@saline09 Thank you for this thoughtful post. Regarding that guy’s “We are the Gold” blog post, I agree with most of his comments and intentions, especially on the problems caused by fractional reserve banking, “governments are criminal,” “insolvent banks,” etc., but it’s clear he does not have real-world experience in economics and institutional finance. Specifically:
recessions are a necessary fact of economies…
Yes, but economic depressions, market monopolies, bad-faith (and often corrupt) international trade agreements, economic imperialism imposed by military empires that become empires through corrupt mercantilist trade practices, and many categories of market failures are economic events that have nothing to do with the natural inhalation and exhalation of a market. Libertarians (including me, when I was a libertarian) often blame these non-market events solely on government. That is only partially true: Blaming government without recognizing the symbiotic dance between government and gigantic corporations that are allowed to amass so much financial/political power that they’re able to capture the government is also an equally toxic symbiotic factor.
Marxists are liars…
I don’t subscribe to Marxism, but anybody who says “Marxists are liars” has never fully read anything written by Karl Marx, doesn’t understand how influential Marx was on virtually all forms of modern economics, and doesn’t know how to engage people rationally without name-calling, all of which reduces their credibility. Marx predicted virtually all the malfunctions of capitalism on Earth today. That alone earns him the respect of any rational thinker. Marx’s solutions are not ideal, but neither are the toxic neoliberal trade theories that have concentrated enormous economic/political power into the hands of a tiny number of oligarchic kings who own/control more wealth than the GDP of entire countries today.
Marxism leads to unappealing socioeconomic outcomes from the perspective of a free-market mind, but the problems we are debating in some of these threads are about the pre-market genesis of a crypto market before it even became an actual market. As with all natural and man-made organisms, birth-defects can have life-long adverse consequences. IMHO, the ADA concentration issue is a major birth defect, which will have lasting consequences. Good people can debate in good faith what those consequences will be; and I respect their right to do so.
all home mortgages must be marked-to-market every single day…
This reflects a shallow understanding of institutional finance. It’s not even technically possible to effectively mark-to-market (M2M) every day because the value truth of any market is very different from the day-to-day price fluctuations within a market. Prices can fluctuate wildly for many non-market reasons that have nothing to do with the intrinsic value of an asset/commodity. If firms whose corporate charters require them to hold a certain level of assets in reserve are forced to M2M, then M2M forces them to rapidly liquidate all their assets to satisfy margin calls and other reserve requirements. That would dramatically increase volatility, reduce the stability of the market, and amplify market bubbles and busts. Standard IFRS/GAAP valuation methods are not perfect, but they’re far less destructive than M2M.
A currency is backed by the character and integrity of men that constitute the issuing nation or body. In short, WE ARE THE GOLD.
I understand and appreciate the spirit of what he’s trying to say, but this is not substantiated by any facts; it’s just a nice-sounding platitude. The reality is that a fiat currency is backed by the coercive power (guns) of governments. Commodity-backed currencies are backed by the socially agreed value of those commodities. Both kinds of currencies require human faith, but fiat currencies are far more susceptible to collapses of faith because the political machinations of governments (and their guns) is a much more subjective and emotionally-charged concept than a society’s relatively more objective perception of the exchange value of a commodity.
Additionally, many populations have no meaningful power to reign in the prodigality of their governments. When faced with tanks and machine guns of an all-powerful state, “the character and integrity of men” become lifeless piles of flesh and blood on the street. That imbalance of power between state and citizen has nothing to do with the integrity and character of the citizens per se, but I understand his point: We, as citizens, should find the courage to fight back against tyrannical and prodigal governments whenever possible.
[everything so far is] contingent on a moral society with a functioning rule of law, honest regulation and a populace that was mostly honorable and trustworthy. . . . If you have a nation of moral degenerates, all bets are off. If the people are more dishonest than honest, and the government is nothing more than a mafia, then all economic systems and all postulations fly apart at the seams. If there is no rule of law, and if theft, graft and looting are the prevalent systems of economic activity, then no matter what your banking system, no matter what your currency – fiat or commodity-backed, your system and your economy will absolutely, positively fail eventually. . . . Sadly, that is where we are in this country.
Throughout that entire section until the end, he makes many broad generalizations that are only partially true; and he ignores many nuances about markets, economics, politics, etc. that are important if he truly wants to accurately diagnose the problems he is venting about.
More importantly, he’s unnecessarily resorting to highly subjective concepts like morality and religion, thereby making the entire issue much more complicated than it needs to be. The problem is clear: When governments allow banks and corporations to become gigantic Tyrannosaurus Rexes (aka, “whales”) that stomp all over their socioeconomic ecosystems, then political and corporate corruption, wretched poverty, environmental pollution, bureaucratic overgrowth (in governments and corporations), and unsustainable concentrations of economic and political power are the inevitable results.
The solutions to these problems are also equally clear to me, but the solutions will be rejected by anybody operating within a puritanical libertarian ideology because they will refuse to see any shades of color between all the isms that plague homo sapiens today. So, it’s not worth the time/effort to debate the trolls that are trapped in their ism prisons, but I really appreciated this post and your open-mindedness in general. Thank you.