Mark Sadowski on Cullen Roche

Here’s Mark Sadowski (much of the following is Mark quoting Cullen):

I want to focus on one particular claim by Cullen Roche which he repeats three times in various forms at two different posts.

http://pragcap.com/of-course-all-economists-already-understood-the-money-multiplier-not/comment-page-1#comment-171007

Cullen Roche
“Depends on the banking system and the “money” you’re referring to. “Federal Reserve Notes” are not actually issued by the CB even though they’re a liability of the CB. They are purchased by the CB and printed up by the Bureau of Engraving. Reserve Banks purchase coin at face value from the US Mint (who is determining your “conversion” rate there – a branch of the US Tsy or the Fed?). So, in a strange sort of way, the Treasury acts as a banker to its own bank and charges that bank quite a bundle in fees to deal in “legal tender”. There is this circuitous/hybrid relationship here that I think gets bungled by a lot of people.

So, when Scott Sumner refers to reserve notes as “paper gold” he’s really not referencing the power of a Central Bank. He’s actually referring to the issuer, the US Treasury which makes Sumner an ironic/funny kind of way. And this is the problem with parts of Market Monetarism. If you don’t respect specific institutional arrangements you end up saying things that make no sense when you consider the actual design of the system.”

http://pragcap.com/who-is-the-alpha-bank/comment-page-1#comment-171180

Cullen Roche:
“…1) I think you overstate the exchange rate concept given that the Fed buys coin and currency from the US Tsy and the fact that there’s deposit insurance via FDIC. US bank deposits are at a very low risk of ever trading below par. The “value” of commercial bank money has been backstopped for all intents and purposes and the Fed is far from the only cause of this effect…”

http://pragcap.com/who-is-the-alpha-bank/comment-page-1#comment-171181

Cullen Roche
“I understand Nick’s point. The thing is, the “unit of account” in Sumner’s theory is not even created by the CB. It’s created by the Bureau of Engraving. All cash and coin is sold to the Fed at face value by the Bureau, a department of the US Tsy. The alpha bank, if we’re going to use such a term, is actually the US Treasury in the Market Monetarist model and they don’t know it because they don’t actually describe the reality of how money is created. Sumner’s “paper gold” is a creation of the US govt, not the Fed…”

For this point forward it’s mostly Mark’s reply:

In a word, this is wrong.

http://www.newyorkfed.org/aboutthefed/fedpoint/fed01.html

“The distribution of coins differs from that of currency in some respects. First, when the Fed receives currency from the Treasury, it pays only for the cost of printing the notes. However, coins are a direct obligation of the Treasury, so the Reserve Banks pay the Treasury the face value of the coins…”

The cost of printing the notes has averaged approximately 0.325% of their face value in the past 11 years:

https://research.stlouisfed.org/fred2/graph/?graph_id=169160#

Of course the Federal Reserve pays 100% of the face value for coins. What proportion of the value of the currency in circulation consists of coins?

http://www.federalreserve.gov/newsevents/testimony/roseman20100720a.htm

“…The value of U.S. coins in circulation as of May 31, 2010, was approximately $40.4 billion, or about 4.3 percent of total currency and coin in circulation.”

So the Treasury only gets paid about 4.6% of the face value of the nation’s currency in circulation by the Federal Reserve, which is appropriate if the Treasury is really in the role of performing a service for the Fed.

As Cullen says:
“If you don’t respect specific institutional arrangements you end up saying things that make no sense when you consider the actual design of the system.”

Kind of “ironic/funny”, eh?

I just have one question for Mr. Roche.  If the Fed buys currency at par, how did the Fed earn its seignorage prior to 2008?


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135 Responses to “Mark Sadowski on Cullen Roche”

  1. Gravatar of Ben J Ben J
    27. March 2014 at 06:38

    Remind me to never make Mark “Stone Cold” Sadowski angry…

    But seriously, great comments from Mark and Nick Rowe in those threads.

  2. Gravatar of benjamin cole benjamin cole
    27. March 2014 at 07:35

    Ditto. No streets fights with Mike Tyson and no econ wrestling with Mark Sadowski.

  3. Gravatar of Cullen Roche Cullen Roche
    27. March 2014 at 08:02

    Ask and thou shalt receive!

    http://pragcap.com/lets-talk-about-seigniorage

  4. Gravatar of Major_Freedom Major_Freedom
    27. March 2014 at 08:27

    Mark and Cullen are both wrong.

    Mark’s critique of Cullen is right, but he proposes another flawed argument in its place. No, we can’t reason from the fact that the Treasury gets paid 4.6% face value of currency that the Treasury therefore “provides a service” to the Fed, and not the other way around, which is then supposed to support the idea that it is the Fed that controls the currency and medium of account.

    In government, as opposed to private business, the hierarchy is established by coercion, not by percentages of money flows. Of course, these two are often overlapping so it can be difficult to separate. But you can’t reason from percentages of money flows who is the boss of who. Never reason from a cut, so to speak.

    In government, focusing on the coercion presents an additional challenge, because most of the time we lump up government coercion into one concept, to distinguish it from the voluntary part of society. But there are coercion levels within government itself as well. It can be difficult for even government agents to know their boundaries vis a vis other government agents.

    In the case of the Fed and Treasury, who is higher up in the hierarchy due to coercion? Or, is there no hierarchy at all between these two?

    To answer these questions, we have to ask deeper questions, such as:

    What is allowed to happen if the Treasury decides to stop selling currency to the Fed, and who exactly allows it?

    What is allowed to happen if the Fed decides to stop buying currency from the Treasury, and who exactly allows it?

    Focusing on cuts is not the right metric.

    For example, consider a neighborhood “protection racket” where a thug and his gang coerce the local shopkeepers to pay them a small cut the size and collection times of which are decided by the gang?

    If we look at cuts, the thugs are providing a service to the shopkeepers, and the shopkeepers are the boss of the thugs.

    If we look at coercion, it is the other way around.

    So who is higher up again? The Fed or the Treasury?

  5. Gravatar of TravisV TravisV
    27. March 2014 at 08:34

    Major_Freedom,

    Are you dishonest all of the time or just some of the time? See below:

    http://www.themoneyillusion.com/?p=26451#comment-325753

    http://www.themoneyillusion.com/?p=26451#comment-325800

    A good indication of character is the ability to apologize. Prof. Sumner certainly has that ability. However, I’m not sure you do.

  6. Gravatar of Major_Freedom Major_Freedom
    27. March 2014 at 08:48

    Cullen:

    This statement you made is incorrect:

    “The Fed also buys notes from the Bureau of Engraving at cost and makes them available to the public on demand. Banks can buy the notes at face value from the Fed. Notes, however, do not count as part of the monetary base until they are sold to the banks. And when this occurs the Fed simply swaps its liabilities with the banking sector resulting in no gain.”

    It is not merely a swap. The Fed, by virtue of obtaining a $1 bill by paying only 0.325% of that value in costs to the Treasury, is gaining the difference. The Treasury makes a $1 note, but recieves $0.00325 from selling it to the Fed.

    It is irrelevant that the notes only become considered part of the monetary base by whomever once they are transferred from Fed to private bank.

    If you would like a good example of internal contradictions in a monetary theory, look no further than MMT, which has the contradictory premises:

    1. Money is needed to facilitate exchanges of real goods beyond what is possible in barter.

    2. Constantly increasing quantities of money are needed to facilitate exchanges of real goods beyond what is possible in barter.

    Then there is this one:

    1. S + I + G + (X-M) = Y

    2. Increasing nominal G increases real Y.

  7. Gravatar of Major_Freedom Major_Freedom
    27. March 2014 at 08:54

    TravisV:

    “I’m very very confident that the next ten years will be more stable than the last ten years.”

    Seriously, who cares about your faith? Your faith in socialism is not identical to its nature nor its outcomes.

    I do not care about your prayers and mantras.

    Regarding your charge of dishonesty: I think you’re just really upset that Sumner violated the sacrosanctity of the MM religion. He dared uttered it will fail. So you lash out at me with “How dare you!”

  8. Gravatar of Philippe Philippe
    27. March 2014 at 09:01

    Definitely an ironic/funny kind of way.

  9. Gravatar of TravisV TravisV
    27. March 2014 at 09:02

    Major_Freedom,

    You are so dishonest. Taking what he said out of context. Here is that full context:

    “People see bad outcomes, and have trouble envisioning it could have been much worse. That’s one reason why my preferred policy was not politically feasible in 2008. But thanks to the NGDP targeting boomlet, it will be somewhat more feasible next time around. Next time people will be able to envision a worse alternative.

    All stabilization policies eventually fail, just as all presidents are judged failures in their 6th year in office. The trick is to have a modest failure like Clinton or Obama, not a serious failure like FDR or Nixon.”

    Sumner was saying that NGDPLT would make future failures “modest” rather than “serious.”

    You misconstrued him and claimed he said something else.

    Major_Freedom, I thought you were an honest person. Guess not.

  10. Gravatar of Philippe Philippe
    27. March 2014 at 09:17

    Major,

    “In government, as opposed to private business, the hierarchy is established by coercion, not by percentages of money flows”

    What you are implicitly always asserting is that all private property is based exclusively on peaceful, voluntary, individual ‘homesteading’, and unrelated in any way to the activities of the State. One need only take a brief look at history, or just look around at, you know, reality, to see what a ridiculous and patently false assertion that is. Your ideology is incoherent for the simple reason that it is based on fairy tales rather than facts.

  11. Gravatar of Jerry Brown Jerry Brown
    27. March 2014 at 09:33

    Major Freedom, where do you get that formula S+I+G+(X-M)=Y ? Why would you attribute that formula to MMT? In my understanding, MMT uses C+I+G+(X-M)=GDP and/or C+S+T=GDP. I lifted these equations from Bill Mitchell’s blog http://bilbo.economicoutlook.net/blog/?p=27192#more-27192

  12. Gravatar of Frances Coppola Frances Coppola
    27. March 2014 at 11:50

    Major_Freedom,

    S+I+G+(X-M)=Y is not right.

    There are two versions of the National Accounting relationship between spending and income:

    Y=C+I+G+(X-M) (GDP = consumption+investment+govt spending+net exports).

    and Y=C+S+T (GDP = consumption+saving+taxes).

    These equations long pre-date MMT, as does the sectoral balances equation derived from them by Wynne Godley: http://en.wikipedia.org/wiki/Circular_flow_of_income#Godley_model_.28sectoral_financial_balances.29

    There’s nothing inconsistent about these equations, or Godley’s sectoral balance equation (which is extensively used by MMT). Whether MMT uses them in an inconsistent way is a different question.

  13. Gravatar of TravisV TravisV
    27. March 2014 at 11:51

    Off Topic

    Dear Commenters,

    See my conversation with Frances Coppola here:

    http://coppolacomment.blogspot.com/2014/03/interest-rates-and-deflation.html?showComment=1395943190512#c8960096966236965196

    Frances is skeptical that more QE by the ECB could help much.

    To evaluate her theory, does anyone know what news headlines have had big and quick impacts on Spanish stock prices over the past 18 months? Which has had more of a positive impact: news from the ECB or news from the Federal Reserve?

  14. Gravatar of Suvy Suvy
    27. March 2014 at 12:02

    When the Fed issues currency, it buys either Treasuries or MBS. So there’s a spread that’s developed there. The Fed is paying out interest on reserves and it receives the coupon from the Treasury or the MBS. That spread results in the seignorage.

    Major Freedom,

    Are you saying that the government gains the revenue from seignorage by holding the monopoly on currency issuance? That it basically forces banks (and the public) to hold its reserves by not allowing other monies to circulate?

  15. Gravatar of Suvy Suvy
    27. March 2014 at 12:02

    MF,

    That last statement should say liabilities, not reserves. Either way, my point should be clear.

  16. Gravatar of Frances Coppola Frances Coppola
    27. March 2014 at 12:26

    Travis,

    The ECB hasn’t done ANY QE. It’s lent a lot of money to banks, it has cut interest rates a bit and it has done a lot of signalling. That’s all.

    The problem with the ECB doing QE is that the Eurozone is not a single country and it has some very silly rules. To avoid accusations of financing government deficits, the ECB would have to purchase a weighted basket of government securities – therefore more German bunds than anything else – in an already bifurcated market. The principal beneficiary of this would be Germany, which is not exactly a fan of QE (it doesn’t like low interest rates either). That’s politically problematic, though it shouldn’t stop the ECB from doing what it thought necessary.

    But there is a much bigger problem with QE. Purchasing a weighted basket of assets in effect means that the ECB would be pooling Eurozone debt by the back door, since such a basket would be a synthetic Eurobond. If I can work this out, the hawks in the Bundesbank and the German finance ministry can too. There is still no agreement whatsoever for pooling of debt in the Eurozone, and there is still this weird belief that the German government backstops the ECB so would bear the cost of any defaults on government debt owned by the ECB.

    So I think the talk about ECB QE is just that – talk. They are talking lots about it in the hope that this will mean they won’t have to do it. “Talk strategy” worked for OMT, after all.

    They would try negative interest rates on reserves before QE, I think. Weidmann has made it clear his preference would be for negative rates over QE.

  17. Gravatar of Frances Coppola Frances Coppola
    27. March 2014 at 12:35

    Travis,

    Also, as I’ve explained in some detail on my site, what made by far the biggest difference to Spanish bond prices was the OMT announcement – which was just talk. But that is because prior to that the ECB had not given any indication that it would act to prevent a country leaving the Euro, so (remembering the fate of the Euro’s predecessor the ERM) markets feared disorderly breakup of the Eurozone, redenomination and devaluation of the new currencies. OMT calmed those fears.

    But the legality of OMT is now in question. Markets aren’t worrying at the moment, partly because they are preoccupied with Fed tapering and a possible financial crisis in China, and partly I suspect because they think the ECJ will rule that OMT is legal. But they haven’t yet thought about the implications of Karlsruhe’s judgement for Germany’s contribution to the Eurosystem if the ECJ confirms the legality of OMT. As far as Germany is concerned, Karlsruhe trumps the ECJ. OMT is illegal and they won’t participate even if the ECJ supports it. This is by no means over.

  18. Gravatar of Major_Freedom Major_Freedom
    27. March 2014 at 13:06

    Sorry Frances and Jerry, I clicked S instead of C. You’re right.

    Frances:

    Yes, I was referring to the MMT interpretations.

    TravisV:

    I see you’re really having a hard time with Sumner saying that all policies aimed at stability eventually fail. How they fail, and the extent of their failure, these are separate questions from the statement that they fail. That is the only statement I considered, and you don’t seem to want to consider it.

    Sumner didn’t say that NGDPLT will make failures more modest. He said policies aimed at stabilization, such as NGDPLT, eventually fail. Sorry if you find it discomforting, I’m just going by what he wrote, in conjunction, incidentally, with one of his previous comments a while back where he said he doesn’t expect NGDPLT to work permanently, that he will update his priors if need be.

    I am an honest person. This is how I am actually reading Sumner. I could be wrong, but I am not purposefully saying something I myself don’t believe, which would be necessary in order for your accusation that I am lying to be accurate. Calling me a liar means you are reading my mind and claiming to know that what I am saying is true, is not what I think is true. Either you really believe you can read my mind, or you yourself are lying. Try not to fling around words you don’t understand.

    Philippe, you wrote:

    “What you are implicitly always asserting is that all private property is based exclusively on peaceful, voluntary, individual ‘homesteading’, and unrelated in any way to the activities of the State.”

    Actually no, that is not what I am implicitly asserting. I fully recognize that history isn’t one of “clean capitalism.”

    But since when did past injustices justify new injustices? If A robbed B 200 years ago, from where does the notion come from that a government agent today, who themselves could very well be living on stolen land, is justified in continuing to violate clean capitalism?

    You see, the problem with backwards looking, which positivists have a tendency to do, is that you interpret ALL arguments, even theoretical ones, as claims of what has happened in history.

    I don’t need to observe a history of clean capitalism before I can advance the argument that private business activity is based on consent whereas government is based on coercion.

    Instances of violent business persons in history, and instances of peaceful government agents in history, do not stand as counter-arguments, because I am not making a hiatorical claim. I am making a claim as to what it means to engage in business activity, and what it means to engage in governmental activity.

    And if what I said is “incoherent”, how in the world can you claim to know that it is “patently false”? To know anything as false, means you find it coherent. You’re just rambling off inventory insults like TravisV.

    Suvy, you wrote:

    “Are you saying that the government gains the revenue from seignorage by holding the monopoly on currency issuance? That it basically forces banks (and the public) to hold its reserves by not allowing other monies to circulate?”

    I wasn’t saying that there specifically, but I would say that that is the purpose of government imposed central banking. It is to be able to spend more than it taxes, the gains of which are through direct and indirect seigniorage. Direct is what you referring to. Indirect is by the public not knowing exactly how much money that is being printed, or who is getting it. The Fed operates in secret, and they only reveal bits and pieces of what they do.

    It took a ballsy, yet nowhere exhaustive, bill from Congress to get the NY Fed to reveal that it secretly (at the time) sent $40 billion to Iraq to finance the imperialist settlement of US forces and US backed leadership, from 2003-2008.

    Imagine what else the Fed is financing in secret. That is what I call “indirect” seigniorage, because there is no way for business people in general to know when and by how much and to who they should raise their prices.

    Frances:

    Any time a CB buys government bonds, or anything else, it is engaging in quantitative easing, for it is easing, i.e. increasing, the quantity of money from what it otherwise would have been.

    The Fed called what they did “QE” because it was a substantially higher rate of QE as compared to the past.

  19. Gravatar of Frances Coppola Frances Coppola
    27. March 2014 at 13:14

    Major_freedom,

    Your definition of QE is wrong. QE is an exceptional tool, not a general description of open market operations.

  20. Gravatar of Suvy Suvy
    27. March 2014 at 13:39

    Major Freedom,

    I agree with you. The central bank does serve the purposes of the government, not the macroeconomy or the public as a whole. Central banks were created in order to fund wars, not to create a better monetary system. With a central bank, the banking system is forced to accept the liabilities of the central bank (currency in the system) instead of different forms of bank money, which allows the government to monopolize on seigniorage. The “best central banks” (by best, I mean the ability to keep prices stable and nothing else) were the ones that would build up their credibility during peacetime and then use all of their “accumulated seigniorage”, if you will, during wartime.

    Historically, if you’re faced with an invader trying to conquer your territory, you’re basically forced to give it everything you have to fight the other guys. That’s why central banks were developed. Actually, the classical theory of money assumes that money is inherently competitive (and I agree).

  21. Gravatar of Major_Freedom Major_Freedom
    27. March 2014 at 13:42

    Frances:

    I define economic terms according to what people do, not what they say they are doing.

    If you consider what the Fed actually did, then you will agree, or perhaps should agree, that all it did was increase the quantity of OMOs per time period. It was only “exceptional” to the degree it was larger than before. That “it” is quantitative easing the whole time.

    OMOs are easings of quantity.

    I go by actions speak louder than words.

  22. Gravatar of Major_Freedom Major_Freedom
    27. March 2014 at 13:56

    Suvy:

    Yup.

    I would only add that it is impossible for anyone to serve or help the macroeconomy or public as a whole. Every activity the central bank engages in, is micro in nature.

    Now of course, we are able to add up the total number of dollars spent on final goods over a period of time, but this doesn’t mean the Fed is affecting everyone’s bank balances equally, nor does it mean it is affecting everyone’ bank balances at the same time. Its actual activity, is purely micro.

    Being able to add to an existing aggregate through micro activity, doesn’t mean you’re affecting each component of the aggregate equally and at the same time.

    I still have yet to see an explanation from MM for why I shoild support an expansion of spending anywhere and for any purpose, as more desirable than intelligent, consumer satisfaction directed spending that happens to be less in total spending relative to some non-market standard.

  23. Gravatar of Cory Cory
    27. March 2014 at 14:00

    Major Freedom,

    From what I’ve seen the major MMT proponents argue, they would not say that money is “needed” for those things. They generally just have an opinion as to why people accept “the government’s money” over other potential mediums, it seems to me. Just my two cents on that matter.

    But I also have an off-topic question. As Rawls noted, ideological pluralism is inevitable in a free society. Under what circumstances do you think you might be able to coexist within the territory of a nation state wherein a large amount of people do not consider civil government and its institutions to be coercion?

    For instance, many people could not care less whether we have the Federal Reserve system or not. If you were able to deposit your money in financial institutions that were not part of the federal reserve system, did not have FDIC deposit insurance, etc.?

    At least until you win the hearts and minds of the world over to your brand of austro-libertarianism or what have you, what types of policies do you think you could reasonably live with knowing that you live in a country with a bunch of monetarists, liberals, conservatives and people who are otherwise reasonably satisfied with civil government??

  24. Gravatar of Mark A. Sadowski Mark A. Sadowski
    27. March 2014 at 14:22

    Scott,
    Off Topic.

    I’m sure you’ve seen this but in case you haven’t:

    http://online.wsj.com/news/articles/SB10001424052702303725404579461191077796078?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702303725404579461191077796078.html

    March 25, 2014

    ECB Mulls Bolder Moves to Guard Against Low Inflation
    By Brian Blackstone

    “…”We haven’t exhausted our maneuvering room” on interest rates, Bank of Finland Governor Erkki Liikanen, told The Wall Street Journal in an interview in Helsinki. Mr. Liikanen is on the ECB’s 24-member governing council,

    Asked what tools the ECB has remaining, Mr. Liikanen cited a negative deposit rate as well as additional loans to banks and asset purchases. His comments and others’ suggest some support for ECB President Mario Draghi if he presses for bold measures to prevent crippling consumer-price declines, known as deflation, from taking hold in Europe.

    Bundesbank President Jens Weidmann, in an interview with news agency MNI, didn’t rule out large-scale asset purchases, known as quantitative easing, as a possibility. He also raised the option of negative deposit rates, though he said he wasn’t talking about any imminent decision.

    Jozef Makuch, Slovakia’s central bank governor and also a member of the ECB’s governing council, said on Tuesday that quantitative easing was one option and added that “several [ECB] policy makers are ready to adopt nonstandard measures to prevent slipping into a deflationary environment.”

    Mr. Draghi was less specific Tuesday on what the central bank might do. But in a speech in Paris, he sought to underscore the bank’s resolve in fighting excessively low inflation, which weakens consumer spending, business profits and investment. “We will do what is needed to maintain price stability,” he said, adding that the ECB is paying close attention to the euro’s exchange rate…”

  25. Gravatar of Philippe Philippe
    27. March 2014 at 14:36

    Major,

    you argue that the State has no right to tax or otherwise interfere with private property because private property is based on individual, peaceful, voluntary ‘homesteading’ which is completely independent of the State. But this is fairy tale nonsense. The moral foundation of your ideology is a fairy tale.

    The fairy tale goes something like this: once upon a time there was a big empty land. Then individuals somehow materialised on the land and set about peacefully ‘homesteading’ their own little bits of it through their own individual labor. Eventually every bit of the land was privately owned by individuals, and all of this was done peacefully and voluntarily between consenting individuals who all recognised each other’s right to exclusively own their own little bits of peacefully and honestly homesteaded land. These individual owners traded peacefully and voluntarily with each other, exchanging the products of their honest labor voluntarily and moving across each other’s private land only with the explicit consent of one another (remember everything was private – no “public” land at all). Eventually the better people ended up with more land and property through voluntary trade because they were more intelligent, talented and hardworking. These people became rich businessmen like, I dunno, Jamie Dimon. There was no coercion involved in any of this because by definition private property is peaceful and voluntary because it’s based on homesteading and voluntary exchange. As such all of this private property was and is moral and just and right and nice. Then one day something called the State randomly came into being somehow and started aggressively violating the rightful property of these innocent and peaceful souls by demanding taxes and stuff for no reason and violently printing funny money. And that explains where we are today: all these peaceful voluntary homesteading individual traders with their peaceful voluntary homesteaded and voluntarily traded property being arbitrarily and immorally violated by the evil State which randomly popped into existence somehow for no good reason and serves no purpose other than to abuse and violate all of these poor innocent victims.

    That is the moral foundation of your ideology.

  26. Gravatar of Mark A. Sadowski Mark A. Sadowski
    27. March 2014 at 14:47

    Scott,
    Off Topic,

    Ditto.

    http://online.wsj.com/news/articles/SB10001424052702304418404579463780850006774

    March 26, 2014

    ECB Faces Uncharted Waters With Negative Deposit Rate
    By Brian Blackstone

    “FRANKFURT””The European Central Bank would be moving into largely uncharted territory, with potentially serious effects on the financial system and currency markets, if it goes ahead with the increasingly popular idea of setting a negative rate on bank deposits””essentially forcing banks to pay for the privilege of parking their money at the ECB.

    ECB officials this week signaled the move is a top choice if they decide to take more action to spur stronger euro-zone economic growth. Earlier this week, the International Monetary Fund said the Swiss National Bank should consider a negative deposit rate if the Swiss franc gets too strong. Denmark’s central bank has had a negative rate on certificates of deposit for nearly two years and has judged it a success, though banks have had to absorb the added cost.

    In the ECB’s case, the main goal would be to boost growth in two ways. First, the policy should encourage private-sector banks to loan more money to businesses and households rather than holding on to it””at a loss””at the central bank. Second, it could lower the value of the euro, which should help exports by making them relatively cheaper on world markets.

    Another potential benefit is that a weaker euro should drive inflation up from undesirably low levels, preventing a slide into deflation””a dangerous fall in the overall price level. Higher inflation would encourage more spending and make debts easier to service…”

    Comment:

    Whether or not negative interest on reserves leads to increased lending is entirely beside the point. It will decrease demand for base money which will be expansionary.

    It may encourage more exports, but this is secondary to the the fact that it will likely increase domestic demand even more. The burden of debt isn’t decreased by higher inflation so much as by higher nominal incomes, which is the main benefit of more expansionary monetary policy.

    “…The idea has its doubters and its risks.

    Skeptics warn that penalizing banks won’t necessarily change their behavior. They say the decline in lending in Europe reflects the lack of demand for new loans, particularly in recession-ravaged parts of southern Europe.

    Critics say negative rates could weaken the already fragile European banking industry by sapping its profits.

    “The banks that would suffer the most are those ones with lower profitability,” said Alberto Gallo, head of European credit research at Royal Bank of Scotland. That includes small banks in Cyprus and Slovenia, Italian banks and some German Landesbanken, or public banks co-owned by the savings banks and regional governments, he added.

    Banks also may pay less interest to savers and could raise the rates they charge on private loans to recoup their costs.

    “From our point of view, it would be completely wrong to experiment with negative interest rates. This would not lead to stronger lending and send a fatal signal to all savers,” Georg Fahrenschon, president of the German Savings Banks Association DSGV, said in a recent speech.

    If the banks don’t boost lending, why would they enter into money-losing transactions with the ECB? They might calculate it is worth the cost to maintain greater flexibility in managing their reserves…”

    Comment:

    While I am obviously sympathetic to the need to not push fragile banks into insolvency, the idea that a more sensible monetary policy should be held hostage to the ill conceived needs of a particular industry or to “savers” is absolutely ludicrous.

    “…A negative deposit rate might have a more immediate effect on the euro, which is above its long-term average against the U.S. dollar. It would make holding euro-denominated assets less attractive for global investors, causing the currency to weaken. It would also be a strong gesture from the ECB that it is willing to take innovative measures to keep inflation from falling too low.

    A weaker euro would help raise inflation via higher prices for imported goods. ECB officials are wary because inflation, at 0.7%, is far below their target of just under 2%. March figures, due Monday, could show further weakening to 0.5%, said analysts at Jefferies International.

    “The main lesson from the Danish experience (with negative rates) is it has a huge effect on the foreign-exchange market,” said Jan Storup Nielsen, analyst at Nordea in Copenhagen.””

  27. Gravatar of Frances Coppola Frances Coppola
    27. March 2014 at 14:56

    I saw that yesterday, Mark. Despite the comments from the German Sparkassen sector (which the ECB should ignore), I think negative rates on reserves would meet with less resistance in Germany than QE. Therefore I think if the ECB is forced to act, it will go down that route rather than attempt QE. But I think its preferred approach is stronger signalling and forward guidance on interest rates, rather than anything active.

  28. Gravatar of Suvy Suvy
    27. March 2014 at 15:00

    Cory,

    The free issuance of money is a very old idea; it’s nothing new. Adam Smith actually has a chapter on it in The Wealth of Nations and he wasn’t the only one. MMT has a really screwed up view of the world as they completely disregard war and geopolitics in general. A history of central banking is a history of war finance. Personally, I think there are times when having a central bank is a huge advantage and necessary (mainly in times of war). The US actually ran into this problem in the War of 1812 after the charter of the First Bank of the United States expired.

    One of the key advantages of having a free banking system is that the supply of bank money expands automatically to increases in the demand for bank money. You also don’t run into the problem of bureaucrats, politicians, and central planners screwing things up. By the way, it’s perfectly feasible to have income redistribution, government spending on infrastructure, and other things of that nature even if the government doesn’t have a monopoly on the issuance of the currency.

    It was actually common in large empires to have different monies circulating. The funny part is that empires were actually way more multi-cultural and decentralized than the modern day nation-states we have today. For most empires, they’d just worry about the national defense part and let the city-states do as they pleased.

  29. Gravatar of Major_Freedom Major_Freedom
    27. March 2014 at 15:04

    Cory:

    I think most people are practising anarcho-capitalists, regardless of what they say is just activity.

    I don’t think it takes a lot of brain power or effort to recognize what it is that we are doing. In this sense, people’s hearts and minds have already accepted anarcho-capitalism. We just have to encourage them to realize this, and to feel important enough to deserve having others, including statesmen, treating them the same way.

    I am not proposing anything radical. In fact, I am probably the most conservative status quo person on this blog. I am just describing what most people are already doing. The reason why it seems so radical, is because most people have been taught to believe since childhood that different rules should apply to different people.

    It always starts in the household. Most of us were brought up in a household where the rules of conduct fot parents differs from the rulee of conduct for you as a child. That has translated into how most people view society once they become adults. They start to view society as one that should have one set of rules for some people (government, playing the role of mommy and daddy, and in our society it tends to look like conservative daddy and liberal mommy government), and a different set of rules for everyone else (citizenry, playing the role of children, and in our society it tends to look like children who need a daddy more (conservatives), those who need a mommy more (liberals), and of course the disobedient children (libertarians and anarchists like me), who are viewed as wanting to break the family up and cause (emotional) chaos.

    I view my life as one of living among mostly children in grown up bodies. I say that not just as a dismissive insult, but rather as someone who knows that we don’t have to bring illusions instilled in us from bad parenting, which is the result of our parents habing bad parenting, and so on.

    What I am advocating is not for the present generation of adult children, but for the new generations of children who actually become adults both outside and inside.

    Responding to your specific points:

    A free society does not imply ideological pluralism. The very meaning of a free society is an ideology of itself, and is necessarily singular: “Do not initiate force.” For a society to be free, it is necessary for there to be an absence of initiations of force, or at least the acceptance that it is wrong for everyone, including mommy and daddy, including those in government. That is ideological singularism.

    If I lived with people who did not view government as necessarily coercive, then all I ask is that they didn’t try or support forcing their mommy and daddy on me as if I needed parents to tell me what to do. If they did that, then government as we know it would collapse, and what would be left would be private, voluntary defense and dispute resolution organizations.

    Obama would become CEO of a private defense agency without a territorial monopoly.

    I am perfectly fine with you and everyone else hiring a protector of your choice. Just don’t force it on me as my protector. And don’t force it on anyone else who wants to unplug from the matrix.

    Not that this matters, but it is not accurate to say that “people” are “reasonably satisfied” with government in the US. Have you seen the polls? How many people have to want to opt out before you believe individuals should be free from initiations of violence?

    Also, if you’re satisfied with the government, then you are telling me that you are satisfied with genocide. Can’t you see that you are only saying what you are saying because you have been taught since childhood not to disobey mommy and daddy and to give unconditional love?

  30. Gravatar of Suvy Suvy
    27. March 2014 at 15:08

    Cory,

    Lots of countries used to have a free issuance of currency in the 19th century including Sweden, the US, Canada, Scotland, and others I can’t think of. In the case of Canada, there was one bank failure in the 1920s and none in the 1930s under a free banking system. In the case of Scotland, there was effectively free banking from around 1716-1845 when the Peel’s Bank Charter Act was passed. Many will use the US as an example to say that the US free banking system failed horribly, but they completely ignore that most of the bank failures were due to states having bad regulations. For example, the reason most of the banks went bust was because those banks were forced to a certain percent of the states’ bonds as assets and then the states would subsequently go bust. In some states, the capital ratios of some banks were as high as 30% because of certain state regulations. In Sweden, free banking worked very well for a very long time and there was only one bank failure in 70 years which was due to fraud.

  31. Gravatar of Major_Freedom Major_Freedom
    27. March 2014 at 15:14

    Philippe:

    Again, I am not arguing what has actually happened in history. How many times do I have to spell it out? I am not claiming, and have never claimed, that there was a golden time of the past where nobody initiated violence against other people’s persons or homesteaded property.

    What I am saying, again, is what is justified GOING FORWARD.

    Ethics deals with what we ought to do, not what we have done.

  32. Gravatar of Mark A. Sadowski Mark A. Sadowski
    27. March 2014 at 15:16

    Scott,
    Off Topic.

    Here is Marshall Auerback arguing negative interest rates are just the same as fiscal austerity.

    http://macrobits.pinetreecapital.com/negative-interest-rates-fiscal-austerity-another-name/

    March 26, 2014

    Negative Interest Rates Is Fiscal Austerity By Another Name
    By Marshall Auerback

    “…Well it won’t improve bank lending for the simple reason that he’s got the causation wrong: loans create deposits, not the other way around.

    When a bank makes a loan, it creates the money out of thin air and credits the borrower, who usually turns around and buys something with that money, which the seller then deposits back in the bank (thus completing the circle of life). However, the borrower still holds a liability (the amounts owed) which mirrors a receivable that the bank holds.

    If the borrower pays back what he owes, everything is fine. If the borrower defaults, the receivable is written down, and the bank’s equity is written down as well. The bank makes a credit decision when it makes the loan. Investors make an investment decision based on their assessment of the bank’s wisdom in making credit decisions when they decide to invest in the bank. Since depositors are not and should not be making an investment or credit decision when they choose to save, they should not have those responsibilities put upon them (which happens to a limited degree today via FDIC insurance).

    More to the point, negative interest rates on deposits penalize savers.

    First the very low interest rate environment forces current retirees who rely on interest income to support themselves to reduce their spending. More importantly the low rate environment plays havoc with retirement planning for both individuals and pension plans.

    For example, individuals planning for retirement have to assume lower rates of return on their investments, and, therefore, if they want to achieve a target amount of assets in the future they have to save more today. Saving more today means buying less stuff today and that works against the demand effects implied by low interest rates. One way to save more is for older workers to stay in the labor force longer. In fact the only growing segment by age in employment during the past few years has been in the over 55 years of age category. By working longer, older workers are blocking the way for young workers who are now locked out of the labour market.

    Is this really what Europe needs right now?”

    Following this logic that means that the ECB should raise interest rates, right? But didn’t the ECB already try that three years ago? That didn’t seem to go so well if I remember correctly.

  33. Gravatar of Major_Freedom Major_Freedom
    27. March 2014 at 15:18

    Philippe:

    My moral foundation is the same one you yourself practise in your day to day life:

    It is morally wrong to initiate violence, or credible threats of violence, against other people’s persons and property.

    That is the moral foundation of my beliefs. Your claims to the contrary are inaccurate.

  34. Gravatar of Mark A. Sadowski Mark A. Sadowski
    27. March 2014 at 15:48

    Scott,
    Off Topic.

    Plosser says reverse repo is not a done deal:

    http://www.reuters.com/article/2014/03/26/usa-fed-plosser-idUSL1N0MN02820140326?feedType=RSS&feedName=bondsNews

    March 25, 2014

    Not foregone conclusion Fed will adopt US repo facility -Plosser
    By Jonathan Spicer

    “(Reuters) – The U.S. Federal Reserve’s committee of policy-setters has not yet decided to fully embrace a new test facility for so-called reverse repurchase agreements as a tool for conducting monetary policy in the future, Philadelphia Fed President Charles Plosser said on Tuesday.

    Addressing the ongoing testing of the Fed’s reverse repo facility, Plosser stressed that the policy-setting Federal Open Market Committee, and not the New York Fed’s open markets desk, will make the final decision on whether to formally adopt the facility.

    He said he worries that investors have already concluded that the facility will be adopted and used as a prime tool for guiding market-wide interest rates, adding that is “not guaranteed.”…”

    But it turns out that Plosser isn’t too keen on the idea.

    “…But asked about the ongoing testing, Plosser said he would like to “slow it down” a little bit. The FOMC needs to carefully think through the ramifications of formally adopting the facility, he added.”

    And this has me wondering, why would an extreme hawk like Plosser be opposed to a tool for draining liquidity?

    P.S. Ever noticed that the FOMC’s extreme hawks complain the most about staying on message, and then are the very first ones to go off message?

  35. Gravatar of Vaidas Urba Vaidas Urba
    27. March 2014 at 16:02

    Mark Sadowski,

    Reverse repo is about redistributing liquidity, not draining it.

  36. Gravatar of Philippe Philippe
    27. March 2014 at 16:02

    “Following this logic that means that the ECB should raise interest rates, right?”

    Marshall Auerback is an MMTer which suggests he favours the use of combined fiscal+monetary policy, and keeping central bank interest rates low.

  37. Gravatar of Vaidas Urba Vaidas Urba
    27. March 2014 at 16:04

    Mark Sadowski,

    Adopting reverse repo now is equivalent to reducing the average interest the Fed pays on liabilities. Maybe that is why Plosser is against.

  38. Gravatar of Frances Coppola Frances Coppola
    27. March 2014 at 16:12

    Mark,

    Reverse repos enable non-banks to obtain Fed liquidity. I’d guess that’s at least partly what Plosser is concerned about.

  39. Gravatar of Mark A. Sadowski Mark A. Sadowski
    27. March 2014 at 16:12

    Anyone care to explain what Tom Hickey is smoking?

    http://mikenormaneconomics.blogspot.com/2014/03/edward-lambert-institutionalist.html

    “…Of course, monetarists will say that Keynesianism broke down with stagflation and monetarism repaired the lacuna with its math-based analysis “” that showed that what happened in the financial crisis was impossible, or at least highly unlikely.

    Those taking a broader view warned otherwise. Like those influenced by Minsky’s analysis.

    What amazes me is that monetarists think that the policy rate is the single lever that moves the entire economy, which is neatly depicted in the IS-LM model…”

  40. Gravatar of Frances Coppola Frances Coppola
    27. March 2014 at 16:13

    Mark,

    Re Auerback: what Philippe said. Auerback is not suggesting higher rates. He is opposing negative rates and arguing for fiscal stimulus.

  41. Gravatar of benjamin cole benjamin cole
    27. March 2014 at 16:26

    If Plosser is against it, then reverse repos warrant serious consideration…what is a reverse repo anyway?

  42. Gravatar of Frances Coppola Frances Coppola
    27. March 2014 at 16:27

    I have no idea what Hickey is smoking, but it’s addled his brain. That’s a complete misinterpretation of Lambert’s post.

  43. Gravatar of Frances Coppola Frances Coppola
    27. March 2014 at 16:33

    Benjamin,

    A “repo” (repurchase agreement) is a simultaneous spot sale and forward purchase of securities. For accounting purposes it is treated as a secured term loan. A “reverse repo” is the opposite – a simultaneous spot purchase and forward sale of securities, accounted for as a secured term deposit.

    What the Fed is doing with “reverse repos” is lending out the securities it has purchased in its QE program.

  44. Gravatar of ssumner ssumner
    27. March 2014 at 16:36

    Cullen, You wrote a deeply silly post. Why not just admit that you didn’t understand how the Fed earns seignorage? Instead you write a post claiming I don’t understand how seignorage is earned.

    A typo is a misspelled word. When you write multiple paragraphs explaining how it’s the Treasury that issues currency and earns seignorage, and not the Fed, then it’s no longer a typo.

    Mark, Yes, I’ve been following that story.

  45. Gravatar of Mark A. Sadowski Mark A. Sadowski
    27. March 2014 at 16:37

    Everybody,
    Gagnon and Sack wrote a nice paper on reverse repo, suggesting a new operating framework based on its use:

    http://www.piie.com/publications/pb/pb14-4.pdf

    I haven’t completely absorbed the paper yet.

    I get what Frances is saying concerning Plosser and that makes sense to me. But I don’t understand what Vaidas is saying concerning the reduced rate on liabilities.

  46. Gravatar of Frances Coppola Frances Coppola
    27. March 2014 at 16:44

    Also off topic. If you like horror stories, take a look at this. Monetary developments in the Euro area for February 2014:

    http://www.ecb.europa.eu/press/pdf/md/md1402.pdf

    No figures for M0. The other aggregates are horrible.

  47. Gravatar of Cullen Roche Cullen Roche
    27. March 2014 at 16:56

    Scott,

    No need to be accusatory. We’re both adults. I’ll clarify as I’ve done repeatedly:

    Seigniorage via coins is a pure Treasury benefit. Seigniorage via cash is a CB benefit. When you add up all the expenses and income from these Fed ops (including OMOs) the Fed remits over 90% of its profits to Treasury. In other words, Seigniorage is almost entirely a Treasury benefit.

    If you have a different version of how things work then I’d love to be schooled by the good professor….

  48. Gravatar of Frances Coppola Frances Coppola
    27. March 2014 at 16:59

    Mark,

    Reverse repos are term deposits secured on collateral. The interest rate the Fed pays on those will be lower than IOR because of the collateralization. It’s another form of monetary easing.

    The Fed’s taper is not what people think it is. The Fed is changing the way it does monetary easing, replacing QE with stronger forward guidance and more use of depositary instruments such as term deposits and reverse repos to adjust liquidity. Plosser would actually like a tighter monetary stance, so he’s probably not too happy about this.

  49. Gravatar of Philippe Philippe
    27. March 2014 at 17:05

    Major,

    “I am not claiming, and have never claimed, that there was a golden time of the past where nobody initiated violence against other people’s persons or homesteaded property. What I am saying, again, is what is justified GOING FORWARD.”

    Given that private property is not based on imaginary peaceful voluntary homesteading and is in fact deeply rooted in a long history of violence and coercion, and is as such completely immoral according to your ideology, I suppose you must wholeheartedly support a complete and equal redistribution of all private property, so as to make possible the development of a truly clean and moral capitalism genuinely based on voluntary exchange?

    lol.

  50. Gravatar of Vaidas Urba Vaidas Urba
    27. March 2014 at 17:33

    Mark Sadowski,

    reverse repo introduces a new class of Fed liabilities. These liabilities are in higher demand, they provide more liquidity services, accordingly, the Fed is able to pay lower interest (5bps on reverse repo instead of 25bps IOR).

  51. Gravatar of Morgan Warstler Morgan Warstler
    27. March 2014 at 17:38

    I’m afraid lurking underneath this conversation is another mint the coin episode.

  52. Gravatar of Mark A. Sadowski Mark A. Sadowski
    27. March 2014 at 18:33

    Frances and Vaidas,
    Here’s my thinking on this.

    Under the new framework the Fed will have two major classes of liabilities: reserves balances and reverse repos (RPP). It pays IOR on reserve balances and the RPP rate on RPP. The RPP rate will be set at a lower rate than IOR.

    Yes, the average interest rate on the Fed’s liabilities will fall because it will acquire a whole new class of liability. But from a monetary policy perspective the most important question is what effect will this have on the overnight rate received by non-banks.

    In fact in order to provide an incentive for non-banks to participate in RPP they will probably have to pay a rate at least as high as non-banks are currently receiving. Thus it seems to me that RPP gives the Fed the ability to set overnight risk-free rates for a broader set of counterparties, effectively establishing a firmer floor on short term rates for the entire economy if it so chooses.

    In other words RPP should lead to tighter monetary policy, not looser, ceteris paribus. Plosser should love this idea but he seems to be giving it the cold shoulder.

  53. Gravatar of Frances Coppola Frances Coppola
    28. March 2014 at 00:45

    Mark,

    Gagnon and Sack suggest setting the RRP equal to IOR and using the RRP as the principal policy tool, replacing the Fed Funds rate. If it did so, then you would be right that the Fed would be setting short-term rates for a much wider range of participants than at present and would therefore have firmer control of monetary policy. Whether this leads to tighter monetary policy surely depends on the policy stance and the attitude of market participants, though. It could just as easily lead to easier monetary policy.

  54. Gravatar of W. Peden W. Peden
    28. March 2014 at 00:51

    On the technical side of monetary policy: could a central bank have a sort of “reverse reserve requirement”? This would be like negative IOR, except that it would be a maximum level of reserves that a bank could legally hold. I can see all sorts of ways in which this would be inferior to negative IOR as a ZLB policy, just as reserve requirements are inferior to OMOs, but I can’t see why it’s unfeasible as such.

  55. Gravatar of Frances Coppola Frances Coppola
    28. March 2014 at 01:31

    W. Peden,

    I see what you’re getting at, but no. Not if the total amount of reserves in the system exceeded the aggregate amount that could be legally held. The banking system has no choice but to hold the total amount of reserves that the Fed issues. If the total amount of reserves exceeded the aggregate legal amount, there would always be some bank(s) forced to break the law. I don’t think we should construct law in a manner that forces people to break it.

    You could impose a penalty charge for reserve holdings above a limit, or a negative interest rate (same thing, really). But you do have to remember that physical cash is an alternative to reserves and the Fed is obliged to supply it on demand. If a bank couldn’t unload reserves to bring them down to the limit it would convert them to physical cash rather than incur a penalty, I’d suggest. Indeed increased vault holdings would be likely if IOR turned significantly negative – vaulting incurs charges, of course, but a sharply negative IOR would be worse. The ZLB problem applies to deposit rates as much as funding rates.

  56. Gravatar of Vaidas Urba Vaidas Urba
    28. March 2014 at 02:33

    Mark Sadowski,

    It all depends on the appropriate counterfactual.

    For any given fed funds rate target, reverse repo facility represents easier policy. To the extent already implemented, repo facility has already lowered the average interest rate the Fed pays on liabilities while leaving the quantity of liabilities unchanged.

    Key risk for Plosser is that repo facility will be used to narrow the current fed funds rate target range down to zero in case downside risks materialize. This would represent a double easing (lower ffr target and easier technical framework).

    It is possible (but less much likely this year) that repo facility will be used to narrow the current fed funds rate target range up to 25 bps. This would represent a combination of tightening (higher ffr target) and easing (easier technical framework).

    Regarding Gagnon’s proposal to abolish the fed funds rate targeting, the key problem is preventing the upside volatility of short term interest rates. Gagnon writes: “Based on this consideration, the Fed could consider modifying our proposed framework to incorporate an automatic mechanism for providing reserves if market interest rates are judged to be too far above the RRP rate or too volatile even in normal times”. Without such modification, Gagnon’s framework is really dangerous, as ceteris paribus assumption with respect to fed funds rate would not be correct without such modification.

  57. Gravatar of libertaer libertaer
    28. March 2014 at 04:18

    Scott on RT! David Beckworth too!

    http://www.youtube.com/watch?v=kWC1h8jNo8U

    I always suspected you were a commie! :-)

  58. Gravatar of Daniel Daniel
    28. March 2014 at 05:53

    I think it would be fair to say that Cullen Roche is clueless and mostly wrong when it comes to economics ?

    So why are we paying attention to the nonsense he spouts ?

  59. Gravatar of Mark A. Sadowski Mark A. Sadowski
    28. March 2014 at 06:16

    Vaidas,
    You lost me right here:

    “To the extent already implemented, repo facility has already lowered the average interest rate the Fed pays on liabilities while leaving the quantity of liabilities unchanged.”

    I saw the NYFRB make a similar statement:

    http://www.newyorkfed.org/markets/rrp_faq.html

    “When the Desk conducts an overnight RRP, it is selling an asset held in the System Open Market Account (SOMA) with an agreement to buy it back on the next business day. This leaves the SOMA portfolio the same size, but shifts a liability on the Federal Reserve’s balance sheet from “deposits” to a reverse repo while the trade is outstanding.”

    But this makes no sense to me. Why should an RPP reduce the amount of reserve balances? Under RPP non-banks are making collateralized loans to the Fed. Why should this have any effect on the amount of deposits banks hold with the Fed?

  60. Gravatar of Major_Freedom Major_Freedom
    28. March 2014 at 08:30

    Philippe:

    “Given that private property is not based on imaginary peaceful voluntary homesteading and is in fact deeply rooted in a long history of violence and coercion”

    That isn’t a “given.” It is false. Again, again for the third time, even after you were corrected on the matter: economic concepts, such as private property, are not historical events.

    When economists say “private property”, they are not saying “what happened over geographical territory x number of years ago.”

    Are you really unable to think in ways other than historicist?

    Again, the meaning of private property is homesteading and free trade. If you want to talk history, then history includes those instances of private property respect AND those instances of private property violations. When the violations occurred, it was not private property respect, but disrespect.

    Clean capitalism is based on individual action constrained to the rules of homesteading and free trade.

    History has not been one of “clean capitalism.” Indeed, history hasn’t been clean anything, other than of course “what happened.” It hasn’t been clean including YOUR ideal of ethical activity either.

    When individuals are free, then inequality of people’s existing productivity, talents, and drive result in an inequality of income and hence wealth.

    Equality cannot be had unless individual liberty is violated, because people are not equal in their productivity.

    I don’t even know what you’re arguing anymore. We agree that history was not one clean my ethic nor clean your ethic. Are you going to actually address the ethic itself, or is all you can do is realize the profound discovery that what has happened, and what should happen, are not the same thing?

  61. Gravatar of Philippe Philippe
    28. March 2014 at 08:47

    “Again, the meaning of private property is homesteading and free trade.”

    but private property is not based on “homesteading”. Nor is it based on “free” trade, if by “free” you mean totally voluntary and not determined by initial conditions resulting from or in forms of coercion. If it was then history would read like the nonsensical fairy tale which I described above.

  62. Gravatar of Tom Brown Tom Brown
    28. March 2014 at 09:29

    Philippe, I enjoyed reading your “fairytale”:
    http://www.themoneyillusion.com/?p=26463#comment-326149

  63. Gravatar of Tom Brown Tom Brown
    28. March 2014 at 09:44

    Mark, re: RRP: isn’t it true that when the Fed accepts a payment (say for the asset it sells in an RRP) it either:

    1. Accepts paper notes and coins
    2. Debits a Fed deposit

    So if the Fed sells a security to a bank or a non-bank, then unless it’s receiving paper notes and coins in return, then a Fed deposit somewhere is being debited. No?

  64. Gravatar of Mark A. Sadowski Mark A. Sadowski
    28. March 2014 at 09:54

    Tom Brown,
    Aha! This makes sense.

    So basically the non-bank deposit changes from a deposit with a commercial bank to a deposit with the Fed. Consequently reserve balances fall by the same amount as RPP increases.

    On the one hand I’m embarassed I didn’t see this right away. On the other hand why couldn’t someone have said it as simply and clearly as you just did.

    Now I have to think about the implications of what Vaidas is saying some more.

  65. Gravatar of Major_Freedom Major_Freedom
    28. March 2014 at 09:55

    Philippe:

    “but private property is not based on “homesteading”. Nor is it based on “free” trade, if by “free” you mean totally voluntary and not determined by initial conditions resulting from or in forms of coercion.”

    If you are an explorer, and you step foot on a piece of land that was previously not altered through anyone’s efforts, and you build a farm and a house, then you have created private property. Homesteading is in fact the creation of private property.

    There is no violence against anyone else’s person or property in this activity.

    If this homesteader were to later sell it or give it away to a different individual, then the private property title is transferred, again without any initiating violence against other individuals.

    This is clean capitalism. This is what I think we all ought to be doing.

    This is purely voluntary. No coercion is present in either homsteading or free trade.

    Being born relativly stupid and/or poor is not in itself a violation of people’s rights. Homesteading and free trade among individuals who might be born into different geographical territories, different natural abundancies, and different wealth given to them by things such as charity and from parents, is not a violation of anyone’s rights.

    To be different from others, and to have a different quqntity of wealth, is no justification, IMO, to point your guns at them to steal what they homesteaded or traded for, so that your jealousy and resentment towards them can be placated under the false banner of justice.

  66. Gravatar of Tom Brown Tom Brown
    28. March 2014 at 10:02

    Mark, I’m happy I could be of assistance to you for once.

    It sounds similar to my case 2 here:
    http://tinyurl.com/ngrwr9m

    in which I’ve simplified away the details about PDs, etc.

  67. Gravatar of Cory Cory
    28. March 2014 at 10:03

    Just want to say that I think this is the best blog that I read.

    Second,

    Major Freedom,

    I patently disagree that a free society does not result in multiple comprehensive worldviews. That is what Rawls’ project was all about and I think he got it mostly right.

    “How is it possible that there can be a stable and just society whose free and equal citizens are deeply divided by conflicting and even incommensurable religious, philosophical, and moral doctrines?”

    Political Ideology is just one subset of our own individual comprehensive doctrines through which we approach the world.

    Also, reject treating the association of People we call the United States of America and its founding charter we call the Constitution but why is it any different than any other association?

    You inherited a Partnership Interest in our National Commonwealth and as a holder in that partnership interest you are bound by its terms.

    But, what I do think is a legitimate criticism by Anarcho-Capitalists is that they’re living in a world wherein there is no place for Anarcho-Capitalists can go.

    See, most of us, are fine with saying we consent to the terms of the social contract. Sure, its a grudging acceptance and we disagree with some of the things our mutual association does but we don’t run around saying that we have been coerced into Civil Government. We would freely choose the Civil Government over the state of nature…over Anarcho-Capitalism.

    But so let me ask you this, what would think if the International Community, set aside a part of the world wherein there was no Central Bank, there was no Civil Government…it was simply set aside for Anarcho-Capitalists to go and live without and not as a nation state and the international community provided all expenses paid trips to those who claim to be coerced by civil government to go set up shop there.

    It seems to me, if there were such free emigration to a part of the world wherein there was no civil government, then you could not accurately say you were coerced if you chose to stay and benefit from the benefits preserved for citizens of the United States, partners in this particular social contract.

    Would that be satisfying? Because it seems to me that most people are perfectly happy to consent to the benefits and burdens of the United States Constitution and call themselves a citizen of the United States and accept its territorial boundaries.

  68. Gravatar of Cory Cory
    28. March 2014 at 10:14

    Suvy,

    You make very strong arguments in favor of a Free Banking only system. However, in the mean time, millions of Americans seem reasonably happy with the current Federal Reserve System. They are fine with depositing their claims on the Federal government in deposit accounts insured by the FDIC, etc.

    However, I understand and acknowledge that the Federal Reserve System is incompatible with the worldviews of millions of Free Banking advocates, libertarians, etc.

    Is there any system you could reasonably consent to within the United States banking system that would allow the millions of Americans who are fine with the Federal Reserve system to keep it while you attempt to change their hearts and minds on the virtues of Free Banking?

    For instance, would you be happy with a law that would allow for business associations to offer banking services without a state or federal charter…Perhaps a “Free Bank” license to compete with banks that are members of the Federal Reserve System?

    Personally I think most people would choose to deposit their money in Fed Member Banks but maybe libertarian minded folks could deposit their money in uninsured, non-member banks???

  69. Gravatar of Tom Brown Tom Brown
    28. March 2014 at 10:19

    Cory,

    “But, what I do think is a legitimate criticism by Anarcho-Capitalists is that they’re living in a world wherein there is no place for Anarcho-Capitalists can go.”

    Mission to Mars?

  70. Gravatar of Tom Brown Tom Brown
    28. March 2014 at 10:21

    … it’s a fresh planet, just waiting to be homesteaded (as soon as those pesky little socialist robots are sent packing)

  71. Gravatar of ssumner ssumner
    28. March 2014 at 11:13

    Cullen, I don’t need someone telling me how seignorage works, nor do I appreciate it when you suggest to your readers that I don’t understand it, when in fact you are the one who inaccurately described it.

    You are in way over your head trying to blog on monetary economics. Have you considered a different topic?

  72. Gravatar of Philippe Philippe
    28. March 2014 at 11:27

    “But, what I do think is a legitimate criticism by Anarcho-Capitalists is that they’re living in a world wherein there is no place for Anarcho-Capitalists can go.”

    It’s just poor old “anarcho-capitalists” who don’t have enough power to live out their ideology. Everyone else can live in exactly the kind of world they want. Poor old ancaps. Such an oppressed minority of rich white grumpy fat old men.

  73. Gravatar of Philippe Philippe
    28. March 2014 at 11:44

    “If you are an explorer, and you step foot on a piece of land that was previously not altered through anyone’s efforts, and you build a farm and a house, then you have created private property.”

    This is the fairy tale I described above. As I accurately stated, that fairy tale is the moral foundation of your ideology. And it bears no relationship to reality. Private property in the real world is not based on your fairy tale. Your own private property is not based on the fairy tale. Yet you claim, for example, that the government has no right to tax your property because of the fairy tale. And that fairy tale is made up nonsense.

  74. Gravatar of Philippe Philippe
    28. March 2014 at 12:08

    This is hilarious. It’s like he can’t even read:

    “When you write multiple paragraphs explaining how it’s the Treasury that issues currency and earns seignorage, and not the Fed, then it’s no longer a typo.”

    So, Scott thinks not only that the Treasury doesn’t produce any currency, but that the seigniorage from this currency doesn’t benefit it. First, let’s just get the Fed’s view on this (via the Richmond Fed FAQ):

    “Does the Federal Reserve produce bank notes and coins?

    No, the Federal Reserve does not produce bank notes or coins. The Bureau of Engraving and Printing (BEP) produces currency and stamps, and the U.S. Mint produces our nation’s coins. The Federal Reserve issues Federal Reserve notes and places them in circulation.”

    In case you’re wondering: “currency in circulation””that is, U.S. coins and paper currency in the hands of the public”. Okay, so Scott is obviously wrong about issuance of currency (though the Fed does issue FR Notes).”

    LOL.

  75. Gravatar of Philippe Philippe
    28. March 2014 at 12:09

    http://pragcap.com/crickets

  76. Gravatar of Cullen Roche Cullen Roche
    28. March 2014 at 12:28

    Let’s review this for you Phil:

    Scott said Tsy doesn’t issue currency.

    Scott said I was wrong to claim Tsy earns Seigniorage.

    The Fed says Tsy issues coins.

    The Fed says Tsy earns most seigniorage.

    This ain’t rocket science.

  77. Gravatar of Philippe Philippe
    28. March 2014 at 12:50

    Do you know the difference between the words “produce” and “issue”, or was your post just another “typo”?

  78. Gravatar of Cullen Roche Cullen Roche
    28. March 2014 at 12:59

    Okay look. I know you’re just trolling, but answer me this:

    Does Tsy benefit from seigniorage?

  79. Gravatar of Philippe Philippe
    28. March 2014 at 13:01

    Do you know the difference between the words “produce” and “issue”?

  80. Gravatar of Cullen Roche Cullen Roche
    28. March 2014 at 13:08

    Also Phil,

    You might be interested to note that your MMT high priest, one L Randall Wray, agrees with me:

    “the US Treasury issues coins to the Federal Reserve in exchange for TGA crediting at par value.”

    http://neweconomicperspectives.org/2013/12/mmt-101-response-critics-part-4.html#_ftn4

    Game. Set. Match.

  81. Gravatar of Philippe Philippe
    28. March 2014 at 13:34

    I know the Treasury issues coins, you dolt.

    The question is whether you know the difference between the words “produce” and “issue”.

    By the way I think Sumner really nailed it here:

    “You are in way over your head trying to blog on monetary economics. Have you considered a different topic?”

  82. Gravatar of Cullen Roche Cullen Roche
    28. March 2014 at 13:56

    Now now. Let’s not get nasty.

    So, you agree that Tsy issues currency. I’m glad we resolved that, agree and can acknowledge that your previous statements were misleading.

    As for Scott’s comment…well, his silence is deafening. I’m still waiting to hear him explain how Tsy doesn’t issue coin or benefit from Seigniorage. Which, of course he won’t do because he knows he’s wrong.

    Have a nice weekend!

  83. Gravatar of Philippe Philippe
    28. March 2014 at 14:06

    Nothing misleading about my comments at all.

    You really should write about something you understand instead of typing gibberish every day.

  84. Gravatar of Cullen Roche Cullen Roche
    28. March 2014 at 14:10

    That is a kind sentiment which I will take into consideration.

    I will suggest that you spend your entire day anonymously trolling the same three or four websites professing your love for MMT. You’ve proven quite proficient at it!

    Take care.

  85. Gravatar of Philippe Philippe
    28. March 2014 at 14:20

    I don’t troll websites “professing my love for MMT”.

    Maybe you’re not even aware of when you’re lying. Maybe it’s just a compulsive habit. I don’t know.

    Take care!

  86. Gravatar of Ben B Ben B
    28. March 2014 at 14:30

    Philippe,

    I don’t understand. Are you suggesting that if it were true that because the implementation of private property rights has been dominated historically by aggression against prior property owners then this means that this is how private property rights ought to be defined?

    Is that like suggesting that since the history of human communication has not taken place in cyberspace, then we ought to refrain from using the internet?

  87. Gravatar of Ben B Ben B
    28. March 2014 at 14:40

    Cory,

    Why would non-member “libertarian” banks necessarily be uninsured? Obviously, no private insurance company would want to insure a fraudulent and highly risky activity such as fractional-reserve banking unless they were backed by the government; however, if they were backed by the government then they wouldn’t really be a “non-member” bank then would they? And, of course, mutuum contracts are uninsurable anyways, but certainly 100% reserve banks could be privately insured with regards to their demand deposits, right?

  88. Gravatar of Ben B Ben B
    28. March 2014 at 14:45

    Cory,

    “Also, reject treating the association of People we call the United States of America and its founding charter we call the Constitution but why is it any different than any other association?”

    Unless most other associations threaten to lock you in a cage if you decline to pay your “member dues” or even if you want to opt out of your “partnership” completely, then I’d say this “association” is very different than any other association.

  89. Gravatar of Major_Freedom Major_Freedom
    28. March 2014 at 15:01

    Philippe:

    “If you are an explorer, and you step foot on a piece of land that was previously not altered through anyone’s efforts, and you build a farm and a house, then you have created private property.”

    This is the fairy tale I described above.”

    How can an if then statement, be a “fairy tale”

    Are you saying that it is impossible for a person to build a farm on previously uninhabited land?

    “As I accurately stated, that fairy tale is the moral foundation of your ideology.”

    It was not accurately stated, because you falsely interpreted my ethic as a claim of history. For the fourth time, it is not a claim of history. It is a statement of what we ought to do, not what we have done.

    If you said that people ought not murder, then it would be silly for me to say that is a “fairy tale” on the basis that there has been murder throughout history.

    The moral foundation of my ideology is that it is immoral to initiate force against other people’s persons and (homesteaded/traded) property.

    “And it bears no relationship to reality.”

    Ethics if what we ought do are a guide to behaving in reality. Ethics are not claims of what people do.

    “Private property in the real world is not based on your fairy tale.”

    Private property in the real world is based on homesteading and free trade. You are talking about violations of private property and accusing me of defining private property as your understanding of violations of them.

    “Your own private property is not based on the fairy tale.”

    Your implied notion that all private property claims are equally legitimiate, is a fairy tale.

    “Yet you claim, for example, that the government has no right to tax your property because of the fairy tale.”

    No, the government’s claim to have a right to tax is based on a fairy tale foundation of morality. It is made up nonsense.

  90. Gravatar of Major_Freedom Major_Freedom
    28. March 2014 at 15:06

    Philippe:

    “It’s just poor old “anarcho-capitalists” who don’t have enough power to live out their ideology.”

    Poor old Jews in WWII Germany and Poland who didn’t have enough “power” to live out their ideology.

    Philippe, I always suspected you to be another dime a dozen sociopath, you’ve just proved it. Might makes right. Power is the determining factor if morality. It is the only “reality.” Everything else is “fairytale.”

  91. Gravatar of Philippe Philippe
    28. March 2014 at 15:29

    I didn’t say or imply that might makes right, silly boy. I was taking the piss out people like you, who often tend to be wealthy pampered spoilt narcissistic brats who like to moan about how oppressed they are. And hilariously you actually compared yourself to the Jews in nazi Germany.

  92. Gravatar of Major_Freedom Major_Freedom
    28. March 2014 at 15:38

    Ah, the trolling might makes right sociopath who feels better about himself by imagining that their hate is only payback for (non-violent) “crime” of being a “wealthy pampered spoiled narcissistic brat.”

    You are not concerned with rational debate, but rather feeling better about yourself by trying to pull down others.

    Were you abused as a child? Do you hate wealthy people? Do you try to understand your own narcissistic desire to take the piss out of people as something else?

    You sound mad.

  93. Gravatar of Philippe Philippe
    28. March 2014 at 15:55

    I didn’t say might makes right. Nor am I a sociopath. Nor did I say that being a “wealthy pampered spoilt narcissistic brat” is a crime.

    “You are not concerned with rational debate, but rather feeling better about yourself by trying to pull down others.”

    That’s hilarious. You spend most of your time insulting people and spouting shrill, angry, made-up nonsense.

    “Were you abused as a child?”

    No.

    “Do you hate wealthy people?”

    No.

    “Do you try to understand your own narcissistic desire to take the piss out of people as something else?”

    There’s nothing narcissistic about wanting to take the piss out of ridiculous characters like yourself.

  94. Gravatar of Major_Freedom Major_Freedom
    28. March 2014 at 17:12

    Philippe:

    You did imply might makes right when you said “poor old anarcho-capitalists” who lack the power to live their own lives. After all, their lack of might means they’re not right.

    Show me where I insulted someone.

    The definition of narcissism is a preoccupation with personal adequacy, power, prestige, and vanity.

    You satisfy every single one of those criteria. You are obviously worried about personal adequacy or else you wouldn’t be trying to pull me down to feel better about yourself. You definitely worry about power, which is why you like those without power, like anarcho-capitalists. You worry about your prestige, for witness the protestations that you don’t want to be viewed as someone who believes that might makes right. Finally, vanity shoild be your middle name, since your self perception is clearly above your abilities, as you’ve been corrected no less than 4 times on the difference between theory and history, and the difference between respect for property rights and violations of property rights. You actually believe violations of them are the equivalent of respect for them.

    You do hate wealthy people or else you would not have used wealth as a criteria for taking the piss out of people.

    Yeah, you mad.

  95. Gravatar of Mark A. Sadowski Mark A. Sadowski
    28. March 2014 at 17:49

    Scott,
    Off Topic.

    I want to respond to two claims that Cullen Roche made about me in a post yesterday:

    http://pragcap.com/lets-talk-about-seigniorage

    Cullen Roche:
    “Scott Sumner has a post up this morning quoting me in a bunch of out of context quotes from one of his readers, Mark Sadowski…”

    I provided links to all of the quotes, so it is extremely easy for people to read the comments in their context, as if that would actually make any difference, which it obviously does not.

    Cullen Roche:
    “…I pointed out that coins are purchased from the US Mint at face value (I also once accidentally said notes were as well, but later pointed out that that was a typo, something Mark Sadowski was not gracious enough to point out)…”

    Cullen made the correction *after* I posted the comments. It would be a pretty neat trick for me to point out something that occurs in the future:

    http://theartsentrepreneur.com/wp-content/uploads/2014/03/fortune-teller-378w.jpg

    In fact Cullen only made the correction *because* one of his regular readers, Tom Brown, read my comment at Worthwhile Canadian Initiative, and pointed out to Cullen that he had made a mistake.

    I’ll leave it to others to decide whether writing three paragraphs, on three separate occasions, with the very same mistake, constitutes a “typo”.

    Cullen Roche:
    “…Immediately after claiming I was “wrong” about this Mark Sadowski went on to contradict himself when he showed I was right about the coin situation…”

    Why on earth would I intentionally immediately contradict myself? It’s crystal clear from the context that I am referring to currency, and not just coins.

    If, as Cullen Roche claims, he already knew full well that the Federal Reserve does not pay face value for the nation’s currency, why would he imply twice, and then explicitly state the third time, the very opposite?

    Either his grasp of the current operational details of our monetary system is exceedingly weak, or his statements were meant to intentionally deceive.

    You decide.

  96. Gravatar of Mark A. Sadowski Mark A. Sadowski
    28. March 2014 at 17:57

    Excuse me, three claims.

  97. Gravatar of Philippe Philippe
    28. March 2014 at 18:12

    “After all, their lack of might means they’re not right.”

    That doesn’t follow logically, does it.

    “You are obviously worried about personal adequacy or else you wouldn’t be trying to pull me down to feel better about yourself.”

    I’m pointing out that you are a ridiculous individual and your ideology is nonsense. If you didn’t constantly parade around spouting really dumb self-righteous things all the time then there would be no need.

    “You definitely worry about power, which is why you like those without power, like anarcho-capitalists.”

    I like “anarcho-capitalists”?

    “You worry about your prestige, for witness the protestations that you don’t want to be viewed as someone who believes that might makes right.”

    No, I was just stating a fact.

    “you’ve been corrected no less than 4 times on the difference between theory and history”

    You repeated some dumb stuff about explorers and homesteading, right?

    “You actually believe violations of them are the equivalent of respect for them.”

    Er no, I was pointing out that your ideology is silly nonsense.

    “You do hate wealthy people or else you would not have used wealth as a criteria for taking the piss out of people.”

    No, I don’t hate wealthy people. I just dislike assholes like you. I hope that clarifies things.

    You’re not really a very logical sort of thinker, are you?

  98. Gravatar of Cullen Roche Cullen Roche
    28. March 2014 at 18:35

    Geez Louise! Talk about making a mountain out of a molehill! Was so much attention ever paid to ONE internet comment?

    I made the error about cash being purchased at face value ONCE. Go read your own cut and paste above. It’s very clear that in the third quote I made a mistake about cash being purchased at face value and I acknowledged the error after TB pointed it out.

    But that’s just a distraction from the point I was actually making about coins. You’ve masterfully distracted everyone from that and now no one is actually noticing the error in your overall thinking with regards to coin being purchased at face value.

    Well played sir. Well played.

  99. Gravatar of Lars Lars
    28. March 2014 at 21:58

    Mr Sadowski,

    Certainly you must be aware that coin is part of currency, correct? If you refer to currency as being issued by the Federal Reserve then you are making a mistake in much the same manner which you criticize others for making.

    I believe this is where the confusion lies. In essence, everyone in this conversation is being extremely imprecise.

  100. Gravatar of Suvy Suvy
    29. March 2014 at 08:14

    Cory,

    Yes. All you’d need to do is to eliminate the monopoly of currency issuance and the barriers to entry of anyone creating their own bank. Regulations help the largest banks and the expense of smaller banks. If you allowed currencies to compete, you would see different payment systems arise.

  101. Gravatar of Mark A. Sadowski Mark A. Sadowski
    29. March 2014 at 08:51

    Lars,
    “Certainly you must be aware that coin is part of currency, correct?”

    Currency refers to notes and coins.

    “If you refer to currency as being issued by the Federal Reserve then you are making a mistake in much the same manner which you criticize others for making.”

    Not once have I even used the word “issue”, because that is not at the heart of the matter. Cullen Roche’s mistake was in claiming that the Federal Reserve pays face value for notes and coins.

    “I believe this is where the confusion lies. In essence, everyone in this conversation is being extremely imprecise.”

    On the contrary, the problem is not with imprecise communication. Allow me to quote Cullen Roche:

    “All cash and coin is sold to the Fed at face value by the Bureau, a department of the US Tsy.”

    That is a precise statement. The problem is that it is precisely wrong.

  102. Gravatar of Cullen Roche Cullen Roche
    29. March 2014 at 09:21

    Mark,

    In the midst of your misleading accusation you said:

    “So the Treasury only gets paid about 4.6% of the face value of the nation’s currency in circulation by the Federal Reserve”

    This is precisely wrong. The Fed remits over 90% of earnings to Tsy. We all make mistakes some times. No big deal, eh? Let’s move on….

  103. Gravatar of Cory Cory
    29. March 2014 at 10:05

    Suvy,

    But if we are to respect the People of the United States, LLP as we would any other association of individuals, it seems to me that it would not be coercive for that association that we call a nation state to say that it will only accept payments owed to it that we call taxes in U.S. Dollars.

    Even if people use other currencies in their private affairs, they’re going to have to convert them to dollars to make their tax payments. And, that is why the dollar is the Unit of Account that most everyone uses.

    Other currencies will probably play the same role as poker chips it seems to me. Tokens used for certain activities but ultimately converted into the U.S. dollar.

    If the Commonwealth of the United States decides to only accept dollars I do not see how that would be coercive. Any other association of persons is free to accept any other token or medium as a payment of their debts. Why should we not apply the same reasoning to the association of persons established by the Constitution?

  104. Gravatar of Major_Freedom Major_Freedom
    29. March 2014 at 11:00

    Philippe:

    “”After all, their lack of might means they’re not right.””

    “That doesn’t follow logically, does it.”

    Poor old anarcho-capitalists, who lack the power to live by their ideology.

    “You are obviously worried about personal adequacy or else you wouldn’t be trying to pull me down to feel better about yourself.”

    “I’m pointing out that you are a ridiculous individual and your ideology is nonsense.”

    You haven’t shown how my ethics are nonsense.

    You haven’t shown how I am being “ridiculous.”

    “If you didn’t constantly parade around spouting really dumb self-righteous things all the time then there would be no need.”

    You haven’t shown how they are dumb, and it is you who is parading around. Look at the top of the thread. Your first comment to me was here:

    http://www.themoneyillusion.com/?p=26463#comment-326067

    and was a mistake in accusing my ethic of being a historical claim about history, rather than what it is, an ethic.

    “You worry about your prestige, for witness the protestations that you don’t want to be viewed as someone who believes that might makes right.”

    “No, I was just stating a fact.”

    It’s not a fact, it’s your opinion. Your opinion is wrong.

    “you’ve been corrected no less than 4 times on the difference between theory and history”

    “You repeated some dumb stuff about explorers and homesteading, right?”

    Those were not historical claims about what happened on X area of land, during a period of time y years ago.

    Homesteading and exploring are not dumb concepts.

    “You actually believe violations of them are the equivalent of respect for them.”

    “Er no, I was pointing out that your ideology is silly nonsense.”

    No, you “pointed out” that my argument concerning private property rights is wrong, because people in the past happened to have violated private property rights. That was your argument.

    “You do hate wealthy people or else you would not have used wealth as a criteria for taking the piss out of people.”

    “No, I don’t hate wealthy people.”

    Yes, you do, or else you would not have used it as a criteria for taking the piss out of people.

    “I just dislike assholes like you. I hope that clarifies things.”

    You sound mad. Why are you so mad?

  105. Gravatar of Philippe Philippe
    29. March 2014 at 12:34

    “Poor old anarcho-capitalists, who lack the power to live by their ideology.”

    That statement doesn’t say that might makes right, does it. Do you know how to read?

    “…and was a mistake in accusing my ethic of being a historical claim about history, rather than what it is, an ethic.”

    My comment that you linked to:

    “What you are implicitly always asserting is that all private property is based exclusively on peaceful, voluntary, individual ‘homesteading’, and unrelated in any way to the activities of the State. One need only take a brief look at history, or just look around at, you know, reality, to see what a ridiculous and patently false assertion that is. Your ideology is incoherent for the simple reason that it is based on fairy tales rather than facts.”

    Do you know how to read?

    You then replied: “Actually no, that is not what I am implicitly asserting.”

    So apparently you’re not asserting that private property in the real world is based on ‘homesteading’.

    Later on you then say:

    “The moral foundation of my ideology is that it is immoral to initiate force against other people’s persons and (homesteaded/traded) property…

    Private property in the real world is based on homesteading and free trade.”

    So, to recap: I said you assert that private property in the real world is based on ‘homesteading’, and that this is the foundation of your ideology. You said no, that’s not what you’re asserting. Then you asserted that private property in the real world is based on homesteading, and that this is the foundation of your ideology.

    You’re pretty dumb aren’t you?

    “You do hate wealthy people or else you would not have used wealth as a criteria for taking the piss out of people.”

    No, I don’t hate wealthy people. I was taking the piss out of wealthy, pampered, spoilt narcissistic brats who like to moan about how oppressed they are, and compare themselves to the Jews in nazi Germany because they have to pay some tax. It may be difficult for you to understand this, but there is a difference between ‘wealthy people’ and “wealthy, pampered, spoilt narcissistic brats who like to moan about how oppressed they are, and compare themselves to the Jews in nazi Germany because they have to pay some tax.” The former is a general term which could describe a whole range of different types of people. The latter is a specific description of a particular type of asshole. Do you understand this point now, or are you still confused?

  106. Gravatar of ssumner ssumner
    29. March 2014 at 13:07

    Mark, Cullen would say that corporate profits are not earned by corporations, they are earned by the Treasury. How do we know? Because part of those profits are paid in taxes to the Treasury.

  107. Gravatar of Morgan Warstler Morgan Warstler
    29. March 2014 at 14:07

    “Mark, Cullen would say that corporate profits are not earned by corporations, they are earned by the Treasury. How do we know? Because part of those profits are paid in taxes to the Treasury.”

    rofl.

    also MF / Phillipe, Might makes right doesn’t matter. What OUGHT to be only occurs when tricky sumbitches figure out how to argue it SHOULD be.

    Moral imperatives are junk. That’s the ought. The US ought to do blah blah for human rights.

    The policy that delivers brass tacks gains tot he hegemony – that”s the should. The US should do blah blah to maintain their global power.

    Real libertarians, don’t talk theory, they roll up sleeves and slit throats.

  108. Gravatar of Cullen Roche Cullen Roche
    29. March 2014 at 14:16

    Scott,

    Taxes are a line item under operating expenses on an income statement. I know you dislike accounting, but come on….This is basic stuff….

  109. Gravatar of Philippe Philippe
    29. March 2014 at 14:23

    Morgan,

    “The policy that delivers brass tacks gains to the hegemony – that’s the should.”

    Why do you think that? And who is the hegemony exactly?

  110. Gravatar of Ben B Ben B
    29. March 2014 at 15:06

    Morgan,

    Why do “real libertarians” slit throats first and ask questions later? What happens if you slit the wrong throat?

    But even so, don’t you have to at least discuss theory somewhat, in order to come to the conclusion that slitting-throats is the proper action?

    You are simply asserting that there is no need to discuss theory any longer because you have discovered the correct theory. But this does not mean that “Real libertarians don’t discuss theory, they roll up sleeves, and slit throats.”

  111. Gravatar of Tom Brown Tom Brown
    29. March 2014 at 15:12

    Philippe the hegemony is the upper 1/3 minus the 1%. How’d I do Morgan?

  112. Gravatar of Ben B Ben B
    29. March 2014 at 15:18

    Cory,

    It’s coercive to impose taxes; what the “association” demands as payment in taxes has no bearing on whether the act is coercive or not.

    The fact that the US dollar is demanded by the US government for taxes does not make it a “unit of account”. If the US government suddenly required you to pay your taxes in apples, would you immediately begin using apples as a medium of exchange? Would you suddenly begin calculating all your economic decisions based on apples? No, you would simply buy apples with money and give them to the government.

  113. Gravatar of Major_Freedom Major_Freedom
    30. March 2014 at 10:30

    Philippe:

    “That statement doesn’t say that might makes right, does it. Do you know how to read?”

    I didn’t say it did say so explicitly. I said that is what is implied in what you said. Why else dump on an ethic for its practitioners lacking the power to live by it in their lives?

    “…and was a mistake in accusing my ethic of being a historical claim about history, rather than what it is, an ethic.”

    “My comment that you linked to:”

    “What you are implicitly always asserting is that all private property is based exclusively on peaceful, voluntary, individual ‘homesteading’, and unrelated in any way to the activities of the State. One need only take a brief look at history, or just look around at, you know, reality, to see what a ridiculous and patently false assertion that is. Your ideology is incoherent for the simple reason that it is based on fairy tales rather than facts.”

    “Do you know how to read?”

    Yes, and what you just linked to shows my assessment to be accurate. You just said in that quote that the ethic is “false” because of what took place in history. That means you are interpreting the ethic as a historical claim of what took place.

    But the ethic is not a historical claim. It cannot be proved “correct” nor can it be proved “false” by what some people have done in the past.

    Again, the private property ethic is an argument of what we ought to be doing. It is not a claim of what people have done, and it is certainly not a description of instances of when the ethic was violated in the past, which is what you implied it was when you said private property violations (which you do not phrase it as) are instances of private property ethics in action.

    “You then replied: “Actually no, that is not what I am implicitly asserting.”

    Correct. I was not implicitly asserting what some people have done the past which supposedly falsifies the ethic I am presenting to you.

    “So apparently you’re not asserting that private property in the real world is based on ‘homesteading’.”

    False again. Although I am presenting an ethic, which is not a claim of what people have done in the past, it is not true to say that nobody in history has ever homesteaded land or traded for homesteaded land. Here, the historical claim to make that is true is that some people practised it, while other people did not. Homesteading has taken place in history. Free trade has taken place in history. Private property ethic has been practised in history.

    But it has not been universally practised in history.

    But even if not a single person has ever practised the ethic thus far, which again is not true but for the sake of argument let’s suoppose it, then it STILL would not “refute” or “falsify” the ETHIC of private property that states what people ought to be doing.

    “Later on you then say:”

    “The moral foundation of my ideology is that it is immoral to initiate force against other people’s persons and (homesteaded/traded) property…”

    “Private property in the real world is based on homesteading and free trade.”

    ” So, to recap: I said you assert that private property in the real world is based on ‘homesteading’, and that this is the foundation of your ideology. You said no, that’s not what you’re asserting.”

    No, I said that it is not based on your mistaken understanding that the instances of the ethic being violated in history, are the supposed private property rights in action.

    You claimed that the history of private property is composed of violations of it. That’s false. Then you claimed
    that those instances of violations are what the homesteading and free trade ethic are based on. That’s also false.

    “Then you asserted that private property in the real world is based on homesteading, and that this is the foundation of your ideology.”

    Yes. In the real world homesteading is possible. It has happened in history. Violating the rights of homesteaders has also happened in history, but that doesn’t mean homesteading has never happened, nor does it mean respecting the homesteader as property owner is not what we ought to be doing.

    “You’re pretty dumb aren’t you?”

    I don’t see anything you have written that would make be believe that.

    “You do hate wealthy people or else you would not have used wealth as a criteria for taking the piss out of people.”

    “No, I don’t hate wealthy people. I was taking the piss out of wealthy, pampered, spoilt narcissistic brats who like to moan about how oppressed they are”

    You just admitted again that you hate wealthy people. Why else make it a criteria for taking the piss out of them? If you instead said you like to take the piss out of black people, then that would be because you hate black people.

    If you didn’t hate wealthy people, you wouldn’t be focusing on wealthy people to direct your hatred.

    Also, as shown above, you are a narcissist. You are more concerned with feeling adequate about yourself, which is why you are directing hatred towards those you percieve to be thinking highly of themselves. You wouldn’t feel so much hatred towards those you percieve to be thinking highly of themselves, if it didn’t remind you of your perceptions of your own inadequacy. You want to feel more adequate, and the only way you know how to do it, is to attempt, and in my case utterly fail, to bring others down.

    You are a textbook example of a narcissist. Narcissists hate it when they percieve others as thinking of themselves highly, because you feel threatened by it, as you want to be percieved as adequate, both from others and from yourself.

    “And compare themselves to the Jews in nazi Germany because they have to pay some tax.”

    Again, I did not compare myself to Jews in Nazi Germany. I compared YOUR beliefs to the beliefs as the Nazis.

    “It may be difficult for you to understand this, but there is a difference between ‘wealthy people’ and “wealthy, pampered, spoilt narcissistic brats who like to moan about how oppressed they are, and compare themselves to the Jews in nazi Germany because they have to pay some tax.”

    Yes, the difference is that your narcissism can run free with the former, but not the latter, and that makes you very mad.

    “The former is a general term which could describe a whole range of different types of people. The latter is a specific description of a particular type of asshole. Do you understand this point now, or are you still confused?”

    I understabd your point that you’re mad and you need to hate those who expose your narcissism as problematic.

    All that is really happening here is that I am saying we all ought to cease violating individual private property rights.

    You percieve that to be a threat to your livelihood, and so you hate me for it. You don’t even care if your livelihood might be a product of violations of property rights. You only care if it were reduced. That’s what narcissists worry about. They care more about their status, than they do justice.

  114. Gravatar of Major_Freedom Major_Freedom
    30. March 2014 at 10:36

    Morgan:

    No Morgan, real libertarians do not initiate violence against others. Real libertarians defend themselves from coercion, where possible, and they TALK, i.e. educate others, into understanding and hopefully adopting the ethic in their view of others. Most people are practising anarcho-capitalists. Most onky differ in what they are willing to respect and tolerate from others, especially those who call themselves statesmen.

    Also, I thnk I would be much more open to your view of libertarianism if you yourself practised what you preached. You’re only talk, and yet you say that is the wrong way. You, like so many, who confuse the state with society, want to believe you’re acting in accordance with your ideology if you see others, in the state, practising it. If the state slits throats, you feel like you are doing it. If the state imposes a new rule in central banking, you believe you’re imposing it. You’re deluding yourself!

  115. Gravatar of Philippe Philippe
    30. March 2014 at 10:53

    “You just admitted again that you hate wealthy people. Why else make it a criteria for taking the piss out of them?”

    You really are quite extraordinarily dense.

    If someone takes the piss out of religious people who are completely intolerant of other religions and who hold extremely bigoted views, does that mean they hate religious people?

    Take your time now, think carefully. I know you find this complicated.

  116. Gravatar of Major_Freedom Major_Freedom
    30. March 2014 at 11:21

    Philippe:

    If you spoke to them the same way as you do me, then of course. For why only take the piss out of religious people with intolerant views, instead of both religious people and atheists who are intolerant of other people’s views?

    There must be a reason why you’re giving intolerant atheists a pass.

    Your hatred seems to be so acute, that it is blinding you.

  117. Gravatar of Philippe Philippe
    30. March 2014 at 12:00

    This is hilarious. So according to you if someone takes the piss out of an intolerant and bigoted religious person, and doesn’t at the same time take the piss out of an intolerant and bigoted atheist, that means they hate religious people. That’s so dumb I’m almost speechless.

    Have you got any more? This is really funny!

  118. Gravatar of Major_Freedom Major_Freedom
    30. March 2014 at 12:32

    Philppe:

    “So according to you if someone takes the piss out of an intolerant and bigoted religious person, and doesn’t at the same time take the piss out of an intolerant and bigoted atheist, that means they hate religious people.”

    Close. If someone takes the piss out someone else with the level of your vitriol and contempt, based on certain criteria, then yes, they would be displaying hatred for people who share that criteria.

    If someone displayed your kind of vitriol and contempt for people of a certain race for example, but they did not show the same for others of different races, then it would be reasonable to assume that person is racist.

    Since you aren’t stating you take the piss out of poor people who are otherwise sharing the same criteria such as narcissism, spoiled, and bratiness, that tells me that you hate wealthy people.

  119. Gravatar of Philippe Philippe
    30. March 2014 at 13:19

    It probably tells you that because you’re an idiot, Major.

    You clearly believe whatever you want to believe, regardless of the facts or logic or anything else.

    According to you because I haven’t stated that I take the piss out of poor people who are narcissistic, spoiled and bratty, that means I hate rich people. This is beyond stupid.

  120. Gravatar of Major_Freedom Major_Freedom
    30. March 2014 at 13:29

    Philippe:

    You haven’t shown how it is stupid.

    If what I said is not reasonable nor logical, then show me why.

    If you don’t hate rich people, then prove me wrong by showing as much vitriol for people who you explicitly point out as being poor, as you do for people who are not poor.

    Shouldn’t be hard, if you’re being honest with yourself.

  121. Gravatar of Philippe Philippe
    30. March 2014 at 14:09

    I don’t “show vitriol” to people who are not poor, nor am I going to “show vitriol” to people who are poor.

    The only subject of my contempt here is you, Major. Basically you’re a nasty person who makes up childish pseudo-economic drivel to try and justify your nasty ideology. That much is clear and obvious.

    The only real question of interest is why you keep on doing it. What motivates you? Are you a delusional character who actually believes he is achieving something? That aspect remains a bit of a mystery.

  122. Gravatar of Morgan Warstler Morgan Warstler
    30. March 2014 at 14:42

    Tom, that’s exactly right. I’d say more like .1%, but you get the drift.

    Ben,

    Ragnar Danneskjöld is clearly the hero (the realist) of Atlas Shrugged. What else do you need to know?

    I’m old. In 1982, arguing with fellow libertarians on BBS (the newsgroups, then The Well, then Threads,. then Electric Minds about how a private police force would work was interesting. 30 years later? I’m most impressed with Snowden, Friis, Zennstrom, Robertson, Cohen, Fanning, Satoshi, Warg, etc. et al

    I also know personally that NONE of them are libertarian theorists, endlessly formulating the Bryan Caplan style pilpul that must leave Orthodox Jews awe struck.

    I used to and now couldn’t give a rats ass about the Rothbard vs. Mises. What I care about is WHAT POLICY CAN PASS IN NEXT FIVE YEARS AND SHRINKS THE # OF PUBLIC EMPLOYEES.

    That’s it.

    If public employees are shrunk, we can pay the ones that are owed $ their $, the new ones won’t be promised anything, and the public funding of Dem politics shrinks enough, that one party or both will have to let the technologists lead.

    I only trust technolibertarians. They might not be pure, but they don’t need donations to preach the gospel.

    Profits are the only sustainable movement.

  123. Gravatar of TravisV TravisV
    30. March 2014 at 15:50

    Morgan Warstler,

    Re: our recent discussion of the “optimal” long-run inflation rate, consider the following data:

    http://idiosyncraticwhisk.blogspot.com/2014/03/a-regime-shift-in-interest-rates-and.html

    Also, I’m sure you’re aware of Glasner’s finding that the stock market is rooting for inflation.

    My question to you is: shouldn’t we shoot for a situation where stocks are neither rooting “for” or “against” inflation?

    If stocks (especially tech stocks) are rooting for inflation, shouldn’t you root for it as well?

  124. Gravatar of Morgan Warstler Morgan Warstler
    30. March 2014 at 16:09

    Travis,

    Why are tech stocks rooting for inflation?

    I know that Wall Street is rooting for QE, I know that Debt Holders are rooting for inflation, but most tech stocks aren’t sitting on debt, and they tend to do better, when the rest of the economy is desperately trying to cut costs. Comparably of course, but still.

    Generally, again my problem isn’t with inflation per se. If we’re doing NGDPLT I’d take inflation when needed.

    My issue is that I think we have a bunch of positive RGDP we aren’t counting, because free ($0) doesn’t count directly. And I think invisible digital deflation is only going to get more intense.

    And lately, we’re starting to see MIT BPI start to disagree with CPI.

  125. Gravatar of TravisV TravisV
    30. March 2014 at 16:28

    Morgan Warstler,

    Excellent point about uncounted RGDP.

    If I were an innovative person working in the tech industry, I’d want a thriving, high-demand high-investment situation like the 1990’s rather than a low-demand one.

    I imagine tech stock valuations act accordingly.

    You certainly don’t want too much inflation. That’s bad for free-market capitalism. But so is too little inflation.

  126. Gravatar of Ben B Ben B
    30. March 2014 at 16:29

    Morgan,

    In the long run, the size of the State is determined by public opinion and not by anybody’s “five year plan”.

    What will happen in five years when a new charismatic leader decides to implement someone else’s five year plan? How will the public avoid being duped? What will happen when the public forgets about the Edward Snowden revelations because they reason that Edward Snowden was exposing THIS government and not the nature of ALL governments? This is where your techno-libertarians fail; they can’t get to the root of the problem.

    No, you shouldn’t have abandoned theory for pragmatism. If the techno-libertarians would abandon pragmatism for theory, we could turn your five-year plan into a long-term one.

  127. Gravatar of TravisV TravisV
    30. March 2014 at 16:55

    Morgan Warstler,

    Other points:

    (1) Your comment about Wall Street “rooting for QE” is too simplistic. The reality is that wealthy people in the U.S. and the rest of the world don’t grasp the fact that easier money is in their best interest. I’m really not sure even most Wall Street elites are rooting for QE.

    (2) It could be that wealthy “rentiers” vaguely favor tight money in order to preserve their relative power position.

    (3) Macroeconomics is a very counterintuitive subject. It’s very very hard for people to grasp that the total benefits from printing money are far larger than the total costs.

    (4) You mentioned that the BPI is starting to disagree with the CPI. Interesting! Is BPI inflation higher or lower than CPI inflation? Is there any analysis on the web discussing this?

  128. Gravatar of Major_Freedom Major_Freedom
    30. March 2014 at 18:18

    Philippe:

    “I don’t “show vitriol” to people who are not poor, nor am I going to “show vitriol” to people who are poor.”

    Yes, you do show vitriol to people who aren’t poor. For you are showing vitriol to me, and assuming I am not poor. Thus, you are showing vitriol to those who are not poor.

    “The only subject of my contempt here is you, Major.”

    For being wealthy, according to you.

    “Basically you’re a nasty person who makes up childish pseudo-economic drivel to try and justify your nasty ideology. That much is clear and obvious.”

    Yes, I understand that peace and voluntary cooperation are “nasty” to sociopaths like you. I get it. You hate peace. You hate homesteaders being understood as the rightful property owners. You hate free trade. You hate this because it means your life will be worse off. If the ethic were practised more so than it is, then you and others who benefit from violations of property rights in the short run, will be worse off in the short run.

    And so you pretend that the ethic of private property is “nasty.” Nasty because you’ll live a nastier life.

    “The only real question of interest is why you keep on doing it.”

    The same reason you don’t know why.

    “What motivates you?”

    The same thing that makes you afraid and resentful.

    “Are you a delusional character who actually believes he is achieving something?”

    Are you a thief? Do you steal other people’s property? Do you initiate violence against other people’s persons? Do you threaten people with violence if they don’t give you their property? Do you believe that you ought not be granted permission by someone before you can take their property or touch their bodies?

    If you answered no to all of these questions, then you are practising the ethic I am espousing.

    What’s your problem? It can’t be me. I am just another random internet poster. What I am saying that is making you rage with hate and anger. Why?

    “That aspect remains a bit of a mystery.”

    Let it remain one. Deal with the ideas.

  129. Gravatar of Morgan Warstler Morgan Warstler
    31. March 2014 at 13:44

    Ben B,

    “In the long run, the size of the State is determined by public opinion and not by anybody’s “five year plan”.

    What the state does is determined by public opinion.

    When I talk about shrinking the state, I’m talking about # of public employees.

    And technology determines the number of public employees, not public opinion.

    Or rather, consumers choose the best product, the best deal, and right now folks like the teachers aren’t it. The public has no “love” of 5M+ teachers, when technology moth balls them (it is just beginning now), the state shrinks.

    The public has no innate love of DMV, court clerks, parking meter readers, etc.

    They just want the stuff to work! Preferably 24/7 with the least amount of effort on the publics part.

  130. Gravatar of Negation of Ideology Negation of Ideology
    31. March 2014 at 15:02

    Major –

    “If you are an explorer, and you step foot on a piece of land that was previously not altered through anyone’s efforts, and you build a farm and a house, then you have created private property. Homesteading is in fact the creation of private property.

    There is no violence against anyone else’s person or property in this activity.

    If this homesteader were to later sell it or give it away to a different individual, then the private property title is transferred, again without any initiating violence against other individuals.

    This is clean capitalism. This is what I think we all ought to be doing.

    This is purely voluntary. No coercion is present in either homsteading or free trade.”

    You are incorrect that this is voluntary. When did anyone consent to this “finder’s keepers” morality? I favor homesteading too, but it is certainly not voluntary. It’s a matter of you (and me) forcing our opinion that homesteading is good on those who disagree with us. Of course, all societies, including anarchist ones, are based on force so that doesn’t bother me in the least.

    If Smith claims that he owns a piece of land because he says he got there first and “mixed his work with it” and Jones disagrees then does Smith really own it? What if Jones settles on a part of the land that Smith left fallow? Who owns the property now? What if someone else homesteaded on the land before Smith, left for 5 years, sold it to Jones who is now claiming it? What if Jones doesn’t believe in homesteading in the first place? Does Smith have the right to force his values on Jones?

    Is there any limit to homesteading? In the US, it was 160 acres if I recall correctly. Why not 150 or 170 acres? If Smith claims 320 acres, does Jones have the right to settle on half of it? Could Smith claim all of Alaska? Why or why not? And who decides?

    Homesteading has to be based on law or custom. In a Constitutional Republic, the laws are written down and if we want to change them we do so by giving everyone an equal say in the change. So when Smith and Jones disagree over who owns a piece of property, whoever followed the process to claim legal ownership owns the property. In your system, Smith and Jones fight it out, and whoever is not dead “owns” the property.

  131. Gravatar of TravisV TravisV
    31. March 2014 at 15:09

    Morgan Warstler,

    (1) Would your personal ideal system of taxation have any progressivity in it or would you simply have flat taxes on things like consumption and land?

    (2) How important is the issue of wealth redistribution relative to the inefficiency of various government programs / employment?

  132. Gravatar of Ben B Ben B
    31. March 2014 at 18:46

    Morgan

    “What the state does is determined by public opinion.”

    And the more government activities the public is against, the smaller the total number of public employees.

    “And technology determines the number of public employees, not public opinion.”

    If technology determines the number of public employees, then why have we witnessed both an explosion in technology and the number of public employees over the past 200 years?

    Public opinion has become increasing less resistant to the growth of government. How else do you account for ballooning government budgets?

    “The public has no “love” of 5M+ teachers, when technology moth balls them (it is just beginning now), the state shrinks.”

    Even if advancements in technology allow for cuts in government spending on education, it isn’t necessarily true that the government will decrease its total spending. It could just as well shift its previous spending on education to some new government payroll or to increase the spending of a pre-existing government payroll. Unless the public says, “Hey, that’s not the role of government” or, “Hey, the government is spending way to much money”, then there is no reason to believe that government will decrease total payroll spending.

    “The public has no innate love of DMV, court clerks, parking meter readers, etc.”

    Favorable public opinion doesn’t necessarily imply a love for any actions of the State. It could just as well imply tolerance of the State. If public opinion is “but without a government, then who will build the roads?”, then this is still “favorable” public opinion; hence, the existence of such unpleasant places like the DMV.

  133. Gravatar of Ben B Ben B
    31. March 2014 at 18:51

    Redaction

    “And the more government activities the public is against, the smaller the total number of public employees.”

    Actually, this is not necessarily true as I noted later in my post. The government could simply balloon those activities that the public does see as a legitimate government function.

  134. Gravatar of Major_Freedom Major_Freedom
    31. March 2014 at 18:53

    Negation:

    “You are incorrect that this is voluntary. When did anyone consent to this “finder’s keepers” morality? I favor homesteading too, but it is certainly not voluntary. It’s a matter of you (and me) forcing our opinion that homesteading is good on those who disagree with us.”

    No, we would be defending against initiations of force. We aren’t forcing anything on others and their property. We are stopping force from being used to take unjust possession of land.

    “Of course, all societies, including anarchist ones, are based on force so that doesn’t bother me in the least.”

    Incorrect. Human society is based on reason, not violence.

    It is not me threatening my family and friends and colleagues with death that grounds our interactions.

    What kind of a family did you grow up in that you would believe such a thing?

    “If Smith claims that he owns a piece of land because he says he got there first and “mixed his work with it” and Jones disagrees then does Smith really own it?”

    Of course. Jones’ opinion and Smith’s opinion can’t both be right.

    “What if Jones settles on a part of the land that Smith left fallow? Who owns the property now?”

    Good question.

    “What if someone else homesteaded on the land before Smith, left for 5 years, sold it to Jones who is now claiming it?”

    Good question.

    “What if Jones doesn’t believe in homesteading in the first place?”

    You mean what if Jones is a thief or invader? Good question.

    “Does Smith have the right to force his values on Jones?”

    Is Smith forcing his values on Jones, or is Jones forcing his values on Smith, in each of the potential activities?

    They can’t both be right if there is a conflict.

    “Is there any limit to homesteading?”

    I would think so.

    “In the US, it was 160 acres if I recall correctly. Why not 150 or 170 acres?”

    I don’t know why there should be any hard and fast number of acres.

    Why 51% rule, and not 52%? Why is government justified if only 40% of the population votes, where 51% of the 40%, or 21% of the total population, observationally supports the government through voting?

    “If Smith claims 320 acres, does Jones have the right to settle on half of it?”

    If Smith homesteads 320 acres, and not just “claim” it, then no. Otherwise, yes.

    “Could Smith claim all of Alaska? Why or why not?”

    Claiming isn’t homesteading.

    “And who decides?”

    The question is not who, but what. The what is reason. It’s our most reliable tool.

    “Homesteading has to be based on law or custom.”

    In order for what? For it to be adopted, or for it to be ethically justified?

    “In a Constitutional Republic, the laws are written down and if we want to change them we do so by giving everyone an equal say in the change.”

    Being able to speak doesn’t mean you’re free.

    “So when Smith and Jones disagree over who owns a piece of property, whoever followed the process to claim legal ownership owns the property.”

    You’re just defining how the statist system works. Not enlightening.

    “In your system, Smith and Jones fight it out, and whoever is not dead “owns” the property.”

    Ha, maybe in your world where you can’t figure out any peaceful solution will fight to the death be the deciding factor.

    You’re really describing your own ethic when you do that.

  135. Gravatar of Major_Freedom Major_Freedom
    31. March 2014 at 18:59

    Negation:

    “”In your system, Smith and Jones fight it out, and whoever is not dead “owns” the property.””

    Actually that is an apt characterization of your system of majority rule. In your system, if there is conflict between two parties, then whoever is strongest and can take the land, in our society meaning government, then they are ethically justified. Might makes right, right?

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