade? Or should we perhaps appoint a commission who dictates who may trade with whom, what may be traded and at what prices? Would your models be used for that, by chance?

          On the question of usury. You seem to equate interest with usury across the board. Interest is a value-free economic phenomenon that reflects our time preferences. There is absolutely nothing wrong with that. Do you even know what time preference is? In addition, the interest rate coordinates production over time. This whole usury nonsense is one of the most glaring proofs of how limited your understanding of economics really is.

          • Memehunter permalink

            KG: “I vehemently disagreed with your initial Rockefeller/Rothschild conspiracy, and you subsequently dropped it to pursue the Fertig/MPS/VF charge.”

            Kaj, this is what I said in my second-ever reply to you, right at the beginning of this discussion:

            realcurrencies.wordpress.com/2012/10/18/answering-tom-woods/#comment-7278

            “Already in 1926, Ludwig von Mises’s first tour in the United States was paid by the Rockefeller Foundation. The National Bureau of Economic Research, which supported Mises in the 1940s, was also heavily sponsored by the Rockefeller Foundation. Mises’s salary in New York was paid by Lawrence Fertig, Kohlberg’s colleague at the AJLAC, and by the Volker Fund.”

            You have asked for confirmation, I provided links. You wanted confirmation by Hülsmann, I provided confirmation by Hülsmann. Here is Hülsmann (your authority of choice, remember?) on Rockefeller-Mises:

            “The year 1926 brought another improvement in Mises’s good
            fortune. He started cooperating with the Rockefeller Foundation
            and established an Austrian Institute for Business Cycle
            Research, which allowed his young political allies-most notably
            Friedrich Hayek-to earn a living in economic research.”

            “He later recalled that the Rockefeller Foundation had “taken a kind
            interest in my teaching and research work.”8 In Austria, Mises
            had a decisive influence on the selection of the future Rockefeller
            Fellows. When he moved to Geneva, the foundation paid
            his salary at the Graduate Institute for International Studies,
            and when he eventually moved to the United States, the foundation
            provided again the lion’s share of his income during the
            first four years.”

            “The Rockefeller Foundation provided funding from 1929 to 1938.” (to the Austrian Institute for Business Cycle Research, coordinated by Mises and Hayek)

            Regarding Mises’ position in Switzerland:
            “While it would be an exaggeration to say that Mises was on the payroll of the
            Rockefeller Foundation (this was effectively precluded both by
            Rappard’s insistence that funds be received with no strings
            attached and by the co-financing of the Institute from Swiss
            sources) the fact remains that during the Geneva years Mises’s
            salary was paid to a large extent out of Rockefeller money, and
            so things would remain for the next decade.[13]”

            Footnote 13: “13 This strong financial connection (dependence) was downplayed by all
            sides. In 1942, Tracy Kittredge wrote in a letter to the U.S. State Department
            that the “Foundation has been familiar with the work of Professor von
            Mises for more than ten years and has contributed toward
            research projects under his direction in Vienna and in
            Geneva, and to his present stipend at the National Bureau of
            Economic Research.”
            [Kittredge to Acheson, letter dated January 5, 1942; Grove City Archive:
            Mexico 1942 files.] In fact, the Rockefeller Foundation paid the NBER
            stipend in full.”

            In the United States: “Eventually it would once again be the Rockefeller Foundation
            that would fund Mises. Joseph H. Willits, who at the time headed the Foundation’s social sciences division, signed a $2,500 grant to the National Bureau of Economic Research to
            put Mises on its payroll for one year starting December 15,
            1940.26”

            “Fortunately, the Rockefeller grant to NBER had been
            extended, though apparently not without resistance.”

            In 1943: “Mises even received a two-year extension
            under the same conditions as before. It was the normal policy of the Rockefeller Foundation to subsidize the integration of
            European emigre scholars into American universities for about
            two years. Thus Mises could be happy to obtain twice as much
            support. However, it was to be the very end of their cooperation.
            The second year’s bonus was a not-so-subtle good-bye.
            The Rockefeller Foundation’s Willits made it clear, and
            NBER’s Carson made it even more stark, that this extension
            would be the last one.70”

            [I apologize to the regular readers of Real Currencies, for whom this must be a bit repetitive]

            I suspect that this would be enough for most people, but I expect you to keep arguing on and on…

            KG: “Now, when asked why these things are relevant, you have no answer.”

            I did answer that comment. Here (not sure why you keep saying that I have no answer – must be another one of your “debating techniques”):
            realcurrencies.wordpress.com/2012/10/18/answering-tom-woods/#comment-7304

            I already replied to most of your other comments, this is becoming repetitive even for me. On interest and usury, there are also lots of relevant articles on Real Currencies, plus links to other websites and authors that you would benefit from reading.

            • Memehunter

              The Rockefeller/Rothschild support for Mises has been debunked already. I also note that you still haven’t been able to explain how you square your claim with the utter squalor that was Mises’ life in the US, compared to much lesser economists of his day, and the same goes for Rothbard. Every “source” you refer to does nothing to contradict this, and even the most glancing look shows that any support was periodic, indirect and extremely limited. No matter what conspiracies you cook up, the reality is that neither Mises nor Rothbard had any support by the establishment, because if they had had that support, they wouldn’t have been shunned for their entire academic careers, indeed their entire lives.

              As said, you can’t account for this fact, but being the conspiracy theorist you are, you can’t accept the fact that all easily verifiable evidence contradicts the slander you’re trying to push.

              All one has to do is ask oneself why Mises in particular never even got a paid position if he was indeed strongly supported by the elites. Just ask that question, and the answer will not escape you:

              He didn’t, in fact, enjoy the support of the elites and that is why the greatest economist of the 20th century, arguably in history, had to suffer the indignities he did for several decades until his death.

              One should also remember why he ever came to America. The reason was that he had to flee for his life. Being a pro free market Jew, who already in the 1920s had written highly critical books of fascism and socialism, he’d been sent to the gas chambers (or the gulag) had he been captured by Nazis or the Russians. This particular tidbit is of course also left out of your otherwise meticulous chronology of Mises’ life, and that really says all that needs to be said.

              I also note another typical trait. As soon as someone tries to discuss real issues like the gold standard, free trade and interest, you shut down completely. Very typical indeed.

              • Memehunter permalink

                KG: “The Rockefeller/Rothschild support for Mises has been debunked already. ”

                So you are now dismissing your authoritative source Hülsmann? Doesn’t matter, there is already plenty of evidence elsewhere on the ‘Net. Unfortunately, you can’t “debunk” something just by pretending you “debunked” it. Anyway, Hülsmann just provided you with ample evidence documenting how the Rockefeller Foundation supported Mises from 1926 to 1945, and you say that this has been debunked? Are you actually arguing in good faith?

                KG: “I also note another typical trait. As soon as someone tries to discuss real issues like the gold standard, free trade and interest, you shut down completely. Very typical indeed.”

                Shut down completely? Just start reading a bit on Real Currencies or on the Daily Knell, see if we “shut down” about the gold standard, free trade, or interest. Why, do you think we have to spoon-feed you and we have to rewrite all these articles as comments just for you? Haven’t I repeated the same things to you over and over again?

                Maybe you should continue the debate with someone else. Anthony? REN? I don’t know what to say at this point, when someone claims that a theory has been “debunked” when their own authority shows exactly the opposite. I’m starting to think it’s a pure waste of time.

                • Memehunter

                  I’m not dismissing Hülsmann. He is the first one to point out the fact that Mises’ life in the US was one indignity, because he was without any support from the elites. He had to rely on friends and people sympathetic to free market ideas, which the Rockefeller/Rothschild cabal were not.

                  And like I said, Every source you refer to does nothing to contradict this, and even the most glancing look shows that any support was periodic, indirect and extremely limited. No matter what conspiracies you cook up, the reality is that neither Mises nor Rothbard had any support by the establishment, because if they had had that support, they wouldn’t have been shunned for their entire academic careers, indeed their entire lives.

                  You can’t account for this fact, but being the conspiracy theorist you are, you can’t accept the fact that all easily verifiable evidence contradicts the slander you’re trying to push.

                  Until you can explain why Mises life in the turned out the way it did, all your claims about him enjoying support from the Rockefeller/Rothschild cabal is white noise. And let me make it even more clear: a few hundred bucks here or there is meaningless. With all the power and wealth at their disposal, any actual support would have yielded Mises a professorship at an Ivy League institution.

                  So speaking of good faith, how can you completely ignore the misery of Mises in the US? Explain that to me. Explain how it is possible that the arguably greatest economist of all time NEVER EVEN GOT A PAID POSITION, if he enjoyed actual and real support from the richest most powerful families in the history of the United States. Explain that one, or just admit you’re completely wrong and all you do is slandering a person who fled for his life because of his heritage and his ideas.

                  As I’ve said repeatedly, until you can prove that you can state even one Austrian position correctly, I’m not going to read your links. We have three topics on the table, just start the debate. Anyone can link to other places, I can link to entire books if I wanted to. But let’s have an honest debate, starting from a clean slate. Or is that perhaps too much to ask of you?

                  You don’t know what to say? That’s easy. Give me the explanations I’ve asked for and that you, for all your lengthy comments, have avoided like the plague.

                  This is so incredibly typical. You think that just because you’ve peddled some garbage in the paste you don’t have to defend your position. There is a century’s worth of literature I could point to, but I’m willing to take the debate from scratch. You are not, because as we all know by now, you’ve never given a critique of a real Austrian position, only your made up ones.

                • It’s just a troll Memehunter. Just like the elves he’s absolutely not interested in the issues, he’s only interested in spinning his own positions endlessly. Keeping people, and mainly himself running in circles.
                  Where he gets the energy, or what he aims to achieve with it? We’ll not psychoanalyze this.

                  Like I said: the discussion is there for everyone to read, so we’ll let the reader decide………

                  • Yes, let the reader decide, because you can be bothered to actually debate the issues…

  5. Memehunter permalink

    Reply to Kaj Grüssner:

    KG: “Nor do you mention the fact that the funding stopped very quickly after Mises’ arrival to the US. That is when is started writing in English.”

    You keep repeating the same falsehoods even after reading my replies. I’ll repeat one last time:

    Lawrence Fertig paid part of Mises’ salary at NYU.

    This from Hülsmann “The Last Knight of Liberalism” (you recommended him, right?):

    ‘Unlike many of his former students and associates, Mises had been unable to obtain a suitable position at one of the major universities.[16] He had offers from smaller schools, but would not settle for second-rate institutions. At some point in 1944, then, some of his friends and admirers in New York took the initiative to provide him a visiting professorship at NYU. Led by Lawrence Fertig, an NYU trustee, these men eventually came to an agreement with NYU’s Graduate School of Business Administration: the School would invite Mises to give an economics seminar, and Mises’s salary would be paid out of private funds.[17] This arrangement would be reiterated on a regular basis. Mises started his classes in February 1945.[18] He eventually “visited” with NYU for more than twenty years.[19]’

    Here is footnote 17:

    ‘[17] See Nash, The Conservative Intellectual Movement in America, pp. 13, 351 (footnote 57). Nash mentions that Hazlitt and Read were among those involved. Nash also mentions (ibid., p. 20) that Hayek’s position at Chicago University was similarly subsidized out of private funds. It is not clear who, apart from Fertig, contributed to paying Mises’s salary. It is however most likely that a major part of the money came from the Volker Fund. Other potential donors were among the men who would later back The Freeman, in particular were Alfred Kohlberg (importer), Jasper Crane, Howard Pew (Sun Oil), Herbert Hoover (former U.S. president), W. Prentis (Armstrong Cork), W.F. Peter (Chicago, Rock Island, and Pacific Railroad). See Charles H. Hamilton, “The Freeman: The Early Years,” R. Lora, W.H. Longton, eds., The Conservative Press In Twentieth-Century America, Greenwood, 1999.’

    So, it would seem that your authority Hülsmann backs up everything I said regarding the fact that Mises was supported by Fertig, Kohlberg, the Volker Fund and so on. Maybe I should include a link to Hülsmann in my article for people like you.

    Mises was also active in the Mont Pelerin Society until at least 1961. Even Hülsmann mentions Mises’ talk to the MPS in 1958, please have a look here:

    mises.org/daily/6022/

    Keep in mind that Kohlberg was the chairman of the American Jewish League against Communism, and Fertig was also part of that association.

    Now, for the connections with Baruch, Hoover, Nixon, and other luminaries:

    atlasnetwork.org/networknews/2010/05/reappraising-the-right/

    ‘The American Jewish League Against Communism was founded in 1947 by Rabbi Benjamin Schultz who was a graduate of University of Rochester and of Rabbi Stephen S. Wise’s Jewish Institute of Religion. He had been rabbi of Temple Emanu-El in Yonkers, New York since 1935. The original backers were Eugene Lyons, author of The Red Decade: The Stalinist Penetration of America (1941) and a biography of Herbert Hoover, Isaac Don Levine, Ralph de Toledano, George Sokolsky, noted Hearst columnist, and Alfred Kohlberg, main funder and head of the “China Lobby.” After several years of clashes between Rabbi Schultz and some Jewish organizations, Nash notes: “between 1952 and 1954, one of the most conspicuous boosters of McCarthy and his “ism” in New York state and beyond was Rabbi Schultz.” Rabbi Schultz received commendations from Vice-President Richard Nixon, J. Edgar Hoover and Bernard Baruch.’

    KG: “Both Tom Woods and Jürg Guido Hülsmann have dispelled your myths. ”

    Hmmmm…. Seems that you need to refresh your Hülsmann, tsk, tsk, that’s disappointing from an Austrian expert🙂

    • Memehunter

      Your entire quote from Hülsmann states that Lawrence Fertig supported Mises to some extent. So what? If my memory serves, Fertig was a journalist, it was not one of Rockefeller’s aliases. In fact, Rockefeller’s name doesn’t seem to appear at all, neither in the quote nor in the footnote.

      Instead, Hülsmann states correctly that Mises was so far away from the establishment that he couldn’t even get a paid position. Now tell me, does that sound like someone who has the full support of the Rockefellers and Rothschilds behind him?

      Regarding the Volker Fund, what is your problem with it exactly? Nor have I seen any mention of the fact that Rothbard was fired from the fund in 1963.

      Nor has anyone denied Mises’ participation in the Mont Pelerin society, but that still doesn’t explain how Mises would have been a shill for the fractional-reserve bankers and fiat money, considering he devoted a large part of his academic career to expose its inherent problems and immoralities.

      And therein lies your problem. You keep listing things like the Volker Fund, Mont Pelerin society, the Jewish League and Fertig, but how is that relevant to anything? What is so bad about them? In other words, what exactly is your point?

      • Memehunter permalink

        Kaj, this is what I said in my second-ever reply to you, right at the beginning of this discussion:

        realcurrencies.wordpress.com/2012/10/18/answering-tom-woods/#comment-7278

        “Already in 1926, Ludwig von Mises’s first tour in the United States was paid by the Rockefeller Foundation. The National Bureau of Economic Research, which supported Mises in the 1940s, was also heavily sponsored by the Rockefeller Foundation. Mises’s salary in New York was paid by Lawrence Fertig, Kohlberg’s colleague at the AJLAC, and by the Volker Fund.”

        You are the one who tries to reduce everything to Rockefeller. You can try to distort what I said, but it will be harder for you this time because it is written down, other readers can check it, and unfortunately for you we are not on the Daily Bell here🙂

        KG: “Regarding the Volker Fund, what is your problem with it exactly? ”

        After Volker’s death, the Volker Fund became controlled by Luhnow and Loren Miller, who attended the first-ever MPS meeting and worked for the Rockefeller-sponsored Bureau of Governmental Research.

        Read more here (and click on the links if you want to know more, or use Google):

        henrymakow.com/details_of_illuminati_funding.html

        ” Miller and Luhnow pulled out all the stops to bring Milton Friedman and Hayek to Rockefeller-controlled University of Chicago. As Philip Mirowski and Robert Van Horn write, “Luhnow and the Volker officers were not mere accessories to the rise of the Chicago school: they were hands-on players, determined and persistent in making every dollar count.”

        Mirowski and Van Horn are both academics by the way, in case this matters to you.

        KG: “And therein lies your problem. You keep listing things like the Volker Fund, Mont Pelerin society, the Jewish League and Fertig, but how is that relevant to anything? What is so bad about them? In other words, what exactly is your point?”

        You know what is the Mont Pelerin Society, right? Even the pro-Austrian Daily Bell lists the Mont Pelerin as an arm of the Tavistock Institute (they might remove the following quote after I cite them, but here it is for now…):

        ‘The Club of Rome, the Trilateral Commission, the Ditchley Foundation and the Mont Pelerin Society are conduits for instruction for the Tavistock Institute, and since all of them are secret there’s little to be said about them unless you undergo instruction at the request of an employer who is associated with the Institute.

        […]

        The real purpose of the Tavistock Institute is to impose various dominant social themes on the West and its middle class populations.’

        You understand who was behind the Volker Fund and the American Jewish League against Communism, right? It is relevant because it shows that the same elite players played both sides of the dialectic, and that the Austrian/Libertarian movement was entirely controlled from the top of the Money Power elites. Now, if you don’t understand why that is relevant, I’m afraid that this is your problem, not mine.

        • Memehunter

          The Rockefeller/Rothschild conspiracy is your idea, not mine 

          Yes, after Volker’s death, the Fund degenerated badly. Subsequently, Rothbard was fired. So tell me again, how is this relevant to Mises, Rothbard or the Austrian school in general?

          I know the Mont Pelerin society yes. Mises famously stomed out of one of their meetings labelling them all a bunch of socialists. So I ask again, how is this relevant?

          The only thing that matters is what the Austrian school argues for. Regarding money and banking, it argues against central banking, fractional-reserve banking, credit expansion, fiat currencies, the bank-state cartel. It and its proponents have been the most vocal and by far the most scientific critics of what you call the Money Power elites.

          All you need to do to verify this is, besides actually reading their books, is to look at their careers. Of all the Austrians in the US, only Hayek has had a somewhat successful career, even though he never came close to the prominence of Friedman, Samuelson and Hansen, not to mention Keynes and Fisher.

          The two most prolific Austrians, Mises and Rothbard, never even got paid positions at a decent university, let alone a posh job at the Ivy Leagues which were reserved for the true establishment economists. No Austrian has ever had any leading position at the Fed, for instance, if indeed any Austrian has ever held any job at the Fed. Nor have Austrians been chosen to the Council of Economic Advisors to the President.

          The only politician who the past half-century who has advocated the Austrian school is Ron Paul. Before him, Barry Goldwater comes the closest, and he was of course thrown out in favor of the Rockefeller Republicans. Ron Paul himself has been shunned, ignored, sidestepped and ridiculed throughout his career. Despite serving 12 terms in Congress, he never received a chairmanship of a full committee in the House, being passed over by lesser and more junior colleagues instead. Only in his last term was he given a chairmanship, that of the subcommittee of domestic monetary policy.

          For us who followed Dr. Paul in the 2008 elections, we were horrified at how he was treated. Not allowed to speak, sometimes even shut out of the debate. But that was nothing compared to the 2012 primaries. The lengths to which the Republican Party went to shut out not only Paul, but all his supporters, is quite likely the biggest scandal in American electoral politics. And again, the entire establishment media did its best to ignore Ron Paul out of existence, or smearing him to death whenever they had to acknowledge him.

          The very fact that someone can equate the Austrian school with the keynesians, neoclassicists and other mainstreamers as part of some sort of false dichotomy defies all reason, especially since a large part of this outrageous view is based on the fact that some obscure journalist, since long dead, gave some support to Mises half a century ago.

          I can’t for the life of me understand how anyone can look at these facts and hold on to the claim that the Austrians are just shills for the bankers. Every single text ever written by an Austrian on the subject of money and banking has been vehemently against everything the so called Money Elites stand for and rely upon. The obscurity in which the Austrians have had to labor and still are laboring in is a consequence of their opposition to the current FED-based system.

          For all your lengthy quotes, you still haven’t even tried to reconcile your ridiculous conspiracy theories with the very unpleasant reality the Austrians have had to live with for over a century. Maybe it is time you asked yourself why that is the case.

  6. Anthony

    “Netiquette (and common sense too) suggests you actually read before assuming’ and ‘guess’ what we might actually have in mind.”

    I have read the conspiratorial nonsense Memehunter was referring to, as have others and debunked it. But speaking of reading, none of you have ever read a single book or even article by an Austrian, and still you purport to know enough about it to critique it? How’s that for netiquette? How’s that for common courtesy?

    I don’t see any reason to cut you much slack, to be honest. There are no backed up claims here, only unanswered critique of your positions. So far, not you, Memehunter or REN have been able to state one single Austrian position correctly. Instead, you mix Austrians with libertarians as if they were one and the same thing, which couldn’t be further from the truth. Any number of people fit in the category “libertarian” these days, like Cato and the objectivists. They have very little to do with the Austrians, particularly those associated with the Mises Institute.

    So no, until you’re able to differentiate between people and get at least one thing right about Mises, Rothbard and the Austrian School, I will continue to call on you on your mistakes and false claims. And my offer to debate you live still stands, but suddenly you don’t seem very interested. Not a big surprise, I must say.

    And again, it is not I who have to read up on any Faux Economics or whatever else you have produced. I haven’t been criticizing any of it. What I have been doing is to point out the mistakes you’ve made in your criticism of the Austrian school, and that is what I’ll continue to do.

    • Memehunter permalink

      “I have read the conspiratorial nonsense Memehunter was referring to, as have others and debunked it.”

      Where is your debunking? It’s not enough to say that you have “debunked” something to make it true, you know. I thought you said one had to “back up” one’s claims…

      • Both Tom Woods and Jürg Guido Hülsmann have dispelled your myths. And as I’ve explained before, none of this “Rockefeller-funed-Mises” nonsense takes into account that Rockefeller and other rich people “funded” a wide range of intellectuals, it was commonplace at the time. In the 1920s, Mises was a prominent member of the Viennese academia and advisor to the Austrian government.

        Nor do you mention the fact that the funding stopped very quickly after Mises’ arrival to the US. That is when is started writing in English. Do you seriously believe that Rockefeller or any of his associates actually read ANY of the books Mises wrote when he was writing in German? Of course they didn’t. It was only when his work appeared in English that the funding dried up. And what kind of associations has the Mises Institute had with the Rockefellers the past 10-20 years? What difference does it make that Mises got a small sliver of Rockefeller money in the 1920s? Another thing you haven’t been able to explain.

        It is omissions like these that debunks your stuff. If you’re really interested in Mises, read his biography by Guido Hülsmann “The Last Knight of Liberalism”. There everything is accounted for.

  7. Memehunter

    Since I could no longer reply on our thread, I reply here with a new comment.

    It is a truism that money doesn’t need to be a commodity given the fact we are not using commodity money today. However, whenever the market has been allowed to choose freely, it has chosen commodity money. What you and people on this site keep missing is that the Austrians don’t want to impose anything on anyone, they want people to be allowed to choose for themselves what they want to use as money.

    These constant conspiracy musings about the “Austrians’ agenda” are utterly absurd. Tell me, what about the Austrian school strike you as conspiratorial? It has been marginalized for almost a century and still is. It’s proponents are openly ridiculed. Politicians who affiliate themselves with it are shunned and ignored. For heaven’s sake! How can ANYONE think that the Austrians are some sort of dark sect trying to take over the world, who have the entire establishment behind them, after the way Ron Paul was treated by his own party and the rest of the establishment, both in 2008 and 2012? Please explain that, and make your explanation thorough.

    No, I have absolutely no interest in reading anymore conspiracy theories about the Austrians written by someone who’s never actually read anything by the Austrians until you give the explanation I asked for. Regarding Mises, what I said was exactly true. He was dropped very quickly upon his arrival in the US in the 1940s. He died in 1973 in relative obscurity. That means he labored in the US for decades without any support from the Rockerfellers or anyone else like that. Only thanks to Henry Hazlitt was Human Action published, for instance.

    What you also fail to mention is that the Rockefellers and others gave support to a wide range of intellectuals, but you try to insinuate they gave it specifically and only to Mises, another example of your pathological dishonesty, as well as covering up the fact the their support for Mises was dropped very quickly after his arrival in the US, whereas their support for establishment shills continued and continues to this day.

    Many people are using advanced models in economics because they don’t understand the science in question. Also, are you actually claiming that humans cannot be differentiated from animals and plants!? Models can always be made, but in economics, they will automatically be seriously flawed, because any given model must necessarily be based on false assumptions, or be missing any number of important factors.

    So the models are not only not perfect, as you put it, but they are so inherently flawed they make otherwise intelligent people and prominent economist hold on to the belief that the USSR will overtake the US economically as late as 1989 (Paul Samuleson). They also make people think that by convincing the people that an alien invasion is coming, the government’s spending on military build up will en the recession in 18 months (Paul Krugman).

    As long as you think human beings function and act exactly or almost exactly as oxygen atoms, you will keep making horrible mistakes. Humans are not like the weather. Whatever happens with the weather is predictable or explainable by math and physics, because inanimate matter always works the same way given certain conditions. Humans don’t. That is how we differ from oxygen and nitrogen atoms, and all other elements and objects, for that matter.

    We are all unique, we act according to personal preferences that change all the time. We are individuals. Have you ever heard of a group of hydrogen atoms saying “You know, today we don’t feel like combining with oxygen to make water. We’re gonna go play with our carbon friends instead”? Have you? If so, I’d like to meet these atoms and talk to them.

    “Refusing to even try to develop such models is a cop-out to justify using “axiomatic deduction” à la Mises or Rothbard, which is unscientific, not to mention hard to prove or justify empirically.”

    No, it is acknowledging a basic scientific fact. There is nothing more UNscientific than trying to apply the obviously wrong methodology to the wrong scientific discipline. The modeling and empiricism works well in the natural sciences for good reason, but they don’t work in a social science like economics. Failing to recognize that fact is as unscientific as anything can get, since it amounts to nothing more than childish refusal to accept fact. To keep refusing to accept this after all the horrible mistakes made because of models is pathological.

    Not to mention that the Austrian Business Cycle theory gives a very coherent, easily understandable explanation to the boom/bust cycle without using any models. That is why the Austrians have always seen them coming, not only in 2008 but throughout the past 100 years, whereas the mainstream economists have always been blind sided by them. How’s that for an empirical fact?

    • Memehunter permalink

      KG: “These constant conspiracy musings about the “Austrians’ agenda” are utterly absurd. Tell me, what about the Austrian school strike you as conspiratorial? It has been marginalized for almost a century and still is. It’s proponents are openly ridiculed. Politicians who affiliate themselves with it are shunned and ignored. For heaven’s sake! How can ANYONE think that the Austrians are some sort of dark sect trying to take over the world, who have the entire establishment behind them, after the way Ron Paul was treated by his own party and the rest of the establishment, both in 2008 and 2012? Please explain that, and make your explanation thorough.”

      Anthony and I have already explained that thoroughly, as you said. I won’t repeat myself here, I will simply point you to these links on the Daily Knell (I’m not posting them as links otherwise the comment gets moderated):

      thedailyknell.wordpress.com/libertarian-network-chart/

      Have a look at the chart, and read the articles linked below to understand the chart.

      This may also be useful:

      thedailyknell.wordpress.com/2012/10/13/video-a-street-conversation-between-a-ron-paul-fan-and-the-daily-knell/

      I never said that the Austrians “have the entire establishment behind them”. Do not distort what others say.

      “No, I have absolutely no interest in reading anymore conspiracy theories about the Austrians written by someone who’s never actually read anything by the Austrians until you give the explanation I asked for.”

      How do you know that I have never read anything by Austrians? Not only is this wrong, I gave you a quote by Rothbard which shows that I knew where to look, and implies that I have, at the very least, some familiarity with his work. Have you thought about this? You, on the other hand, have obviously not looked at the “conspiracy theories” to at least see if you could learn something from them.

      KG: “Regarding Mises, what I said was exactly true. He was dropped very quickly upon his arrival in the US in the 1940s. He died in 1973 in relative obscurity.”

      No, it is not true. Mises was supported by the American Jewish League against Communism, and his salary was paid by Fertig for years. The publication of his books was sponsored by the Volker Fund. Mises was also a member of the Mont Pelerin Society, which he attended regularly until at least 1961 (when he was 80 years old!), contrary to the Rockwell/Hulsmann mythology. This is all documented and can be found online, if you take the trouble to do it.

      KG: “What you also fail to mention is that the Rockefellers and others gave support to a wide range of intellectuals, but you try to insinuate they gave it specifically and only to Mises, another example of your pathological dishonesty,”

      I am covering the Libertarian side of things. Everybody knows that the Rockefellers supported all kinds of things, but I can only do so much in my articles (the Daily Knell is about exposing libertarian lies after all, not covering the entire conspiracy).

      “Pathological dishonesty”? Wow, I have replied to you 2 or 3 times, providing quotes and references, and I am already “pathologically dishonest.” Even the Daily Bell was more patient before resorting to insults…

      By the way, what about your story of Mises’ funding, or your claim that I have never read anything by the Austrians? Is that “honest”?

      KG: “Also, are you actually claiming that humans cannot be differentiated from animals and plants!? Models can always be made, but in economics, they will automatically be seriously flawed, because any given model must necessarily be based on false assumptions, or be missing any number of important factors.”

      As I said, ecological models, weather models, etc…, are not perfect, but they do work. There is no reason why one should not at least try with economics. Oh, and animals and plants don’t behave like atoms either, and yet these complex ecological models work. Even if human behavior is more complex, I don’t see any “hard boundary” justifying why models could not even be considered for economics behavior. There is no black and white limit in reality here, only in your head. Why are you so afraid of using logic, engineering principles, systems theory and the like? People like Marc Gauvin, John Turmel, or Mike Montagne (MPE), to name just a few, have been quite successful applying these approaches to our monetary system. I’m sure Anthony and other readers could name others.

      KG: ” Failing to recognize that fact is as unscientific as anything can get, since it amounts to nothing more than childish refusal to accept fact. To keep refusing to accept this after all the horrible mistakes made because of models is pathological.”

      I note with some amusement that you are very quick to label people who don’t believe the Libertarian propaganda as being “childish” or suffering from some kind of pathology. Don’t worry, Anthony and I are used to that, and we have seen much worse than you. You make me smile. Have a good day!

      • Memehunter

        You have explained no such thing. Referrals to some site does not make up for this particular shortcoming. Not to mention that neither of you have been able to state a single Austrian position correctly. I choose to believe my own eyes over your baseless conspiracies.

        “Do not distort what others say.”

        Haha! Comes from the person who still hasn’t manage to state an Austrian position correctly.

        How do I know you haven’t read anything of the Austrians? How about your constant failure to state even one single Austrian position correctly? Quotes are easily found, especially from books that are available free on the net. I could quote the entire Bible if I wanted to, it still doesn’t mean I have actually read it, let alone understood it. And you’ll excuse me for taking Hülsmann, whose actually studied Mises’ life, more seriously than your web based “sources”.

        No Meme, economic models don’t work. How many times must they fail utterly before you accept this empirical fact? There is every reason for them not working, reasons I’ve explained quite thoroughly. It isn’t complicated either, they don’t work because independent, sentient beings who act according to individual preferences and desires cannot be modeled. You can’t model something whose characteristics vary from unit to unit, so to speak, and even the specific units vary from time to time, depending on any number of factors. Tell me, how do you perform a controlled experiment on humans?

        I’m glad I make you smile. You on the other hand don’t. And you’ll excuse me for not thinking that human beings and inanimate objects are so alike that the models applicable to the latter are equally applicable to former. And I also make note of the fact you still haven’t been able to state one single Austrian position correctly and critique it. Instead, you spend all your time slandering a person who died 40 years ago.

        • Memehunter permalink

          See my more detailed reply above. I won’t bother with your comments about “reading Austrians”.

          Let me note, however, that ecological models taking into account fauna/flora/geographic interactions (I’ve already mentioned these in 2 previous comments, just in case you did not notice) are not just dealing with “inanimate objects”. Not only that, but the point is that if such complex interactions, involving different species, predator-prey interactions, effect of the environment, etc…, can be modeled, then there is no reason why models of economic interactions could be constructed. I thought you would have understood my point when I mentioned these models earlier, but it seems that I need to spell it out very explicitly for you.

          • Let met state this again:

            The fact that ecological models take into account fauna/flora/geographic interactions is completely irrelevant. Human beings are neither fauna or flora.

            Even animals are almost entirely instict driven, certainly the less evolved animals. They don’t have anything even resembling the brain capacity of humans. That is why you don’t see animals cheering for a sports team of their choice, or working to become an engineer, or writing books. Yet you seem to think there is no discernable or noteworthy difference between humans and animals. If you think that, then of course you can’t understand why humans can’t be modelled. It should be point out what disastrous attrocities have been committed by people who have failed to make the distinction between humans and animals.

            I have understood you perfectly, but what you don’t seem to grasp is that I think you are completely wrong for reasons very thoroughly explained. And you have you to explain how exactly you’d perform a controlled experiment on humans, the result of which can be applied to all other humans.

            Now can you please give that explanation? As long as you don’t give this explanation, all you say is white noise.

            • Memehunter permalink

              Who is talking about a “controlled experiment”? Ecological models are not “controlled experiments”. The point is not necessarily to apply anything, simply to better understand how things work. Even if there is a difference between humans and animals (or other scientific phenomena which have been successfully modeled), it is not so black and white that one could be modeled, and that in the other case (humans) one should not even attempt to make a model to understand how things work. I have also explained this a few times already in this discussion🙂

              By the way, have you read some of Marc Gauvin’s work, or Mike Montagne, or John Turmel? That would be a good idea, to give you a different perspective besides your beloved Austrian economists.

              • Memehunter

                Just answer the question:

                How do you perform a controlled experiment on humans?

                When you have admitted that controlled experiments can’t be done, you can try to explain how you’d go about modelling humans. Then you can let us all know how well these models have worked in the past. I’ve already given you a few examples of what absurdities they’ve led to, not to mention that our current economic problems is to a large part the consequence of central planners trying to use economic models to manage the economy.

                Regarding Mike, I’ve actually skyped with him on a few occations. I even set him up with Robert Murphy. Though I think Mike is a pleasant person, I remain utterly unimpressed with his work.

    • Bourchakoun permalink

      Kaj – give it a rest and please look more deeply into the issues at hand instead of only regurgitating Austrian “economics”.

      The thread of the given power-fabric that should make up our world is made of a wide range of economic theories and partly applicable conditions. But they always omit usury (never a problem), they always omit the credit-based money generation by the banks through fractional reserve banking (always omitting it and no state publishes the effective ratios of credit-applications and given credits at any given time – one of the tools that really create recessions and depressions). Billions and billions are poured into neoclassical, liberterian, Austrian and even neo-keynesian economic research – all of the funds allocated ALWAYS ALWAYS in avoidance of approaches of the likes of Silvio Gsell, social credit, mutual credit, usury-free systems flat-fee credit systems, even propositions by Bill Still or Karl Denninger. Why are those models never even mentioned and refuted in economics studies like Ponzi-schemes that they are deemed to be?

      If you had the willingness or the funds you could also embark on a physical voyage and actually meet some of the most “liberal” and famous economists of our times and you would be extremely surprised when talking to them off-record that some of them – i.e. Milton Friedman was actually for the abolishment of the current Fed, but also of the current Fractional Reserve Banking. Look into the research of Dr. Margrit Kennedy and Andreas Popp.

      And that is just the financial and fiscal part of the economics scam perpetrated – there is “free” trade (outsourcing and now insourcing (already happening at mines in Australia and Canada), abolishments of unions, allocation of pension funds, sell-off or free give-away of state property to corporations etc. etc.

      If you would care to look into the Reece commission of the 50s, countless publications of the CFR, speeches of UNESCO and UN directors, Carroll Quigley’s works, Club of Rome papers and many many other sources: if you would actually try to talk to some of the movers and shakers (some of them you can meet loosely at yacht parties if you can get invited), then a surprisingly different picture would emerge.

      The picture is simple: you are either one of the uninformed, disinterested, elite-guided masses, or you are – irrelevant of IQ and education – cleverly conned regurgitating some part of right-to-left-economic-dialalectic or you are aware of the SCAM, but more or less well paid to act, write and say accordingly. A true scientific mind is open to change of opinions and long-held theories when presented with information that provides a more logical explanations of the matters at hand.

      • Bourcha

        The usury problem is a completely made up problem. There is absolutly nothing wrong with interest. Interest is nothing more than a reflection of our time preferences, the fact that we value any given good today more than the same good in a year, all things equal. This usury obsession illustrates a grave misunderstanding of the value-free economic phenomenon known as interest.

        However, I would be interested to see you back up your claims that “billions and billions” are poured into Austrian economic research.

        Friedman was a monetarist. He supported both Fed and fractional-reserve banking, and did so vehemently. The Austrians are the ones who oppose those things and have been since the 1870s.

        • Bourchakoun permalink

          Funds are being allocated to all kinds of economic research – not only Austrian – all except those which provide real alternatives to ever increasing debt and crushing interest.

          And Friedman of course published only offiical dogma. What he said in private however is completely different. It seems that a lot of high-level economists are aware of the scam, but choose to continue the game.

          But hey – living in the land of connology is great fun, especially if you imagine to be the oh-so-contrarian to the status quo supporting Austrian economics, gold standard and the likes of Peter Schiff and Ron Paul. Read Jacques Attali “A brief history of the future” – he is on the effective power level of Kissinger – just in Europe. And Mr. Attali tells what the plans are for the EU until 2050. You will be pleased to know that the future will be more Austrian than ever with “free” markets reigning absolute – of course in strict accordance to “quasi-fascist” green de-industrialization.

          Discussions like this can go on for eons – spinning and spinning without end in sight, since quasi-rational arguments can be procured forever. Especially since economics as a social science is anything but exact. And even medicical science can be easily manipulated (and in that field people actually die – but if they die slowly enough – no problem), so how easy can it be with economics – ridiculously easy.

          But hey – have fun in Austrian Disney-Con-Land.

          • Bourcha

            Just tell me how much federal money is spent on Austrian economics.

            You’ll have to excuse me if I don’t really believe your notions about what Friedman may or have not said in private. At any rate, even if he had said those things that only proves that he was a coward. Austrians have, as said, opposed the current system since its inception, and have done so openly and vocally.

            You can rant on and on how about the Austrians being pro status quo. All you need to do is to youtube Paul or Schiff and you’ll see how wrong that ridiculous claim is. For all your talk about “knowing the truth”, you seem to be very averse to actually looking it up yourselves. I guess conspiracy mongering and slandering is more fun.

            I also make note of the fact that you, like Anthony, REN and Memehunter, ignore all serious topics, like the time preference – interest issue. No, slandering and name calling is so much more fun, isn’t it?

  8. Jim Evans permalink

    According to Ben Franklin, the colonies, before the British parliament restricted it via the Currency Act, were able to function well with paper script.

    It seems to me, the key is the quantity of money vis-a-vis the amount of goods & services in the system. Stability of the prices of goods & services is important and that is determined by the amount of money. Deflation/inflation can be because of the amount of money chasing the goods & services, however, productivity increases (or decreases) will also effect the prices for goods & services (although, usually for specific goods or services).

    Gold can be stable (and produce confidence in the medium of exchange), but particularly after the American Civil War, was subject to restriction by European bankers (even the U. S. couldn’t produce enough gold on its own to meet an expanding economy).

    Honest bankers don’t like deflation or inflation, although, if they have to pick one or the other, would rather have inflation than deflation.

    Dishonest bankers engaged in a conspiracy do want deflation because it does allow them to confiscate collateral, which when the economy is re-inflated can be sold at a profit or held as an asset to be loaned against.

    Here’s an idea: Have flat fees for loans, instead of compound interest.

    • REN permalink

      Franklin limited his loans to 8 years, so there was no big usury factor where compounding drove the loan excessively. Also, said loans were based on land, but the land could not be confiscated. Franklin noticed that former traders had changed professions to become merchants; their ships rotted in the harbor, disused. Said traders now merchants, then cornered the money supply and also intercepted goods, driving up prices and taking monopoly rents against the population.

      Remember this was a “hard money” economy, which circulated silver Spanish dollars and other specie. Specie is just so wonderful isn’t it? Into this specie economy, paper was introduced.

      When Franklin started issuing his paper money, he noticed immediate economic increase, distressed properties had for sale signs removed, and employment improved markedly. Actually they ended up with zero unemployment. Benjamin said it may have been the happiest place on earth.

      Former monopolist rent seeking traders returned to the harder life of shipping, and gave up being predatory merchants. The real merchant economy became honest.

      The Colony bank, re spent the usury back into the economy. Any growth in loans from usury was used to finance further loans.

      This would be a real money system, where the usury transfer redounded to help the general welfare. By contrast, private banks inevitably become predatory, because the pride defect in humans means that privateers will manipulate their money system for their selfish benefit. A private money system is advocated by Austrians, against all evidence of history. Why?

      A state banking system, where money is a public good can work well, but it needs to be lawful and run by honest citizens who are held to transparent public standards.

      Franklin later stated…paraphrased, “Experience has shown paper to perform above all expectations.”

      If there were any counterfeiters, they were treated harshly. The privately owned Bank of England (BOE had ensared England in 1694) whose owners were former Gold Men, took Franklin’s bank as a very serious threat. This threat was a large factor in precipitating the revolutionary war.

    • Thanks Jim, I sure do agree with your proposal of a flat fee!

  9. Hmm the writer of this article confuses arrogance with argument, and he does a disservice to his ‘point’ which is ultimately juvenile, short sighted, false and largely incoherent.. Putting that aside a short note.

    Austrians either advocate a gold standard or a commodity standard. This simply means that the supply of money in an economy can only grow as fast as the supply of commodities or gold. So in order for deflation to occur by your incorrect definition the supply of gold or commodities in an economy would have to shrink. This is impossible as commodities and gold are REAL, they can not simply evaporate. Instead the real definition of in/deflation is movements in prices. This can be affected by the supply of money clearly but is not ONLY determined by this as the writer incorrectly (and arrogantly) dictates. Under a commodity standard or similar the supply of money can not grow faster than the economy uses those goods so inflation or deflation is considerably more up to market forces determining the value for products, goods and services as the economy expands and the money supply expands along with it. Once you factor this reality into your ‘argument’ it falls to pieces.

    In conclusion you are arrogant and misguided. Instead of writing pathetic barely coherent drivel ignorant of reality, try educating yourself. A dose of Hayek would very quickly educate you. Although i am sure you would rather write obscenities and beat your chest.

    • REN permalink

      I guess when the Spaniard’s took tons of gold and silver from the America’s, and it then caused inflation in Spain; that would be a case of market forces finding balance?

      Or maybe whole tribes of Indian’s refusing to reproduce because their “mining” conditions were so horrific. Perhaps millions died in search of the useless metal.

      Maybe the British building ships to intercept Spanish Galleons on the high seas, sinking them, is a wonderful way to rule the world.

      Yep, Hayek and his ilk are wonderful humans. Gold is the magic panacea that cures all ills.

      The plain brutal fact of the matter is that money is an accounting identity that allows transactions to be consummated. It stands in as a good during the moment of transaction.

      That there is a “value” function also attached is an error in thinking. This is where Hayek goes off the rails. I can recommend Silvio Gessel, “the natural economic order” for those Austrians who are not completely propagandized, and beyond reach.

    • JD, do you really believe my definition is ‘incorrect’?

      “So in order for deflation to occur by your incorrect definition the supply of gold or commodities in an economy would have to shrink.”
      No, they can also be taken out of circulation, as is the usual tactic of the Money Power. Even if they didn’t, gold typically is mined in lesser quantities than economic output grows, also creating deflationary pressures (in relative terms there is less gold available compared to total transactions).

      I can understand you have a problem with my tone of voice. But to be fair, i’m still a lot more bearable than Gary North and even Tom Woods was pretty boastful in his defense of deflation.

  10. >>>>started with North’s assault on Brown and my rebuttal at the time.
    18 months later you re-butted your rebuttal, and acknowledged that
    a) you had no idea what you were talking about when your rushed to the aid of your hero poster girl
    b) Ellen Brown knew nothing about Lincoln and the Greenback
    c) Gary Noth was right about Ellen Brown, and the Daily Bell was right about Lincoln and the Greenback

    Ellen Brown was elevated to stardom to discredit the concept of government-issued, interest- and debt-free currency

    >>>>‘We’ are those who have tolerated
    Do you think Ellen Brown and Bill Still groupies are the majority ?

    >>>>traitor Alex Jones.
    He is not a traitor, he is very to true to his principles: a loud-mouth wind-bag, leading the ignorant ones in circles to nowhere

    (what if 2013 is a better year than the previous 4 put together ?)

    • “>>>>‘We’ are those who have tolerated
      Do you think Ellen Brown and Bill Still groupies are the majority ?”

      i don’t know, but I am absolutely confident that they have far more support than is evident from their exposure in the alternative media. Simply because the ‘free press’ has been almost completely subverted by well financed libertarian outlets and gold dealers. That’s the eternal problem: there is little money in interest free money.

      Gary North was NOT right about Ellen Brown. It’s true that I’m not as enthousiastic about her solutions as I used to be, mainly because she is not nearly as much against interest as I assumed she was.

      But she still is infinitely better than wat North stands for.

      • Of course he was, he has shown her lack of knowledge of the subject by her “own” writing

        =====
        byTW:
        No one can prevent you from going to the Mises.ord forum or the DailyPaul forum and presenting your ideas about paper currency with an expiry date; see how they respond, and pratice how well you can defend Silvio’s concept……

  11. ImpetuousStew9 permalink

    It sounded like to me in the debate that you were just an ignorant marxist that wouldn’t listen to reason and evidence and so he stopped debating with you there

  12. Hello,

    I’m no prominent Austrian, but I still wanted to share my thoughts on this article.

    A few exerpts:
    ”During the ‘Industrial Revolution’, the common man was relegated to 80 hour working weeks in the sweatshops, making just enough to feed himself (but not his family) on a spuds/grains only diet.”

    Neither Tom Woods nor anyone else in his “camp” has denied that the working conditions in the factories were hard. However, the important question is where and what they were relegated, as you put it, to the factories. The fact is that they were relegated from abject poverty and death by starvation they faced in the rural areas. Nobody forced them to take these jobs, they chose to do so voluntarily. Why? Because their alternatives were even worse, much worse.

    It is undeniable that the Industrial Revolution lifted the standard of living of millions of people. Of course it took time to go from the one bad harvest away from starvation to the comfort of modern day, but the Industrial Revolution was the what set that development in motion, and the progress was stupendously fast.

    It should also be noted that social inequality has nothing to do with capitalism. Capitalism is merely an economic system based on private ownership of the means of production. That is all. And as history has shown, no economic system leads to more equality and higher standards of living at the same time than capitalism. There are many reasons for that, but that is another topic.

    Regarding the FED study by Atkeson/Kehoe. It is important to note that the FED has always viewed deflation as something bad. After all, it wants constant inflation and does its best to achieve it. In addition, one of the FED’s principal arguments for existence is the age old, debunked claim that deflation is what caused the Great Depression and that deflation is the most serious threat now. In other words, it is in the FED’s interest to prove the damaging effects of deflation whenever it can. It is therefore very significant and noteworthy when the FED publishes a study which conclusions run against its own interests. The FED had every interest to find a clear link between deflation and depression, but it found no such link. That is what gives the study so much credibility, because there is absolutely no reason to think that the FED would manipulate a study so that it shows the exact opposite of what the FED wants the study to show. I would have thought this was fairly obvsious.

    Regarding the definition of deflation. To imply that Tom Woods doesn’t know that deflation means shrinking money supply is beyond disingenuous. It is and outright lie. He knows full well what it means and has stated it on numerous occasions. However, this study used the falling prices definition which is the same definition the FED uses, and the same definition many deflation hawks use. They also think that falling prices is what leads to a depression. Again, the study found otherwise, so even according to their own definitions, they are wrong and the study shows that. Another reason for giving it credence.

    The next paragraph deserves to be quoted in full:
    “This is where we enter the, what I like to call, ‘ultra naive’ parts of the Austrian paradigm. It’s amazing how many Austrian positions are both utterly naive to the real world and simultaneously incredibly comfortable to the Powers that Be and this is a typical case in point. Obviously, the elite does not fear deflation. However, it is keenly aware the masses (us) absolutely deplore deflation. We hate it, because it broke our back in the thirties and many other depressions. So of course the Money Power and its shills cater to this by being very busy pretending they hate deflation too.”

    This really is just a pointless rant consisting of overt insults and ad hominem and unbacked, demonstrably false claims. You say that elite doesn’t fear deflation. If that is the case, why has the FED printed money to the tunes of 15 TRILLION dollars the past few years? Why are the interest rates at zero? Why has the FED’s balance sheet tripled since 2008?

    In 1980, Paul Volcker famously raised the interest rate north of 20 percent, which broke the inflationary spiral of the 1970s. If the elites didn’t fear inflation, they would not have enacted massive stimulus, they would have let the too-big-to-fails go bankrupt, let the housing prices fall to their actual market values, kept interest rates at 4-5 percent or even raised them, raised the reserve requirements etc. But they didn’t, they did the exact opposite. They did everything conceivable to keep the money supply growing and the prices from falling (and preferably going back up). If this is not a display of an almost manic fear of deflation, then what is it?

    Instead, you make it seem like the Powers-that-Be did this because they know “we the masses” deplore it. This may be the most ridiculous thing I’ve ever heard. Firstly, I like falling prices. It was a great boon for “the masses” from the founding of the American republic until the founding of the FED in 1913. Even in the 1930s, it was great for those who had a job and at least some comfort to those without it, since whatever little money they got could actually buy something. Had they only been allowed to lower their wages, they would have done much better.

    Regarding the private bankers and their lust for deflation. I’ve noticed that most people who speak confidently about banking don’t know the first thing about banks and how they operate. You and your friends are perfect examples of this rule. What you forget is that no institutions are so leveraged and loaded up with debt (already matured debt to boot), as banks.
    Take HSBC, for example, one of the largest banks in the world. It has $2,556 billion in assets and $166 billion in equity. What does this mean? That HSBC has $2,390 billion in liabilities, i.e. in DEBT. The same is true for all banks. All of them have almost as much debt as they have assets. What’s more, their assets consist mainly of long-term receivables (mortgage debt, auto loans, student loans, business loans etc), while most of their liabilities are short-term payables, with a large chunk of their deposits being payable on demand.

    For banks, inflation has two major advantages: 1. It raises the nominal value of their assets. 2. It dilutes the value of its liabilities. In addition to that, the banks generally receive any new money first, so they get to enjoy the most purchasing power. If the banks were actually keen on deflation, as you seem to suggest, they would simply refrain from engaging in credit expansion. Also, no bank likes it when borrowers default on their loans. The bank doesn’t want the house or car the borrower has bought, it wants the money it has lent to the borrower. Houses are illiquid. They don’t yield good returns, especially if everyone has been so impoverished that they can’t even pay rent, let alone buy the houses. Residential apartments carry lower rents and higher maintenance costs compared to commercial property. Residential houses is even worse. That is why you don’t see banks owning houses. They don’t want to, so it is rather silly to claim that they do.

    Another quote:
    “Nowadays, it’s a mainstream science matter of record that all the banks own each other and are one major cartel, no, monopoly.”

    You’d be hard pressed to find an Austrian who don’t view the banking industry as a monopoly or cartel, so I really don’t understand the derogatory rant preceding this paragraph.

    “But of course we’re far too polite and far too interested in maintaining cordial relations with everybody even pretending to oppose the banksters”
    Are you serious? Your whole “article” was nothing more than a smear job build on unbacked claims and outright falsehoods.

    I hope and trust Tom Woods will accept your “challenge”. However, if and when he does, you will be left with shame. A word of advice to you: Don’t issue challenges on subjects you don’t understand. You will most certainly lose, and it won’t be pleasant.

    Regards,
    Kaj Grüssner

    • REN permalink

      The banks own debt contracts on the organic economy. The debt contracts grow exponentially while the organic economy grows “organically” or at a flat rate of 2 to 4%. Let’s not forget that the debt contracts came into being with hypothecation, which is fraud, where the debtors credit is borrowed.

      Quantitative easing has put a floor price on debt contracts, which has allowed “banks” to swap their leveraged debt contracts “instruments” for cash. In effect QE is bailing out and insuring our plutocratic elements.

      The shadow banking sector, that is the non insurd FDIC sector, has leverage ratios of 50:1. To make an MBS a TBTF bank assigns “value” at the SPV (special purpose vehicle) within said big bank. I keep mentioning big banks, because it is the same players…the primary dealers. The PD’s are funding government, engaging in interest rate swaps (derivitive contracts), and creating MBS securities. It is probably best to think of banking in the U.S. as three levels. The bottom level is Base money, then FDIC commercial banks, then the top level is shadow/investment banks.

      The MBS are nothing more than a secuity against our FDIC housing loans. They look for short term money and attach it to our long term housing. This should be illegal as it is borrowing short to lend long. Investment banks found a way to stick their fingers down a level into insured commercial banks.

      The entire private banking sector stinks to high heaven. There is a book out that explains how Wall Street attracts psychopaths, and the population density is about 10%, where it is about 3% in a normal population.

      I’ve found that Austrians know little about banking or how the bankings sector works. Neither do the classical economists for that matter. Most of the classical’s don’t even know we are no longer reserve constrained. Most economist had no clue how quantitative easing works. Please go and read up on MMT theory, or MMR. pragcap.com is a good site.

      Most Austrians don’t have a clue as to what money is, and they aren’t that advanced on banking either.

      • Kaj Grussner permalink

        REN

        I don’t see a single point in your reply that is even remotely connected to my comment. Your claim that Austrians don’t know money and banking is ridiculous on its face. Menger, Mises, Bohm-Bahwerk, Hayek and Rothbard wrote extensively about money and banking. De Soto, Salerno and Murphy are the most prominent monetary economists today. The Austrian Business Cycle theory is a great example of how well Austrians understand money and banking.

        It is symptomatic for people like you to not only make absurdly false claims, but to always fail to even try to back them up.

        • REN permalink

          i DID back up my claim. There is a considerable body of work put out by MMT and MMR. ALL they do is functional finance. That means they analyze how banking works. IT is all they do. OK? The entire economics department at the University of Missouri at Kansas city works on the nature of banking. Here is a link, have fun there: http://www.pragcap.com. Don’t go there with any Austrian swagger, or you will be chewed up. The truth can hit lit a velvet hammer.

          Here is a gem from Rothbard:

          “Although most economists in the 20th century and our time would disagree strongly, Mises insisted that economic theory itself was an a priori discipline. What he meant is that economists shouldn’t ape the methods of physicists by coming up with hypotheses and subjecting them to empirical tests. On the contrary, Mises thought that the core body of economic theory could be logically deduced from the axiom of “human action,” i.e., the insight or viewpoint that there are other conscious beings using their reason to achieve subjective goals.”

          Austrians admit it openly. They just make it up a-priori. Their hypothesis don’t need to be verified, just the quality of the thought is good enough. Ha Ha. What a joke.

        • REN permalink

          Kaj, I know it is difficult waking up from mind control matrix you and other Austrians are trapped in. It is no fun being mocked and derided, and maybe I shouldn’t do that to you guys. But, please start snipping away at the spider web tendrils you are caught in.

          The neoclassical economists are having the same difficulty countenancing that their theories are flawed. The world is caught in the neoclassical grip, which has demonstrably false paradigms, e.g. individual action can be scaled up large scale. Steve Keen who has deconstructed neoclassical economists, says neoclassicals will probably need to die off as they cannot shake their dogma. Up until and through the crash of 2008 they will still patting themselves on the back about their “great moderation.” If Austrian’s are equally obtuse, then I might be wasting my time.

          So, well meaning people are attracted to other heterodox theories, like Austrianism. But, it too has the fatal flaw of a-priori thinking and extrapolating human action. Any theory that doesn’t stand up to reality, should be rejected as poor method and science.

          The economists that, in my opinion, are people like Minsky, John Stewart Mill, The French Physiocrats. Most of what Dr. Hudson writes seems correct, but he has no plan for fixing the banks other than a debt jubilee.

          I can recommend Silvio Gessel to learn really what money is about. He also deconstructs Marxism. The flaw in Marx is value theory. Marx spends three volumes on “value?” Really, what is value? It is yet another piece of imagination. There is only price at the moment of transaction.

          If we follow the money ties, there is a lot to be suspicious about Austrianism. It is the mirror imagine of the other false dialectic, communism.

          The tap root that funds these false dialectics is banking money. They will react violently to having their funding cut off.

          • Kaj Grussner permalink

            REN

            You backed up absolutely nothing. What difference does it make what given universities teach? All you need to do is to listen to the public debate and you will se hpw little people understand money and banking.

            Reading your comments, anyone can see your just throwing insults. You’re not even making any arguments. If you want to back up your claims, get specific. For example, you can begin by pointing out where Rothbard is wrong in “The Mystery of Banking”.

            That is, if you have actually read a single sentence written by an Austrian, which I seriously doubt you have. But let’s have a debate. Send me a mail at vindician at gmail dot com. If you are serious, you will. But I somehow guess you won’t.

            • REN permalink

              I’m suggesting Austrian theory is mind control with small basis in reality. Stop wasting you time on falsehoods. Money is not a division of Gold, and Austrian handlers promulgate that to ensure control over labor. If you want to really know how banking works, read up on Functional Finance. I can also suggest the Levy Institute at Bard College. It will take you about a year to go through all the material and then maybe slowly the scales will fall from your eyes. There is a large body of work out there that is not trying to throw BS around, if you would but look.

              There were no Austrian’s that predicted the Crash in 2008. There were no neo classicals that predicted the crash. The only theory that did predict was functional finance Neo classicals maintain that money is a division of debt contracts, another falsehood that allows their handlers to promulgate control over labor. Both Austrianism and NeoClassical theory belong on the ash heap of history. Both theories are designed to rent seek and siphon wealth towards predatory money power.

              Even if an Austrian economist I’m not aware of found a nugget and figured out private debt to GDP ratio was going out of control, It wouldn’t matter. The Austrian control matrix is to use gold and deflation to steal from Labor. We move from money as debt contracts (neo classical thought) to money as Gold (money supply divided by gold amount), the effect is the same….stealing from the mouth of labor, and using those profits to do mind control on mankind.

              A real money supply is a division of what people produce, that is, GOODS AND SERVICES. A real money supply is low friction (low or no interest), and doesn’t steal from producers.

              I’m not throwing ad-hominiems, I’m demonstrating, but you don’t want to listen. This is what I mean by being obtuse. If you want to learn, you would be asking questions. Being a part of Austrian confusion attack, ultimately makes you a foot-soldier for your handlers. The hope is that Austrian’s are honorable people who are only guilty of falling into a trap, but can work themselves out. Are you?

              • “The hope is that Austrian’s are honorable people who are only guilty of falling into a trap, but can work themselves out. Are you?”

                couldn’t have said it better and Dick indeed provides excellent resources for those wanthing to dig themselves out of a hole.

                • Anthony,

                  I note that you didn’t respond to my original comment at all, in which I rebutted all your points. You are hardly the one to talk about being honorable.

              • REN

                I don’t really care what you are suggesting, since you can’t back up anything you say. One reason for that is that you’ve never read an Austrian text in your life. That being the case, I’m curious to know what you base your fairly ridiculous claims on. I also make special note of the fact you didn’t dare to take me up on my invitation to discuss specifics via email exchange.

                I don’t need to read up Functional Finance or any other university course. I’ve been working as a consultant to banks and other financial institutions for several years. I’m going to out on a lim here and guess you don’t have any working experience with any financial institution.

                “There were no Austrian’s that predicted the Crash in 2008.”

                No Austrian predicted the Crash of 2008? Ever heard of Peter Schiff, Ron Paul, Mark Thornton, Doug French, Peter Klein, Joe Salerno, to name a few? The entire Austrian School saw it coming and warned about for it years, just as Mises and Hayek warned of the 1929-crash and Hayek warned of the 1970s crash and subsequent price controls. This you would know, had you ever actually read a single line written by an Austrian. Thomas Woods gave out a book in 2009 called “Meltdown”, in which he explained what had happened and why. It was easy to do, since the 2008-crash was a textbook example of the Austrian Business Cycle.

                “The Austrian control matrix is to use gold and deflation to steal from Labor.”

                And so we degenerate into conspiracy theories. My friend, economics is a value free scientific discipline. It is not about control or about theft, it is about studying human action and explaining the consequences of those actions. It is always so encouraging to see that our “critics” don’t even know what economics is.

                “I’m not throwing ad-hominiems, I’m demonstrating, but you don’t want to listen.”

                You’re calling Austrians all kind of names. You’re demonstrating nothing but your own ignorance about economics in general and Austrian economics in particular. Please excuse me if I’m not too interested in the babble of a delusioned Marxist.

                But my offer still stands. If you are interested in an actual debate, send me an email. And just for the record: please list all the Austrian books you’ve actually read ☺

                • REN permalink

                  It’s simple, Austrian’s agree that gold is money. It is not, and on that point everything else Austrian is a towering edifice of sophomoric babble. If the foundation is faulty, if the fundamentals are faulty, then what comes later is faulty. Human action is B.S. As Gissel says, there is only “PRICE” and it is discovered in the market. If the market it manipulated for “value” that is where you Austrians/Marxists and others slip in and take rents from the producers. And so we have complex economics trying to get a handle on what was made complex by a money error…that is confusing money as an asset. Take away the usury and the system behavior changes completely. Oh, but Austrians are for usury, and keeping money as an asset….after all the shiny metal cannot rust, and is perfect for “holding value.”

                  Like I said, even if an Austrian found a nugget and predicted market action, so what? By denigrating neo-classical economics (Neo’s are pro debt contracts) is part of a control matrix to push people into gold (control using deflation). The entire history of metal as money, is one of predators using their money power over producers. Oh yes, Austrians like to cherry pick history, and display only that which makes their case. The free banking period for example. I guess I would know that how? Maybe by reading Austrian nonsense until I couldn’t take it anymore.

                  Who won the revere awards for predicting the 2008 crash? The winners are all critical of Austrian Theory.

                  Here’s another thing to consider. Yamaguchi has modeled the entire world economy using system dynamics, and it has been peer reviewed by System Dynamics experts two years in a row. The IMF modeled the Chicago plan, and found all its (debt free) claims correct. In the U.S. money has been redefined by new 2012 accounting rules. Guess what, Money is now defined as a division of the commonwealth. Interesting, new rules defining money say nothng about gold. Maybe not all of the people are so easily fooled.

                  The net is closing in on Austrian theory, you won’t be able to hide behind your retrograde pro gold position much longer.

                  I don’t need to debate you privately. I’m enjoying this… everybody publicly gets to see how an Austrian responds to criticism.

            • REN permalink

              By the way… I started out reading Austrian Theory many decades ago. I would put myself in the honorable company of Dick Eastman, who also worked himself out of the mind control matrix.

              • REN

                Right off the bat you make a false claim. Austrians don’t say that gold is money. They do, however, acknowledge that gold has been used as money for thousands of years. That is an important distinction and a very common mistake made by people who haven’t actually read Austrian texts. The Austrians define money as a universally accepted medium of exchange. It can and has been many things, but precious metals have been favored by the market. There are good reasons for that.

                It is interesting to hear that human action is BS. Do you claim than, that humans do not act? If yes, that how do you describe your commenting on this thread?

                The Austrians didn’t find a nugget and predicted a market action, though I’m glad to see you’re admitting that they did in fact make correct predictions. They simply warned that given actions tend to have given consequences, as they have done for 100 years. And again, they were proven right. Instead of continuing this baseless, incomprehensible, mistaken slander of the Austrian school, maybe you should take a moment and actually familiarize yourself with it. Because it is clear to anyone you don’t have the faintest clue what Austrian economics is all about.

                So far, you haven’t been able to state on single Austrian position correctly, and as you yourself said, when the premise is false the whole edifice crumbles. Though calling your argumentation and “edifice” would be giving it far too much credit at this point.

                “The winners are all critical of Austrian Theory.”

                Another false claim. Marc Faber was credited with calling the financial crisis, and he is very sympathetic to the Austrian School. Peter Schiff and Ron Paul called it too, and they are both followers of the Austrian School. In addition, the “winners”, as you put it, are with few exceptions part of the establishment. The Austrians are not. But that makes no difference. The Austrian predictions are on record, whereas the keynesians, neoclassisists, monetarists and the rest of the mainstream gang made laughing stocks of themselves claiming that the economy was sound and that housing prices would never fall as late as 2007.

                You’ll excuse me for not being very impressed with Yamaguchi. Anyone who actually think you can model any part of the economy, not to mention the entire economy, has absolutely no idea what economics is all about. Models are the tools of central planners, and this constant uses of modelling is one major reason for why the economy is so screwed up all the time.

                It is also interesting that you refer to the IMF, one of the key factors in the international banking cartel. Again you’ll have to excuse me for not putting much faith in the IMF to make accurate observations of the economy.

                You seem to think that the Austrian school somehow dominates the economics profession, the banking institutions and the politicians. If you think that, you’re under a serious misapprehension. I couldn’t care less what the bureaucrats at the IMF or anywhere else define as money. Money is a medium of exchange that is universally accepted in the free market. It is not something that is put into place by executive order and the use of force.

                I think anyone who reads this exchange sees I’m responding to your insults and false claims in gentlemanly manner. I’m all for public debate so I ask you again, what Austrian works have you actually read?

                • Memehunter permalink

                  The Austrians may not define money as gold, but they define it as a commodity. This tendency to treat money as a “good” is definitely typical of the Austrian School. Do you deny this?

                  A little quote to refresh your memory:

                  Murray Rothbard, “What has Government done to our money”, p. 15: “A most important truth about money now emerges from our discussion: money is a commodity.”

                  KG: “In addition, the “winners”, as you put it, are with few exceptions part of the establishment. The Austrians are not.”

                  I have shown in several articles how many prominent Austrian economists and Libertarian outlets are (or were) connected to the very top of Money Power. Please visit the Daily Knell for more information. So it depends on what you define as “the establishment”, but the idea that Austrian economics/Libertarianism are not promoted by at least some faction of the elites is definitely a myth.

                  KG: “Models are the tools of central planners, and this constant uses of modelling is one major reason for why the economy is so screwed up all the time.”

                  All quantitative, empirical sciences are based on modelling. Even very complex phenomena like local weather conditions, or the relationship between the fauna or flora and the geography of a region can be modeled with a reasonable degree of success. So why couldn’t economics be modeled? This is completely untrue, and yet Austrians keep repeating that.

                  Current economic models may not be perfect (and will probably never be, like weather forecasts), and one would be naive not to suspect that the models will tend to favor certain ideologies, but that is no reason to dismiss modelling so quickly. Also, it is not true that a model is necessarily associated with “central planning”. Or are you saying that basically all quantitatively-based scientific models are “the tools of central planners”?

                  • Memehunter

                    Money can and has historically been a good like any other good. The main difference between money and other goods is that you don’t consume money, nor is it desirable to produce great quantities of it. Rather, you want the supply to remain stable. The fact that various commodities have been used as money, like gold, can hardly be denied.

                    Still, the Austrians define money as a universally accepted medium of exchange. Rothbard was merely making an observation of historical fact.

                    It is hardly too much to ask that you name these “prominent Austrians” and “Libertarian outlets” that are or were connected to the very top of the Money Power. But let me guess, you refer to the Rockefellers having for a very brief period giving some financial aid to Mises just after he arrived to the US, failing to mention that they dropped their support entirely as soon as they learned he argued for free market money and banking?

                    The natural sciences are indeed based on empiricism and modeling, because you can use controlled experiment. However, economics is not a natural science, nor is it based on empiricism, because you can’t use controlled experiments in economics. It is a social science and no matter how much people want to deny it, you simply can’t study humans the same way you study atoms. People act according to their own personal preferences, needs and desires, using their own personal faculties, reasoning and resources.

                    It never seizes to amaze me that so many still haven’t figured out the difference between highly intelligent and unique, living beings and inanimate objects. But to spell it out to you: every single hydrogen atom is exactly alike, but not a single human is alike. Does that explain why economics can’t be modeled?

                    Yes, I am very much saying that every “scientific economic model” (an oxymoron if there ever was one), is the tool of central planners, as well as social engineers.

                    • Memehunter permalink

                      Kaj: “Still, the Austrians define money as a universally accepted medium of exchange. Rothbard was merely making an observation of historical fact.”

                      The point is that money does not have to be a commodity or a good and I believe that there is a hidden agenda behind the Austrians’ insistence on tying the means of exchange to a commodity or seeing it as a good.

                      “It is hardly too much to ask that you name these “prominent Austrians” and “Libertarian outlets” that are or were connected to the very top of the Money Power. ”

                      As I said, everything is on the Daily Knell. Please have a look here for a start:

                      http://thedailyknell.wordpress.com/2012/03/11/old-rothschild-and-rockefeller-hands-controlled-the-libertarian-communist-dialectic/

                      Regarding Mises, here is a more truthful version (don’t be naive, it’s not the first time I hear your version:) ):

                      “Already in 1926, Ludwig von Mises’s first tour in the United States was paid by the Rockefeller Foundation. The National Bureau of Economic Research, which supported Mises in the 1940s, was also heavily sponsored by the Rockefeller Foundation. Mises’s salary in New York was paid by Lawrence Fertig, Kohlberg’s colleague at the AJLAC, and by the Volker Fund.”

                      ” It is a social science and no matter how much people want to deny it, you simply can’t study humans the same way you study atoms. People act according to their own personal preferences, needs and desires, using their own personal faculties, reasoning and resources. ”

                      So why are people using advanced models in social sciences? Are you saying that all animals or plants are identical? Yet, scientists have made and are making complex ecological models.

                      Economics can definitely be modeled – as I said above, I’m not claiming that such models would be perfect, but after all we do have weather forecast models that are still useful even if they are not perfect. Refusing to even try to develop such models is a cop-out to justify using “axiomatic deduction” à la Mises or Rothbard, which is unscientific, not to mention hard to prove or justify empirically.

                    • lol. Netiquette (and common sense too) suggests you actually read before ‘assuming’ and ‘guess’ what we might actually have in mind.
                      You can read all about Memehunter’s and mine extensive research into the build up of Libertarianism in the 20th century in Faux Economics.

                      It goes, way, way beyond the grants that Rockefeller gave Mises (and bhe got much more than the few bob he got when he came to the US).

                      Billions are invested in Libertarianism per year and this has been the case (measured in PPP) for decades.

                      Read up in Faux Economics.

                      Kaj, cut us some slack: we are not some silly keynesian or leftwing nobodies here ok? Read up on what we’re actually about here and then come back. That’s just a normal courtesy when you visit a new site.

    • “Nobody forced them to take these jobs, they chose to do so voluntarily. Why? Because their alternatives were even worse, much worse.”
      This is indeed the case and this is how Libertarianism suckers the gullible: ‘choice’. Between a rock and a hard place, but it’s ‘voluntary’, right?

      “It is undeniable that the Industrial Revolution lifted the standard of living of millions of people. ”
      It is also undeniable that the multitude were far better of in the late middle ages and that scarce money through gold, which becoming the norm only in the modern age (after the Renaissance) was the main reason for the decline in living standards throughout Europe.

      “It should also be noted that social inequality has nothing to do with capitalism. Capitalism is merely an economic system based on private ownership of the means of production. That is all. And as history has shown, no economic system leads to more equality and higher standards of living at the same time than capitalism. There are many reasons for that, but that is another topic.”

      This is a completely unsubstantiated claim that entirely reject. Social inequality has everything to do with capitalism, as capitalism is a key cause of it. Your ‘definition’ of capitalism is yours, your free to cook one up, as there is no widespread accepted definition out there. I cooked up an entirely different one:
      Capitalism is the system where the few owning capital dominate the multitudes who labor by control of the money supply.
      you can read about it here:
      https://realcurrencies.wordpress.com/2011/12/20/what-is-capitalism/

      “Regarding the definition of deflation. To imply that Tom Woods doesn’t know that deflation means shrinking money supply is beyond disingenuous. It is and outright lie. He knows full well what it means and has stated it on numerous occasions. However, this study used the falling prices definition which is the same definition the FED uses, and the same definition many deflation hawks use. They also think that falling prices is what leads to a depression. Again, the study found otherwise, so even according to their own definitions, they are wrong and the study shows that. Another reason for giving it credence.”

      Here you just prove how wordgames are used to obscure the truth. And when it suits his purposes, Woods does not fear to use it. thanks for that confirmation.

      “This really is just a pointless rant consisting of overt insults and ad hominem and unbacked, demonstrably false claims. You say that elite doesn’t fear deflation. If that is the case, why has the FED printed money to the tunes of 15 TRILLION dollars the past few years? Why are the interest rates at zero? Why has the FED’s balance sheet tripled since 2008?”

      I’ll tell you why Kaj: The FED is printing money, but not to reflate the economy, but to prop up the black holes that the ultra rich and the banks call their balance sheets. The rich don’t fear deflation: the Money Power has forever caused depressions by deflating the money supply. You elsewhere state ‘we degenerate into ‘conspiracy theory”. No, we don’t: you simply still live in lalaland of Austrianism and Main Stream Economics who both try to hide that, and how, the ultra rich wage ware against the many. Next you are going to tell me you don’t realize they are planning World Currency and World Government.
      At the same place you also state: ‘My friend, economics is a value free scientific discipline. It is not about control or about theft”
      That really would be utterly hilarious, were you not suggesting you were actually aiming at a serious discussion. Wake up man: economics is ALL about control and theft. All these memes, be it communism, austrianism, anarcho capitalism, and keynesianism were all invented to hide plunder through usury and the boom/bust cycle.

      “In 1980, Paul Volcker famously raised the interest rate north of 20 percent, which broke the inflationary spiral of the 1970s. If the elites didn’t fear inflation, they would not have enacted massive stimulus, they would have let the too-big-to-fails go bankrupt, let the housing prices fall to their actual market values, kept interest rates at 4-5 percent or even raised them, raised the reserve requirements etc. But they didn’t, they did the exact opposite. They did everything conceivable to keep the money supply growing and the prices from falling (and preferably going back up). If this is not a display of an almost manic fear of deflation, then what is it?”

      You do realize how incredibly pleasant it is for the rich to rake in 20% per year over freshly printed cash, do you?
      You are completely oblivious to ‘stimulus’ and ‘reflation’. Real stimulus and reflation would be aimed at increasing the purchasing power of both producers and consumers in the economy.
      What Bernanke and his predecessors consistently have done is bailing out the banks that got busted. Ostensibly to make them lend again, but in reality to bail out the ultra rich.

      Wake up man! You are falling for words. There is no ‘stimulus’, there is no ‘reflation’, there is only forking over cash from the already illiquid productive parts of the economy to those who created the mess, ONLY INCREASING THE DEFLATION IN THE REAL ECONOMY!!
      You dig Kaj?

      It’s really very funny for you to explain ‘we don’t know the first thing about banking’ when you go on to ‘explain that “Take HSBC, for example, one of the largest banks in the world. It has $2,556 billion in assets and $166 billion in equity. What does this mean? That HSBC has $2,390 billion in liabilities, i.e. in DEBT.”
      HSBC has no debt. People are indebted to HSBC!
      Jesus, get a grip man!
      Deflation makes cash worth more. Ie: the interest that the banks get paid over all these debts they have outstanding remains the same in nominal terms, but is escalating in real terms.
      Hello?

      It iS true that banks don’t mind inflation either. They create a boom/bust cycle. It’s not a force of Nature Kaj, it’s done on purpose. Inflation gives them even more debt owed to them and especially in the deflation they plan to create after the inflation, these debts and the interest will become worth even more!

      You know Kai: not all people are such naive nice guys as yourself. There are real vampires out there and the worst of them go work for banks

      “You’d be hard pressed to find an Austrian who don’t view the banking industry as a monopoly or cartel, so I really don’t understand the derogatory rant preceding this paragraph.”
      this is simply not true. If you read many libertarian outlets you’ll see they say it’s the ‘statist’ Central banks that are the problem and that ‘banks’ are just a ‘free market’ operation that get messed up by ‘statist interference’.

      Well Kaj, as you can see I don’t fear in the least to provide detailed feedback. It’s just sometimes tiresome to for the umpteenth time explain the self evident, whereas my whole blog is full of these explanations and people just don’t care to read and start blazing away completely oblivious to the idea that somebody actually might coming from a reasonable point of view.

      So, please tell me: how much Greco, Eisenstein, Lietaer, Kennedy, Feder, Brown, et alia have you actually read?

      • Anthony

        Yes, it is voluntary. It is a terrible position to be in, but the point is that the industrial revolution gave these poor people an alternative they otherwise would not have had. Would, in your view, had been better if they only had the death-by-starvation alternative open to them?

        “It is also undeniable that the multitude were far better of in the late middle ages”

        This is a bald-faced lie. Had that been the case, then the industrial revolution would not have happened, because if they people were better off before that, they would never have supplied the labor needed to run the factories and mines. To even suggest that most people were better off in the Middle Ages is ridiculous on its face, considering how less effective the structure of production was then. There were far less of everything, yet you believe the people had it better?

        “This is a completely unsubstantiated claim that entirely reject.”

        Unsubstantiated? Compare the standard of living and equality of the people in Western Europe and US with those living under the communist regimes in the East. Compare South Korea to North Korea. There is evidence galore for this claim. And my definition of capitalism is correct. Yours, on the other hand, seems to be taken right out of the Communist Manifesto.

        The fact that you don’t understand why credence is given to the FED study even after my lengthy explanations shows that you’re not interested in serious discussion, you just want to be inflammatory. No argument, no rebuttal, nothing.

        You’d be hard pressed to find an Austrian who claims that the FED is printing money to reflate the economy for the good of the people. To the contrary, the Austrians have always said that the FED’s main purpose is to serve its special interests and the state. So of course they are reflating to save the banks and the government. Austrians have also always said that this money printing hurts the economy. It benefits the special interests at the expense of the general population, savers in particular. You’d know this, had you actually ever read anything by Austrians.

        But even so, regardless of why the FED is printing money, its objective is to avoid deflation. They are, in fact, desperately afraid of deflation because that would generate credit defaults in the trillions, bankrupting the banks. That in turn would send interest rates through the roof, as the only thing keeping the interest rates so low is the constant money printing. The banks need to keep the inflation going and by the looks of it they’ll keep it going until hyperinflation hits. We can only hope they stop before that happens.

        The very fact that you willingly admit that the FED and the banks are reflating in order to save themselves flies in the face of your completely unsubstantiated claim that not only do they not fear deflation, they use it as a tool of control. Again, if that was the case, the money supply would not have grown many thousand times over as it has since 1913. There is absolutely nothing out there suggesting that banks are not terrified of deflation. Absolutely nothing.

        Regarding World Government. Austrians have raised this issue for decades, with vehemence since the founding of the Bretton Woods system with its World Bank, IMF and Bank of International Settlemets. Again you display your complete ignorance of Austrianism, but not only that, had you read what I was referring to with my conspiracy-comment, you’d know I meant REN’s suggestion that Austrian economics itself is some sort of conspiracy.

        You further go on to say that Austrianism was “invented to hid the plunder through usury and the boom/bust cycle”. If this indeed was the case, why would Austrians have labored for over 100 years to expose the business cycle set in motion in large part by central banking, credit expansion, money printing and artificially low interest rates? Why would they have kept pointing out the very factors that generate the business cycle, at great personal expense, if their aim was to hide it? Nothing of what you say makes any sense at all.

        “You do realize how incredibly pleasant it is for the rich to rake in 20% per year over freshly printed cash, do you?”

        Yes I do, which is yet another reason for them fearing deflation and preferring inflation, which has been my point from the very beginning. At this point, I don’t think even you know what you are trying to argue. I think it is you who needs to wake up, because nothing you say is even remotely applicable to me.

        You seem to think I’m in favor of the current system, central banking, money printing etc. I’m not. You seem to think I’m in favor of so called stimulus, I’m not. Like all other Austrians, I recognize that the stimulus is actually a sedative and that the economy is getting closer to a complete overdose. And pray tell, where is this deflation you speak of? Where are prices falling? In what way is the money supply shrinking? Use any definition of deflation you like, and you won’t find it anywhere.

        Oh, so no banks have no debts. Right. Because no bank ever issued any bonds. No bank ever lend from the public. Deposits are not treated as loans. As I said, you don’t know the first thing about banking. Normal companies have turnovers, i.e. their net sales of the year. Banks have net interest income, which is in short is the difference between interest received and interest paid. So they do have debts and they do pay interest. Deflation also means that the nominal value of the collateral for the loans they’ve given goes down, and if it goes down enough, it is not enough to guarantee the loan. If the borrower is unable to offer extra collateral, he may very well end up defaulting on the loan. Because the value of the collateral has gone down, not only does the bank suffer a credit loss, it also sits on a very illiquid asset which is unlikely to generate any reasonable return. They don’t want that, if they did, it would be the easiest thing in the world for them to do.

        “If you read many libertarian outlets you’ll see they say it’s the ‘statist’ Central banks that are the problem and that ‘banks’ are just a ‘free market’ operation that get messed up by ‘statist interference’.”

        Really? Read Mises.org or lewrockwell.com and tell me where you find anything like this.

        “Well Kaj, as you can see I don’t fear in the least to provide detailed feedback.”

        If you call this “detailed feedback” then we have a serious disagreement, as I’ve just shown. This “feedback” was even more derogatory, ad hominem ranting than your initial post. Again, you clearly haven’t read an Austrian book in your life, yet you think you are competent to critique it. That is beyond dishonest.

        • “Yes, it is voluntary. It is a terrible position to be in, but the point is that the industrial revolution gave these poor people an alternative they otherwise would not have had. Would, in your view, had been better if they only had the death-by-starvation alternative open to them?”

          No, it’s not voluntary. It’s symptomatic of your wavering moral compass that you do not feel forced to look deeper and jsut say: ah well, it’s bad, but it could be worse. To you it’s just fine that the ultrarich of the day exploited low wages to the max: just voluntary right? Wrong: a fucked up balance of power that everybody in his right mind should expose and resist with all his might. NOt just for himself, but for his brothers.

          “This is a bald-faced lie. Had that been the case, then the industrial revolution would not have happened, because if they people were better off before that, they would never have supplied the labor needed to run the factories and mines. To even suggest that most people were better off in the Middle Ages is ridiculous on its face, considering how less effective the structure of production was then. There were far less of everything, yet you believe the people had it better?”

          There are twohundred years between the IR and the Renaissance. Body weight, life expectancy dramatically detoriated during this time. Get you facts straigth and don’t settle for deductionism in the face of available facts.

          “Unsubstantiated? Compare the standard of living and equality of the people in Western Europe and US with those living under the communist regimes in the East. Compare South Korea to North Korea. There is evidence galore for this claim. And my definition of capitalism is correct. Yours, on the other hand, seems to be taken right out of the Communist Manifesto.”

          You don’t realize that the West’s high living standards are because of their ability to import gratis resources due to the monetary system? Ever heard of John Perkins? Go read him and find out why the west rules.
          Meanwhile, while suckers like you and me are relatively comfortable for the time being, the inexorable redistribution from poor to rich through usury (anywhere between 1 to 2 trillion per year in the US alone is being paid by the poorest 80% to the richest 10%) continues and the disbalance between the rich and the poor grows worse every year throughout the west. The divide between the rich and poor countries and grown fivefold over thelast century. THAT’s capitalism. The definition that you use is not unheard of, but it certainly is not universally accepted and the simple fact is: there is no universally accepted definition.
          Spare me the commie crap. Commies want state ownership (where the same rich that rule in the ‘free market’ rule the state). Both capitalism and Communism are monopolies. It’s called the Hegelian dialectic.

          “The fact that you don’t understand why credence is given to the FED study even after my lengthy explanations shows that you’re not interested in serious discussion, you just want to be inflammatory. No argument, no rebuttal, nothing.”
          I’m going to put this accusation squarely where it belongs: with you, as you have done nothing to dispell what I said about how tom woods uses wordgames when it suits him to hide that deflation is a horrible threat and that it in reality is a shrinking money supply and not declinign prices. Tom Woods DEFENDS deflation, and he does it by using said study to obscure that tanking money supplies and depressions are one and the same, by using a study denying deflation is linked to depression, while using declinign prices as definitions. This is willfull obscuring, and you are trying to make it go away by being a blowhard.

          You’d be hard pressed to find an Austrian who claims that the FED is printing money to reflate the economy for the good of the people. To the contrary, the Austrians have always said that the FED’s main purpose is to serve its special interests and the state. So of course they are reflating to save the banks and the government. Austrians have also always said that this money printing hurts the economy. It benefits the special interests at the expense of the general population, savers in particular. You’d know this, had you actually ever read anything by Austrians.”

          You again do not understand or trying to make it go away: THE FED IS NOT REFLATING!
          IT is just bailing out the trillionairs. Would it be reflating, it would give interest free credit to the productive parts of the economy, not to hedgefunds and banks.

          “The very fact that you willingly admit that the FED and the banks are reflating in order to save themselves flies in the face of your completely unsubstantiated claim that not only do they not fear deflation, they use it as a tool of control. Again, if that was the case, the money supply would not have grown many thousand times over as it has since 1913. There is absolutely nothing out there suggesting that banks are not terrified of deflation. Absolutely nothing.”

          Again: the FED is not reflating.
          You are probably unaware of the P+I>P equation, proving that an interest bearing money supply is always deflationary, because the interest needed to pay of the debt is not being created. That’s why the money supply has grown far more than prices have risen over the last hundred years:
          Prices have not risen becuase of ‘inflation’, but because of ever higher cost for capital related to an ever growing interest bearign money supply. The money supply HAD to grow, to avoid continuous massive bankrupcies because of a lack of cash because of the P+I>P issue.
          Welcome to Interest Free economics; time to read up and give this primitive austrian nonsense a little rest.
          And don’t respond to this, because you have nothing: go do your homework.

          “You further go on to say that Austrianism was “invented to hid the plunder through usury and the boom/bust cycle”. If this indeed was the case, why would Austrians have labored for over 100 years to expose the business cycle set in motion in large part by central banking, credit expansion, money printing and artificially low interest rates? Why would they have kept pointing out the very factors that generate the business cycle, at great personal expense, if their aim was to hide it? Nothing of what you say makes any sense at all.”
          You conveniently skip responding to the Usury bit. Undoubtedely because there is nothing you can show for the Austrian resistance against a 5 to 10 trillion yearly global wealthtransfer through usury from the poorest 80% to the richest 10%.

          The boom /bust cycle theory of the Austrians (credit booms resulting in ‘malinvestment’) is one of their typical half truths. The real issue is that the Money Power creates this boom/bust cycle willfully. Credit booms are just their method.

          “Yes I do, which is yet another reason for them fearing deflation and preferring inflation, which has been my point from the very beginning. At this point, I don’t think even you know what you are trying to argue. I think it is you who needs to wake up, because nothing you say is even remotely applicable to me.”

          you are just unwittingly playing the ‘inflation vs deflation dialectic’. I analyzed that issue here:
          https://realcurrencies.wordpress.com/2012/01/12/the-inflation-vs-deflation-dialectic/
          Banks profit both from deflation AND inflation. But they love deflation better, because deflation FAVORS CREDITORS KAJ! THEIR DEBTS OUTSTANDING INCREASE IN VALUE AS DOES THE INTEREST AS I HAVE ARGUED FOR SO OFTEN NOW.
          Ok? do I make myself clear?

          “You seem to think I’m in favor of the current system, central banking, money printing etc. I’m not. You seem to think I’m in favor of so called stimulus, I’m not. Like all other Austrians, I recognize that the stimulus is actually a sedative and that the economy is getting closer to a complete overdose. And pray tell, where is this deflation you speak of? Where are prices falling? In what way is the money supply shrinking? Use any definition of deflation you like, and you won’t find it anywhere.”
          I dont think you’re in favor of the current system.
          Also I’m absolutely positive you don’t want stimulus. You’re an austrian, you want deflation.
          I want stimulus. But not by bailing out banks, but by interest free credit for mainstreet.
          Where are prices falling?
          Man……..how about the Dow? How about housing?
          Interestingly, these are not part of the Fed’s core inflation………….

          “Oh, so no banks have no debts. Right. Because no bank ever issued any bonds. No bank ever lend from the public. Deposits are not treated as loans. As I said, you don’t know the first thing about banking. Normal companies have turnovers, i.e. their net sales of the year. Banks have net interest income, which is in short is the difference between interest received and interest paid. So they do have debts and they do pay interest. Deflation also means that the nominal value of the collateral for the loans they’ve given goes down, and if it goes down enough, it is not enough to guarantee the loan. If the borrower is unable to offer extra collateral, he may very well end up defaulting on the loan. Because the value of the collateral has gone down, not only does the bank suffer a credit loss, it also sits on a very illiquid asset which is unlikely to generate any reasonable return. They don’t want that, if they did, it would be the easiest thing in the world for them to do.”

          Of course banks borrow, that’s not the issue, but a bank of course lends out at least as much as it borrows for higher interest

          “Because the value of the collateral has gone down, not only does the bank suffer a credit loss, it also sits on a very illiquid asset which is unlikely to generate any reasonable return. They don’t want that, if they did, it would be the easiest thing in the world for them to do.””

          This is just the ultra naive austrian lalaland. Banks go bust because they know they will be bailed out. They’re robbers, ok?
          They would never go bust if they thought it would lose them money. But they own the Federal Reserve, literally and they mind control people like you to believe they actually have a problem.

          But let me guess: this is ‘degenerating into conspiracy’…….lol

          Again: I have no problem providing you with detailed feedback. You, on the other hand, avoid the basic points I’m making about every important issue, including usury and deflation.

          I don’t mind, I just let the reader decide. They know.

          • Anthony

            “To you it’s just fine that the ultrarich of the day exploited low wages to the max: just voluntary right?”

            What are you talking about? When I have even remotely suggested anything of the sort? It is you, mind you, who want to take away even that meager possibility for the poor to better their lives. When child labor was banned in Bangladesh, for example, it ended with children (and their families who depended on them for income) dying of starvation, or making ends meet by prostituting themselves. My friend, it is not I who fails to scratch the surface here.

            “There are twohundred years between the IR and the Renaissance. Body weight, life expectancy dramatically detoriated during this time.”

            Uhm…okay…so from the Renaissasnce to the IR, life expectancy deteriorated dramatically. And this shows that people had it better during the middle ages than the IR and after how exactly?

            The standard of living rose in the West because of the veritable explosion of productivity. We produced things that people in the East couldn’t even dream of, much less produce themselves and export to us. Where are you getting this stuff from? As Woods pointed out, you don’t know what the Hegelian dialectic means, something you managed to demonstrate very well with your claim that capitalism and communism are both monopolies and essentially the same thing.

            There is absolutely nothing to fear from a shrinking money supply, especially since so much of the money used today is created out of thin air. What would be preferable of course is actual sound money, and a stable money supply. The US had something very close to that from 1776 to 1913, and it was a great boon for the country and the people.

            Reflate means “trying to inflate again”, which is exactly what the FED is trying to do, and in doing so it bails out the banks and other favored corporations. But I note that you conveniently ignored me pointing out that the Austrians are and have been the most vocal critics of this.

            I don’t need to respond to your equation nonsense, because that is all it is. You’re contradicting yourself in every single paragraph. You clearly classify the current monetary system as interest bearing money. It is statistical fact that the money supply has grown exponentially. You yourself define deflation as shrinking money supply. So clearly, “interest bearing money” is incredibly inflationary, not deflationary.

            Then you say that prices have not risen because of inflation. At this point, I have absolutely no clue what you mean with inflation, because you seem to change your definition from one sentence to the next. The Austrian proposition is that nominal prices have risen because of inflation, inflation meaning a growth in the supply of money. With more money units chasing the same goods, money prices will rise.

            I didn’t skip the usury bit. You equate all interest with usury, we don’t. No point in dwelling on that. And regarding wealth transfer, especially through the monetary system, you won’t find more vocal critics than the Austrians. To be honest, I don’t understand how you can be alive and not know this. Have you ever heard Ron Paul speak?

            “The real issue is that the Money Power creates this boom/bust cycle willfully.”

            Right. And what exactly does the Austrian Business Cycle theory say about what creates the boom/bust cycle? I believe it says that it is created by the central bank in cahoots with the commercial banks.

            Yes, deflation benefits creditors. What you don’t seem to understand is that banks are debtors too. If they did prefer deflation, then why do they always opt for inflation? You still haven’t been able to explain this little hole in your theory.

            I simply want a stable and sound monetary system, a commodity money. I want the market to set interest rates. I want the market to allocate credit. I want full reserve banking. I don’t want any government involvement what so ever. But yes, housing prices have fallen somewhat from their peaks, but not nearly by far enough, and are actually on the rise in some regions. And most other prices are going through the roof, as is the expansion of the money supply. So I ask again, where is this deflation? Certainly not in the money supply or in consumer prices.

            It is good to hear you admit that banks actually borrows. Today, most banks have almost as much debt as it has assets. You know, these childish lalaland rants are getting tiresome. Since you have nothing of substance to say, just don’t say anything. But pray tell, how exactly are the banks “mind controlling” me. This I should like to know! Do I come off as a huge supporter of the current system to you?

            I haven’t avoided a single point, but I admit it is almost impossible to know what your point is from comment to comment, sentence to sentence. But tell you what, how about we stop this comment nonsense and have a live discussion. I have Skype, as have you. Let me know when you’d like to talk, I’m sure it’d be fun for the both of us.

  13. Matt Tanous permalink

    Interest Free currency? LOL. Interest is a fact of life. To eliminate it would be tantamount with eliminating current consumption – everyone would have to value having a good 100 years from now the same as having it today. The very idea of “interest free” anything is utterly absurd.

    • Matt, don’t remain in the dark: interest free currency is the easiest thing in the world and has been done for centuries, both as interest free (mutual) credit, or as debt free government units. Read up at the interest-free economics page to your right.

  14. nitupsar permalink

    I have a confession to make. And may God forgive me for not thinking things through. I have been a gold standard believer until not too long ago. I have always (at least for a few decades) known that the fiat money system we have today and especially the dollar was doomed. I thought naturally that hard money (gold) or money closely tied to gold was the solution. I think like most people I did not really dig deep into the issue, I simply grasped the next straw that presented itself and it happened to be golden. After all, gold has a certain attraction on us humans. And it is tempting to have money that increases in value instead of shrinks.
    But, and here comes a big but, which would guaranteed mean a big kick in the butt for us if we bet our bacon on gold and think we’ll be lot better off holding gold instead of whatever we are holding or not holding today!
    We might be better off in a temporary short lived crisis situation where no one trusts anybody’s paper. But this a a very meager and not very lasting comfort.

    Let’s get right down to the nitty gritty of of the gold issue. We all feel strongly that we need something better than what we have today. And we have thus come to cling to a golden straw. And we want to make gold the standard and the backbone of our new monetary system. Let’s say we go for a system where in the first case we either trade in gold directly and physically. It is doable if we just dilute it enough. You can have coins with all kinds of different percentages of gold in them, all from 100% down to 0,0001% if you wish. Maybe not very practical, but possible. A second option is100% gold backed notes. Would anybody be worthy of our trust to do this. Probably not.

    Then if we are going to implement this new system and it will mean that gold is money. Period. We have to have one standard and it’s in the cards that it will be gold and maybe silver (poor man’s gold) will
    play second violin. I will skip all the practical problems but in the final analysis the new system will mean that the ones who have the most gold will have the most “money” since gold now is money and the peasants and the workers will be just as poor as they are today.

    One can clearly see that if we are going to have fairness as part of the equation, the new system will not be one hair better than the old decrepit debt laden fiat system we now have. We will instead now in the form of monetary law have established once and for all that “he who owns the gold, makes the rules”! The backward “golden rule”. Fun for the ones who owns the gold, maybe, but continual eternal servitude for the rest of us. You may say that there is gold in the ground and it is up to everyone to go and dig it out for themselves! Yes, that is true, especially if you own a mining company. It is the same with freedom of speech, you have it in full if you own a newspaper or a news agency like Reuters. Thank God for the internet and the alternative media.
    There are people in this world today that possess thousands of tons of something that you maybe have a few ounces of. Do you really want to have established once and for all that these people shall have the upper hand? To me that is the most fruitful way of seeing this issue. Then to further build your case, you can start thinking about how these people came to be in possession of all this gold. One thing is for sure, they did not work in a factory or office from (7) 9 to 5, and neither did their parents nor their grandparents. A system based on the ownership of gold simply gives an unfair advantage to people who have too much to begin with.
    If we wish to strive for greater social justice and more financial equity, then any standard based on gold will not serve us. We have to rethink the whole way of how we look at each other and how we wish to create the future for ourselves and our children. This is a big subject and worthy of many hours of analyzing, but let that be for another time.

    The bottom line when it comes to gold is it contains just too much hell! I used to say that, take the (hel)l out of gold and you’ve got God! That’s how firm a believer I was. But partly thanks to Anthony, I have seen the light, and am already working on better money than both the fiat notes we have today and the good old gold.
    Nothing wrong with gold, folks, it just isn’t a vehicle for change and more social justice. It is nice for wedding rings and jewelry and many other things, but it just isn’t fit to be our future medium of exchange and payment for our blood and sweat. The holders of gold would also of course underestimate the value of our labor and overestimate the value of their gold. That is just human nature, isn’t it?!

    I challenge everyone who has had the notion that a gold standard would be better than what we have now, to think the issue through, free from greed, emotion and sentimentality. Money, neither gold nor fiat nor any other money is God-ordained and predestined to be. We are free moral agents and have the freedom to live completely without money, or if we are not ready for that yet, to create the kind of money that serves us best. The kind of money that serves the greater good and not just a few. I wish you all the best in your efforts to create a better world!

    PS Reality check: What kind of money or exchange system do you think a factory worker or a farmer would come up with if he was allowed enough time off to be able to think these things through?

    • thanks nitupsar.
      I’d be most interested to hear more about your new system!

  15. The Austrians and Hyman Minsky both saw the boom and bust cycle as being caused by the the creation of dent money and its destruction. Minsky’s prime follower is Steve Keen who does favor Debt Cancellation but does not advocate the end of debt based currencies and fractional reserve banking.

    I have a slightly different take than you do, But I once wrote something about the fallacy of Austerity which is hurting Europe now and will be hitting America very hard in 2013. Austerity is the an idiotic idea common to the Austrian school and the Neo-Liberals at the IMF and ECB.

    This is it

    The Mathematics Of Austerity: Proving Austerity Never Was Even Intended To Work

    http://vidrebel.wordpress.com/2011/09/12/the-mathematics-of-austerity-proving-austerity-never-was-even-intended-to-work/

    Thanks, Daniel

  16. marxbites permalink

    BTW, please PROVE the Austrians ever said a free market evolved and universally accepted money created by production, like the precious metals, carries a single farthing of interest unless by state coercion?

    I wont hold my breath on that one for sure.

    Interest on loaned capital, was never the problem though; except when its interest by, of and for CBs & their puppeted Govts fiat debt money created from thin air w/near zero cost of production or any intrinsic value but the state’s bayonets.

    Metals, or fully redeemable paper equivalents have NO counterparty risk, but ALL paper certainly does.

    Go read Rothbard’s History of Money & Banking.

    • REN permalink

      What about Cecil Rhodes (Debeers) and Openheimer (Anglo American) in Rhodesia/South Africa? That was a free market as there was no money! The natives had no need of money as we know it. Totally free and lawless, perfect for Austrianism. The diamond and gold privateers created a head tax, so the natives had to work to acquire money. The government superstructure then fell into place, and natives had to mine gold/diamonds to acquire said money.

      In this case, it would be a government of private monopoly interests, holding the money power and their population in thrall. OOOH they had plenty of gold, yet it was the taxes that got things rolling? Hmmm. How about the diamonds? OH wait, they limit diamond supply. Again, privateers that hold money power, government power, and also manipulate the world diamond market.

      This south african money got its currency as a promise to receive in taxes. That’s all. Sorry about that, it is not the gold or diamonds, or other perceived magical make belive powers imputed to money. Law and force and faith are the elements. That means we need government, but it has to be the right kind.

      Austrianism skewing what money is, and throwing up their smoke screens does humanity a disservice. We know that humans are defective. OK! Let us make a money system where our better angels are allowed to build it.

      Austrians have sided with the dark elements of humanity, and their confusion attack is not helpful.

      • Matt Tanous permalink

        “The natives had no need of money as we know it”

        Free market without money? How does one have indirect exchange without a medium of exchange?

        Barter is problematic, and impossible for anything beyond bare subsistence living. The problem of coincidence of wants and indivisibility of goods prevents any market from arising.

        Your understanding of economic theory is utterly wrong. Money does not require government, and it does not come about because of a tax.

        • REN permalink

          Credit and Debts pre-date money. Money came along much later in middle eastern temples. In villages of 70 people or less, human’s use credit/debt mechanisms. They simply remember who they loaned what to. This evolved to marks on mud or clay, which are called Talleys. A talley is high information, but low velocity. The talley allowed barter to be “marked” and gave it an element of law. Settling debts and credits were often done at fairs. Mayfair and other large fairs in Middle Ages are good examples.

          African’s at the time of DeBeers did not have a well developed money system. Along the coast line, they used Conch Shells.

          With farming and estabilished agricultural communities evolved, along with Temples, money started to be used. Barley weights and other forms of money were always denominated in lunar or calendric numbers (divisions of 30 or 12), which is evidence of humans counting and looking at the heavens. The Temples used money to pay their workers, who were people on the edge of society (the welfare class). They made goods and traded with other Temples. Money was a way of keeping account. Dr. Michael Hudson and Alex Marshack have done quite a bit of work on the history of money.

          Again, we have prima facie evidence that Austrians don’t look to history to verify their theories. They make them up a-priori. If it sounds good and make some sort of logical sense, then it must be true… It is a good way to ensnare and entrap with a false dialectic.

  17. marxbites permalink

    What a load of malarky vis the pre-FED gold std that all is Anthony.

    Listen to Geo Selgin blow it RIGHT outa da water for you.

    AND, he’ll clue ya’s in on the good and bad kinds of deflation as well.

    (Wood’s IS a great historian, but Rothbard is even better, also worth one’s while are Roy Childs, Gabriel Kolko, Albert J Nock, Herbert Spencer & Robert Higgs, all enemies of the same power elite scum we here mutually detest)

    A Century of Failure: Why It’s Time to Consider Replacing the Fed | George Selgin

    Go ahead and refute anything he says if possible.

  18. REN permalink

    From 1914 to 1917 wholesale prices rose 65% and, then increased another 55% to May 1920, So Gold coins lost over 75 % of their value against wholesale prices in the Fed’s first six years. Then by June 1921 wholesale prices fell 56% against gold. “Hard money” advocates who believe that gold money has been stable should study these facts.

    For hard money, you simply need to limit the supply of your money tokens. Paper or any sort of Fiat can be HARD MONEY! Strict adherence to money supply matching overall level of goods and services is one approach. Or, for simplicity limit money supply to population levels and some growth factor. The other element is make money accelerate to a higher velocity.

    Limiting usury to the principle is one way to increase velocity. Also, this approach limits the transfer of usury to a plutocracy. Another way is to ban compound interest, which flattens the usury curve even more. Any plutocratic growth can then be taxed away with advanced tax laws.

    A lesson of history, especially the Massachusets Bills, is that money simply needs to be a promise to receive. It does not need to be a promise to pay. Pay attention to history Austrians! Humans will use the paper token, even if the silver or gold is still in the ground. A simple promise to receive in taxes is enough power to give money currency (force to move as current).

    Austrianism does not get it right. They have a serious problem with a-priori methodology. If they think it, it must be so. But, history teaches us other lessens, and to not heed those lessens is both arrogant and foolish.

  19. Bourchakoun permalink

    Delightful once again Anthony. Congrats on the good work of economic enlightenment.

  20. madtom permalink

    Anthony, good article. question though, as some of this seems personal as well as substantive. do you have a problem with guys like Tom Woods and Austrianism as a whole, or is it just their love affair with gold and approval of interest? aside from calling for a gold standard, I think Austrianism generally gets it right. just wondering what you think of that. I sometimes think that there is too much divisiveness when there can actually be so much common ground. and perhaps I find myself defending Tom Woods because I respect him so much as a historian if not as an economist.

    • Hi MadTom,

      No, Austrianism has certain things right: no disinformation is complete nonsense.

      And the issue is not even being right or wrong.

      The issue is continuing a party line even in the face of evidence and arguments proving how incredibly dangerous they are. Like in the case with deflation and austerity.

      There’s no problem with not knowing, there is with purposeful lying.

  21. Reblogged this on Recovering Austrians.

Trackbacks & Pingbacks

  1. Why Tom Woods is wrong about the Greenbackers | Real Currencies
  2. Debunking Tom Woods’ “Catholic” Austrian economics « Real Currencies

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