I disagree with you about the comment section. I forgive those I overlook, but I do recall names like Bill Woolsey, David Glasner, Greg Ransom, Bob Murphy, etc, who presented pro and con views and seemed well-informed. And there were many other good commenters. Of course in any comment section there will be less well-informed commenters, and I would certainly put myself in that class. But I do think I learned something about Austrian BCT. I still don’t believe it adds much to mainstream AS/AD, which I think explains business cycles and inflation pretty well.

With all due respect to your commenters, a blogpost comments’ section is not the right place to learn anything. Certainly, I would not use reading a comments section as evidence of me knowing something.

I strongly urge you to start looking at Roger Garrison’s powerpoints on Hayek’s boom-bust cycle, then to pick up some Hayek and Rothbard, and eventually Mises. Until then, you cannot possibly make the claim that you did not find anything useful in Austrian economics.

From where you stand, after years of mainstream education, reading a blogpost comment making an Austrian point will of coruse sound like alien nonsense to you. But until you actually know what Austrians are talking about and what they mean, and spend some time reading them, you can’t say they offer nothing useful.

Nick, I believe that most free banking types oppose any copyright on the unit of account. In that case you might well have competition in currency, despite network externalities. (Perhaps tied to a gold standard.) But competition in currency might be even less efficient than monopoly, as the seignorage could be dissipated in wasteful non-price competition. Price competition may be technically infeasible due to the inconvenience of paying interest on cash. (Some have proposed lotteries based on serial numbers at randomly chosen dates. This is probably the most efficient way of paying interest on cash.)

TGGP, Thanks for the tip. I have never studied anarchy.

But my hunch is that the network externalities are what’s important, in making it difficult to have competing media of exchange and media of account.

But if network externalities do restrict competition, if we did de-nationalise money, we might just replace a government monopoly with a private monopoly, which is not obviously better, and might be worse.

They are not. So far I understand, the Liberty Dollar people are being prosecuted for what amounts to ‘counterfeiting’. The basis of which is whether people haplessly assumed that 20 liberty dollars could be exchanged for a $20 FRN…

It remains to be seen whether they are convicted anyways…

The store will be awarded a payment in FRN, albeit probably in excess of the market price of silver.

This is different then say the merchant agreeing to accept a particular lot of silver–or you agreeing to trade a particular house etc. Then the court will be happy to assign title and custody–even if you had subsequent (improperly) transferred those items to someone else.

So as the fine print on the bill says, “This note is legal tender for all debts, public and private”

Azmyth, Your analysis seems very sensible to me. The only additional point I would make is that the C-S index slightly exaggerates housing inflation during booms, (and vice versa.) If I am not mistaken, that makes our estimates even more similar.
On a side issue, my work on the Depression led me to believe that price indices that included mostly flexible asset prices often tracked NGDP more closely than the CPI. Thus I seem to recall that both the WPI and NGDP fell roughly in half during the early 1930s, but the CPI fell only about 25%. Since I am in favor of using NGDP growth as an indicator of monetary policy, I am sympathetic to those who prefer a price index that has lots of flexible asset prices.

123, Yes, I agree. I have always had a problem with the notion that the Fed simply blows asset price bubbles. Yes, the Fed can affect real asset prices, but only by creating unexpected changes in NGDP growth. If NGDP growth were completely stable, any change in real asset prices would be due to real factors, not monetary policy. Of course NGDP growth has not been completely stable over the past 15 years, but it certainly hasn’t been unstable enough to blow up huge tech/RE/oil bubbles.

Adam, I worked through a 189 comment post on Austrian economics, and didn’t see much advantage over textbook economics. It seemed to have many of the same flaws as Keynesian economics, such as the assumption that low interest rates means “easy money.” I have a lot of problems with textbook economics, but I don’t see any Austrian shortcuts to solving those problems.

DG, Nick, Bill, TGGF, Jon, Are US stores allowed to price all goods in ounces of silver, and demand payment in silver? I don’t know the answer, but I assume someone does. Last night I flew home on American Airlines, and they refused to accept dollars in payment for the snack packs and alcoholic beverages. Was that refusal illegal? I would guess not.

My hunch is that Nick is right and that alternative monetary regimes are not illegal. But in either case, there is no point in debating the issue, someone simply needs to look up the answer. If alternative monetary regimes are not illegal, the success of the dollar may be due to network effects.

There was a lack of competition in the creation of money substitutes for USD.

There are many rivals for ‘money’ though. As Nick suggests: oil could be used as money and we could trade notes backed by the oil in cushings.

Side discussion:
If we take the current price of gold as the ‘legal’ price, then the gold cover-ratio of FRN is around 20%.