Ask a Market Anarchist!

[Tmaq]

Because I worked one hour on it today, but will only get paid 1/10th its worth after the efficiency increase.

Sure, the product has gone down in price. That's not a problem. You can still try to sell it for how much it cost you, but then no one's gonna want it.

And I thought by Labor value that a finished good would have a value of the labor time plus material cost, which is just previous labor. So all finished goods according to LVT represent the labor time that went into it.

No... you can sell it for less than it's worth. You just can't sell it for more. "Cost is the limit of price," remember?

What a load of crap.

You think it costs $20 to produce a gallon of water?

(That would be the bootleg, black market, AKA free market price...immediately after Katrina in New Orleans)

-Tom

[Tmaq]

For simplicity sake let's assume that the price of gold is stable. (a mental exercise that helps me visualize it better)
So the amount of cash based on that gold is finite.
Humans generally innovate, by making new more efficient processes and new products that make our lives easier and/or more pleasurable.
So humans generally add value to the world.
So as more things of value come into existence, there is less cash per item, thus prices of everything must go down, because all of these ever increasing things vie for the same finite amount of cash. (This was a major wall to me, I felt that if money did not grow in relationship to the amount of new stuff that there would be no money to buy that new stuff, so why invent and make new stuff, if there was only a finite amount of money to be had)
But if every thing just got less expensive in relation to cash and those items would still be valued higher or lower than other items, just everything would cost less.
But would that not then also devalue labor?

Just because the price goes down doesn't mean something is less valuable. Fluctuations in real estate prices don't change how many people can live there, or how large an office you can operate in some building. That's the other side of the wall.

But things get cheaper....seems like a feed back loop, How close to zero would things get?

Compared to what?

There are many physical design aspects of our lives that HAVE approached zero. Consider, for example, how much energy and material goes into international communications. At one time we had a 250,000 ton piece of cable across the Atlantic, and 'baud' could hardly describe it, the bandwidth was so low.

Now we have a few dozen one ton satellites, and they serve billions of people. Compared to where it started, we already are at zero. Cell phones and towers are at zero compared to the weight and cost of the wires and poles we used in the 80's. The metal in a 1930's cars could make about 12 of today's cars.

That process is usually called 'ephemeralization,' and that pattern has repeated in so many other, non-governmentally manipulated realms that it shouldn't surprise us if it happens in the monetary realm, too, once its set free in the market.

Also, our technical advances appear to be exponentially increasing, so perhaps the approach of the price to zero is an exponential decay.

would we need to make smaller denominations of money?

Why not? Silver and copper have worked fine for small amounts of value in the past.

This was my original question. The only thing I could add to this after reading the discourse is that Values would cost less to make as more innovative and efficient ways to make them come about. This would tend to make things less expensive. So that might balance somehow.

It does balance, left to itself; supply versus demand.

Deflation and inflation serve different groups in different ways; inflation favors debtors. Deflation favors creditors, for example, which is why democratic governments rarely deflate, once they establish a central bank (to hack on monetary values); there are always more debtors than creditors.

I guess in my new understanding of speculation, all values would be reevaluated to level things out.

Right. Speculators are the people who sniff out and gain advantage from price-vs-value differentials...which means severely inept differentials don't last. Real information that affects those relative valuations will be passionately sought and acted upon as soon as possible in a hurry by someone, so the exchange rates such markets produce are as up to date as almost anything in economics can be.

Incidentally, we are all to some degree speculators, and I mean 'every life form which ever existed' - the antenna of an insect, the whiskers of a cat, the hairs on a root, are all feeling out the environment, seeking the best place and way to invest one's resources in order to further their ability to gather resources.

Speculation isn't just an economic function; its more fundamental to life than liberty or property.

-Tom

[Tmaq]

What I was trying to get at is that there is a fundamental difference in the two types of manipulation, which shouldn't be glossed over.

Saying "well, ditching fiat currency won't stop all forms of manipulation by anyone" is irrelevant, because it will stop (hyper) inflation, interest-rate fixing, monetization of debt, providing scrip for unnecessary wars, and other institutional and systemic manipulation by the government, and that's quite enough to make it a good idea.

-Tom

I was not glossing over them, just agreeing with them and trying to get an answer to my original question. I even said Earlier

I think he means that I was glossing over the differences, not you.

Yes, that's what I meant.

Also, it occurred to me that I overlooked an important issue in your description of 'fiat' value attaching to gold in the face of a (decreed) gold standard;

How do you distinguish the particular amount of value that would attach to gold when some authority decrees it to be legal tender from the amount of value that would attach to gold because of its widespread adoption as money, once all legal tender laws were retracted?

Put another way, the fact that gold-as-money would bring a generally higher price than gold-as-collectors-item isn't a result of which particular method brought gold back into widespread use as money. Which means you can't accurately attribute such an increase to 'fiat.'

-Tom

[Tmaq]

The quality is also different; governments couldn't inflate like made without fiat currency.

I Gooogled Exchange Stabilization Fund as you suggested.

http://en.wikipedia.org/wiki/Exchange_Stabilization_Fund

States that in 1934 that "The fund began operations in April 1934, financed by $2 billion of the $2.8 billion paper profit the government realized from raising the price of gold to $35 an ounce from $20.67"

I think this the fiat like manipulation Tism is mentioning that can still happen with gold.

Its even worse than that. 1933 was the year the government made it illegal for US citizens to own gold. IOW, it wasn't just the manipulation, fiat-like, of the value of money. It was part of the establishment of the fiat system. "The price of gold" was in fact the amount of gold you could get for your dollars - it was the price of dollars, in gold, as much as the other way around. (That's often a big part of the wall; any price can be compared to any other. Gold, however, is simply the stablest. A 1,000 year old byzantine or roman coin is worth just as much as it ever was. So whats the easiest price to compare everything against?)

Dollars used to be 'payable on demand' which meant that you could go to the bank and get a set amount of gold for them, because everyone knew that gold, not paper, was real money. After using paper representations for a generation, they let the feds take the gold itself.

Put another way, once the inflation enabled in 1913 by the Federal Reserve started making itself felt, the price of gold started going up. Stealing it from the citizens kept them from being able to measure it, but our trading partners still expected the gold in payment. Changing the price of gold basically told them "fuck you" or, if we are being kind "we fucked up. Sorry. Shit rolls down hill."

In 1971, Nixon finally closed the 'gold window' - dollars were good for....paying taxes. You poor people can use them for toilet paper or wallpaper.

Again I ask how low the deflation would go?

My Dad graduated college in 1957. Gas cost 20 cents a gallon then.

I have two dimes from then - they are approximately 1/10th of an ounce of silver.

Silver is worth about $15.00 per ounce right now. Those two dimes are now worth about $3.00 Gas around my house costs about $2.75

That's a 25 cent, or 16% deflation over 60 years, even before we talk about the increase in taxes since 1957.

Deflation is always occurring...if we but know how to look.

An hour is worth an hour. That's the one constant in the system. If you worked one hour in the past, you've "saved" one hour of work from other people in the future.

Do you really think that Bill Gates actually worked as many hours as what his software has saved his customers?

I mean...really?

-Tom

[tism]

No, because now you're just hacking on language for no particular reason. You've got a point, a kernal of truth, but calling it 'fiat' is fucking up your ability to express it.

Thank you.

You are probably right. "Fiat money" almost universally means some kind of government paper or over-valued coin. A quick check of some dictionaries confirms this to me now. As I was writing my posts earlier, though, it was occurring to me that the term "fiat" alone means something is decreed. A law establishing a gold standard, however irrelevant you would imagine it to be to the new value of gold, is a form of "fiat" simply by being a decree. I suppose that the value that such a decree would grant to gold, even an immeasurable one as you say it is, is a fiat value. That is how I came to use the term fiat and I am saddened that it caused confusion.

"Fiat money" means unbacked currency that the government decrees you must use anyway. It does not refer to unmeasurable theoretical differences between the price of something, and the price it would be under different conditions. Sorry.

But in a way, I think it does. Or else, how could you distinguish that paper as legal tender is fiat but gold as legal tender is not, for instance, without pointing out that the difference from one kind's legal value to its otherwise value is much greater than the difference of the other kind? You said that gold is already a form of money or wealth even without decree, but then so is paper.

The difference between fiat value represented within paper vs gold I think is only in the degree, not in the substance.

Although, as I fear that it is becoming laborious to further this point, I'm willing to drop it now. From now on I will attempt to refrain from using "fiat" to refer to difference in value from decree only. What other words should I use, which will make sense for what I'm trying to say about this value? I do not wish to change the meaning of what I was trying to say, but only to put it into better terms.

Regarding the 'aggression' against free money, you might get clear if you consider how such aggression manifests; Gresham's Law - "Bad money drives out good."

What good form of money do you fear that gold - by 'fiat' - might drive out?

My answer appears in response to another quote below.

No. I refer to the value it gains from aggression, besides any value it gains from simply being money.

CF above about Gresham's Law. Aggression, to my knowledge, is not capable of creating value.

Did I say it creates value? If I ever did, I was insufficiently accurate. But, above I said only it gains value via aggression. More specifically, value gained via aggression is value taken from whatever is being aggressed against.

Like I said; you have a point with the change in value of the item designated as legal tender, but using 'fiat' keeps you from making it.

I'm sorry. I will try to find better words, then. At least you have understood what I've been trying to say.

Further, comparing those two issues, the relatively modest 'fiat' value that some might reap from a gold standard does not concern me nearly as much as the 'fiat' value that the FED currently commands with fiat currency. Its the lesser of two evils by several orders of magnitude.

The lesser of two evils is, strictly speaking, still evil. I don't want to stop at getting rid of some or even most of the evil of government monetary policy but all of it. I do not agree that enacting a gold law is getting there. In fact the federal reserve is a very large holder of gold itself, so I think it would still be able to "manage" (to some degree) under a gold law.

Most people who talk about gold standards don't see a difference, actually, because history provides no particular reason to think there is; free money produces a metallic standard, with gold doing most of the work. Exceptions are mostly limited to small isolated communities that use something weird like smokes, cocao beans, pins, etc.

"Something weird" being something which may be cheaply obtained, in relation to gold. These would be some examples of the "good money" you were asking about (though of course not all, I would say labor itself is an important one, being immediately available to any free laborer), which would be adversely affected by a gold law, to the extent that such law penetrates into those societies.

No, it isn't. Its a particular word with a particular meaning, and that meaning is "interest rates too high"

If one believes as free money advocates believe that unfree money charges for more than free money would, and that the only just rate is the rate that a free money charges, then "interest rates too high" is a property one could say unfree money has.

[tism]

An hour is worth an hour. That's the one constant in the system. If you worked one hour in the past, you've "saved" one hour of work from other people in the future.

Do you really think that Bill Gates actually worked as many hours as what his software has saved his customers?

I mean...really?

-Tom

This is why I'm asking about what the time component has to do with values in LTV.

[tism]

The amount which is charged for a product is based on the labor required to have made it in LTV, yes?

Yes. "Cost is the limit of price."

If one product required more labor than another because one was made earlier (and then saved) using inferior technology, then to say that the earlier one being worth the amount of labor that *it* required would be reason to think that it would charge more than an identical product made today.

But you couldn't sell it at that price, obviously, making the point irrelevant.

I want to charge as much as it is worth.

Then you won't be able to sell it.

So I cannot charge as much for it as it is worth?

How do you expect to sell it if it's more expensive than the same product made today? Unless you promote it as an antique.

What about savings in general, then? How can savings be expected to be exchanged for more product later, more than the amount of work that went into the savings?

An hour is worth an hour. That's the one constant in the system. If you worked one hour in the past, you've "saved" one hour of work from other people in the future.

If all of this is true in LTV then I am wondering what LTV has to say about the time component of savings. That is, if one saves the product of his labor, how then can one expect it to enable him to buy more than he put into it, some time later? I asked if you believed that savings should gain in value and you affirmed, and said that an hour becomes worth more when improvements in production are made. But if you are not able to sell your savings for even as much as you put into it, how can that happen?

[Francois Tremblay]

Your question is confusing me. I assume the word "savings" refers to stored currency, but now you seem to be implying that these savings are in the form of products. Otherwise the term "sell your savings" doesn't make any sense.

[tism]

Put another way, the fact that gold-as-money would bring a generally higher price than gold-as-collectors-item isn't a result of which particular method brought gold back into widespread use as money. Which means you can't accurately attribute such an increase to 'fiat.'

I would say, as I have, that gold-as-decreed value would happen besides gold-as-money value.

[Francois Tremblay]

Do you really think that Bill Gates actually worked as many hours as what his software has saved his customers?

I mean...really?

-Tom

This is why I'm asking about what the time component has to do with values in LTV.

What? Tmaq's comment made no sense whatsoever. Nowhere does LTV claim that your product takes as long as it saves time for other people. I fail to see how one implies the other, or in fact what that has to do with any theory of value.

[tism]

Your question is confusing me. I assume the word "savings" refers to stored currency, but now you seem to be implying that these savings are in the form of products. Otherwise the term "sell your savings" doesn't make any sense.

I never meant to make any distinction, there, between product and currency. One is a different representation of the value of the other.

We're establishing that saved products generally don't carry value over time -- don't charge for the same labor's worth of products later. But that savings in another form (as currency) ought to carry its value over time via deflation. Meaning one can buy more with his saved currency later when things are cheaper. How does this happen? What is the element of the saved currency which allowed it to avoid losing its saved value as the product it represents does? Does LTV say anything about it?

[Francois Tremblay]

I'm still not sure I'm following you. The basic principle is that the hour can produce more in the future due to technological advances and changes in procedures, thus making your currency worth more in the long run. This is not directly related to LTV, no. In fact, I still don't really see the relevance of any of this.

[tism]

I'm still not sure I'm following you. The basic principle is that the hour can produce more in the future due to technological advances and changes in procedures, thus making your currency worth more in the long run. This is not directly related to LTV, no. In fact, I still don't really see the relevance of any of this.

Basically I am concerning myself with the way that the "deflating currency" acts as a carrier of saved value from labor over time, while the product of labor itself doesn't. How does currency obtain that unique property which makes it safe to save your value in it? And does anything in LTV help us to decide it?

[Francois Tremblay]

Uh... okay. I don't really understand what it is you're looking for.

[Tmaq]

Put another way, the fact that gold-as-money would bring a generally higher price than gold-as-collectors-item isn't a result of which particular method brought gold back into widespread use as money. Which means you can't accurately attribute such an increase to 'fiat.'

I would say, as I have, that gold-as-decreed value would happen besides gold-as-money value.

And I would say it wouldn't, because the price pressure is due to the huge increase in demand, regardless of the source of the increase in demand. The fact that free money produces a gold standard because so many people prefer it is my argument for the increase being approximately identical in either case.

Can you make a case that the government decree would cause more of an increase in demand due to gold becoming common as money than gold becoming common as money by free choice? Or do you have some argument that free money today wouldn't just flock to a gold standard, the way its done approximately every other time?

There is also the notion that advocating a 'gold standard' only means advocating that individuals should adopt a gold standard in their judgments. IOW, that people should make their price comparisons in gold, even if gold hasn't been decreed legal tender, and even if money isn't free.

If I was a language-hacking weasel, I'd claim that's all I ever meant, but that isn't as interesting a discussion.

-Tom