Gold Standard (Re: Fail Quotes)

[VectorM]

A response to Shane's videos regarding money and his series of videos on economic basics, from this forum thread: http://www.offtopicproductions.com/forum/viewtopic.php?f=7&t=11292&start=15

As for the first video: what an idiot. On the one hand, if you take it very generally, that atheist guy[TheAmazingAtheist] is right: money has value because people perceive it to have value (this is true for anything). Value is not derived from labour (as he claims regarding the production of gold). More specifically (he is more specific in his video), he is right to some extent but also makes some elementary mistakes. One ounce of gold is not worth the same everywhere. In fact, gold has value because people perceive it to have value. If people would decide one day that gold does not have any value you would have the same problem with paper money: it would become worthless. And even with a gold standard, there is never enough gold to pay everyone, so there is still a lot of 'virtual' money in circulation.

The big difference between gold and paper money is that the value of gold is to large extent exogenous: that is, gold can be used for many things, like producing computer hardware or jewellery. However, gold prices rise during an economic crises because people buy it not for consumption or production, but to store value. Part of its value (as represented in its price) is therefore due to it being valuable. Paper money has a very low exogenous value (one could use it to wipe one's ass or make paper planes or whatever, but it's not very useful otherwise) and derives most of its worth from being perceived as valuable. That's because (being fiat money) paper money is basically a standardized IOU: when I get $100 pay, it gives me the claim on goods worth $100, so I can go to a bakery and buy a loaf of bread. The baker accepts the payment because he is legally obliged to do so, but also because it's a beneficial exchange: he has more bread than he needs for himself, and he can use the money he gets to buy other stuff in return. The money has value because people perceive it to have value, and the obligation to accept it means people keep perceiving it as valuable, because it ensures its usefulness and thus its value. Paper money is not actually different from gold or money backed by gold. The production of paper money still requires labour an capital, like gold, and has some exogenous value. The difference is rather in differences within these characteristics. Paper is ill suited as money, because of its low value (which, again depends ultimately on its use), so it would not be any better than simply bartering. (Bartering is in fact what we still do, the process has simply become much simpler because there is now a good universally accepted as valuable, and which is equally valuable to everyone).

EDIT: WTF, this guy is in favour of insider trading? That is pretty fucking retarded. In fact, it's one of the very few things which everybody agrees on is a bad thing: economists, politicians, citizens... That's because there is not a single reason for insider trading.

Long story shirt: read a good textbook if you're interested in economics, don't watch these videos which give a completely wrong impression.

This guy studies economics, btw.

[Travis Retriever]

This guy studies economics, btw.

Doesn't surprise me one bit.  State sponsored academia does that to people.

[MrBogosity]

If people would decide one day that gold does not have any value you would have the same problem with paper money

And if a frog had wings he wouldn't bump his ass a-hoppin'.

The thing is, we have seen this with paper money every single time it's been tried. We haven't seen it with gold ONCE.

The whole "there isn't enough gold" canard just shows how ignorant the person is. The whole POINT of money is that there's not a lot of it!

However, gold prices rise during an economic crises because people buy it not for consumption or production, but to store value.

Yes, gold is EXCELLENT as a store of value--and as I said in the video, that's one reason it works GREAT as money.

Paper money is not actually different from gold or money backed by gold.

What makes this such an incredible fail is that he preceded it with the most important way paper money IS different from commodity money!

The production of paper money still requires labour an capital

Bullshit. It's just someone typing a number in a computer. How much more difficult is it really to type a big number than a small one?

WTF, this guy is in favour of insider trading? That is pretty fucking retarded. In fact, it's one of the very few things which everybody agrees on is a bad thing: economists, politicians, citizens... That's because there is not a single reason for insider trading.

Ignoring all the reasons I DID give for it. And there are PLENTY of economists who say it's a good thing, not the least of which was Milton Friedman.

[gamer0004]

I registered specifically to debunk some bullshit about economics. I don't know what this forum is about or whether the person who replied to my original post shamelessly copied here is the person who made the video I was replying to... but here ya go.

And if a frog had wings he wouldn't bump his ass a-hoppin'.

The thing is, we have seen this with paper money every single time it's been tried. We haven't seen it with gold ONCE.

The whole "there isn't enough gold" canard just shows how ignorant the person is. The whole POINT of money is that there's not a lot of it!

The whole point of money is to facilitate trade. The point of money is not that there isn't a lot of it. We don't - typically - use diamonds as a means of paying. We certainly don't use my shit as a way of paying. It's certainly rare, as I'm the only one producing it, but it's not valuable. To facilitate trade, money requires certain characteristics, as demonstrated in the video. Paper money meets these characteristics. Paper itself doesn't, because it doesn't have a high market value. Paper money does have a high market value, because people are obliged to accept is as payment, and because people can use it to pay other people. I myself am more than happy to accept digital numbers on my bank account in exchange for labour performed, since I can use that money to buy nice stuff. I cannot do so with, for instance, toilet paper. It's paper allright (BTW, paper money is not, in fact, made of paper) but it doesn't have nearly as much value because I can't use it to pay. It has value because people think it has value and vice versa, and the government ensures it keeps its value.

Of course, if the government decides to print more money, the result will be that value goes down. If they do it very often, people steer clear of paper money entirely, because people perceive it does not retain its value, and as such it loses its value.

You don't want the gold standard because there is a limited supply of gold. Throughout the middle ages, there were great problems with a lack of bullion. The supply of money was too small to facilitate all profitable trading opportunities. This hampers growth. When the economy grows, the supply of money should grow as well, because more trade (in dollars) will take place. If supply doesn't grow, money becomes more valuable. Which is deflation. Which hampers growth to great extent. Deflation causes lots of problems. If money becomes more valuable every year, people are inclined to keep it instead of spending it. You probably know that deflation is a bad thing, and otherwise you should look it up. This is one of the reasons why central banks aim at an inflation of about 2% instead of 0%.

Yes, gold is EXCELLENT as a store of value--and as I said in the video, that's one reason it works GREAT as money.

What makes this such an incredible fail is that he preceded it with the most important way paper money IS different from commodity money!

Bullshit. It's just someone typing a number in a computer. How much more difficult is it really to type a big number than a small one?

Ignoring all the reasons I DID give for it. And there are PLENTY of economists who say it's a good thing, not the least of which was Milton Friedman.

The big difference is that gold has a relatively large exogenous value, whereas paper money has a small exogenous value. This is a big difference, but it doesn't make them different in nature. Printing money still requires resources. It requires less resources than mining and refining gold ore, but it still isn't free. But that isn't relevant, since mankind has known for about two hundred years now that value is not derived from inputs.
To give another example as to why the difference isn't essential, gold coins were often worth far more than the value of bullion it consisted of. That's the effect of supply and demand for money. In some cases, the amount of gold or silver in coins was very low. Just like the value of the 'paper' in paper money is very low.

The notion of "paper money can't work because paper isn't work anything" is a thousands year old myth. One of the reasons why the church (and the Islam still today) was against charging interest was because money was seen as sterile: there is a certain amount of gold, which has a constant value, and as such charging interest is theft, because it reduces the amount of money available to the society in favour of those charging interest.
Have you ever noticed how economic development didn't really go anywhere the thousand years before the financial revolutions in Italy, the Dutch Republic and England?

I'll give you this: the value of paper money is more volatile than gold or money backed by gold. There are risks of hyperinflation and there is typically sustained inflation. These are good arguments for the gold standard. But paper money works, just like gold works or money backed by gold. The principle is the same in all cases: a means of payment which is worth the same amount of goods for all people. The devil is in the detail, not in principle.

As for insider trading, I was perhaps a bit too fast in my response that everybody is opposed to insider trading. I don't think insider trading is a good idea, because it increases risk for anybody except insiders, and because these insiders can exploit asymmetrical information, which might result in a lemons market. Considering the fact that most countries have forbidden insider trading, I guess there are good reasons to do so, but apparently some people argue in favour of it. I do not know that much about it and as such will not be arguing against insider trading any further.

[MrBogosity]

First of all, welcome to the forum!

To facilitate trade, money requires certain characteristics, as demonstrated in the video. Paper money meets these characteristics. Paper itself doesn't, because it doesn't have a high market value.

No, it doesn't, as I showed in the video. It's not a store of value, so there's nothing protecting its worth. Whereas gold always, always, ALWAYS represents the amount of resources needed to mine an equivalent amount. If at any time you need an ounce of gold for something, you don't have to get together all the resources and take the time and labor to mine it; you just get it off the market.

Paper money does have a high market value, because people are obliged to accept is as payment, and because people can use it to pay other people.

That's not a high market value; that's duress.

You don't want the gold standard because there is a limited supply of gold.

I DO want the gold standard because there's a limited supply of gold! And because there are entrepreneurs who are ready to trade gold between the currency window and the commodity market to keep the system in balance.

Throughout the middle ages, there were great problems with a lack of bullion.

[citation needed]

The only such lack I'm aware of is because government taxed people so much they no longer had much. But the government and their cronies certainly had enough!

When the economy grows, the supply of money should grow as well, because more trade (in dollars) will take place. If supply doesn't grow, money becomes more valuable. Which is deflation.

You're confused on what inflation and deflation are as well. Let me explain it clearly:

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Deflation does NOT happen because the economy grows. As I show in the video, what REALLY happens in that situation is that capital is freed up and can be used for other purposes. Printing money to offset that just means the poor, the middle class, and small businesses are robbed of the benefits of this.

If money becomes more valuable every year, people are inclined to keep it instead of spending it.

If that happens in a gold standard, then people will buy gold from the commodity market and turn it in for money, providing the economy with the extra money it would need in such a situation. You seem to be under some kind of impression that the money supply never, ever changes in a gold standard. Nothing could be further from the truth. It just seeks equilibrium, as opposed to fiat money which seeks the appropriation of wealth for the government and its cronies.

This is one of the reasons why central banks aim at an inflation of about 2% instead of 0%.

No, they aim for inflation because they get rich doing it. At OUR expense.

To give another example as to why the difference isn't essential, gold coins were often worth far more than the value of bullion it consisted of. That's the effect of supply and demand for money.

Bullshit. So you know fuck all about numismatics as well. Let me educate you. Coins can have three values: commodity value, face value, and collectible value. Commodity value would be the value of the gold in the case of gold coins. But they have a SLIGHTLY higher face value, because of the process involved in minting the coins. When they have a MUCH larger face value, it's because of their value as collectibles, NOT as money, and they have value the way rare stamps do.

The Roman empire started increasing the difference between commodity and face value of the dinarius by slowly reducing the amount of silver in it. Go research what happened--it's Gresham's Law in action!

But paper money works,

How come EVERY society that used paper money ended up in financial ruin within a century or so? Whereas gold has remained a stable currency for millenia? Even today gold is the second most popular form of money in the world!

[Travis Retriever]

You seem to be under some kind of impression that the money supply never, ever changes in a gold standard. Nothing could be further from the truth. It just seeks equilibrium

This is a misconception I've seen many Austrians have as well.  It boggles the mind why so many people view money--especially free market money as some top-down thing that is more rigid than a pillar of ice near 0 Kelvin.

[gamer0004]

No, it doesn't, as I showed in the video. It's not a store of value, so there's nothing protecting its worth. Whereas gold always, always, ALWAYS represents the amount of resources needed to mine an equivalent amount. If at any time you need an ounce of gold for something, you don't have to get together all the resources and take the time and labor to mine it; you just get it off the market.
That's not a high market value; that's duress.

Like I said, this is a woefully outdated concept of value. Value is not the same thing as price. Prices, in a perfectly competitive market, will be close to cost of production. Prices are determined based on supply (which is determined by production costs) and demand (which is determined by (marginal) utility, or the (marginal) value a good has to consumers).
Paper money does not have high value because of 'duress', it has value. I want the money. It offers value to me. That's all that's necessary. The fact that the government ensures that money retains its value is a good thing, just like a government which ensures that my stuff isn't stolen, which is required for an economy to function. That's another important task of the government, and it is coercion, but it too is a good thing. Don't be so paranoid about your government (I assume the US government? It has some really nasty features, but it's still better than many authoritarian regimes or no government at all).

I DO want the gold standard because there's a limited supply of gold! And because there are entrepreneurs who are ready to trade gold between the currency window and the commodity market to keep the system in balance.

[citation needed]

Roger Backhouse, The penguin history of Economics (which I can recommend, it's about the history of economic thought and a lot of really interesting concepts are discussed, including the labour theory of value. You'd better drop that BTW, as that's precisely what Marx based his theories on!) and Niall Ferguson, the ascent of money (p. 25). I can also recommend the latter, especially regarding the gold standard and other concepts.
The precise problem is that you want to "keep the system in balance". the system isn't balanced. This is the first time in history that mankind has seen sustained economic growth (since about 1500 A.D., which accelerated during or after the industrial revolution). Increased production requires more money, because total transactions in one year are higher (in dollar value, or whatever other currency is being used). If the supply of money does not increase (or increase only slightly), as is the case with a gold standard, this increases the price of money (which sounds weird but isn't). The result is deflation and increased interest rates. People keep their money without spending it, companies have to pay a higher interest rate to compete for scarce money (which is made scarcer because simply keeping the money instead of investing it becomes relatively more attractive), and this reduces both consumption and investment, with a lower Y as a result. I'm not sure whether it is possible to buy gold and sell it to the government for money when there is a gold standard. If it is, it is still an inflexible system, made worse by deflation: buying gold two months later will increase the amount of gold one can buy. The result is a deflationary spiral. May I remind you that the gold standard made the Depression even worse?

The only such lack I'm aware of is because government taxed people so much they no longer had much. But the government and their cronies certainly had enough!

Deflation does NOT happen because the economy grows. As I show in the video, what REALLY happens in that situation is that capital is freed up and can be used for other purposes. Printing money to offset that just means the poor, the middle class, and small businesses are robbed of the benefits of this.

If that happens in a gold standard, then people will buy gold from the commodity market and turn it in for money, providing the economy with the extra money it would need in such a situation. You seem to be under some kind of impression that the money supply never, ever changes in a gold standard. Nothing could be further from the truth. It just seeks equilibrium, as opposed to fiat money which seeks the appropriation of wealth for the government and its cronies.

No, they aim for inflation because they get rich doing it. At OUR expense.

I'm not going to watch that video, as it is a video by you and I'd probably disagree, and I'd rather stick to the current discussion. It seems you have a very unhealthy stance towards government, which severly clouds your judgement. The government is not there to make money. It, in fact, loses money, what with the deficits and all. Deflation does not "free up capital". Inflation does not make "the government and its cronies" (whoever they may be) rich. It does makes debtors better off, but a constant inflation will simply be compensated by an equally increased interest rate.

Bullshit. So you know fuck all about numismatics as well. Let me educate you. Coins can have three values: commodity value, face value, and collectible value. Commodity value would be the value of the gold in the case of gold coins. But they have a SLIGHTLY higher face value, because of the process involved in minting the coins. When they have a MUCH larger face value, it's because of their value as collectibles, NOT as money, and they have value the way rare stamps do.

The Roman empire started increasing the difference between commodity and face value of the dinarius by slowly reducing the amount of silver in it. Go research what happened--it's Gresham's Law in action!

How come EVERY society that used paper money ended up in financial ruin within a century or so? Whereas gold has remained a stable currency for millenia? Even today gold is the second most popular form of money in the world!

(Gold coins can be worth far more than the value of the gold they consist of, depending on government regulations. For examples I refer to the books above.)

According to your logic, we should now all be subsistence farmers. Because how come EVERY society in history which increased its standards of living collapsed within a few hundred years?
Our society, our economy, our science, our technology, our knowledge and our production is different. We (our capitalistic, western civilization) have a modern economy which is completely different from other civilizations, which is a result of flexible finance and which REQUIRES flexible finance. The gold standard is particularly ill suited for a modern economy.

There is a reason we let it go. Not necessarily because governments (the people you love ) wanted it, but because they had to. It was unsustainable in our modern globalized economy.

[gamer0004]

This is a misconception I've seen many Austrians have as well.  It boggles the mind why so many people view money--especially free market money as some top-down thing that is more rigid than a pillar of ice near 0 Kelvin.

It depends on the system and what your definition of money supply is. In any case, it is very inflexible, to the extent that even governments can't sustain it beyond a certain level of production.

Oh and @MrBogosity: thanks, and I'm sorry for the "idiot" part. I wouldn't have called you that in your face (because it's impolite, not because I'm afraid of you ). I didn't mean you're dumb, but you are presenting your opinion (gold standard is good) as fact, and you made some elementary economic mistakes (like the claim that value depends on inputs...). It's an interesting debate though.

[MrBogosity]

Like I said, this is a woefully outdated concept of value.

Argument from time fallacy.

Value is not the same thing as price.

Never said nor implied that it was--in fact, EXACTLY the opposite. Stop strawmanning.

Paper money does not have high value because of 'duress', it has value.

It has NO value absent the force of government. That makes it duress.

That's all that's necessary.

No, it MUST have value ABSENT force or else it WILL be an unstable currency that sends a civilization into ruin. We've seen this in history time and time and time again.

And this has nothing to do with paranoia; another strawman combined with an ad hominem.

including the labour theory of value. You'd better drop that BTW,

Never said it and don't adhere to it. Another strawman.

And you need to show how those sources support your point.

The precise problem is that you want to "keep the system in balance". the system isn't balanced.

Because it's a fiat system manipulated by government! WTF kind of response is that?

This is the first time in history that mankind has seen sustained economic growth

And I'm a member of the first generation in American history that isn't at least as well off as our parents.

Increased production requires more money

BULLSHIT. Increased production just means more products are sold at a lower price; you don't need to inflate the currency out of some sort of hardon for the price staying the same!

And BTW, that fact that products are sold at a lower price benefits the poor and middle-class, whose paychecks now go farther. It IS NOT DEFLATION, as I showed in my video. Again, all your inflationary policy will do is rob this benefit from them.

If the supply of money does not increase (or increase only slightly), as is the case with a gold standard, this increases the price of money (which sounds weird but isn't).

It increases the VALUE of money. Learn the difference between value and price.

The result is deflation

It absolutely is not, and I've shown why. Are you going to respond to that point or are you just going to continue to make the assertion?

and increased interest rates.

This has no effect on interest rates, other than from more people having more money to save.

I'm not sure whether it is possible to buy gold and sell it to the government for money when there is a gold standard.

That's how money is CREATED in a gold standard! Why don't you go research THE BASICS before running off your mouth about it?

The result is a deflationary spiral. May I remind you that the gold standard made the Depression even worse?

Oh, INCREDIBLE ignorance! 1) The GD was caused by fiat money inflating the markets and creating the bubble. 2) The gold standard WAS NOT FOLLOWED as the Fed didn't react to the gold exchange like they were supposed to. 3) In 1933 FDR made it ILLEGAL FOR PEOPLE TO OWN GOLD, thus completely abrogating the gold standard. (And manipulated the price of gold based on things like superstitious lucky numbers!)

I don't know whose propaganda you're mindlessly regurgitating, but it is wrong, wrong, WRONG!

I'm not going to watch that video

So, you're just like a creationist, then: no desire to learn and so afraid you'll be shown to be WRONG. As far as I'm concerned, with that one statement you lost all credibility and no one should take you at all seriously.

According to your logic, we should now all be subsistence farmers.

Never said it, never implied it, nor is it in ANY WAY the result of what I'm saying. Desperate much?

Because how come EVERY society in history which increased its standards of living collapsed within a few hundred years?

NOT true.

Our society, our economy, our science, our technology, our knowledge and our production is different. We (our capitalistic, western civilization) have a modern economy which is completely different from other civilizations, which is a result of flexible finance and which REQUIRES flexible finance. The gold standard is particularly ill suited for a modern economy.

Spoken like someone COMPLETELY ignorant of history.

There is a reason we let it go. Not necessarily because governments (the people you love ) wanted it, but because they had to. It was unsustainable in our modern globalized economy.

No, it's because government wanted to spend beyond their means. And it's brought us to financial ruin.

[Travis Retriever]

It depends on the system and what your definition of money supply is. In any case, it is very inflexible, to the extent that even governments can't sustain it beyond a certain level of production.

Oh and @MrBogosity: thanks, and I'm sorry for the "idiot" part. I wouldn't have called you that in your face (because it's impolite, not because I'm afraid of you ). I didn't mean you're dumb, but you are presenting your opinion (gold standard is good) as fact, and you made some elementary economic mistakes (like the claim that value depends on inputs...). It's an interesting debate though.

Hm...vague hand-waving with zero substance.  Figures.

[gamer0004]

Okay, so I'm not going to be nitpicking single lines because that way there's not going to be a constructive debate, which you don't seem to be interested in.

You should learn more about history. List of historical GDP per capita. Roman Empire, Chinese Empire: all very impressive isn't it? It is, but even they did not manage to achieve a level of GDP per capita far above subsistence level (which is about $400 in those numbers). The average is higher because there was a rich elite, but the rest of the population was still around subsistence level.
Since about 1500 A.D., things have changed. There has been sustained growth, something which has never happened in history (not that average GDP per capita was lower in the year 1000 A.D. than in 1 A.D., and that both averages are only slightly above subsistence level).
I'm saying we should all be farmers because historically there has never been any such thing. According to your reasoning (it didn't work before, so it won't work now) this would be impossible. Historical facts should always be examined very critically. Our economy is different, our financial system is different (regardless of gold standard) and as such, a different system might work.

The fact that our paper money system requires government force and as such is unstable is, again, nonsense, for our whole economy (both the financial and the 'real' part of it) require government force. Without the government forcing people to comply, it can't function. Again, basic economic theory (property rights) and common sense.

Also note that I'm not really in favour of either, because this is not my field of expertise. However, you present your opinion as fact, and do so by making elemental mistakes. That's what I take issue with.

And when I see your reaction, I think I better stop here. By taking apart my argument you're completely missing the point and mistake what I'm saying. Sentences follow each other for a reason. I do not write in bullet points. For example, when I say "The precise problem is that you want to "keep the system in balance". the system isn't balanced" I was not talking about our financial system, but about our economic system, our ever increasing production.

Your responses to my post are not backed by any facts. You're arguing that paper money is unstable. I argue why it's not, that it does have value, to which you then reply that it doesn't. That's not arguing. That's just repeating your initial statement over and over again. You accuse me of not having any sources, but where are yours? I have at least a few facts though I don't think they're decisive, you have shown none. All you do is denying any points I make without arguing why. Your initial argument being that paper money doesn't work because it only has value because of coercion by the government and that historically this has always failed, you go on responding to my points with:
-It has NO value absent the force of government. That makes it duress.
-No, it MUST have value ABSENT force or else it WILL be an unstable currency that sends a civilization into ruin. We've seen this in history time and time and time again.
-Because it's a fiat system manipulated by government!
Which is nothing but exactly repeating what you initially said. Still no proper rebuttal, no facts, no reason why I'm wrong or why you're right. Only the same argument, over and over.
Then you have a completely wrong concept of deflation, thinking it is beneficial to lower and middle class, again giving no reason why this would be, and completely ignoring the very basic fact that if money buys more products in a few months (which is the concept of deflation) that people are going to consume less, which will reduce production and, as such, income (it will also lead to unemployment, for wages rise and typically can't be cut, because employees tend not to accept that. As a result, labour becomes expensive and will be replaced by capital, which does get cheaper because of deflation).

Some other great rebuttals supported by facts:
-NOT true.
-No, it's because government wanted to spend beyond their means. And it's brought us to financial ruin.
And one not supported by any source:
-Oh, INCREDIBLE ignorance! 1) The GD was caused by fiat money inflating the markets and creating the bubble. 2) The gold standard WAS NOT FOLLOWED as the Fed didn't react to the gold exchange like they were supposed to. 3) In 1933 FDR made it ILLEGAL FOR PEOPLE TO OWN GOLD, thus completely abrogating the gold standard. (And manipulated the price of gold based on things like superstitious lucky numbers!)

(note that from 1933, the economy was finally growing again...)

What I'm talking about is not about facts. It is not about history. It is about elementary economics. Read literally any modern textbook on macroeconomics and you'll understand why you're completely wrong. But until we're discussing things from the same framework (which you can criticize, I don't agree with everything I learn either) it's useless to go on. I can't teach you decades of economic research in a few forum posts, and I'm certainly not willing to do so. Once you are familiar with basic concepts such as the IS-LM model and its underlying concepts and the AS-AD model and its underlying concepts we can discuss this. You need to understand how things work before facts are of any use.

GDP per capita is still growing. This generation will be better off than previous generations unless things go really bad, but there is absolutely no reason to assume they will, unless you rely on historical evidence which is not representative for our situation. (and again, you use this as an argument why I'm wrong, but this argument is only based on your initial statement).

And the labour theory of value is outdated because it doesn't work and it has never worked - not because times have changed. Science has progressed. You are talking about the value of gold and how it is determined by its scarcity and the required input to obtain it. This is similar to the labour theory of value and it is utter bullshit.
As for what determines value: I said that if the supply of money does not increase, while production increases, this will increase prices, to which you said that it was wrong and the value would go up.
This is really unbelievable. surely you understand the concept of supply, demand, and equilibrium price? Supply doesn't increase, demand increases, this increases price. Simple as that.  As you seem to be unable to understand this incredibly simple and elementary concept of economics, here's a nice graph:

And no, I'm not going to provide you with facts, because this is just economic theory. The demand increases, this means the demand curve shifts to the right (it is not a change on the demand curve because the increase in demand is not the result of a change in price), supply remains the same, price goes up (to P2). Supply of money is usually pretty much fixed unless the government intervenes, which would result in a vertical supply curve, but the result is the same: price goes up. Simple, isn't it?

As for the concept of value, it depends on how it is defined (yes, nuances, how terrible!). There are different ideas about this. It can be taken to be price. It can be taken to be how much of one good people are willing to give up in exchange for another good (which would be the same as price in a perfectly competitive market characterized by perfect rationality and information, which does not exist in the real world, so there are some differences in practice). The latter depends on the marginal utility of the two goods. The utility curves determine the demand curve. In the model of a perfect economy, as I said, relative prices and relative marginal utilities are the same for every actor involved, because this model only explains the allocation of goods. The supply curve therefore depends on marginal utilities and the initial allocation of goods. There is a different supply curve when production is possible (which ultimately depends on marginal utility as well).
Value ultimately depends on the utility the good offers me. In case of gold or dollar bills (if used for buying other goods), the worth is equal to the goods I can buy with them (or the utility the 'consumption' (jewellery) of gold offers me, if that is higher than the utility of the goods I can buy with that gold).

Talking about fallacies: you're claiming I'm ignorant of history. I'm not. I read a lot about history, as I find it very interesting, and I do a large minor exactly about these kind if things, that is: economic history. Another great example of an ad hominem is accusing me of being a creationist, which has nothing to do with this (and is of course not true). I'm just not interested in having to go through hundreds of pages of macroeconomic theory just to get you at some level of understanding of what we're talking about.

As for the gold standard, as I have always understood it, and a very quick wikipedia search tells me I'm right (can't be bothered looking for a better source), the gold standard means the government backs the money with gold, so people can buy gold with their currency. This to ensure people perceive the value of their paper money to be more tangible (or real). AFAIK it does not go the other way round (people selling gold for dollars) on a regular basis. Also note that during crises, governments often refused to exchange their currency for gold. So it's not a failsafe alternative either.

Last but not least, the huge increase in bullion in Europe due to the findings of silver and gold in South-America led to lots of inflation, especially in Spain. Gold is not stable either, though there are less opportunities for governments to influence their economies and finance. Still, governments can decide to stop exchanging currency for gold, as they've done in the past, so that safety mechanism is not that effective either.

Start coming with real arguments instead of repeating your initial argument over and over again, come up with facts that back your ideas and show me why decades of macroeconomic theory are wrong and we can continue discussing this. If you don't, I won't take the effort to continue responding to your nonsense.

[MrBogosity]

You should learn more about history. List of historical GDP per capita.

Sigh...You should learn what GDP is:

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Although I don't know why I bother; you've already said you won't watch videos that refute your points.

Roman Empire, Chinese Empire

Yeah, what happened with the Roman empire after they started devaluating the dinar? What happened to the Chinese dynasties that had a fiat currency?

You want to increase per capita GDP? Just have government print a zillion dollars. Woohoo! Look at how rich everybody suddenly is!

Our economy is different, our financial system is different (regardless of gold standard) and as such, a different system might work.

See, some people might call that "special pleading."

Of course, the fact is, it ISN'T a different system, and there isn't really anything fundamentally different from the system we have now. Other than the fact that we can much more easily create money on a massive scale, that is.

The fact that our paper money system requires government force and as such is unstable is, again, nonsense, for our whole economic (both the financial and the 'real' part of it) require government force.

Again, BULLSHIT! Most things that happen in the economy require NO FORCE AT ALL, least of all government force! Most of the things we do are actually free market. But the more government force gets involved--banking, health care, etc.--the worse off those industries are.

Without the government forcing people to comply, it can't function.

Again, BULLSHIT. It can't function if you HAVE to force people to comply! The only stable, functioning system in the long term is the free market.

However, you present your opinion as fact,

I never did that ONCE. I made LOTS of points, and you haven't been able to respond to a SINGLE ONE.

Your responses to my post are not backed by any facts.

They are backed by TONS of facts! You just don't have any response to them, so you ignore them. That's the REAL reason you don't want to take things point-by-point: it allows you to skip over points I made that trash your arguments.

That's just repeating your initial statement over and over again.

No, bud, that's what YOU'RE doing.

You accuse me of not having any sources, but where are yours?

I have LOTS. But you refuse to watch the videos so you won't see what they are. I have NOBEL PRIZE-WINNING ECONOMISTS agreeing with me.

Which is nothing but exactly repeating what you initially said.

I've given examples, which you've ignored. I've pointed you to detailed videos I've made WITH SOURCES, which you refuse to watch. The problem is with YOU, NOT me.

Then you have a completely wrong concept of deflation, thinking it is beneficial to lower and middle class,

I never SAID deflation was beneficial to the lower and middle class! I said that the thing you were CALLING "deflation" IS NOT ACTUALLY DEFLATION, and THAT is what's beneficial to the lower and middle class! Can you even allow yourself to let ONE of my points enter your head, or do you have to strawman them ALL just to avoid the possibility that you might be wrong?

if money buys more products in a few months (which is the concept of deflation)

No, it FUCKING ISN'T, because the reason WHY the money buys more is the key factor! As I showed in the video you refuse to watch, if it buys more because of monetary contraction, then capital is lost and you have deflation, which is bad. But if it buys more because production is more efficient, it's NOT deflation, and it's not bad because capital isn't lost--it's freed up to be used for other things.

(note that from 1933, the economy was finally growing again...)

Pfeh...Watch my video on the Great Depression, and the GDP one while you're at it. If it was growing, how come it was ANOTHER THIRTEEN YEARS before people actually saw wealth returning to the people?

What I'm talking about is not about facts.

That much is obvious.

It is not about history.

Because history shows you to be WRONG.

It is about elementary economics.

Nope, sorry, you get that wrong, too. And yet you arrogantly bleat on about how YOU don't have time to teach ME!

GDP per capita is still growing.

Which is bullshit. All it means is our government is printing money like crazy and sending the next generation into even deeper debt.

And the labour theory of value is outdated because it doesn't work and it has never worked

Never said it did, and I've already corrected you about this once. I can only assume that you're just lying now.

You are talking about the value of gold and how it is determined by its scarcity and the required input to obtain it. This is similar to the labour theory of value and it is utter bullshit.

It is IN NO WAY the labor theory of value! The labor theory of value IGNORES the independent accumulation of capital, which is what my argument RELIES ON!

As for what determines value: I said that if the supply of money does not increase, while production increases, this will increase prices, to which you said that it was wrong and the value would go up.
This is really unbelievable. surely you understand the concept of supply, demand, and equilibrium price? Supply doesn't increase, demand increases, this increases price.

Why wouldn't supply increase? All this new population, don't they have jobs, too? Don't they have productivity they can lend to the economy? Why are you assuming that supply stays static? Haven't you ever heard of Say's Law?

And you, with even greater arrogance, try to school ME on supply and demand! You need to GROW THE FUCK UP.

Talking about fallacies: you're claiming I'm ignorant of history. I'm not.

And yet you said it was the gold standard that made the Great Depression worse! How much more ignorant of economic history can you get?

is accusing me of being a creationist,

No, never did that, either. I said you're relying on the same tactics as the creationists, WHICH YOU ARE.

As for the gold standard, as I have always understood it, and a very quick wikipedia search tells me I'm right (can't be bothered looking for a better source),

Well, THERE'S your problem!

the gold standard means the government backs the money with gold, so people can buy gold with their currency.

I would recommend you read Mark Skousen's The Economics of a Pure Gold Standard, but it's out of print. Maybe you can find a used copy though.

Last but not least, the huge increase in bullion in Europe due to the findings of silver and gold in South-America led to lots of inflation, especially in Spain.

Total myth. The inflation happened because they told the people they found a lot more gold than they did and printed the money without anything to back it up!

Now, are you EVER going to respond to even a SINGLE ONE of my points?

[MrBogosity]

Actually, I just checked: The Economics of a Pure Gold Standard is back in print:

http://www.amazon.com/Economics-Pure-Gold-Standard-Skousen/dp/1453753087/ref=sr_1_1?s=books&ie=UTF8&qid=1330824813&sr=1-1

And there's even a Kindle edition:

http://www.amazon.com/Economics-Pure-Gold-Standard-ebook/dp/B0054LR1HK/ref=sr_1_2?s=books&ie=UTF8&qid=1330824813&sr=1-2

There you go. Read and learn. Unless your dogma is more important to you than the facts, that is.

[Travis Retriever]

Shane, in that large post above your mine (the one quoting gamer0004), the quotation format gets a bit weird near the end of your reply.

EDIT:  found out why.  At the end of one of your quotes, you accidentally put:

Code Select Expand

[/quote[ instead of

Code Select Expand

[/quote]

[MrBogosity]

Shane, in that large post above your mine (the one quoting gamer0004), the quotation format gets a bit weird near the end of your reply.

EDIT:  found out why.  At the end of one of your quotes, you accidentally put:

Code Select Expand

[/quote[ instead of

Code Select Expand

Thanks!