Streams

Economic Breakdown

Monday, August 20, 2012

Richard Duncan explains how credit creation and consumption created a new economic dynamic and why he thinks the global recession is in danger of becoming another Great Depression. In The New Depression: The Breakdown of the Paper Money Economy he explains the economic calamity now unfolding: its causes, the government's policy response to the crisis, and what is likely to happen next.

Guests:

Richard Duncan

The Morning Brief

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Comments [34]

weedy from NY

Keynes has been shown to work.
That's a lot more than one can say about the Austrians.

The successful response to the last great depression was Keynesian through and through.

the CAUSE of this one is Austrian, through and through.

Aug. 21 2012 10:23 AM

@david - Note well that 21% of that inflation occurred during the 2002-2009, 7% was post-Obama.

And wages have not been keeping track for quite a while with the overall 'growth' of the economy...Since Kennedy.

Aug. 21 2012 09:59 AM
David

For you, Spectator from NYC:

Principles of Economics
http://mises.org/Books/Mengerprinciples.pdf

(Just don't let Obama or Romney find out you're reading this.)

Aug. 21 2012 01:10 AM
David

Spectator: NOTHING has intrinsic value. It's only people making use of something that gives it value. This goes for a commodity or a labor skill. Gold and silver became commodities because they were used in the manufacture of goods prior to becoming mediums of exchange. They were used for jewelry, vases, goblets, eating utensils. Today, both metals have even more uses in terms of industry, medicine, and high technology.

Aug. 21 2012 12:52 AM
Spectator from NYC

Hm.
I'm listening to a repeat of the show now. It would be helpful if a distinction is drawn between the real and financial economies.

I would also like not to be condescended to with regard an instrument of exchange being confused with a store of actual value. Gold is used as money, but has little intrinsic value. Oil can be used as money, and has substantial intrinsic value.

It's fiat learning ;-)

Aug. 21 2012 12:33 AM
David

Bad news, gang: I'm wrong. What cost you $1.00 in 2002 would now cost you $1.27:

http://www.usinflationcalculator.com/

Anybody have a 27% increase in the average salary in their field in the past 10 years?

Aug. 20 2012 03:11 PM
David

For those of you who erroneously believe that expanding the money supply is the way to grow an economy, then why doesn't the government just send each and every one of us a few million dollars instead of just letting the Banksters get the money first to do with what they wish?

If expanding the money supply was the way to grow an economy, then Zimbabwe would have been the healthiest economy on the planet between 2003 and 2009.

http://en.wikipedia.org/wiki/Zimbabwe#Hyperinflation_2003.E2.80.932009

Aug. 20 2012 02:13 PM
David

By the way, Mick C from Manhattan, there is ONE way that technology could bring about a reason for no longer using gold and silver as mediums of exchange. If one of the promises of the new field of nanotechnology is that an individual will be able to produce things very cheaply in one's home, then gold and silver would no longer be difficult to produce "things" (i.e., commodities); therefore, the market would attempt to discover something else that is not easily reproducible to use as a medium of exchange.

An excellent introduction to nanotechnology:

Nanofuture: What's Next For Nanotechnology
http://www.amazon.com/Nanofuture-Nanotechnology-J-Storrs-Hall/dp/1591022878/ref=sr_1_1_title_0_main?s=books&ie=UTF8&qid=1345485919&sr=1-1&keywords=nanofuture

Aug. 20 2012 02:06 PM
David

Mike C from manhattan, you wrote: "The libertarian economic "common sense" does not apply in an economy where wealth and value is relative and the absolutes that frame your views on how things ought to be are are outdated by technological advances."

Though economics is a social rather than a natural science (e.g., physics, chemistry, biology), there are economic laws. You can choose to ignore economic laws, but I can assure you that economic laws won't ignore you.

From the comments you've made, it's again obvious to me that you either have not read much Austrian economics or just didn't understand it. (By the way, there's nothing wrong with not understanding it. Frank Shostak, one of the top Austrian economists in the world today, couldn't make heads or tails out of Mises's "Human Action" when he first read it. That's the problem when our minds have been polluted with Keynesian pseudo-economics crap for over half a century.)

Human Action
http://library.mises.org/books/Ludwig%20von%20Mises/Human%20Action.pdf

And here's another excellent book on money:

The Ethics of Money Production
http://library.mises.org/books/Jorg%20Guido%20Hulsmann/The%20Ethics%20of%20Money%20Production.pdf

Aug. 20 2012 01:25 PM
David

Mike C from Manhattan: You have no idea what you are talking about. NO COUNTRY has ever been on a 100% gold standard. So there was still inflation and deflation at times—just not as bad as today when there is absolutely nothing to anchor the paper money supply to prevent it's being easily inflated.

I'd love to know how much Mises, Rothbard, and all the other Austrian economists you have read. From you comment, the answer is either not much—or you read a lot, but just didn't understand it.

I repeat, the Banksters are thrilled when economically-ignorant people spout their nonsense about gold/silver vs. fiat currency. The Banksters wealth keeps growing more and more, and our savings continue to be worth less and less.

Aug. 20 2012 01:07 PM
David

Jeff Pappas, you wrote: "On this planet to have a system based upon them, do the calculations even $ 100 US dollars traded in for gold would be a tiny tiny sliver of metal." So? What's your point. Then we can use the more abundant precious metal silver for smaller dollar amounts.

The whole world understood for centuries that a commodity that could not be easily reproduced held its value over a long time. That's why the market participants ultimately chose silver and gold as the preferred media of exchange. (See jgarbuz breakdown below) The way economies grow is that as more goods are produced against these stable commodities, the more one can purchase with these stable commodities. By the Banksters constantly increasing the supply of paper money, they are lowering the value of each individual unit of that money. If you're a 1% person, that devaluation of your savings doesn't hurt you that much because you have so much of that awful, easily-reproducible paper money. (This is called marginal utility: The more units you have of something, the less importance an individual unit of that something means to you.) But if you are a middle-class and—especially—poor person, that devaluation hurts your small savings tremendously.

If you use the inflation calculator I posted below, what a $1.00 could buy you just 10 years ago, now can only buy you .80¢ worth of goods and services. Did your salary increase by 20% over the last 10 years? I think not.

Aug. 20 2012 01:01 PM
Mike C from manhattan

by the way .. when the USA was on the gold standard the US dollar Japanese Yen exchange rate was 1 dollar for 1 yen it's about 70 to 80 yen to the dollar now .... so much for the gold standard and inflation and monetary value
There is a reason why Von Mises is ignored... and rightly so... The libertarian economic "common sense" does not apply in an economy where wealth and value is relative and the absolutes that frame your views on how things ought to be are are outdated by technological advances.

Aug. 20 2012 12:47 PM
David

As far as the "glories" of fiat currency as compared to "barbaric" gold and silver, the value of a U.S. dollar in 1913 (when the Banksters created the Federal Reserve in their OWN interests) has now plummeted to .04¢ thanks to this "progressive," "modern" system.

http://www.bls.gov/data/inflation_calculator.htm

Talk about economic "efficiency."

Again, folks, learn what the Banksters don't want you to know about a true, stable monetary system:

http://mises.org/books/whathasgovernmentdone.pdf

You can also learn about the wonderful inflation-"fighting," economy-"stabilizing" Federal Reserve:

http://library.mises.org/books/Murray%20N%20Rothbard/The%20Case%20Against%20the%20Fed.pdf

By the way, there has never been a 100% gold standard anywhere. So please don't respond with ignorant remarks about the gold standard historically "not" working.

Aug. 20 2012 12:45 PM
Tom Pinch

wow, was Richard a liberal conservative or a conservative liberal? where's Chizzlefizz when we need him to be listening?

Aug. 20 2012 12:43 PM
John A

As intellectually stimulative as day 1 in the best college course.

Aug. 20 2012 12:42 PM
David

Jeff Pappas, when someone believes that there is not enough gold and silver on the planet to use as a medium of exchange, that someone obviously doesn't understand how a monetary system based on gold and silver works. Most people incorrectly assume that all of the gold and silver in the world would be divided up equally among everyone. That is not the case. I would strongly suggest you read the pdf I attached to my previous comment.

As a convenience, I re-attach it here:

http://mises.org/books/whathasgovernmentdone.pdf

Aug. 20 2012 12:40 PM
Jessie Henshaw from way uptown

Ask if the economy isn't limited a little like Malthus said.

If the money system keeps multiplying our ability of expand our consumption of the earth will still have natural limits, won't something have to give?

Aug. 20 2012 12:39 PM
DS from Manhattan

The "Rich" will never spend , invest or see all of the wealth they have gathered. I say let them think they have the wealth that they have. Let them look at their terminals and see the train of zeros ... take that "money" and spread it around
They wil never miss it

Aug. 20 2012 12:39 PM
jgarbuz from Queens

To Jason

A $1000 dollars in 1912 could buy you house. A thousand dollars today can buy you two or three IPads. :) If you buried a $1000 worth of gold in 1912 it could still buy you a house today.
However, if you had invested $1000 wisely in 1912, and assuming it wasn't lost in bank crashes or stock crashes, etc., it too could be cashed out for a house today. Gold does generally retain value better than paper currency that is not correctly invested, but then where do you keep it? It can get stolen, etc.

Aug. 20 2012 12:39 PM
John A

Next up: The Locusts. We are so deserving.

Aug. 20 2012 12:38 PM
Jeff Pappas from Dumbo

Work and creativity create Wealth. There is not enough Gold , Silver and Platinum On this planet to have a system based upon them, do the calculations even $ 100 US dollars traded in for gold would be a tiny tiny sliver of metal. Especially when you do the math of ALL the wealth we have....
A new out of the box system has to be created and I believe we need a world currency Based on the Value of what we all have Now, excluding Debt.

Aug. 20 2012 12:35 PM
Jason from Queens

The power of the USA is that it has the most stable economy and currency in the world. If you buried $1000 dollars 100 years ago, those dollars would still be spendable. Try that with any other currency (other than the British pound) and you would be out of luck. !00 year old Chinese Yuan , German Marks, Japanese yen etc are only of value to collectors as those governments and economies have fallen by the wayside (as the Euro just might do) . The USA is in a supreme position and if we can just get out of this grade school economic mentality which is being used to instill fear and manipulate political and racial problems, these issues could be see for what they really are

Aug. 20 2012 12:33 PM
David

To all of you who believe in fiat currency, all I can say is:

“It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.”

By the way, the Banksters agree with all of you. That should tell you who benefits the most from fiat currency/fractional reserve banking.

Learn some basic economics about a medium of exchange:

http://mises.org/books/whathasgovernmentdone.pdf

Aug. 20 2012 12:32 PM
Hugh Sansom

The dollar is only depressed if it was not inflated in the 90s and 00s, but it was inflated. A key component of Clinton economic policy, ala Robert Rubin, et al., was to keep the dollar unnaturally strong, giving Americans more buying power. The question is where the normal value of the dollar is or should be.

Aug. 20 2012 12:31 PM
John A.

My notes say that everyone in the world owned or had gold reserved for them, then their individual share would be a tiny cube 1/2 inch on a side.
Based on info from right here:
http://www.wnyc.org/shows/lopate/2009/oct/08/underreported-the-golden-bubble/

Aug. 20 2012 12:28 PM
MC from Manhattan

All of this wonky discourse still does not address the fact that the economy is not supposed to "balance out" on the Macro level. You don't operate the national economy of a superpower like the USA or even China with the same economics of a household. It's all a prime number followed by a bunch of zeros (which ironically mean nothing). Debts are never meant to be fully repaid, and they should not be. The monetary supply in an era of economic and technological change will always be playing catch up to the economy.. How and where do you get a 70 Billion dollar valuation for a "web site" (Facebook) which is not a material fact or product but the organization of immaterial objects? This "wealth" was created out of the ether and just might soon vanish back into it. Debt CAN be put off forever, that is the purpose of debt. Comparing the USA to Greece is deceptive. It raises fears and emotions but it is not an accurate analogy. North West coast Native Americans engaged in a "potlatch economy" where those who accumulated the most wealth gave it all away every year. Looking at the Science channel's "How it's made " it is easy to realize that we are in a crises of OVER PRODUCTION which needs little if any employment of people to run it.

Aug. 20 2012 12:27 PM
jgarbuz from Queens

The world economy is slowing down, and what to do about it is the crux of the matter. All countries suffer unemployment and debt problems in a slowing and possibly descending global economy. It could go on for decades, and lower the standard of living of the US, EU and many others for a long time to come. But I doubt messing around with various currency issues is going to matter much. The real danger of world recession is war, which happened in the 1930s as a result of the great world depression. That led to destruction and eventual rebuilding. Hopefully world war won't happen again in a nuclear age, but how we solve the problem of a global economic slowdown is beyond my personal understanding.

Aug. 20 2012 12:26 PM
antonio from baySide

Sorry for the simple question:
Who is better to stop this dire proposition?
Obama or Romney?

Aug. 20 2012 12:25 PM
emmanuel

I was wondering if your guest knows what happened to the Czar's banking system when the Bolsheviks came to power? Was there a massive cash out, and on what currency? Also, did some extended families consolidate their funds to one family that came to the US?

Aug. 20 2012 12:24 PM
Jessie Henshaw from way uptown

Leonard, you really should crowdsource some better questions to ask your economic and environment guests...

Your experts tend to be main-stream enough to not have much exposure to the real diversity of creative thinking on even their own subjects...

Aug. 20 2012 12:23 PM
Leo from Queens

what can people do to help mitigate the coming depression? - Should we buy land? Chickens to feed ourselves?

Aug. 20 2012 12:22 PM
Henry from Manhattan

The gold standard is over.

We’re not going back.

The End.

Once upon a time salt was used as currency. Things change.

Aug. 20 2012 12:18 PM
John A

How does deflation play out? Does commerce magically stop immediately?
-
Are there any example countries living at very low or even zero inflation?

Aug. 20 2012 12:15 PM
jgarbuz from Queens

Anyone can be on the "gold standard." All you have to do is take your paycheck and buy gold. It was illegal for Amercans to own gold coins and bullions in the US between 1934 and 1971, until Nixon went off the international gold standard but also allowed individuals to buy gold. I believe everyone should own a little bit of gold - enough to survive on for a month or two - but to suggest that we should return to the international gold standard is absurd in this day and age. There are very good reasons why economies left the gold standard and began using the creditworthiness and taxation capability to back "fiat" paper currency.
The Chinese were doing that thousands of years ago when gold became scarce.

Aug. 20 2012 12:13 PM

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