Numismatics Informs Economics

[syrakusos]

Von Mises, Hayek, Rothbard, and the others were woefully ignorant of numismatics. Numismatics is the art and science that studies the forms and uses of money. If mathematics is the language of science, then money is the language of economics. Yet, claimants to the cause of economic liberation leave huge lacunae and large hiatuses where the facts belong.

(As I point out on Organizations and Markets, Rothbard was a poseur who force-fitted his ideology to fill the space where facts belong.)

I truly put my money where my mouth is.

Numismatics: The Standard of Proof in Economics

Open Banking and von Hayek

Gresham's Conjecture

Love and Money (no fake, Jake: money is the origin of the heart symbol of the Valentines "heart" which does not look at all like an anatomical heart.)

Libertarians (including "Objectivists" as well as the self-identified anarchist communist university professor David Graeber) claim that debt is evil, when in fact, Debt is the Seed of Civilization

Science is as science does - and, really, folks, come on: what is not is as it does?? - and SIr Isaac Newton was warden and master of the British Royal Mint. He went in disguise, undercover, as a sworn justice of the peace to meet counterfeiters in order to arrest and interrogate them before taking them to Grand Juries for prosecution.

... and so I pursue Murray N. Rothbard faker of economics...

[BaalChatzaf]

Von Mises, Hayek, Rothbard, and the others were woefully ignorant of numismatics. Numismatics is the art and science that studies the forms and uses of money. If mathematics is the language of science, then money is the language of economics. Yet, claimants to the cause of economic liberation leave huge lacunae and large hiatuses where the facts belong. (As I point out on Organizations and Markets, Rothbard was a poseur who force-fitted his ideology to fill the space where facts belong.) I truly put my money where my mouth is. Numismatics: The Standard of Proof in Economics Open Banking and von Hayek Gresham's Conjecture Love and Money (no fake, Jake: money is the origin of the heart symbol of the Valentines "heart" which does not look at all like an anatomical heart.) Libertarians (including "Objectivists" as well as the self-identified anarchist communist university professor David Graeber) claim that debt is evil, when in fact, Debt is the Seed of Civilization Science is as science does - and, really, folks, come on: what is not is as it does?? - and SIr Isaac Newton was warden and master of the British Royal Mint. He went in disguise, undercover, as a sworn justice of the peace to meet counterfeiters in order to arrest and interrogate them before taking them to Grand Juries for prosecution. ... and so I pursue Murray N. Rothbard faker of economics...

I thought economics was the science of resource allocations and trade-offs.

Before there was money, humans made and traded stuff and services. Money was an artifact to overcome the gross burden of combinations in the trades of goods and services for goods and services. If M goods and services trade for N goods and services there are M*N types of trade. With money as the universal trade good, this reduces to M + N. With money you need fill your pockets with only one kind of thing.

Ba'al Chatzaf

[syrakusos]

Sounds like a good theory, Robert, but it is hard to prove. The historical record does not begin until by definition debt was invented. Writing was created to keep track of debts. Before that, from about 8000 to 3500 BCE, a system of clay tokens allowed the memory of promises.

We know what anthropologists reported about so-called "primitive" people, but realize that anthropology as a science only dates to the 1800s, long after first contacts - 300 years is 10 generations: think about that. Also, it is not clear at all that any society is static. Just because you find some people here now doing these things does not mean that they always lived there or had these customs (language, etc., etc.). Wampum may have been invented as late as 1550, but no earlier than 1350. It was "money" to the Europeans who already had money in their culture. It was not that at all to the Indians, but rather a gift. Ritual gift exchange is the basis for trade.

Again, Mespotamia: Writing begins about 3500 to 3200 BCE: 300 years, 10 generations; you can turn the page, but you cannot read the edge of the page. The Code of Hammurabi dates to 1772 BCE... Nearly 100 generations later.... Another 500 years and the Bronze Age Collapse wipes a lot off the slate and we start all over with our remnants of culture. On Crete, at Knossos, are uncovered rooms facing the street that look a lot like retailers to the researchers following Schliemann and Evans into our own time, but Knossos left no evidence of a money economy, though, indeed, the "talonton" (talent) of bronze, the size and shape of an oxhide dates from there and then. But there are no little silver or gold talentons to hold in your hand. The bronze "pigs" and "elephants" of the Romans, weighing one Roman pound, date only about 450 BCE -- and admittedly, it did not take them long to adopt the silver coins of the Greeks.

But that's the point: coinage was not invented in Sumeria. Coinage was not invented for commerce. Rather, it only served a commercial need by discovery and imitation. The greatest traders of the day, the Phoenicians, were among the last ancient civilizations to strike coins. Even the Celts beat them to it.

I am only saying that there is a lot we do not know and the so-called capitalist economists were no more insightful than their comrades on the left.

It's like asking where in Newton is Apollo's chariot which carries the sun across the sky.... Oh, OK, I get it, the sun is stationary, and the chariot carries the Earth around the sun. So, where does the chariot go at night? ... Or like the Newtonian Objectivists who deny quantum and relativity, seeking Aristotlean explanations for probabliistic indeterminate events.

Money is handy stuff to us, indeed. And you are right about how we use it. But that's not how it was invented.

[BaalChatzaf]

How does dusting off old coins address the matter of credit. The capitalist system runs on credit, which is essentially investing stuff that is yet to be created.

Ba'al Chatzaf

[Brant Gaede]

How does dusting off old coins address the matter of credit. The capitalist system runs on credit, which is essentially investing stuff that is yet to be created.

Ba'al Chatzaf

Credit is transfer of capital from the owner to a user who gets temporary custody. If the capital is actually debt then debt is transferred and that's inflation. Fractional reserve banking is inherently inflationary and when things go bust what is left over is the original capital, but probably in the wrong hands. That's deflationary which is the prelude to hyperinflation as paper money is discarded as worthless and people retreat into hard value assets (old coins and such) and commerce exponentially contracts into a major depression. The American economy has been based on debt since the creation of the Federal Reserve 100 years ago. It's the blatant story since WWII, accelerated when Nixon took the buck completely off the gold standard in 1971. Most world trade is settled in dollars. The whole world has already begun to suffer with the ramp up in commodity prices. If you live on a dollar a day equivalent, 50% for food and that becomes 75%, you will starve.

--Brant

[Peter]

MEM wrote:

Money is handy stuff to us, indeed.

end quote

When I was a kid I collected coins including all the buffalo nickels I came across. I loved the artwork. Recently I decided to liquidate my collection simply because none of my girls showed any interest in numismatics.

Unfortunately, up until a certain year of minting, the date on buffalo coins was “raised” higher than the artwork which means, throughout the circulation process, the date got abraded off. So I had about 80, beautiful buffalo nickels with no date. The dealer said they were only worth face value but because I had other, better coins, he would give me six cents apiece.

Someone I know, had Confederate money. I told them the bills were probably worth zilch. Was I ever wrong. People collect the stuff and the person with the Confederate bills “made a mint.”

Peter Taylor

[syrakusos]

Thanks for the vignettes, Peter. I believe that numismatics is the largest unregulated money market in the world. Goto an ANA convention or a large regional show such as Central States, Long Beach, Pacific Northwest, or Florida United Numismatists and you will experience the thrill of real capitalism.

One interesting aspect is that "worthless" objects acquire value because it is demand, not supply, that drives price. This is basic to economics and yet is commonly misunderstood, even by advocates of the open market. The money of Zimbambwe is a perfect example. Supply is a factor, of course. Banknotes often are priced according to their rarity as determined by the signatures of the officers. Hence, collecting notes with aviation themes, I paid $15 or $20 for Brazilian cruzado and new cruzado notes with Alberto Santos-Dumont on them. Even when they were issued, they were worth a fraction of that.

Another common fallacy is that there is a public price. In the supermarket, the prices are the same for everyone. You look in the financial newspaper or go online and find the price of Apple stock. But with numismatics, no two people ask or get the same price. Price guides exist, a dozen of them, all authoritative; but they are guides, estimates of relative rarity. It is one reason why I do not get a new Red Book every year; or buy a new Standard Catalog of World Coins when used books stores have them for cents on the dollar from years gone by.

I served several times as the education chair for our Michigan state conventions. Once, we had a talk from one of our former Young Numismatists who had just graduated from law school and gone to work for Heritage - the third largest auction firm in the world, behind Southeby and Christie's. His topic was "Getting to Yes" and it was based on the book by the same title from a Harvard research study on negotiating. On the bourse floor, we always argue price. Their advice: to get your price, negotiate something else entirely; arguing price is not a win-win strategy.

On the third side of the coin, I find it interesting and sad that so many numismatists are ignorant of economics as Austrians understand it. They do demand that price guides be "accurate" (by what standard?). They commonly denigrate the people who watch Home Shopping and call an 800-number to pay (quote) too much for coins that are "junk." (Then the collectors spend three hours in a coin store to save ten bucks on some Indianhead Cent or Morgan Dollar that I would never even consider, since my interests are different.) And when they have political opinions that are contradicted by their own experience on the bourse floor: they want the government to issue hard money; or be on a gold standard; or claim that legal tender means that you cannot refuse the offered object without canceling the debt; or that credit is inflation; or that international money masters control us through central banks based on debt. Once, at the New York International Coin fair, I met a guy who collected the coins of fascist Italy because he was a fascist. I wondered how he would like to see the bourse floor run like an Italian industry.

[syrakusos]

Allow me to add, also, that coin is a short word and numismatics is unfamiliar. Historically, coins have been the most common form of money seen and held by most people in monetized economies. In fact, for the archaeologist or historian, coins are often the most common artifact of a society or culture. That said, coins... coins... coins... coins... could be a Monty Python shtick. Even in the Middle Ages, once double entry bookkeeping and notaries for hire were available, credit and paper moved more goods. America was not built on gold coins. America's wonderful success in the 19th century came from paper promises. The true history of trade, commerce, and finance is not the mythology touted by the conservative right. Among my interest areas is scripophilly, the study of stock certificates, bonds, and related issues.

[BaalChatzaf]

Allow me to add, also, that coin is a short word and numismatics is unfamiliar. Historically, coins have been the most common form of money seen and held by most people in monetized economies. In fact, for the archaeologist or historian, coins are often the most common artifact of a society or culture. That said, coins... coins... coins... coins... could be a Monty Python shtick. Even in the Middle Ages, once double entry bookkeeping and notaries for hire were available, credit and paper moved more goods. America was not built on gold coins. America's wonderful success in the 19th century came from paper promises. The true history of trade, commerce, and finance is not the mythology touted by the conservative right. Among my interest areas is scripophilly, the study of stock certificates, bonds, and related issues.

Some form of credit is the only way a capitalist economy can grow and expand not only in size but in scope. We have to import money from the future the make the present different. I wonder how well the concept of backward movement of value in time is grasped. Our economy is a time machine.

Ba'al Chatzaf

[syrakusos]

If the capital is actually debt then debt is transferred and that's inflation. Fractional reserve banking is inherently inflationary and ... paper money is discarded as worthless and ... Nixon took the buck completely off the gold standard in 1971. ... you will starve. --Brant

Brant, despite the historical allusions, history provides no examples of your claims, or at best one: France 1793. Extreme in all its manifestations, the French revolution gave us the story of the assignat. We all know Fiat Money Inflation in France: How It Came, What It Brought, and How It Ended by Andrew Dickson White.

The German (and Austrian) hyper-inflation was a different case, entirely. Indeed, though, for convenience, people did return to old coins when they were not carting wheelbarrows of paper for photographers. In fact, on the advice of her Austrian economists, Austria borrowed gold and issued new gold-back currency. (On the fifth-ounce gold coins, the old Hapsburg eagle traded his orb and scepter for a hammer and sickle. Who says Austrians have no sense of humor?) Those were caused by the war reparations. When Germany and Austria delivered their gold to the victors, their currencies collapsed on the international markets; and then became worthless at home as a consequence of deliberate actions. On the other hand, the emergency money that replaced them - Notgeld, Woergels - were not backed in gold, either. They worked well enough for their context.

I know a story from Michigan's frontier days, "Levi Loomis and the Bank of Singapore." Levi Loomis helped clear the land. He built the sawmill. (He did not own it. He just framed it.) For a while, the people of Singapore, Michigan, used wooden bowls for currency. Of course, that was not workable long term. They formed a bank. The specie behind the paper actually traveled along the Kalamazoo River serving several towns. The currency collapsed only because Loomis himself to whom many had paid local money for boots he imported from Boston needed to pay his Boston creditors and they needed Boston money, not Michigan. When the bank paid him off - at gun poiint - with their Boston paper, the local money lost any perception of value.

And, indeed, the people did turn or return to hard money - from Mexico. See Spanish Coins on American Banknotes here.

But not all the wildcat banks failed. That is one of the great oversights in Murray Rothbard's fairy tales. He really had no empirical knowledge of the wildcat era.

Nixon's actions had no such affect. We traded our dollars for gold and silver,indeed, but the only significant transaction that I can recall is about 1981 or so, trading an ounce of silver for a six-pack of homemade beer at a Libertarian Party convention. Mostly, we just put dollars into hard money for savings. But, I had five Wayne Gretzky rookie cards fresh from wax packs, as well, so it gets complicated.

Despite the fact that the dollar has lost 90% to 99% of its value in 100 years, no one is starving as a consequence of inflation. Also, although the supply of Federal American money doubled or tripled since 2008, prices in FRNs have not.

Credit expands and contracts. Prices change. The weather changes. People change their minds. Baseball managers change pitchers in the 8th inning. Change is real. The only problem is from absolutists of the right and left who think that by managing the economy or by not managing it they can capture and tame a chimera called Stability. Even Ludwig von Mises posited "an evenly rotating economy." Nice... as long as no one invents anything .... Or offers investors a marvelous new invention which proves unmarketable...

[syrakusos]

Some form of credit is the only way a capitalist economy can grow and expand not only in size but in scope. We have to import money from the future the make the present different. I wonder how well the concept of backward movement of value in time is grasped. Our economy is a time machine. Ba'al Chatzaf

I agree! On Roderick Long's Yahoo discussion board, I tried to float that idea, but failed to overcome objections. It is true - as he pointed out to me - that money has more value in the future because you have more opportunities looking toward the future. So, future value exists. My thesis - as yet internally contradictory, though suggested by evidence - is that bankers (lenders) take the opposite view from borrowers, or there could be no transaction.

Be that as it may, at the great fairs of the Middle Ages, bankers would get together and clear their books without touching a coin.

Credit was just that: credo - I believe.

On the other hand, the German mark was eight ounces of silver, standard bars, transported at expense and risk. ... along with spices, wood, leather, and wool...

Rothbard claimed that medieval kings ruined their silver penny currencies, debasing them to pay for wars. That did happen - sometimes. Mostly, the huge volume of penny and groat coins came from local issuers, barons, bishops, and such, and they were debased to keep up with falling prices. You could not make a penny of pure silver small enough - they were cut into farthings eventually - so, they put less silver into them. Eventualy, silver strikes at Joachims Thal allowed large "taler" (dollar) coins, and silver inflation was the new problem: inflation from too much hard money, coming to market faster than increases in productivity could absorb it. Fortunately, there were no comparable gold strikes ... until 1849, but by then, productivity was increasing faster than anyone could mine gold. Silver, of course, continued its downward plummet, becoming a durable form of fiat.

[Brant Gaede]

If the capital is actually debt then debt is transferred and that's inflation. Fractional reserve banking is inherently inflationary and ... paper money is discarded as worthless and ... Nixon took the buck completely off the gold standard in 1971. ... you will starve. --Brant

Brant, despite the historical allusions, history provides no examples of your claims, or at best one: France 1793. Extreme in all its manifestations, the French revolution gave us the story of the assignat. We all know Fiat Money Inflation in France: How It Came, What It Brought, and How It Ended by Andrew Dickson White.

The German (and Austrian) hyper-inflation was a different case, entirely. Indeed, though, for convenience, people did return to old coins when they were not carting wheelbarrows of paper for photographers. In fact, on the advice of her Austrian economists, Austria borrowed gold and issued new gold-back currency. (On the fifth-ounce gold coins, the old Hapsburg eagle traded his orb and scepter for a hammer and sickle. Who says Austrians have no sense of humor?) Those were caused by the war reparations. When Germany and Austria delivered their gold to the victors, their currencies collapsed on the international markets; and then became worthless at home as a consequence of deliberate actions. On the other hand, the emergency money that replaced them - Notgeld, Woergels - were not backed in gold, either. They worked well enough for their context.

I know a story from Michigan's frontier days, "Levi Loomis and the Bank of Singapore." Levi Loomis helped clear the land. He built the sawmill. (He did not own it. He just framed it.) For a while, the people of Singapore, Michigan, used wooden bowls for currency. Of course, that was not workable long term. They formed a bank. The specie behind the paper actually traveled along the Kalamazoo River serving several towns. The currency collapsed only because Loomis himself to whom many had paid local money for boots he imported from Boston needed to pay his Boston creditors and they needed Boston money, not Michigan. When the bank paid him off - at gun poiint - with their Boston paper, the local money lost any perception of value.

And, indeed, the people did turn or return to hard money - from Mexico. See Spanish Coins on American Banknotes here.

But not all the wildcat banks failed. That is one of the great oversights in Murray Rothbard's fairy tales. He really had no empirical knowledge of the wildcat era.

Nixon's actions had no such affect. We traded our dollars for gold and silver,indeed, but the only significant transaction that I can recall is about 1981 or so, trading an ounce of silver for a six-pack of homemade beer at a Libertarian Party convention. Mostly, we just put dollars into hard money for savings. But, I had five Wayne Gretzky rookie cards fresh from wax packs, as well, so it gets complicated.

Despite the fact that the dollar has lost 90% to 99% of its value in 100 years, no one is starving as a consequence of inflation. Also, although the supply of Federal American money doubled or tripled since 2008, prices in FRNs have not.

Credit expands and contracts. Prices change. The weather changes. People change their minds. Baseball managers change pitchers in the 8th inning. Change is real. The only problem is from absolutists of the right and left who think that by managing the economy or by not managing it they can capture and tame a chimera called Stability. Even Ludwig von Mises posited "an evenly rotating economy." Nice... as long as no one invents anything .... Or offers investors a marvelous new invention which proves unmarketable...

Careful there. "You will starve" was ripped out of its context the way you quoted me, Michael.

I made a vary compressed statement which is open to correction by many particulars that may or may not be vallid criticisms. I'll try to deal with some if not all of yours later.

--Brant

[Mikee]

Whoa. Figured out why a kid would get interested in coins.

[BaalChatzaf]

I thought production and trade were the language of economics. Money is a handy dandy convention.

[syrakusos]

Mikee the Romans would not load, but I figure that these were images of "spintrae" which we just do not understand today. They were not coins in the normal sense. It has been suggested and accepted that they may have been "brothel tokens." But they may just have been porn, little pictures, with no economic use except as objects for sale themselves.

Ba'al, the relationship between production, trade, and money is not obvious and not the what is provided by the usual narrative. Production came first in that a thing of value must exist first, but, that said, trade began as ritual gift exchange. Ritual gift exchange probably defined "trade" for 10,000 years before someone began to make things in excess of need with the intention of actual giving.

Money came much, much later. It is not true that people bartered until they spontaneously selected gold and silver. If you care for the details, I provided the links in the original post. Start here:

Debt is the Seed of Civilization:

http://necessaryfacts.blogspot.com/2011/12/debt-seed-of-civilization.html

We went around on this following you Reply #2. You are only repeating a myth unsupported by empirical evidence. Mises and Marx were both wrong. Mises reasoned it out without facts. Marx simply lacked facts: archaeology had not come far enough yet when he was writing in the British Museum.

Numeracy - counting the things owed to the Temple - was the source of literacy.

Accounting for Civilization:

http://necessaryfacts.blogspot.com/2011/10/accounting-for-civilization.html

[Frediano]

Accelerated present consumption in exchange for creation of future value: debt/credit

Deferred present consumption of present value already created in exchange for future value: savings/investment

We tend to borrow when we are young and have a future of value creation ahead of us.

We tend to save when we are middle aged and seek to convert excess present value into future value.

We tend to live off the earnings of our savings in old age.

The alchemy which supports that conversion of deferred present value into actual future value is exactly the relation between debt and savings/investment-- when it is in balance, it is win-win for each of the participants(who largely tend to be the -same- participants at different stages of their ecomonic careers.

But this exactly illustrates the difference between private debt and public debt; there is no such thing as public savings/investment.

This means, in order to not endemically pervert/distort the economies, the sum of all private and public debt must be balanced by just private savings/investment-- since there is no such thing as public savings/investment.

When some folks focus just on 'debt' and call it the foundation of our economic system, they are being a little selective; in balanced, healthy functioning economies, it is both debt and savings/investment that is the foundation of our economies, in balance, as the alchemy that provides the magic of using accelerated consumption of value to also be the means of converting deferred present value into actual future value.

When all that is in balance -- which is the function of conservative banking regulations -- there is no perversion of our economies.

The single greatest actor disturbing that balance in our economies has long been the government itself.

When a private entity takes on private debt, a human incentive is created to create new value in the future, to paydown debt.

When a public entity painlessly takes on public debt, not a single human being anywhere has any incentive to do anything at all. Public debt is borne with the same painless ease that it is accepted to begin with. All that remains after the accelerated present consumption of public bond financed present value is an unwanted obligation on a future generation, imperfectly redirected onto others who did not participate in the orginal accelerated consumption, by way of politico chutes and ladders.

The upside of introducing value proxies into commerce-- of defining trade as value for value-proxy for value, instead of value-value(pure barter) is clear. But it is not withour doownside. The downside is, the introduction of more opportunities for gaming of the new value-proxy marketplace.

The use of value-proxies that themselves have intrinsic value -- coins -- is a hedge against that gaming. In modern economies that use value-proxies with no intrinsic value, it is open season the gaming of value-proxies, and the sharks have long come runnng.

regards,

Fred

[BaalChatzaf]

As Browning wrote: Grow old along with me, the best is yet to be.