Wednesday, August 12, 2009

fiat currency isn't money.

Before we can even ask how things might go wrong, we must first explain how they could ever go right.

— F. A. Hayek

when imagining a goal, always begin with the proper conditions of the world. in order to bring about some end, you must first realize that it already was, in the beginning. there is nothing more to add, nothing to tinker with, nothing that needs fixing. there is only the damage you have already done which you must alleviate, the confusion you must clear, the darkness you must illuminate, the hurt you must forgive.

imagine a free barter economy.

the definition of money is: the commodity with the greatest marketability. in a free barter economy, some commodity holds "good" status with a majority, or perhaps simply a critical mass, of human actors. thus it becomes a store of value through its liquidity. an economy becomes "proper," having selected at least one money good. murray rothbard's case against the fed summarizes the actual history of this process. i am reviewing.

another way of naming the money good is to say that it is the most liquid commodity. liquid means that if you hold it, you will be able to make an instant sale without:

- offering a discount,
- advertising,
- paying commission.

you would think someone was crazy if you had to use one of these gimmicks to get them to take money from you in exchange for some other good or service. this is also review material.

enter a dominant business establishment. it is so wildly popular that actors in the marketplace begin to go into debt with the business, at its many branches. or, perhaps, it simply dominates by the sword, and makes claim to debts it imagines a society owes it for its services: tax.

in either of these cases, advertisement is pivotal. in the former case, there must be some stated purpose, some reason, for going into debt with this establishment. the more people they are able to bring into the fold, the better their advertisement must have been for these debt contracts. it is impossible to corner such a market without a market-friendly communication.

however, in the latter case, what is obvious in this contrived example yet apparently too hard for most americans to read and understand from the face of "their own" dollar bill, is a corrupt, "market-unfriendly advertisement." it generally runs something along the lines of "you will pay me or i will kill you," though the actual text on the particular instrument in question is the somewhat more subtle, "this note is legal tender for all debts, public and private." that is, the "price" for smoothing the gears of the marketplace in various individual exchanges is a tiny bit off the top (tiny at first, anyways).

you are required by this establishment to use the debt instrument they issue to pay what you owe them, but you can only get the debt instrument from them by providing some service. your healthy sons and daughters, for example. it is because the establishment is coercive to begin with that it must operate in a debt-driven fashion, having no marketable capital at the outset. it is not the debt model itself that is the problem.

therefore while it is generally ignored on a conscious level, whenever you spend any debt instrument from any establishment that uses coercion or force to obtain goods or services you are leveraging one of the gimmicks which clearly define (in the negative) the property of liquidity in a commodity: advertisement. even if this contract is made verbally -- no actual physical piece of paper representing the debt instrument exchanged or even in existence -- an implied "state advertisement" of violence or coercion does exist. it is a contract you must agree to. "we've started a club... and you're in it."

thus is the difference between the state advertisement and the market advertisement demonstrated. and the consequence is this: fiat currency is not money.

[notes for exposition]

what is currency?

poorly defined because of
- the youth of the concept of national currencies
- the confusion of money and currency which is addressed herein

DEFUN: a medium of exchange with "limited liquidity"

market for it:
- limited to a geopolitical area, i.e., the remnibi.
- limited to an interest group whether by race, trade, etc.
- limited to a temporary distraction, i.e., monopoly "money."

consumption of the medium defines the market.
thus even a m.c.d. in canada that takes USD is part of the currency's market,
and by all accounts belongs in any US GDP figure.

we can shortcut to the heart of the idea by allowing for well-defined "sphere"
we can do that, because people really actually do it
look at a map and its borders
they're well-defined, even though in most cases you won't find the paint on the ground if you go there

the sphere is systemic, a logical construct, it exists in our mind
the market is empirical, it exists in the world, you must go out and find it

dualism not necessary to understand this as

"the market" is also a logical construct in that it is two words
that point to a definition that explains what is happening in reality

and "the sphere" really can be tested and probed for its edges
just drive ten kilos of coke across the border and you'll find it

what is a FIAT currency?

a currency with a "sphere OF INFLUENCE"

consumption of the medium defines the market, but,

the sphere of influence is defined before the market arises:

founded on a lie, assertion of a market that did not exist "as known."


consequentually the circulating medium depreciates, and,

coercion and eventually force is necessarily used to maintain it.

[this is just some bullshitting that needs revising or dropping]

fiat and the marketplace can be understood as similar processes which form mutually exclusive result sets up to the degree of force involved, no matter what is done in the name of which. the dollar currency, in the united states, was declared to be "legal tender for all debts, public and private." this is a kind of "state advertising" that was necessary to force the dollar into liquidity. it is a standing declaration: it depends on a continuation of force since the day of establishment. we normally just call this fraud, because it's a shorter word. evil is only worth the time it takes to put a bullet through it.

it is irrelevant whether the process of the dollar's establishment has thus far involved only fraud (maybe in 1775 this was true), or everything from fraud to coercion to outright warfare (this one, today, folks). there is surely no other option: any warehouse ticket which arose on the market did so without a "legal regime," but a warehouse, and a creditable business. our false substitute of the original commodity has been on life-support, suffered by the actual constitution of an entire nation-state, in the name of its nominal constitution -- which really is just a piece of paper, and i would imagine very much damned by g-d -- ever since then. i can't conceive of a better example of parasitism than that.

hey, presto: the "advertisement copy" also states on every single note the plain fact that it is just a debt instrument, not an actual commodity. whoops. tell a lie often enough, in plain view, and people will invest their belief in it: the mind's working definitions for nouns come from subjective experience. "what is everyone else doing to get it?" "what is everyone else doing with it?" this will apply to "commodity," and to "money." you can't make debt into a commodity without a lie, because debtors are all unique souls, whether these babel-tower, jarhead, homunculus mongoloids think so or not, and lies are just a proper subset of advertisements. therefore, marketplace results reside where advertisements are free of such fictions.

when you pay someone with a fiat currency, you are giving them nothing in return for the good they have done you, so you had better mind your manners. in their eyes the customer might as well be the devil himself, grinning widely, accepting goods with grace and dignity, saying, "why, thank you, i am ever after in your debt!" raise your hand if you want the devil to owe you something. now, if the producer in this example wants to make up for his instantly realized loss, he has to go out and screw someone else over with that same pile of worthless, fiat currency. only then may he breathe a sigh of solvent relief. multiply this by hundreds of millions of transactions, daily: one no longer wonders why most societies come apart at the seams.

like all state currencies, however, the dollar will come to an end -- an ugly one -- as the collateralized debt instrument which everyone in society finally traded away all of their life and liberty to, then suddenly discovered there was nothing it could be traded for. virtually no market participant will see any future left for such debt. some, with essentially zero foresight, will commit suicide, or murder, or murder-suicides. some already have, as each recession and depression threatens to become this zero-hour event. [you can pray for any or all of these people, if you like, but g-d himself said "the last shall be first." i'm inclined to take his word for it.] others will see as far as bartering and community to solve their problems, still others will see to local currencies and rebuilding fractured states.

a very gifted few see beyond. they worship best, who depend only on g-d. they understand that your money is your life, and your life is your money. they do not, and will not, confuse the dollar for money. yet the brightest of these will even take your dollars from you, sell you gold, and say "thank you for your business."

watch out: these last few might be saints.

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