Wednesday, 22 February 2012

Spreading the Word

Courtesy of Douglas Carswells blog, I found this.

Here's what they say about...


In economics laissez-faire is an environment in which private parties are free to trade and transact in the absence of state intervention. State intervention can take the form of capital controls (human and financial), regulations, taxes, tariffs and enforced monopolies. Laissez-faire is a French phrase and literally translated means “let do”, but more broadly it means “let it be”, or “leave it alone”. Much of the debates within economic and political circles centre around to what extent economies should be left to operate on a laissez-faire basis.

A number of prominent gold investors are intellectually aligned with the Austrian school of economic thought and argue that it is in fact intervention in our money and markets that has caused the gross imbalances in our financial system that manifested themselves in 2008. Whilst the heart of these arguments centres around a flawed monetary system and the problematic effects of central banks (cited as an apparent cartel) gold investors such as Peter Schiff argue that intervention in various markets is responsible for many of our economic woes.

This political interference is said to have distorted market forces and pricing, with the manipulation of interest rates and provision of credit being most obviously visible. Such manipulation of interest rates and credit, for example, enables politicians to purse their goals of increased home-ownership above what would be possible under a normally functioning market.

Here endeth.


Antisthenes said...

Laissez-faire or as I would put it free market capitalism is indeed the answer to our financial and social ills. Also as a means to enhance democracy a free market after all is the ultimate in democracy. Of course the opponents of this system point out to the inherent flaw in the system in that there are winners and losers. They are of course right however their preferred system socialism has even greater flaws in that there are fewer winners with many more losers and/or only that the winners and losers are different. It is when the losers in society gain sufficient enough powers to overthrow the system that the system is changed. Hence free market capitalism has been changed to social democracy in the West and socialism has been changed to free market capitalism in the East. Like a pendulum will this state of affairs continue ad infinitum until the battery runs out.

chefdave said...

I gave up on Carswell after he refused to allow any of my posts on Georgism and the land value tax in his comments section.

A faux-lib to the very core that uses monetarism to deflect attention away from the much more important land issue.

Mark Wadsworth said...

L, in the mythical golden days 1945 - 1970, UK governments actually increased the spread of owner-occupation very successfully, while keeping prices stable (by fair means or foul). This was A Good Thing.

The problem is that Home-Owner-Ism has now been perverted into a system that has as its main aims a) maximising the amount of debt which people are willing to take on and b) pumping up prices as high as possible, both of which are incompatible with achieving the widest spread of owner-occupation.

CD, yup, the hallmark of a true Faux Lib is enthusiasm for Local Sales Taxes, in which he scores 10/10.

Ralph Musgrave said...

Artificially low interest rates can also be attributed to an unacceptable free market activity: fractional reserve banking. Private banks can create money from thin air and lend it out: no one has to forgo consumption to create the “savings” that private banks lend out. Thus private banks can undercut what you might call genuine savers.

I expanded on the above argument here:

Kj said...

A question on monetary systems, in regards to the austrian gold vs fiat money debate, maybe you've had some posts on it in the past MW: what changes are required to have market decided interest rates within a fiat/central bank monetary system as opposed to targeted rates?

Mark Wadsworth said...

RM, agreed.

Kj, fiat money is one of those things that theoretically doesn't work at all, but in practice works surprisingly well; gold is the other way round.

As to market interest rates, taking RM's caveat into account, there's nothing to stop there being 'market' interest rates with a central bank, they are something like CPI inflation plus 1% or 2%, job done. Deliberately having them 4% below inflation is quite clearly wrong.

Anonymous said...

Looks like I need to make a post on why gold doesn't even work in theory... ;)

Lola said...

MW/ Fraggle.

Yes, well. Gold does 'work' but it works by backing a 'fiat' currency. Or competing currencies work. What I don't think works is nationalised currency. You just can't trust central bankers and politicians.

From about 1750 to about 1820 England had lots of different 'monies', usually backed by various substantial enterprises - Bolton and Watt for example. These concerns all issued tokens made mostly of copper and silver which did not necessarily have the intrinsic value of their face value. It worked really quite well, and dealt with the failure of the Royal Mint to provide enough small change.

Now I admit that todays demand deposit accounts muddy the waters, but the same rules apply - as long as banks are prevented from collective balance sheet expansion madness fostered by an irresponsible central banks and government and rules on who owns money deposited.

Derek said...


It's all a question of trust in the end. Did the punters trust Bolton and Watt to redeem their tokens? Would they trust the government to pay out in the gold that the gold-backed currency is supposedly backed with? Are the gold coins that I want to pay you with, unclipped and 22K as I promise, or not?

Basically if I trust the Issuing Party to make good on the extrinisic value, it doesn't matter what the intrinsic value of the monetary tokens is: I will accept them. And if I don't trust the IP I won't accept them.

So yes, it's a nice fall back if the tokens are valuable in their own right but if the economy is in such a bad way that I would want to make use of that property, I'd far rather that the token was backed by something really valuable like good quality farmland.