Felix

That's correct according to the Austrian barter model, because there an economy is defined as all the stuff people create and barter. It totally ignores money like pretty much all economic models. I know very well that the theory I present goes strongly against one of the foundations of Austrian dogma, actually against one of the foundations of pretty much every economic theory. But I still think that it is valid and correspondingly that Austrian theory has got it wrong. The model I am presenting is completely focused on money and the corresponding contracts. It describes the economy as a system of contracts on debt made in time. This model only regards an action as economically relevant if it leads to a new contract. So, building your own house with stuff you have already bought is not economically relevant while paying a company to do so is. It's a theory based pretty much exclusively on finance, regarding actual production and trade as secondary and derivative. All subjective value evaluations are ignored and only the actual contracts are considered. It's something completely new, which is why I was hesitant at first whether I should even mention it especially as I am still learning this myself. I expected harsh words and criticism because pretty much everyone who is interested in economics on this forum is an Austrian. Since trying to ask these questions on the Austrian Forum only ended up in attacks by Pete, I thought that I could give it a try here, hoping that people here are less dogmatic and more open to a new perspective. I understand, however, that this is a fundamental premise I am attacking. Funny. These were the questions that got me started initially. Tell me: Where does the money come from and why does it have value? I gave my answer. Give yours.

People pay back their debt? Hmm... Have a look at these charts: Debt in the US Money doesn't represent the products and services that are already there, but those that are promised to be made and offered. Only coins can be remotely considered as having actual (already paid for) value as they should consist of valuable metal. But they don't. You get a lousy coin that is cheap to produce and it backs itself. The difference between the cost to make that coin and its "value" is called minting profit. They can be considered as having only exchange value.

The thing is that the money game is zero-sum. All the products in the world cannot change that. Actually it isn't even zero-sum. It's worse. Once money is borrowed, there is now a demand for money that doesn't exist in the first place (interest). The thing is: money is not a commodity. Money is an option on someone's work. That means that for every dollar there is someone who has debt to that amount. There is no net money. One man's money is another man's debt. And the existence of interest means that there is never enough money to go around to pay back that debt. It is this time pressure that gives Capitalism backed by a formal property system its boost and it's the reason why poor countries remain poor due to the lack of such a system.

No. This was only true for my example. In your example the reason is mere convenience for the buyer. He doesn't have to go through the hassle of production. That saves him time. And he pays for that. All I'm saying is that if it sells for more than the cost, you have made a profit and thereby taken money out of the market. If it's not made, it's not sold. It is made with the intention of profit. And competition usually drives profit down and increases consumer surplus. And since everything on the market is there with the intention of profit, not everyone who enters the market makes one. Some don't break even. There isn't even enough money in the market to pay for interest. Some win, some lose. And those who win do so at the cost of those who lose. They who are losing have invested their time and work and still lost money or had to take on debt. This is true for any market.

Me neither, but heroin abuse was one of his examples. JASKN: My point is not only that you die sooner, but that your in your short life you will endure a lot of pain. That's why you feel pain. It's a biological adaption to show you that you work against your survival and directly experience it. If you wreck havoc with you health, you won't live a short but happy life, you will live a short and miserable life with short peaks of extacy due to repeated acts of hedonism.

Atlas Shrugged is a work of fiction written to make a philosophical point. The theory of economics which is its basis is basically Austrianism. It is this basis that I question. Why does not simply accepting what's written in Atlas Shrugged and having questions about it mean that I am stupid and a liar? First: If I lack reasoning ability, why do I ask questions about things that I don't understand? And why do I want to know what is wrong with my point - if I am? Why do I try to explain my current understanding and am willing to debate it? Second: Why should I lie? I don't even have anything to gain from that! If you don't like to discuss with me, that's your good right. But don't try to rationalize it, please. I'll have a look at Menger's principles even though I suspect it's a rehash of what I have already read on the subject and disagree with. But maybe there's something in there that changes my mind. Thanks for the recommendation. What do you think I'm doing here? As far as I see it, money is not a product. It's not a commodity. People don't want money because they like looking at the beautifully printed paper. Money is an option on the work or the products of the work of other people. You put more dollars into the system by accepting debt of the same amount. This debt is backed by your ability to pay it off, that is: to provide work which is of high enough subjective value to other people so that they willingly give you the money so you can pay it off. Money is nothing but the other side of debt. And given that a dollar is made a generally acceptable means of payment by law, it can be used to pay for anything you could possibly want. That's the root of money as far as I see it. If I'm wrong here, please correct me. Why is he paid that money? Usually he's paid it by his employer who uses his work to get more money from his customers. And people let go of their money for two reasons: 1) actual needs like food and clothing 2) additional things they think they need The second is just a matter of personal taste. But the fact that he gets something he values for his money doesn't change the fact that he gave his money to John and now has 1000$ less.

If you think so, I'll try again. Your notion boils down to absolute positivism. Whatever people do, they do it for being happy, therefore it is ethical. Your point is a rejection of ethics. Your basic point is: Who are you to tell me what makes me happy?! It's a valid question. But all we are saying is that the short-term hedonism you are promiting is bound to fail in achieving its end: happiness. The reason for this is not that short-term thrills are not thrills. They provide you with real good feelings. The problem comes with the later results of your short-term focus. You sabotage yourself by engaging in that form of behavior. If you take heroin, you will not only die earlier, but you will suffer a great deal of your time. How is that in accordance to your goal of happiness? And especially your psychology will suffer. You will hate normal existence, because it is painful. You don't get around that. You are right that I have no right to tell you what to do with your life. But you asked and we tell you that this approach is stupid because you sabotage your own goals. You need ethics precisely to understand which things maximize your happiness and which actually destroy it. If you spent all your money on drugs because you love getting high, the problem is not that you got high and enjoyed it, the problem is that you have no more money to buy food and may have failed to acquire the capabilities to make new money. If you think that taking drugs and dying at an early age is a happy life, I have no right to stop you. I just think that you are selling yourself short on happiness, even in the short life you have chosen to live.

So then, everything people ever do and ever did is economics. I can spend all day counting ants in the garden. What does that have to do with economics? If you want to call these people suckers and exploiters, well, then he's an exploiter because he left with more money than he entered. You can be a winner in the game by being a middle-man. You only lose if you have to sell for less that you bought it for. It's the actual transaction that determines the outcome. This is an example of a middle-man transaction. As I said, this qualifies as a profitable trade, because you leave with more than you enter. You just dropped the guy who bought the bread for 4$. You can attack me personally as well as my theory as much as you like. But there is no way around the fact that if one man leaves the market with more money than he entered it with, another has to leave it with less. The motivation for economical behavior is a person's value structure. I agree on that. But I doubt that economics should stop there. To have a grasp of what's going on, one needs to see how actual goods are actually transfered. Where they end up and why. That's my motivation behind this. I don't see how this is irrational and if you can provide me with any literature regarding that, please help me. I haven't found anything on that, because economists all seem to stop when they see that people make a trade and think: Oh well, it must have happened to both people's benefit, otherwise they wouldn't have made the trade. That's like saying: People act the way they do, therefore it must be good. There's a word for that: Positivism.

Maybe that's because you ignored my post.

I'd say that I was smarter than the buyer. No. He made an actual loss of 1000$. If it hadn't been for me, he could have bought it for 5000$. He lost 1000$ to me and I gained them. He could have had 1000$ and the car but now I have the money.

This only works if it has the right to just use the printing press. As far as I know, governments today get the money they need by issuing bonds.

Unless people start taking on debt, the economy can't possibly expand. What can happen is efficiency-improvement, yes. And that makes everything cheaper for those that have money. I agree completely. But that does not change the game we play to get money in the first place. No I don't. If that wasn't the case, profit would be impossible, because exchange would not take place. Exchange takes place because of different evaluations of whatever is being exchanged. But this emotional side doesn't change the fact that someone actually loses when another one wins. In objective, (ac)countable monetary terms. Ah, thanks. That was the term I was looking for. I only knew it in German. (For those who are interested: "Ökonomische Rente") If I enter the market with 5000$ and leave it with 6000$, someone else must have left it with 1000$ less. I'd say that the person who bought the car for 6000$ lost the 1000$, because he could have bought it directly from the guy who sold it to me for 5000$. No. They only both think they do. One of them is wrong.

Unemployment (according to the standard definition) is created by government debt by the fact that government has to pay interest on that debt, something between 2 and 8 percent per year. The problem with unemployment starts only once the debt is high enough. As long as government debt is rising and rising, the "only" problem is growing inefficiencies and the taking over of the private sector by the public sector. Unemployment appears when government tries to actually pay back its debt and interest. Then government spending drops as it is used to pay off some debt. The problem is that this leads to deflation. Creating debt creates new money (fiscal money creation) and a correspondingly high debt. Paying back that debt destroys both the debt and the money it created. That drop in existing money is deflation. To make it clearer: Taking on debt is the creation of money. If you give me money and I then owe it to you, I spend the money (otherwise I wouldn't borrow it). The thing is now that I can take that very debt of yours and use it as money. Bonds are traded. They are interchangable with money in the bond market. This does not work if you borrow me a shovel (usually, even though it could). You can't trade a piece of paper saying: "Felix will give you the shovel I borrowed him.", simply because nobody would accept it. However, people pay money for a piece of paper saying: "I will take money from the people living in my country and give it to you." Bonds are considered a safe investment because the goverment has the monopoly on force. If the government debt is paid back, the bonds disappear, because the contract of debt is null and void. The same process happens when you borrow your money to a company. You also get a piece of paper saying that the company owes the holder money (and interest) and it can be traded. What makes Capitalism work (and what makes it possible for economies to grow at all) is the ability to use debt as money. This only works if there is a working legal system of property. That's the theory.

I doubt that. Markets exist so that companies can get back the money to pay back the debt they accepted to finance production plus interest and profit. Production is the means to monetary profit and markets are the place to get it. My formulation actually leads to the fundamental necessity of credit/debt. Still, the fact that one man's monetary gain is another man's monetary loss can't be ignored. This is true if there's credit or not. In value terms, yes. But not in Dollar terms. If I'm wrong here, please provide an example. Maybe that can end my whole argument. I provided my example in the last paragraph of my previous post. Twice. I understand very well that if my theory is correct, Galt's Gulch is impossible. That's why I ask.

That's because of the Simpsons character. I liked the story. You make a good point.

Being a newbie in this area myself, I still wonder if I can pull off defending this theory, but I'll give it a try. Let's start with a simple problem: In any market, every dollar that enters it has to leave it. This means that any person's profit has to happen at the expense of another person's money. And more importantly: Not everyone can profit. One person's profit is another person's loss. Now I'm not talking about felt benefit, but about actual measurable profit: Namely, you enter the market with y Dollars and leave it with y+x Dollars. It's a mathematical necessity that if someone gains money, someone else loses it. Now every company enters the market with the goal to make such a profit. And as far as I see it, most of them have to fail. The main mistake made by Austrians is that they confuse money with felt benefit: The idea held is: I have 5000$ and I want to buy a car and it is worth 10000$ to me. Then there is the guy who sells that car to me for 5000$, because that's what it's worth to him. I then get a car worth 10000$ and he gets his 5000$ and it looks like I have made a profit of 5000$. But I have not. All that is not profit, but felt benefit. It's all in my head. I can't invest these 5000$, I can't pay my bills with it. Simply because they don't exist. They are a way of expressing my happiness about the car. But it creates no additional money. All we have is a car and 5000$. Like before. The difference is that I am happier about having the car than he is. But that's not profit. Profit would be if I would then sell it to someone else for 6000$. Then I would have made 1000$ of profit. It's this difference that's not seen in economics that makes me doubt the theory of profit by mere exchange.

No, removing unemployment is not easy. It has to create a profit. And during a deflation this is not possible. Why is employment full, when now only 50 people work instead of 100. This looks like a 50% unemployment rate to me. I agree that - at first - government spending creates inflation. Naturally. This is the Keynesian solution to the problem I have mentioned. But it backfires, because at some point the government has to pay back its debt - with interest. I think that maybe the main point where we disagree is that I think that there is not enough money to go around. Never. Simple exchange is not the only thing going on in an economy. What is lacked is that pretty much every money is someone's debt and that there is interest to pay on that debt. That money to pay the interest doesn't exist. It's fundamentally different from the Austrian paradigm which says that exchanging our goods is all that happens and all that needs to happen in an economy. The theory I'm sticking to is called debitism. And I think it is more valid than Austrianism. Meaning: The exchange-paradigm is wrong. It's not all about exchanging goods. That's secondary. The primary thing is contracts. Which is why countries where there is no general access to a formal property system poverty is widespread. Capitalism doesn't work there. No matter how people work and exchange. But I guess this calls for another thread.

The thing is that all these things that make you happy require you to be alive. And since you want to live a happy life as long as possible, there are certain facts of reality you just have to accept. Like, if you want to live (happily of course), you have to eat, for example, or you can't just jump off a cliff. That would be stupid if your goal is to maximize your happiness, because you can't experience happiness when you are dead. Objectivist Ethics is saying that there is a world out there that you have to live in and that it provides you with certain obligations if you want to go on living. That's why you have to lead a productive life. To sustain your life. A heroin addict does feel good due to the drug, but it shortens his life to a degree that it makes it a bad choice if your goal is happiness. It's immoral precisely because it is stupid by the standard of a happy life.

There's a good book called "What Smart Students Know". Its approach is that learning and passing tests well are actually two different things, which is a point you mentioned and I agree completely. This book helps you accomplish both. You try to learn as much as you can first and then you spend some time actually preparing for the test in a systematic manner. I'm currently in a big motivational hole myself and reading that book again has helped me get back to work - motivated. So, give it a try. Good luck with your paper.

Thanks.

This sentence could help you: Scepticist doubt is belief in disguise. If you have no reason to believe that something is false or even could be false, like in the "I have ten fingers"-example, what you have is not reasonable doubt, but unfounded belief that it could "somehow" be otherwise. What you need to learn is that doubt isn't always justified and that it should be to be taken serious. Doubt is nothing but the other side of the coin called belief. Once you can make that distinction, you'll be able to differentiate theory and truth.

I have the answer now. If the state enters the financial market by issuing bonds, money which would usually be used to finance work and the incorporation of more efficient technology is now used up by the government. This results in less work and in lower wages. As the government debt rises exponentially, so does the lowering in wages. This is what is called deflation. It shows by lowered productivity first and ends with falling prices, both for products and work. If we enter a deflation, the situation we have is that everything becomes cheaper over time. Wages get lower and prices drop. The problem with deflation is this: The more prices drop, the more prices drop. It's a positive feedback loop leading to disaster. Production takes time. The company which has taken on debt pays the workers at current price level. For less money they won't work now. They then produce the product which takes time. This time costs money in form of interest. So just to break even the company has to sell it product at production cost+interest to break even. The problem is this: If prices start to fall so fast that during this time difference between production and sale drop and even drop a lot, it is totally impossible for a company (pretty much any company that produces anything!!!) to even break even, let alone make anything resembling a profit. This causes the company to be unable to pay back its debt. It goes bankrupt. Now that company is not the only one in trouble and it is very likely that it has debt to other companies it can now no longer pay, making it harder for the other already struggling company. Each company has to make money as fast as possible, because otherwise it may get bankrupt. This leads to even faster falling prices, because the only way to get rid of your products faster and at least cut losses is to sell at low prices. This leads to more bankruptcies and this again to faster falling prices. It's a vicious circle brought about by government debt. Now the first thing that happens is unemployment. Not hiring new staff because it can't possibly be profitable due to the contunuous fall in prices. This haunts business sector after business sector. Add rising taxes due to government debt to the mixture of bankruptcies and rising unemployment and a little few who hold the government bonds and are rich and you have all the ingredients for a nice civil war. You can look at the French revolution and at the fall of the Weimar Republic for examples.

I'm just thinking: Oh my God! They killed Chef! You bastards!

Here's a nice book about the effects of prayer etc. on the human body, written by a real scientist without any afflictions to a certain religious belief. I haven't read it myself, but it seems to be a classic on the subject.

Seems to be the Scientologist version of not giving the sanction of the victim. Damn! I always liked the Chef.