News & Analysis
Central Banks Won't Produce Natural Interest
The Bank of England should raise interest rates next week ... Most people that read finance columns have heard of the "natural rate of unemployment", and many will know that the term was introduced by Milton Friedman. But far fewer will know where he got the term. He said himself, in his Nobel Prize lecture, that "The 'natural rate of unemployment' [is] a term I introduced to parallel Knut Wicksell's 'natural rate of interest'". But who was Knut Wicksell and what is the "natural rate of interest" – and does it matter? We shall see that it does indeed matter, and tells us something important about current UK monetary policy and the outlook for the UK economy and George Osborne's chances of delivering his fiscal plans ...Three years, now, at 0.5 percent, and counting. That compares with a natural rate of interest that was about 5 percent when times were better and will be around 3-3.5 percent now. (Essentially, add the 2.5 per cent RPI inflation rate that's about the target to the 1 percent or so sustainable growth rate, and you get a decent guess at the natural rate.) Having interest rates so far below the natural rate damages the sustainable growth rate of the economy. – UK Telegraph/ Andrew Lilico
Dominant Social Theme: We just have to figure out what's natural and then fake it.
Free-Market Analysis: Here comes Andrew Lilico, an economist with Europe Economics, and a member of the Shadow Monetary Policy Committee, according to the UK Telegraph (see article above).
The gibberish contained in the above excerpt is only magnified throughout the article. It is really incredible. What is it about price fixing that such intelligent commentators don't understand?
If you artificially set a price by force – and this is what central banks do – then that price is almost bound to be incorrect. Only the market itself can generate a "natural" rate of interest or determine monetary volume.
That's because the market itself is competitive. The "Invisible Hand" of competition creates naturally fluctuating interest rates and the appropriate volume of money stuff.
This is why monetary competition historically yields up evermore efficient and healthy money. People voluntarily choose the kind of money they want and the volume of money as well.
Within this context, gold and silver have proven to be a historically popular money stuff. Used with each other, gold and silver provide a ratio. If the ratio becomes distorted, people can tell that someone is trying to manipulate the market. This called bi-metalism.
Greenbackerism has made a startling comeback of late, which we have long predicted, citing Ellen Brown's effective boosting of the idea that government ought to have the sole franchise to print money.
But regardless of whether a mercantilist public/private body like the Bank of England or Federal Reserve prints paper-fiat money, or a fully public enterprise, such as those found in India or China, the problem of the natural rate and volume remains. Once human beings arrogate to themselves such decisions, money itself cannot help but be distorted.
Both India and China are now suffering from vigorous price inflation. That's because when human beings have a monopoly of something, it will inevitably be abused. It is impossible to expect mere flesh and blood not to print too much money. Money buys all kinds of fun, especially for those in control of it.
Over time, even within a competitive monetary environment, government eventually prints too much paper money, eventually debasing it. As this paper money became cheapened, people seek not to hold it, and try to get rid of it.
This is why schemes like Greenbackerism tend to lead to government consolidation of money authority. As people reject government money, those in charge gradually mandate its use. Within historical contexts, there tends to be an expansion of force as people are compelled to use what they would otherwise reject.
There are arguments that certain kinds of government monopoly money have proven more effective than other kinds. Ellen Brown, Bill Still and others argue that tally sticks were a wonderfully effective government initiated money that helped England build an empire.
But from our point of view this is perhaps a misreading on several fronts. First of all, there is nothing all that admirable about an empire. Societies tend to flourish, as we have often pointed out, when they are separate and singular but gathered closely together.
This allows people to travel from one place to another nearby place if they are being oppressed. Gradually over time, a culture of freedom is established as governments compete with one another to provide environments that are attractive and laissez faire.
Many great cultures have been established within this context. Rome had its Seven Hills, the Greek Golden Age and the Renaissance had city states, the United States had "these" united States.
Over time, consolidation usually takes place and gradually what was free and innovative becomes less so. Eventually dirigisme and socialism may set in.
Gradually the leaders of the consolidated country begin to become aggressive and to focus on outside threats to distract attention from an increasingly failed society. This is the empire phase.
It is unfortunate that most of history focuses on the "greatness" of empire when in fact, an "empire" is symptomatic of societal sickness not health.
During the tally stick era in Britain, Kings – having access to the money supply – apparently borrowed against the stock of tally sticks considerably for purposes of waging war. Not only that, but as tally sticks were generated to pay taxes, the volume of the money supply was seemingly artificially restricted.
This was great for those who controlled tally sticks – the ruling class – because an artificially restrained money deprived people of capital and likely had a retardant effect on social mobility and individual economic potential. Tally sticks were a perfect money for the elites.
There is seemingly no substitute for competitive money and for the Invisible Hand setting the volume and price of money. In economies that use gold and silver, hoarding and dishoarding sets the price of market money, along, perhaps, with the opening and closing of mines, depending on how much gold and silver is circulating. This is one reason why precious metals have been successful as money throughout history.
In the modern era, central banking has taken over the world – and the result is general catastrophe and ruin. This is only to be expected. It is in fact what those behind the system are intending to create.
The power elite that has seemingly installed modern monopoly fiat money – and the dollar reserve system itself – apparently seeks to build world government. It needs to foment economic turmoil and wars in order to move society toward one-world money.
Central banking is key to this strategy. The more monetary price fixing there is, the more economic chaos and catastrophe takes place. It is a closed loop, a virtuous circle from the power elite point of view.
The elites spend an enormous amount of time trying to justify central bank price fixing. It is one of their biggest dominant social themes – that only a handful of good, gray men can manage the economy and make decisions for everyone else.
Andrew Lilico wants us to believe that central banks ARE capable of mimicking natural rates of money production. In truth, there is no "natural interest rate" or rate of monetary production that human beings are EVER capable of creating.
Even if the top people at these monopoly money banks were capable of figuring out where the price and volume of money could be, there is no guarantee that they would generate the correct prices over time.
They would use their power for their OWN benefit. As indeed they have. We can see it clearly, even today. What misery there is in the world.
Conclusion: Power corrupts, and absolute power corrupts absolutely.
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Posted by Agent Weebley on 04/02/12 11:58 PM
Hi amanfromMars,
Excellent piece!
snip---
There is too much debt, too little cash-flow, too many promises, too many lies, too little common sense, too much mass delusion, too much corruption, too little trust, too much hate, too many weapons in the hands of too many crazies, and too few visionary leaders to not create an epic worldwide implosion.
snip---
What to do, what to do?
Your today is my tomorrow. Good day/night.
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Posted by Bischoff on 04/02/12 11:55 PM
Tell me what you mean by "mistreat" and I might be able to give you an answer.
As to your rebuttal that you have no core believe, you proved it by saying: "I can access learned data anytime when I need to pull something up that I need."
Pulling up data does not mean that to act or to speak from conviction. That's why I never bother to click on the links presented in these feedbacks, unless they specifically indicate to contain statistical data to prove a point. These links containing someone else's opinion are an excuse to have to take a stand in a rebuttal. Hide behind somebody else's opinion. Many of your replies in these threads are sprinkled with these links. I've never clicked on any of them, since you never referred to them as containing statistical data to bolster your points.
Anybody can drag up somebody else's opinion to oppose or support as one "feels" inclined. It's "feeling" that seems to drive you Weebley, not "reasoning".
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Posted by amanfromMars on 04/02/12 11:40 PM
Surely to consider introducing/reintroducing any system which was used in the past as a valid replacement for anything in the present is never going to result in success in the future, for if it was not good enough to survive the outrageous slings and arrows of misfortune then, and be sequestered into the service of the powers that be, who will always adopt and nurture that which will blossom into a rich and secure bounty for control of assets and liquidation of liabilities, will it in no way have changed to be any better today.
The future is nothing like the present or the past and to imagine that it contains anything of either which has not significantly and fundamentally changed and morphed into a completely different system/being/guise, condemns dim-witted humans to forever cycle their failures rather than forge ahead in new fields of endeavour and opportunity ….. Raw Dreams.
And here is a looming liability which has them realising the error of their ways in blind, mindless support of the present regime and its nodding dog puppets and muppets and lemmings? ……. Click to view link
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Posted by Agent Weebley on 04/02/12 10:58 PM
Hi Ingo,
"I have no system" does not mean "I have no core." It just means I have removed all human constructs from my thinking. I have no preconceived notions of what is true and what is false.
I have no "givens."
Rather than getting philosophical all over your . . . assume that everything you have ever learned is put in abeyance. That doesn't mean I have forgotten everything, it just means that the stored data does not affect or cloud the things I am thinking about right now. I can access it anytime when I need to pull something up that I need.
Since you jumped in, the core of the message to Memehunter was this:
If a parent mistreats a child, should the state step in, or should human nature balance the wrong?
Forget about the Framers, the constitution, RBD, history, and your ego.
What say YOU?
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Posted by Bischoff on 04/02/12 10:30 PM
@ memehunter
Weebley: "Did you not read any of my earlier talk with Ingo? I have no system."
Do you see why talking to Weebley is a waste of time. The man has no core. He has no understanding of anything. He waits for you to make a point and then shoots it down with all sort of illogical retorts.
He calls the RBD currency flawed, yet he hasn't got a clue as to how it works. You try to explain it to him, and he comes right back to say that it doesn't work. He says he knows all about RBD currency, and when you ask him details, he cannot answer.
To tell him that RBD currency is the intent of the U.S. Constitution, and that RBD was in use in North America for almost 200 years, doesn't impress him at all. Instead, he goes right back to the matra that RBD currency doesn't work.
What do you call somebody who behaves like that... ??? I call him a wind bag, but I am sure you can make up your own mind about Weebley's pronouncements.
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Posted by Agent Weebley on 04/02/12 09:05 PM
Hi memehunter,
Did you not read any of my earlier talk with Ingo?
I have no system.
From my vantage point, anyone who tries really hard to create a dialectic where I can't see one, and grasps at straws for even the tiniest turn of a phrase to glean some meagre gription to justify their contrived dialectic, gets my radar spinning.
I said YOUR sanctions, bullets and bombs have killed thousands, if not millions of kids, but you couldn't write those words in their entirety back at me. How come?
Rather than twist things over to your agenda, how about you stick to the issue I brought up? If a parent mistreats a child, should the state step in, or should human nature balance the wrong? It's actually a big deal, since you are slamming a great thinker, Rothbard; twisting what he said into something else.
Your answer will determine whether you are a promoter of the state or not.
If so, you are on the wrong site.
Also, your currency is as flawed as Ingos, yet you persist in fighting a 2 front war on this site with that contrived dialectic. It seems to me that your currency, like Ingo's, demands involvement by the state.
Everything begins with no state . . . no solids, no liquids, no gases . . .
. . . just thoughts.
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Posted by Bischoff on 04/02/12 08:43 PM
That's a deal... ??? I wouldn't waste my time.
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Posted by Bischoff on 04/02/12 08:36 PM
"Your example of "natural interest" may work with living creatures, but it will not work with everything. Many (most?) material possessions don't behave like mares and cows."
Memehunter,
You have to open your mind. Let yourself think in more than one or two dimensons.
As I clearly stated, the "natural interest rate" based on the reproductive force in nature applied to animal husbandry, provides the bottom to the level of interest. In essence, domesticated animals are considered capital.
Does that mean that inanimate capital cannot demand interest? Of course not. The animate and the inanimate capital are in competition. It's this competition that sets the "natural interest rate".
Under the gold standard, the "prime" or "prevailing" interest rate is determined by savers. The "prime" interest rate will gravitate to the "natural interest rate" by the willingness of savers to either invest or to hold out for higher interest.
While there maybe temporary and regional difference in the "prevailing" interest rate under the gold standard, the difference is never large enough, nor long enough to allow arbitrage earnings, or secondary sales in a bond market.
"Gesell's ideas have proven to be successful in practice, with the Wörgl experiment."
They have... ??? Maybe in the little corner of Austria where Woergl lies, but nowhere else.
The idea of having a "decaying" currency is foolish. I know what Gesell tries to do. However, hoarding a currency is not a problem with RBD currency which is a vastly superior currency than the Woergl currency. I cannot understand why everybody wants to reinvent the wheel.
RBD currency has worked extremely successfully for hundereds of years until it was finally sabotaged by the big NY banks, resulting in a world fiat currency system. After 40 years of this world fiat currency system, there are all these attempts to solve problems with solutions that haven't worked or have been tested before. Woergli bucks being one.
RBD has worked. Benjamin Franklin and George Clymer put it into practice. The framers set up the Constitution to make RBD currency the monetary system for the U.S. It built the industrial might of this country. The greatness of its success also brought about its demise. Lack of oversight and general knowledge of RBD currency creation allowed special interests to kills the RBD currency.
The world fiat currency system is on its last legs. To dig around and drag up these untested and obscure theories of currency systems leads nowhere. RBD is the only alternative to the demise of the world fiat currency system.
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Posted by Abu Aardvark on 04/02/12 06:33 PM
MH: 'Yes, I am in favor of minimal goverment and coercion'
AA: What's the outcome of goverment and coercion 'taken to its logical extreme' - to use ... YOUR phrase?
Wouldn't that be ... what we have NOW?
Besides, what's more likely to happen, 'taken to its logical extreme'? That in a free society significant numbers of humans will let their children starve to death, because legally they then might be free to do so, or that even the most well-intended 'minimal goverment and coercion' will expand, grow, corrupt it's operators, and be(come) the natural tool of the elite of the day, as it has for thousands of years, apparently?
MH: 'At least, and to their credit, the DB has not ignored the historical role of Money Power in the rise of large-scale wars. It is surprising that you, as an dyed-in-the-wool DB closeted elf, would try to do so.'
AA: Well, you're lying again, memehunter. I have done no such thing. Get a life!
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Posted by memehunter on 04/02/12 05:56 PM
OK, I will reply, brave purveyor of inanities:
I very much doubt that I said anything that could be construed as meaning that "I am all for government and coercion", but I invite you to find the relevant quotes - good luck with that. Yes, I am in favor of minimal goverment and coercion, which is not quite the same as being "all for government and coercion", except in your distorted sophistry.
I repeat that governments are not necessarily evil, always and in all circumstances. To claim otherwise is typical Austrian/Libertarian "Hate the State" brainwashing propaganda, ignoring that it is Money Power which has been behind most, if not all, of the abominations we have seen in the last century, and probably in the last few centuries.
At least, and to their credit, the DB has not ignored the historical role of Money Power in the rise of large-scale wars. It is surprising that you, as an dyed-in-the-wool DB closeted elf, would try to do so.
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Posted by memehunter on 04/02/12 05:47 PM
DB:You specifically claimed it was a moral issue.
Then you backed off.
Then you claimed it wasn't exactly ...
Then you decided it was ...
It is important. You do this all the time.
Mis-state something and then deny you did.
We'll leave it to our viewers ...
M: Dear DB, I warned you to be careful in your attacks. Are you again claiming that I am lying?
My article, published on February 26 (long before the exchange you mentioned), states the following:
"To his credit, anarcho-capitalist Murray Rothbard distanced himself from Mandeville's ideology. However, the same Rothbard advocated that parents have "a legal right not to feed [their] child, i.e., to allow it to die", and for the emergence of a "free market in children".
Since Rothbard's system denies that humans have moral obligations to each other, he rejects aggression (the "non-aggression principle") but allows outright neglect, to the point of causing death.
This is the evil outcome of taking libertarian ethics to their logical extreme. Clearly, the "non-aggression principle" is necessary but not sufficient to design a just and humane society."
See here:
Click to view link
As I said, Rothbard is basically denying that parents have moral obligations towards their children. The article from Rothbard that I quoted makes the point fairly transparently. The DB is simply indulging in sophistry, not realizing that they are defending a viewpoint that is completely indefensible.
By the way, did the Daily Bell ever mention Bernard de Mandeville's influence on Mises and Hayek, or Austrianism more generally (the answer is no)? Did the Daily Bell ever discuss Rothbard's views on children?
Reply from The Daily Bell
As we wrote below, people can make up their own minds on this issue and many others ...
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Posted by Abu Aardvark on 04/02/12 05:33 PM
Yes, you may reply, brave knight.
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Posted by Abu Aardvark on 04/02/12 05:20 PM
MH: 'being against Money Power does not mean that one is for government or coercion/jail/guns (abbreviated as CJG).'
AA: Alright, but YOU are all FOR government AND coercion. YOU SAID SO. You remember your words, do you?
Reply from The Daily Bell
See thread, below for more of this ...
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Posted by memehunter on 04/02/12 05:17 PM
So you're back to the inanities and ad hominem arguments... Too bad.
I may reply again when/if you have substantive counterarguments.
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Posted by Abu Aardvark on 04/02/12 05:12 PM
Incredible. You ARE the Black Knight ...
Click to view link
... on steroids, that is. And more crawling in store, right?
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Posted by memehunter on 04/02/12 04:59 PM
W: On the other hand, your state sponsored sanctions
M: Why "my" state sponsored stuff? What do I have to do with this?
Governments, especially in the Western world but probably over most of the planet, are merely enforcers of the plutarchy that currently dominates the world. Wars, sanctions, and genocides are ultimately desired and implemented by Money Power, using governments as their goons.
Blaming governments is a bit like focusing on the weapon that committed the crime while ignoring the brain that ordered the assassination. Most people agree that governments need to be reformed, but I would suggest that we should first replace the driver before thinking about reforms. The current driver of most governments is Money Power, and it is Money Power that is ultimately behind the violence that you condemn.
Abu was complaining that I repeat the same stuff over hundreds of feedbacks. Well, I am patient, for I will repeat this once more for you: being against Money Power does not mean that one is for government or coercion/jail/guns (abbreviated as CJG).
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Posted by memehunter on 04/02/12 04:51 PM
I'm really not sure where the DB is going with all this sophistry, but if you want to defend a system where parents should be legally allowed not to feed their children, please go ahead...
Reply from The Daily Bell
You specifically claimed it was a moral issue.
Then you backed off.
Then you claimed it wasn't exactly ...
Then you decided it was ...
It is important. You do this all the time.
Mis-state something and then deny you did.
We'll leave it to our viewers ...
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Posted by Agent Weebley on 04/02/12 04:15 PM
Memehunter,
That legal right is balanced by human action . . . charity. Mises lived in a free trade zone for a while when he was young (DB?) I think that's where he learned about people and their motivations.
If parents don't feed their child, then neighbours or their friends parents do it. Or their granny feeds them. Or a passer-by may give them some food. Or the child may beg for food.
Mental abuse or physical abuse; the child eventually leaves, because their home is not a home.
The extreme food case you cite, would be over in about 7 days max. The child would live, not die.
On the other hand, your state sponsored sanctions, bullets and bombs have killed countless thousands, if not millions of kids.
Click to view link
Reply from The Daily Bell
He wasn't making a legal point. He was basically stating that Rothbard's worldview lacked a moral perspective or core. See below.
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Posted by memehunter on 04/02/12 03:49 PM
DB: Initially you had decided Rothbard's statement was a "moral" one. But at the time, we pointed out the truth of it ... that he was making a legal point (which he was).
M: We already had this discussion. My article quoted Rothbard's exact words, down to the "legal" part. So I did not initially "decide that his statement was a moral one" and later change my mind. I'm not sure why the DB would want to keep claiming this as my articles are available for everyone to read - your statement can easily be disproven and there is no need for us to spend time discussing it.
DB: He was making a theoretical statement, not encouraging a certain kind of behavior. Now you've corrected the record, but continue to make the same point ...
M: I didn't correct anything, because I didn't have anything to correct. I even made the point (and made it again today, indirectly) that in the end this is not about Rothbard, but about the evil outcome of Libertarianism taken to its logical extreme.
Theoretical statement or not, what kind of society is a society that legally grants parents the right not to feed their children?
Reply from The Daily Bell
You wrote this on 03/08/12
M: Note that this is an example [starving children] provided by Murray Rothbard himself. Again, it is not about Rothbard in the end, it is an example of what could happen in a society built only on the non-aggression principle, to the exclusion of any moral considerations between humans.
(You mean here that a society that is built on the non-aggression principal is one where immorality like starving children may happen.)
-----
We then wrote on the same thread:
DB: This is a canard. Rothbard SPECIFICALLY mentioned he is making a legal not moral analysis ... We wrote: Your statement was an UNTRUTH. You cannot rebut it. You also wrote: "Rothbard's system denies that humans have moral obligations to each other." This is simply wrong. It is not accurate. It is not correct.
Here is one statement by Rothbard that DIRECTLY contradicts YOUR statement: "If a person is forced by violence or the threat thereof to perform a certain action, then it can no longer be a moral choice on his part. The morality of an action can stem only from its being freely adopted; an action can scarcely be called moral if someone is compelled to perform it at gunpoint."
Rothbard is stating quite clearly that humans have a MORAL obligation to not compel other people's actions at the point of a gun.
-----
You then wrote (modifying your incorrect assessment: "Well, it is accurate to say that Rothbard advocated for parents to have a legal right not to feed their child and that he promoted the idea of a "free market in children" (which may not be entirely immoral depending on your viewpoint, but is curious to say the least)."
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Posted by memehunter on 04/02/12 01:18 PM
AA: Nothing - as long as I or others are not FORCED to participate. This goes for ANY form of voluntary contract, money and/or interest, as far as I'm concerned. The problem with your 'model' - in fact with your entire approach - is, that it is in 'need' to use force to coerce others - a 'minimum of coercion' as you call it. THAT'S what I have against it.
M: Why does anyone need to force people to use interest-free currencies? Many will choose to do so of their own free will in a free-market situation.
On the other hand, in your earlier example, you were perfectly satisfied with letting your two parties agreeing on a transaction involving interest FORCE the other users of the currency to accept the negative consequences that this transaction would inflict on them. In fact, you apparently even refuse to see that it is also the business of other users of that currency.
AA: Well, that's one of the problems with people who babble on and on about an entire school of thought while 'being proud' of their 'ignorance' about it.
Here's Murray Rothbard for you...
M: Yes, the same Rothbard who advocated for parents to have a legal right not to feed their children and promoted the idea of a free market in children. That's where extreme libertarianism and the unbridled pursuit of individualism and self-interest will lead in practice, when taken to their utmost extent. 'Nuff said...
Reply from The Daily Bell
This is another example of your "issues" with your own recitations.
Initially you had decided Rothbard's statement was a "moral" one. But at the time, we pointed out the truth of it ... that he was making a legal point (which he was).
Which guts your whole argument ...
... that Rothbard was an evil, Luciferian soul wanting to kill children.
He was making a theoretical statement, not encouraging a certain kind of behavior. Now you've corrected the record, but continue to make the same point ...
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