Dr. Antal Fekete on Real Bills, Quantity of Money Theory and the New Austrian Economi

[mick silver]

i never heard of this guy but he make a lot of good points . i like this part . it a good read ..... Antal Fekete: When Mises was asked what he would do if he were the President of the United States he said he would resign forthwith. I answer your question by saying that I would also resign and issue a strongly-worded statement that I don't want my name to be associated with a wrong-headed, utterly corrupt and unconstitutional experiment with irredeemable currency, foisting it upon the rest of the world. It is immoral. It marks the darkest hour in the history of this nation. - See more at: http://www.thedailybell.com/exclusiv...3mXxgRR.dpufad .

[mamboni]

You have to be Hungarian; and you have to be double-jointed.

[mamboni]

Key points(Feketian Axioms):



ZIRP (zero interest rate policy) has the effect of destroying capital.


QE leads to permanent gold backwardation (read: headlong rush of gold into hiding)


We are already in a depression, masked by unlimited money creation which is pouring oil on the fire of deflation


Capital destroyed by the falling interest rate structure cannot be resurrected by an exercise in exit strategies.


The most marketable good was (and is) gold. Marketability is measured by the spread between the asked and bid price as ever greater quantities are thrown on the market. For the most marketable good the spread declines more slowly than it does for any other good.


On that day President Nixon was facing the worldwide disappearance of gold on an unprecedented scale. He could have solved the problem by doubling the official gold price from $35 to $70 per oz.


Once the rate of interest has risen, the marginal bondholder buys back his gold bond at a lower price. In doing so he relinquishes the gold coin he obtained when he had earlier sold his bond at a higher price in protest against low rates.


When permanent gold backwardation sets in, meaning that the basis has turned and stayed negative, it will mark the withdrawal of all offers to sell gold. Those who still want it must get it through barter.


A barter economy that is grossly insufficient to serve the multifarious needs of our complex world economy. All kind of shortages would arise and famine, pestilence, unemployment would be rampant.


Historically money is not the creature of the state. It is the creature of the market in promoting gold as the most marketable substance on Earth over the millennia.


The original meaning of 'legal tender,' before advocates of monetary duress distorted it beyond recognition, was that the weight of the gold coin must fall within the range of tolerance standards. Legal tender gold coins were those the weight of which complied with the tolerance standards. They were accepted at face value when paid out by tale, even if they were slightly under-weight. Gold coins falling outside tolerance standards were not legal tender.


Hyperinflation always means that the velocity of money-circulation is getting ever higher, in fact, higher than any preassigned velocity, however large. This may or may not be accompanied by central-bank money printing. The underlying flow of existing money from the bond market to the commodity market can do the trick independently of the wishes of the central bank.


Hyperdeflation would mean that the velocity of money circulation is getting ever lower, in fact, lower than any preassigned velocity, however small. The important thing to note is that this is totally independent of the wishes of the central bank. It is the direct consequence of the spontaneous money-flow from the commodity market to the bond market.


I think the correct approach to the deflationary spiral is through arguing in terms of resonance between oscillating commodity prices and oscillating interest rates. Mainstream economists do not understand speculation. Post-Mises Austrian economists are no better. Risk-free speculation in the bond market explains everything without a hitch.


No producer has ever paid a single gold coin for a semi-finished good, never ever! Payments in gold coins are made exclusively for finished goods, and that by the consumer, not by the producer! Producers of higher order goods get paid for semi-finished goods by drawing bills on the producer of lower-order good, and that's that.

Gold bills were forcibly and brutally eliminated by the victorious Entente powers in 1918 as they feared post-war German industrial competition and innovation. They were obliged to lift the blockade in compliance with the terms of the peace treaty, but they thought they could finesse their way through blocking the trade of gold bills in the London clearing houses. The Entente powers could not have done something more insane. They shot themselves in the foot. The gold standard Britain re-established in 1925 failed because it missed an organic part: the clearing house, that is, the market for gold bills.


What politicians and economists forgot in 1918 was that without the bill market there is no wage fund. There is no way to finance the production of consumer good now, for which the consumer will pay only 91 days later, apart from gold-bill financing. In the euphoria after the victory several bubbles were blown: the bubble in the government bond market in 1921, the bubble in Florida real estate in 1925 and, most notoriously, the stock market bubble in 1929. Nobody noticed that the bubble-financed consumer goods market was going to be starved of funds, once the bubbles were pricked one after another. That became clear in 1930 when it turned out that the bloated inventory of consumer goods was unsalable. Had the bill market been rehabilitated in 1918, adjustment in inventory would have been made in time to avoid the glut, and financing of further production would have been available through discounting gold bills. The upshot was that workers producing consumer goods had to be laid off in six-digit contingents. Pseudo-theories were a dime a dozen, among others, those of Keynes about over-saving, under-consumption, lack of demand in 'mature' capitalist economies, the contractionist nature of the gold standard, to mention but a few. No one was looking for an answer in the forcible destruction of the gold bill market in 1918, inspired by the chauvinistic jealousy of the victorious Entente.


The market for gold bills is entirely spontaneous. The wholesaler delivers supplies to the retailer and bills him. Once endorsed by the latter, the bill goes through a metamorphosis and becomes money that the wholesaler can use in replenishing his inventory. His suppliers accept the endorsed bill from him in payment. In this way the gold bill, the next best thing to the gold coin, becomes money, albeit an ephemeral one. It was destined to expire in no more than 91 days. Gold bills are the best earning asset a commercial bank can have. Demand for them is virtually unlimited. Not only will producers of semi-finished goods scramble for them; everybody with a large payment coming up such as bond issuers just before the maturity date of their issue, or purchasers of real estate before the closing date will, too. They would not accumulate bonds, for example, in preparation to pay their obligations. Bonds are far too illiquid for that purpose.


The Real Bills Doctrine is a living memento that the Quantity Theory is false. Thus it is a thorn in the flesh. Certainly drawing real bills will add to the money supply, but it does it in such a way that will not make prices rise.


The rate of interest is that rate at which the stream of interest payments plus the lump sum payment the (fixed) face value at maturity amortize the (variable) market value of the bond. Once you accept it, you realize that there must be two interest rates, one having to do with the asked and the other with the bid price of a bond.

[EE_]

Do you guys think this would be good for barter? Easily divisible.
These are jewelry grade nuggets out of Alaska, over 20 years old. They are 90/92% pure.

First pic is 4 and 6 mesh
Second pic is 1+ grams to a 6.5 gram nugget

[mamboni]

Do you guys think this would be good for barter? Easily divisible.
These are jewelry grade nuggets out of Alaska, over 20 years old. They are 90/92% pure.

First pic is 4 and 6 mesh
Second pic is 1+ grams to a 6.5 gram nugget

No. First, most people don't know gold let alone nugget gold. Then, there is the problem of providing accurate weight. Third, there is the question of actual gold content. Personally, I might barter for these only with substantial discount on the imputed gold content. Bottom line: better than nothing but very limited applicability in the field.