F.A.Hayek’s Final Lecture

On the evolution of Morality:
View link: Hayek lecture, video 50 min.
He explores top-down (constructionist) moral ideas vs. bottom-up selection of what has contributed to success.
Any bottom-up perspective implies change following rules of nature and not of a designing mind, as designing “constructer.” To invoke “intelligent design” is to commit a category error.

Benedict Spinoza

I once heard Albert Einstein replied to a question about his religion by saying he believed “in Spinoza’s God.” I love that citation, even if apocryphal, because it conforms with my views.
(I am like a Quaker, but with Spinoza’s God at the center of my faith – and a gun at my side.)

Here are two excellent narratives from George H. Smith discussing the ideas of Spinoza. A shorter and more lovely philosophy lesson could not introduce you well enough to this great man.

Spinoza on the Bible. (Libertarianism.org Excursions podcast, – 12:37 min. audio)

Benedict Spinoza. (Libertarianism.org Excursions podcast, – 15:21 min. audio)

Spinoza’s Ethics was not published in his lifetime, due to his fear of persecution. He was the most important atheist in modern history. He influenced all who would come after. Spinoza was rarely cited by followers who also feared persecution by openly praising his insights; but they repeated and elaborated his ideas.

Note specially the Appendix to Part One of his Ethics [Final causes]. In this essay he demonstrates how the arguments of “Intelligent Design” are not valid.
Spinoza wrote in 1674.

Einstein liked him.

Transferable Blockchain “coins”

Today individuals who buy or sell bitcoin can do it directly with someone else who completes the transaction for both sides, usually outside the Blockchain. This would be a “wallet” agent of some kind, who accepts USD in exchange for a quantity of bitcoin.

A transfer of a value in bitcoin is one direction, one time. There is no waiting period to allow for errors and corrections, as in the ACH system for US dollars. The ACH system is also a fully electronic method, like the Blockchain, of moving ownership, but only bankers can participate. It is, however, a fully duplex payments system. Trade is always two-directions, even if the counterparty is a banker. As always in human society both sides exchanging assets receive satisfaction and ownership.

The Blockchain is one directional, and final. It is a permanent and auditable public record, which a closed bankers’ loop is not. The Blockchain element (asset) is irrevocably transferred to a new owner.

Two-way exchange of assets can be barter, but more sensibly and commonly it uses a common intermediate trade token. A conventional understanding of accounting creates the Unit of Accounting, which can be weight in some cases, volume in others. Governments intervene when they forcibly separate weight from the units and totals of accounting reports.

Your bank balance, which you access for trade by means of ACH or a debit card, is an asset to you and a liability to your banker. It is a special asset due to its liquidity (bid and ask are equal, ideally). When you buy groceries or gasoline, you transfer part of this asset and acquire the new ones. The value of this asset is in its utility as a tool of communication and agreement.

Asset Barter

Macroeconomics was originally formulated memorably in Say’s Law, that “Supply creates its own Demand.” This is code for a detailed description of what could be called Quantum Economics. All human trade begins with ownership by you of an asset you can use to offer other people. With our social division of labor, we all must make these offers continually to live. The alternative to trade is authoritarian distribution and allocations.

The Payments System is an information system, but it has institutional scarcity (the “quantity of money”) and a method of assigning ownership to assets in detail. It is an accounting system, and a Unit of Accounting is central. The Unit of Accounting is no more substantive than a digit on the Blockchain, but it has separate scarcity. A further example of separate scarcity would be the “quantity of money” for UK Pound; for the Euro; and Renminbi.

Balaji Srinivasan:

Wall Street Journal weekend interview, Sept.23, 2017 by Tunku Varadarajan.

“Bitcoin is a way to have programmable scarcity. The blockchain is the data structure that records the transfer of scarce objects.”

“The internet is programmable information. The blockchain is programmable scarcity.” He elaborates: “All of these previously disparate things—from physical mail to television to music to movies to telephony—basically got turned into packets of information and got remixed by the internet. Plus things that we normally didn’t even think of as information—your Fitbit , your steps, your Facebook settings—became programmable.” It’s fair to say, he continues, “that the internet and all things downstream—search engines, social networks, ride sharing, and so on—have basically been the technological story of the last 25 years.”

“With the blockchain, everything that was scarce now becomes programmable. That means cash, commodities, currencies, stocks, bonds—everything in finance is going to be transformed, and aspects of finance baked into everything else.”

The scarcity of the information codified in Blockchain, which has an audit trail and coded ownership for each unit, has only a significant disadvantage. This proposal is one to reduce the cost of asset barter just as the Payments System is able to do – when paper currency and coins are used.

Transferable Bitcoins

The utility of the Blockchain process is that ownership of units can be transferred, one way, with encoding to indicate size, new ownership, and provenance of authenticity [i.e. its history on the Blockchain, from mining to yours].

Visualize a computer chip with all the data of some quality of bitcoin, on a chip, and you can program the chip to be held in your name, your code. If you physically gave that computer chip to someone else, they could then also change the program of the chip to make it held in their name. A process could possibly be developed to link the chip to any connected computer and update records on the Blockchain. Information on your chip could be copied to the blockchain, and you could reprogram the chip to contain a new satoshi value. If you gave it to someone else it would serve as a medium of exchange for whatever programmed quantity it showed.

There seems to be little difference in this concept from what we know as the reloadable debit card, or gift card which might not be reloadable. One uses such a piece of plastic with an embedded chip to hold and allow the transfer of Units of Accounting (dollars, euro, et al.) and such a card can be used by a person different from the original owner (manufacturer; retail store; you

Milton Friedman Portrayed


Leo Rosten, Milton, and Rose Friedman, started a lifelong friendship while attending the University of Chicago in 1934.

“Our long friendship with Leo, now deceased, was one of the great joys of our life. He was a wonderfully entertaining, yet also wise, friend, with incredibly wide interests and knowledge.”
-Milton and Rose Friedman, Two Lucky People, p.55

Leo became a noted and influential writer; Milton became a noted and influential economist. They shared a world-view that placed great value on the pursuit of truth.

Upon agreeing to the suggestion that he host a major PBS TV series, Friedman urged Bob Chitester to contact Leo Rosten to discuss ideas for its content. Leo participated in several early planning sessions for the series.

In his book, People I have Loved, Known or Admired, Rosten wrote an essay titled “An Infuriating Man.” Milton Friedman served as the model for this essay, about “Fenwick,” in which Rosten gives voice, wonderfully humorous voice, to the tendency of most people to wish the truth not be brandished in their face.
We’re grateful to Madeline Lee and Margaret Rosten Muir, for granting us permission to include this essay in our collection of articles about the Friedmans and their ideas.

The Essay

You take my friend Fenwick [Milton Friedman]. He is an exceedingly loveable little man. His disposition is so sunny, his character so open, that even the Most Hardened Cynics, of whom my wife is International Chairman, call Fenwick “utterly adorable.” He is the very incarnation of the Boy Scout creed: “trustworthy, loyal, helpful, friendly, courteous, kind, obedient, cheerful, thrifty, brave, clean (great Scott! but he’s clean), reverent.”

Now you would think that with a personality like that, Fenwick would be just about the most popular man on our block. That is not so. Fenwick is just about the most unpopular man on our block. People can’t stand him. I have seen Sunday-school teachers with unblemished complexions, and account executives with split-level ranch houses, throw conniption fits at the mere mention of Fenwick’s name. Why? Why? I puzzled over this for years, using the finest puzzling equipment money can buy, before I discovered the answer: Fenwick is a man who goes around being logical. He even uses reason at cocktail parties.

Now, most people believe in reason the way they believe in cold showers: It’s O.K. if you don’t overdo it. Very few people are so insensitive as to go around applying logic to other people’s beliefs. The consistent application of reason to human affairs is irrational. It is also dangerous, as you shall soon find out.

The basic trouble is that Fenwick, who is very intelligent, assumes that other people are very intelligent, too. And that, believe it or not, is the way he talks to them. This makes people uneasy, for nothing is more unsettling than to be treated as if you are extremely intelligent—especially by someone you hardly know. To avoid disillusioning such a man requires that you maintain a constant state of alert, and think before you speak, which imposes cruel demands on your brain. It even makes you examine the partly packaged platitudes you have always employed instead of thinking. Few activities tire one out so rapidly.

Fenwick has no understanding of such things. I think I should tell you that Fenwick enjoys reasoning. He uses his mind the way a sprinter uses his shoes: to get from one point to another with a maximum of speed and a minimum of nonsense. Such a discrepancy between the swift and the stupid ordinarily causes hubris in the former and dysphasia in the latter, hubris being the fancy name for cockiness and dysphasia a variety of depression. But these psychological reflexes do not click on where Fenwick is concerned, because the people he outruns (or, more correctly, out ratiocinates) tend to save face by calling his speed a symptom and his skill a neurosis. Such people attain emotional serenity from believing that superior thinking is a sign of emotional disturbance. I am not sure they are wrong.

Of none of all this is my friend Fenwick remotely aware. For although he actually likes to think, even when no one is forcing him to, he also likes people. The exotic combination of cold cerebration and warm feelings throws people for a loop.

Even more enlooping, my friend Fenwick loves to learn. It does not matter what you do, like, think, or talk about: Fenwick is passionately interested in it. He listens intently to anything you have to say, which is both flattering and seductive; but if you mention something Fenwick does not know, his eyes become as wide as Frisbees and he asks where you found that out, how you know it is true, and how—assuming for the moment that you are right, which is conceivable, though unlikely—you can account for any one of fourteen cases which, if true, shoot your case as full of holes as that of the couple with two children who decided not to have a third because they had read that every third child born these days is a Chinaman. And as you bumble and blubber and flounder and flush, Fenwick sweetly soothes your ego by sighing, “Of course, you may be right … but not for the reasons you presented.”

Fenwick appears to own a brain that came equipped with a sorting device that separates inference from information, allegation from argument, illustration from proof, and preferences from conclusions. Despite this, he has more friends than I do. His friends, it is true, tend to have strong nerves and read statistics the way some men read pornography. But they are staunch, stout friends. Even the thin ones are stout friends.

In ordinary conversation, Fenwick is a fellow-traveler. He follows every chug in your train of thought—indeed, he leaps right on the train with you. And you have barely begun to pick up steam before Fenwick excitedly demonstrates that: (a) you have taken the wrong train; or (b) it doesn’t stop where you want to go; or (c) the tracks don’t lead from your premise to your expectations; or (d) you had better jump off while the jumping’s good or you’ll land in the swamp of mushy ideas you never suspected your position rests upon.

Yes, my friends, Fenwick comes pretty (sic) close to being that most odious and exasperating of human types: the persistent thinker. He may even (I hate to suggest this) be an Intellectual. An Intellectual is a man who shamelessly uses his brain most of the time. No one, of course, uses his brain all of the time; such a man would be a monster—he would not dig sand piles by the sea, or fall in love, or observe Mother’s Day.

Oscar Wilde, who was diabolically clever (and just as superficial), once quipped: “I can stand brute force, but brute reason is quite unbearable. … It is hitting below the intellect.” Fenwick, a beamish fellow, never hits below the intellect. He is always kind, fair, patient, moderate—which greatly increases his unpopularity. Do you follow me? Fenwick is so fair in discussions that people can’t even accuse him of using unfair tactics, than which nothing is more aggravating when you are wrong.

I once heard Fenwick explain to a cocktail party full of decent, taxpaying liberals why it is that no socialist society, however well-intentioned, can give its masses anywhere near the standard of living of a competitive or capitalist society. After the dumbfounded humanitarians had finished stamping their feet, screaming “Reactionary!” and otherwise increasing their psychiatric bills, Fenwick kindly compared the postwar achievement of West Germany with East Germany, of Japan with Red China, of Italy with India, of France with Soviet Russia. He gave several of his listeners the veritable jim-jams by going so far as to compare the economy of Cuba before and after Castro, and the G.N.P. of liberated Africa before and after European imperialism.

If that episode doesn’t tell you what kind of screwball Fenwick is, let me cite another. Fenwick and a friend of mine from Washington, a sociological Meistersinger named Rupert Shmidlapp, were talking about minimum wages, which Congress had just voted to raise from $1.25 an hour to $1.40—and ultimately to $1.60.

Fenwick stunned Shmidlapp, whom I had forgotten to brief in advance, by mournfully remarking that the minimum-wage laws would of course create unemployment, and that these particular laws would wreak havoc precisely among those unskilled workers (Negroes, teenagers, Puerto Ricans) they were supposed to help.

“What?” gulped Shmidlapp.

“To begin with,” said Fenwick, “the American wage-earner today gets twice $1.40 an hour, so the bill is not going to affect him——-”

“The bill is designed to help the unskilled and the undereducated,” retorted Shmidlapp.

“An admirable intention,” beamed Fenwick, “because a tragic proportion of that group is unemployed. But if employers aren’t hiring them at $1.25 an hour, is there any reason on earth why they will hire them at $1.40?”

I poured a stiff drink for Shmidlapp.

Fenwick continued: “Surely the unemployed will have less chance of finding a job under the new, higher minimum-wage laws than they had under the old.”

“What?” cried Shmidlapp. “Can you prove that?”

“Yes,” said Fenwick. “Every time minimum wages have been raised, the ratio of unemployed teenagers has risen—and mostly among Negroes and Puerto Ricans, who are the teenagers it seems absolutely insane, if you look at the crime rate, to force onto the streets with nothing to do! … Don’t you agree that every time you raise the minimum, you must push more unskilled or inexperienced or poorly educated or discriminated-against workers onto the unemployment and relief rolls?”

Instead of repairing his fences, Shmidlapp attacked on the flanks. “What about the greedy employers,” he demanded, “who cruelly exploit their workers by not paying them enough to live on?!”

A twinge of pain crossed Fenwick’s boyish features. “Oh, very, very few employers can hold on to their workmen if they pay them less than the workers can get elsewhere.”

“It isn’t what they can ‘get,’ it’s what they’re worth!” Shmidlapp thundered.

“Only God can decide how much a man is ‘worth,’” sighed Fenwick. “Let us consider the best wage a man can get— for his labor, services or talent——”

“Some men just can’t live on that! Or feed and clothe their children! Or pay their medical bills!” This was Shmidlapp at his best.

“We certainly ought to remedy that,” said Fenwick. “No American who wants to work should go hungry because of the objective (and therefore efficient) forces of supply and demand. Let us by all means give and guarantee the poor a minimum income; that does far less economic and political damage than a minimum wage. A minimum income does not discriminate against the black, the illiterate, the inept——”

“Do you mean to stand there and tell me”—Shmidlapp was too agitated to notice that Fenwick was sitting, not standing— “that no workers are actually helped when Congress raises the minimum wage?!“

“Oh, some workers will have their wages raised from $1.25 to $1.40 an hour,” said Fenwick, “but far more will not get a job they might have gotten at $1.25! And fewer teenagers and Negroes will get on-the-job training, which they desperately need. It is just too costly to train them at $1.40, much less $1.60 an hour—especially for skills that take long training periods. This makes a raise in minimum wages absolutely heartless,” mourned Fenwick. “It prices decent, innocent, willing workingmen right out of the labor market!”

“Then why does Congress pass such laws?” shouted Shmidlapp.

Fenwick blinked. “Are you suggesting that Congress never passes foolish or short-sighted——”

“I am asking why, if minimum wages are so goddam stupid, far-sighted humanitarian leaders like Lyndon Johnson and Hubert Humphrey and Governor Rockefeller support them?!”

“Politics,” chuckled Fenwick. “Or innocence. Or ignorance. Or all three. Politicians and labor leaders get a lot of public credit for raising wages, and considerable private satisfaction in imagining all the good they have done.”

“I happen to know that many business leaders, Republicans and conservatives, favor minimum-wage legislation!” swooped Shmidlapp.

“Of course they do. They can be just as wrong, ignorant, or selfish as anyone else,” said Fenwick. “Many of them are manufacturing products in the North——”
“What does geography have to do with it?” demanded Shmidlapp.

“Well, northern manufacturers are delighted to force up their competitors’ costs in the South* ; in that way, businessmen in the North won’t have to face the desirable effects of that free-enterprise system conservatives and Republicans love to extol.”

“But opinion polls show that the public——”

“The public,” sighed Fenwick, “is not well-informed about economics, and will pay for its innocence. Increased minimum wages lead to increased costs, which lead to higher …. Then many honest, low-wage earners in the South (where the cost of living is lower; which is one reason wages there stay lower) will become disemployed. And many more of the young and no-skilled, in Harlem no less than Dixie, will remain more hopelessly unemployed than they already are.” Fenwick regarded Rupert Shmidlapp innocently. “Tell me, honestly: Would you rather work for $1.25 an hour or be unemployed at $1.40?”

While Shmidlapp was wrestling with many unkind thoughts, Fenwick gave his guileless smile: “I am strongly in favor of wages’ rising—which is entirely different from raising wages. Let wages go up as far as they can and deserve to, for the right reasons, which means in response to demand and supply and freedom to choose… Take domestic servants, Mr. Shmidlapp. Why maids, cooks, cleaning women, laundresses have enjoyed a fantastic increase in their earnings. And notice, please, that domestic servants are not organized; they don’t have a union, or a congressional lobby. Or take bank clerks ….”

But I can’t bear to go on. I guess you can see why Fenwick is so unpopular. The man is infuriating.

P.S. Outraged letters should be addressed to P.O. Box 146, Tierra del Fuego, where I shall be spending the long, hard winter.

Reprinted from PEOPLE I HAVE LOVED, KNOWN OR ADMIRED by Leo Calvin Rosten, copyright © 1970 By Leo Calvin Rosten.
Used by permission of The Rosten Family LLC


* John F. Kennedy was once quoted a saying he intellectually knew that the minimum wage was harmful, but the owners of the mills in Massachusetts who had to compete with the rising Southern mills convinced him it was politically necessary to change his mind. The first minimum wage law threw something like 400,000 black tenant farmers in the South out of work, replaced by machines.

What is the Quantity of Money?

We understand the Quantity of Money as a “quantity” (trillion dollars, lump sum) but it is not quite the same kind of thing as a trillion “gallons.”
First, to get such a “quantity of money” it is necessary to add up your bank balance and my bank balance, and everyone else’s bank balances. This becomes absurd. Should you include the informal cash accounts and FRN’s circulating in Africa?

    But the basic idea is that the sum total of all the “money” anyone might be able “to spend” is an important “quantity.”

Notice which labels, above, I have put into “scare quotes.” I want to emphasize in the comments below how those terms are not what you might have first believed the words mean.

In the Beginning, there was god and he created gold and silver. This is a good enough “creation myth,” and we don’t need to care about it. The central picture from this myth is the idea of a finite quantity in the universe for gold, or silver. The idea becomes fixed that somehow the fixed quantity of these metals is a critical economic detail, because Prices are quoted in the names and references of these metals, throughout history.

But the genuine innovation in the use of money among mankind was when somebody invented the Unit of Accounting. When the first cattle herding early man made a trade with his neighbor, perhaps trading half a bull for the other man’s daughter, the Unit of Accounting was invented, as also was the concept of “CREDIT” = Latin verb = “He trusts, he believes.”

Coinage came along much later, and it was always a free market coinage until the Roman Empire. The advanced Egyptians did not at first make coins. They had excellent scales and could weigh the gold dust and alloy the ore. No problem. No coins needed for repayments of credit-due in the markets of Egypt.

Coinage with government seals was a signal of the alloy or purity of the coinage, as in Lydia, which had a particular alloy of silver to offer in coined form. It made their mining product more exportable, because it was stamped for authenticity and purity: an early trademark.

The Roman victor in the civil war, Octavian Augustus Caesar, came to Rome and closed the mint at the temple of Juno Moneta, where Senators had always had their copper, gold and silver ore hammered into recognizable Units, of relatively standardized sizes. This had been a private-religious, not a government, activity. The Senator who minted his coins chose its face design, often a god or family event.

The family of Marcus Brutus celebrated his assassination of Julius Caesar by coining an image of that glorious republican deed. Augustus did not appreciate this, and closed the mint. Only coins with his face on them were permitted, which he used to buy votes in the Senate and among the Plebeians (he was an elected Tribune, with “veto power” also).

Ever since, a tradition of government monopoly of money has caused much mischief.

What Determines “the Quantity” of Money?

The conceptual Quantity of Money is not a “monetary aggregate,” measured by statistics such as M-1, M-2, M-[et al]. It is the same idea as your own bank account limit today. The hypothetical sum of all bank accounts is an exaggeration, since many such accounts hold fungible credit allowances, not “money.” Aggregates are treacherous epistemologically.

You should think about this idea as if I asked you “What is the quantity of bond asset values in society?” Surely the total quantity of bonds is important, as an asset class. As a macroeconomic valuable, surely this must be important. It certainly represents a monetary quantity, as bonds are a relatively liquid form of financial wealth, easily traded for other assets (houses, factories, government deficit finances). Maybe the total aggregate of corporate Aaa bonds would be something like M-7 and who knows what government bonds are? (Perhaps M-0?)

What makes it possible to calculate the asset value of a bond is to look at its annual dividend payments (or notional future dividend payments) and the current market interest rate for its security class, based on risk, etc. What some buyer will pay for it, based on some valuation calculated on its return.

What makes it possible to calculate the Quantity of Money is to look at the interest rate the Federal Reserve pays on excess reserves, which are the commercial banks’ basis for financing loans and creating new M-1 deposits for borrowers. Reserves are most importantly used for interbank clearings. When the Fed offers an “opportunity cost” of 1.0%, no borrower will get a loan by bidding lower than 1.0% – and higher capital restrictions and regulations will further make the banker cautious about increasing his part of the M-1 aggregate supply.

This is a form of “dynamic control.” It helps the central bank to work toward balancing the aggregate supply of what it can offer (“dollars”) for what the borrowing-part of the world economy wants to have, to make more liquidity in payments and trade. The ACH and SWIFT networks are very important, and need to be kept liquid for daily settlements. The “lubrication” of trade.

Gold as an Asset in the Future Payments System?

So, from an “Austrian Economics” perspective, how does the theory of Von Mises accommodate this new system of the quantity theory? Gold is not part of the “money supply,” nor is any form of specific commodity legal tender. It is all electronic today.

I would point to the later work of the Austrian economist, F.A. Hayek, who published “Denationalisation of Money” (1976) and proposed floating exchange rates as a formal, and privatized, system. He had earlier published “Monetary Nationalism and Economic Order” (1938) and the new global view of currency competition is more realistic. There are seven major currencies traded today, and thus seven central banks are in competition, with a bit also of cartel behavior. The governments believe such power is necessary, as did Augustus. Income taxes depend on these Units of Accounting.

Some new Blockchain products are offering to entitle units of gold weight in ownership on the public ledger. Any asset can be attached and entitled on the blockchain used for it. Logically, units of gold and silver will become popular as a store of value if they can be traded even more liquidly on a blockchain, and cashed for other assets (including one of the seven majors).

Open an account, among the many new ones and see how it works.

[ footnote:

  1. Public Law 99-185 (31USC5112) notwithstanding, although I wrote it; defining a bullion ounce of gold as $50 and thus a “dollar” = 2% of the current exchange rate XAU/USD.
  2. The ‘$50’ detail was added by Democratic staff, under Rep. Frank Annunzio (D-IL) at the insistence of the numismatic lobbyists, to make obvious the “legal tender” quality of the coin.
  3. Curtis Prinz was the chief of staff for Rep. Annunzio.

It plays only a nugatory role in the payments system, but it is “legal tender.” ]

    This essay will be expanded.

Is “inflation” the Only Answer to Exploding National Debt?

I wonder if those wild claims of people who sell bonds and gold coins can actually be true? I have my doubts, which I wrote about in 1985, published in Reason magazine.{tk] My claim is that it is not in the U.S. Congress nor Treasury’s self-interest “to inflate” nor even to make people worry about “an intention to inflate” the value of the U.S. currency – down to Zero value, or perhaps merely less than last decade.
[footnote TK: Reason headline writers assigned my essay a misleading title, “A Dubious Debt Doubt,” but that was just being playful.]

It is indeed not only dangerous to talk like that, or suggest it, but it is totally suicidal for a government running a fiscal deficit.

What can “to inflate away the debt” possibly mean, in today’s context?

In the fairy story the king has a big debt and he decided not to pay it off in the gold coins like he received when he sold his bonds. Instead he would print up little paper certificates, saying “this is a coin.” Then the bond owners would have to go away, receiving “payment” in this new “legal tender.” But that tells you about paying off the king’s debt.

What happens the next time the king wants to borrow from the money lenders?

The money-lenders’ demand for the king’s bonds is the dominant factor in this process. The king cannot force people to buy his bonds; they hide their wealth and pretend poverty. What is one supposed to do in confronting a tax on wealth?

The U.S. National Debt Must Be “Rolled Over” about every 6 Months.

In my 1985 article, I showed statistics current at that time about the maturity structure of the U.S. government debt held by the public. I have not done the updating research, but that is a simple search engine question. The situation is undoubtedly worse, with the government running up the entitlement spending.

Interest rates are determined by the Federal Reserve, in relationship to the international capital markets, so it is difficult (i.e. impossible) to predict any future rates, or values, there. Yet, there is a “model” of human behavior that tells me IF the government sent a signal it might “play with the idea” (run a scenario in a computer model?) of inflating away the national debt, indeed the free market, worldwide,


Imagine what would happen to the foreign exchange rate of the U.S. Dollar? The recent years of a “strong dollar” and falling oil (priced in “dollars”) would be ancient history. Consider what has happened to the UK currency exchange rate, an instantaneous indicator of demand for a Unit of Accounting (“pound sterling”).

It would be sudden. No warnings. It would be a sudden “crash” one day, without warning, when something silly like a careless remark by the President – who really does not understand international finance – sends the whole “confidence game” into the toilet. The British experience on June 24 is a lesson worth learning, when a government’s Unit of Accounting falls out of favor with international bond traders.

Wait for it. It is in our future.

The Unit of Accounting

On October [tk] 1968, Mark Bickhard and I met in New York city at a “convention” Murray Rothbard had summoned to found his Radical Libertarian Alliance. Karl Hess was there, who left early to lead some confrontation with the military at Fort Dix in New Jersey as an anti-war gesture (“new left style”).

Mark and I visited other people in NYC, among them Murray Bookchin, a well known, published anarchist. Bookchin was expounding to us about his “system” for a communal society. He had some idea of the “distribution” of production using computers, but it was not choate.

    Mark Bickhard asked Murray Bookchin what was his “unit of information” in his imaginary computer economic-information system? (“Bits” of some variant; associated with “what value?”)

Mark Bickhard went on to become a Professor of Philosophy, Robotics, and Psychology at Lehigh University. He has published several books and articles further developing his early ideas.

The Unit of Accounting

To me, his question introduced the concept of the “Unit of Accounting” as the key detail to the question about money and “the quantity of money.”

    1. The Unit of Accounting is


It can have a Sum Total. That becomes “the quantity.” It also becomes the basis for CREDIT. Credit is any form of “asset” based on a promise of future payments (the “liability” of some obligor), and of course those are traded as well as held to maturity. Some of those liquid assets are called “nearly money” by economists.

    For example, what your banker owes you on your current statement is called “money” because it is only one step removed. But it is not as fungible (in some contexts) as BenFranklin F.R.$100 notes.

See further discussion of where this analysis of the Unit of Accounting, and its central role in “money,” are explored:

A Flexible Exchange Rate World.

Units of Accounting example: gold grams.

A “Concrete” Unit of Accounting.

Modest Proposal for Kilo Gold US Treasury bonds.

Gold As a Parallel Currency.

Financial Planning Requires a “Concrete” Unit of Accounting

Financial Planning Requires a “Concrete” Unit of Accounting

If you want to see a financial system that promotes savings and investments, a society needs a “concrete” Unit of Accounting. Economists have taught for 100 years that “money” is just worth the trust people put into it. What happens when such trust fades?

    The conceptual “concrete” detail of this idea is that it makes the financial paper (bonds, deferred payments), which could use this Unit of Accounting seem “more trustworthy.”

Visualize the problem most people face when challenged by financial planning decisions, such as for a distant retirement. What is the frame of reference in which someone is supposed to weigh some future value (in “dollars”)?

    [ Pretend you are not as well-informed about finance and economics as the professionals you are consulting. How well can they predict the future?]

A lifetime of retirement beginning in 20 years, planned in “dollars,” cannot be compared to any standard of living referent (rental costs, food costs, taxation) in terms of familiar “dollars” today. The numbers do not allow a comparison of values because they have no relation except as the passage of time may reveal. You have to predict the Consumer Price Index 20-40 years from now.

    What will a dollar get you next year? Less?

No one can successfully do financial planning today in terms of “dollars.”
A gold coin would remain a gold coin and whatever your deferred-payment contract says, it would promise to pay you that equivalent way (in the same kind of gold coinage). Creditors could be paid in a gold coin, but more likely in some transfer of ownership of other paper assets to discharge the debt, but denominated in the gold coinage. Final settlements could be done by any other, different paper-credit methods (at the option of the obligee).

The supposed “stable price level” objective of measuring, would be knowing or trusting the relative value of something you want/need, and what you can trade to obtain it. We might not be able to predict the exchange rate of an ounce of gold vs. a pound of beef in 25 years, but it would not be a whim of imagination.

    I would be more comfortable thinking about coin vs. beef than about $100 today vs. $1,000,000 in 25 years, and wondering which would be more valuable?

Net present value calculations collapse to the shortest time horizon when future money values are uncertain. “Uncertainty” is subjective.

The “unit of accounting” in your mind should possess some “object permanence.” It ought to be a foundation of “Constitutional Money” to have the government’s Unit of Accounting be a concrete thing. In the old days of 1785 and 1792, the “dollar” was an object – a silver coin. Your property is your private ownership; so would a coin-object be;

    . . . but what is the status of the “account balance” your bankers owe you in promised bank-draft credit to pay your expenses? Do you use direct debits or checking? If your “account balance” happens to be denominated in government-accounting units ( “d-o-l-l-a-r-s” ), you should have a right to know if those are not shrinking or “melting away” as a matter of government (or Federal Reserve “central planning”) policy?

Your banker relies on Federal Reserve Accounting-Unit U$D, his reserves on deposit with the Fed.
“F.R.A.U.D.s” would be an insulting acronym for those accounting units.

See also Gold As a Parallel Currency.

How to ‘Manage’ a $15/hr. Minimum Wage

The primary “practical” reason why a statutory Minimum Wage of $15.00/hr. is a bad idea is because some workers are “not worth” that much to some employer, who has to use the workers’ productivity somehow to get paid by a customer.

Employers discriminate against “losers.” They shun workers who do not meet minimum “qualifications,” which mostly the employers choose (barring race, et al.).

How to ‘Manage’ a $15/hr. Minimum Wage

Employers are not going to pay and continue to pay, after perhaps a trial probationary period, for an employee who “is not worth it.” But the “social welfare” aspect of the Minimum Wage seems to be outweighing, politically, the logic of economics.

How might a Political Economist solve this problem? It is clearly a problem for the School of Public Choice economists, of whom I am proud to have known some personally (Coase, Buchanan). A simple institutional structure might work here, to divide the “employment” part from the “welfare” part of the costs.

Under current law, every State has a “work training and unemployment compensation” system of some sort. Workers who apply for unemployment compensation after losing a job can apply for it but they have to attend training programs in most jurisdictions. It is a subsidized process.

Proposal for Handling the Minimum Wage

Perhaps the solution is a structural reform, replacing the current Unemployment Insurance and job training programs.

Those old and sub-functional State agencies should be operated as strictly Temp Agencies for employers looking for workers at the low end of skill.  The difference is this “temp agency” is subsidizing those workers who use it for their employment, and the employer does not pay the full $15.00 plus overhead for other taxes.  The low-skilled workers and the employers all win; the American economy wins.  And the “social justice warriors” cannot keep complaining about underpaid poor workers.

Let the Minimum Wage be paid to the workers directly by the State labor exchange, if they get their jobs that way. Otherwise no Minimum Wage shall be mandated. Employers do not have to pay any such thing any more, and we ought to hope the State governments follow this deregulation, and repeal their implicit excise taxes on hiring sub-par workers.

The Federal and State minimum wage laws will be repealed.  Employers could hire anyone at any wage the worker would agree to.  If the worker wanted to receive more, he can go to the State labor exchange and sign up and return directly to the same employer who already wants the worker at less than $15.00.  But the worker would get the higher payments as “wages” and not as “welfare” such as Medicaid and food subsidies.

Employers Decide how much to Pay

Employers would submit a “bid” for workers, and the labor exchange would choose which ones to send for an interview, based on whatever they do “to train” workers about job-finding skills, and assessing their level of skill.

If the workers and the employer do find each other first (the old-fashioned method), then the workers themselves can come to the State labor exchange to start receiving their subsidy.  This would require less bureaucratic administration by the government supervisers, responsible for sending the workers around for interviews.

    1. Let the employers come to the State labor exchange to interview workers, or workers can be sent to interviews, and the employers would be inviting them. Guaranteed interview, and possibly a guaranteed job.

The employer would reply directly to the State labor exchange whether s/he wanted to take on that employee for a trial 30-days and option to renew the worker for a year at an agreed fee (like a temp agency contract). The wage will be paid to the State labor exchange and the State would pay the worker his or her $15/hr. It would also do all the Social Security withholding, etc. including ACA compliance (Medicaid) and workers compensation, and any other local taxes on employers who hire workers.

The implicit Excise Tax on an employer, who hires workers whose productivity may be sub-par with experienced and better trained workers, would be eliminated – and paid by the taxpayers through the labor exchange “minimum wage” – as all welfare payments ought to be paid, not mandated on others to pay.

And . . . the Moral Argument

Finally, the primary “ethical/moral” reason why a statutory Minimum Wage of $15.00/hr. is a bad idea is because the government does not have any legitimate right to command an employer to pay any particular worker any particular amount that the worker has not earned that day.

But retired intellectuals like me can understand why most people want to survive in a world dominated by State laws. This “compromise” idea would give everyone a way out of the Minimum Wage issue, and separate (i) the “welfare” part from (ii) the wage an employer pays. [The social democrats get their “living wage” paid (social justice?) and employers get a more free labor market with no wage controls.]

The Philosophical Argument (phronesis)

It is precisely that “wedge” from the elementary supply & demand graph (the “burden” of welfare), imposed by the government on the private employer; this causes “unemployment.” Since the employer can choose not to hire, that law causes unemployment. [law of demand – demanders move upward on the curve, for a smaller quantity demanded] It is an implicit Excise Tax on employers who hire sub-par workers, thus fewer of those workers are hired.

Yet if we could divide the welfare payment from the wages paid by an employer, then “unemployment” goes away. Taxpayers would pay the “welfare” part of $15/hr. and the employer would pay to the State labor exchange what the employee is worth. The employer’s payments would be under a contract with the State labor exchange; it would pay $15/hr. to the formerly “unemployed worker.”

“Unemployment” goes away. That’s a good result. Employers might figure out how “to chisel” the system by bidding low to get a good worker, and pay the employee less than the $15 the taxpayer is stuck with, but why care about that? Workers get jobs, employers get workers to train, and social democrats get higher taxes “to redistribute wealth” without requiring employers to pay all those taxes themselves, which a mandated Minimum Wage like today’s does do.

Today’s Minimum Wage laws are just a form of Excise Tax on an employer who might hire workers whose productivity is sub-par compared with experienced and better trained workers. When we tax something, we get less of it. Stop taxing job creation.

Note: Nothing in this proposal would restrict direct employer hiring of a worker, and no minimum wage laws would apply when such “Excise Taxes” have been repealed. Workers who do not want the State $15/hr. wage could work for less directly with an employer.

Creating a New Currency


    Link: A review of Warren Coats’ new book.
    (see a list of his articles and books)


Stronger currencies despite central bank policies to weaken

Gold as a Parallel Currency Shows Promise in Foreign Exchange transactions, using the technology of a Blockchain.

Why Dollar-Alternatives Are Non-Starters, e.g. the SDR.

The Appeal of the Gold Standard

The appeal of the Gold Standard is that classic image of the Gold Coin in the minds of people. It is a concrete mental picture. Our paper money system is something else. People know the Federal Reserve dollars are slowly losing value (“inflating”). The gold coin you see in your mind’s eye is more than just a physical object; it is a belief in permanence, a belief in objective reality (and in some sense, “natural law” i.e. chemistry, mechanics).

31.1g AU coin
31.1g AU coin

Economists would want to promise a “Stable Price Level” as a monetary standard. It is not believable. The Federal Reserve cannot even “manage expectations” about their plans for interest rates in 2016. Seeking this elusive ideal, government “planning” crowds out financial planning by individual families and businesses, because “the language of future prices/values” becomes fuzzy. The ideal of their success – a “stable price level” – is not believable (another example, perhaps, of believing in unicorns).

    [ from the page on this site, “Gold as a Parallel Currency,” — continuing to “A Modest Proposal” — Gold kilogram 50-yr.Treasury bonds. ]