agrippa1

Decreasing taxes increases the profitability of lending money, thus incentivizing lending under higher risk scenarios. It was the expansion of credit that led to an increase in the money supply (we are talking M3/MZM here right?) Likewise, the decrease in taxation leads to an increase in risky investments, which would not be risk-adjusted profitable given heavy taxation's squeeze on high-side expectations. These factors, in addition to the technological boom of the 1920's acted as impulses to the system, which responded with an increase in wealth and a temporary bubble. The great increase in wealth during that time created the illusion of a decrease in lending risk, when in fact the bubble prices evidencing decreased risk were in fact winding up increased risk as they created opacity to the long-term value of collateral. The adjustment to new conditions came in 1929, and instead of allowing markets to make their adjustment to the new conditions, the U.S. gov't drastically changed the conditions again and again, leading to and lengthening the Great Depression.

A stable government which facilitates and protects the use of an efficient means of exchange provides great value to its citizens. That value is enhanced when the government provides protection of contracts and protection against fraud when the protected means of exchange is used. As long as the government allows alternate means of exchange, not protected by law, the protected exchanges can be taxed, and the tax can be considered voluntary. If the tax is far less than the value provided by protected currency-based exchanges, then a rational person would be inclined to use that currency and pay the tax voluntarily. Such a system provides a natural check and balance against an abusive government, which would not exist in the case of a compulsory taxation or a donation system. A donation system creates a conflict of interest as soon as the contributions of a small number of donors become important to the government servants dependent on those donations.

Do you have a source for Rand's statement to this effect? If so, I might have to leave, too. But I doubt you can source this assertion. Just curious, what kind of rifle do you approve of? Certainly not an "assault" rifle. (edit: typo)

Is there a term that covers the increase of money for other reasons, for instance, under a gold standard, the discovery of a huge gold deposit that results in a general devaluation of money? It would seem this would have to be considered inflation as well, lest we allow connotation and motive, rather than denotation and cause to define our terms.

I agree, in fact, I believe that the effect of abandoning the deposit/reserve regulating effect on loans was the major cause of the bubble, aided in smaller part by the Fed manipulations. When Fan/Fred guaranteed mortgage-backed securities, they effectively removed the requirement for a risk dividend on ROI for MBS, providing market investors with an unbeatable risk-adjusted return on MBS and derived securities. The Gramm-Leach-Bliley Act of 1999 led to no private MBS' until 2003, a lag of four years that is inexplicable except for the fact that the gov't's guarantee of Fan/Fred MBS made it impossible for private concerns to offer similar risk-adjusted returns - or mortgage rates to borrowers, on the other side of the coin. I believe (though have seen no direct evidence) that somewhere in the early 2000's, the gov't gave implicit guarantee to private MBS's in order to increase home-ownership and remove the appearance of a Fred/Fan monopoly. It was with such a guarantee that the ratings agencies were able to justify high-quality ratings to private MBS, against all logic. The fact that the government jumped in to help out with those overpriced securities is the only evidence that they had secretly signed on to guaranteeing all MBS', not just Fan/Fred's. It was the flood of cash into banks from wall street, replacing mortgages on their books, and eliminating the need for reserves, that decoupled mortgages from their historically low risk norms. The failure to recognize that risk had fundamentally changed was what led to the overvaluing of mortgage-derived securities, and of bank-held mortgages.

The correct formulation is: when the supply of money rises without a corresponding rise in demand at the current value, the value of money declines. Inflation is an unfortunate term, as it wants to relate to the increase in prices and the causative increase in money supply. The definition that limits itself to the money supply ignores the primary motivation behind the concept, which is price effects. In a commodity-money economy, the money supply increases when the goods-value of the commodity (e.g., gold) rises significantly above the cost of production, due to an increase in demand for money. Thus the money supply increases with the demand for money at the current value, so as to keep prices relatively stable. Even enhancements in the efficiency of production, such as that seen in the late 1800's with the introduction of the cyanide method of gold extraction, do not tend to have a long term inflationary effect, since the increase of efficiency of gold production, in general, tracks with the increased efficiency in all other productive endeavors. The most useful definition of inflation is the increase in money supply above that warranted by the demand for money. This recognizes the cause of inflation, while focusing on the relevant effect, which is the general increase in prices. I don't think you can talk "real wealth" v. "nominal wealth" except to reference current wealth to a nominal value of that wealth at some (prior) point in time. The term "real" simply means "adjusted for a measured change in the value of money." That change is measured in terms of some arbitrarily chosen goods, whose prices have changed over time. One of the biggest holes in our conceptual framework of economics is marginal value of wealth, which tends to decrease far faster than the inverse of total wealth. For instance, the first ~$400 of annual income is required for survival. The value of that $400 is effectively infinite, the value of the second $400 is vastly greater than the value of the second $million. The former is the difference between day-day survival and a modicum of security; the latter is the difference between home location and brand of SUV. The revenue-conscious gov't does itself a great disservice by ignoring the decreasing marginal value of wealth. As wealth and income increase, the marginal value of an hour's work decreases with respect to the value of an hour's leisure. This is the reason why an increase in the tax rate results in a disproportionate decrease in earnings for the rich, vs. the not-so-rich. If a theory of marginal values of income and wealth could be developed and applied to income and behavior it might help clearly explain why tax breaks for high-producers, possibly even a regressive income tax, might increase revenues.

One of my favorites. If you're interested in Physics, there are a couple of audio recordings of his lectures that capture his brilliance and humor. I think they're called "Six Easy Pieces" and "Six Not-So-Easy Pieces." He was a unique individual, with a great sense of life.

Huh, that's a pretty good answer, but you'll have to back that up by stating the consequences of someone else denying that your marriage exists. It seems that what you are defending against is the denial of existence in the context of the "rights" demanded by the government to be conferred upon married couples by virtue of the existence of their marriage. Any way you slice it, this is gov't forcing us to treat people as "married," regardless of our view of the legitimacy of that status. My objection to governmental recognition of "marriage" is that the government proceeds, from that definition, to imagine all manner of conditions associated with it, that are not explicit in the original verbal agreement; while at the same time ignoring most of the condition that are explicit. For instance, government will ignore unfaithfulness in a marriage, and maintain that even if one party violated the explicit conditions of the verbal contract, the other party may still be forced to provide support, against his or her will, for the party that violated the contract. In some cases, the government may decide to recognize a contract that was never even entered into by either party (i.e., "common-law marriage"), as a basis for punishing one or the other party. Convenient, for what? "A legal convenience" implies that some benefit is being bestowed upon these individuals, by the state (i.e., the arbiters of legality), in recognition of the couple's status. So again, what privileges do you believe should be conferred upon them?

I never suggested abolishing the term; I suggested preserving it, by maintaining the established definition. In fact, I know of no more effective method of abolishing a term than changing its definition to meet the arbitrary whim of the user. I object to the changing of the definition of the term "marriage," to include any arbitrary relationship between two human beings. Or do you have some definition in mind that includes homos. couples but excludes other couples of humans? What, exactly is it about heteros. and homos. couples, in your mind, that makes them both candidates for inclusion in the concept "marriage," that excludes other humans who might wish to enter into a contract conferring similar reciprocal rights to another human, whether it be a wife, husband, best friend, son, second cousin etc.?

For the purpose of protecting it (marriage) from what, exactly? What privileges do you believe should be conferred upon married people that are not conferred upon others? And, why?

If marriage is a fundamental right, then why are we required to get a government document specifically sanctioning such right, in each case? The question here is "what is marriage?" It must be answered before we can have a rational discussion. Marriage, in the eyes of the law, confers all sorts of special rights to individuals who choose to, and are qualified to marry. That seems to me a violation of equal protection. Are we arguing here that homos. in a sexual relationship should be conferred those same special rights, over other citizens? At least, and at the very least, you can argue that the value of marriage as a means to encourage child-bearing has some beneficial effects on society. For instance, an unstable home life is potentially causative to criminal behavior in later life, etc. I know of no similar such factor arguing in favor of homos. marriage. I would rather see the government provide, at most, a pro-forma contract, perhaps call it a Reciprocal Assignment of Next-of-Kin, in which two individuals mutually agree to confer upon each other certain reciprocal "rights," such as hospital visitation, health care sharing (should health insurance companies voluntarily agree to recognize such rights), end of life decisions, etc. (I'm using the term "rights" in an imprecise manner, here, but you get what I mean). If some choose to be married in the manner in which they feel is appropriate (church, etc.) then they can be "married" in a socially-recognized ceremony, separate and separable from their gov't-recognized RANK contract. That way, the right - and recognition - of "marriage" are not officially sanctioned by the government, and we are free to recognize what we want as "marriage" or some farcical sham, as each of us wish. Just a thought.

A rational mind puts different values on existing vs. future goods. You almost always prefer present to future goods, which is why you require a greater amount of future goods in exchange for present goods (interest being the difference). Almost, because you might anticipate a future in which goods will be worth more to you than they are now. The amount of time between "now" and "future" is the metaphysical, and the preference of now over future depends on an evaluation of a wide array of variables, including the expected value of a good in the future, the value of it now, and the chances that the good will actually be available. All of these variables are the product of a rational mind, and so the determination of time preference, being derived from both the metaphysical and the man-made, is therefore man-made.

It seems this makes the violation punishable, since it's no longer just policy, but law now. (?)

You need to differentiate between a bout of inflation and a true collapse of the dollar. It is likely that the massive debt being piled up by the U.S. will necessitate a monetization (that is, we will print dollars to pay debts), which will significantly reduce the goods-value of a dollar. If and when that happens, it is very likely that other nations with similar debt ratios will see a devaluation of their currency, but others with a more serviceable debt structure may get through unscathed. However, if the dollar truly collapses, that is, becomes untenable as a means of exchange, it will be because of a massive paradigm shift that invalidates the concept of a currency backed solely by "full faith and credit." If enough people (that is, large states) demand an asset-backed currency, based on gold, symmetals or some other basket of goods, then the unbacked dollar will collapse, and, being the strongest of all unbacked currencies, logically lead to the collapse of fiat currencies in general. In fact, if a single large economy, China, for instance, were to introduce an asset-backed currency, we would probably see a rush from dollars to that currency, and a collapse of fiats. The migration from gold to fiat was globally coordinated, and had to be, as any one major player holding out would have found its currency becoming a de facto standard. The U.S. and its economic allies maintained the gold standard lie until it was clear that no leading currencies were effectively backed by gold.

Think.

The question is one of marginal benefit of an activity. All activities tend to have an initial positive rate of marginal benefit, followed at some point, by a negative rate of marginal benefit. For instance, if you want to play golf, practicing for one hour a year has very little marginal benefit per hour. The second hour of practice has an increasing marginal benefit as it starts providing an increasing skill level and enjoyment. As you increase the amount of time devoted to the game, your marginal benefit per hour increases for a time, but as it puts more strain on other activities and produces less marginal results, its marginal benefit begins decreasing until it reaches zero. At that point, you stop putting additional hours into it. Production is no different. The effect of tax is a decrease in the amount of income per hour worked. So taxation decreases the dollar income of additional work, but the fact that it has decreased the amount of income on previous hours worked tends to increase the marginal value of additional work because the marginal value of income is greater at lower income levels. If a man earns only $400 a year, then the marginal value of an additional $100 is far, far greater than the marginal value of that same $100 if he earned $100,000 a year. In fact, it is greater than the marginal value of $25,000 (a proportional equivalent) to the man making $100,000 a year. The difference between $400 and $500 is life vs. death, the difference between $100,000 and $125,000 is Lexus vs. Toyota or 3 vs. 2 baths. So there is a balance, between the additional marginal value of additional work caused by a decrease in overall income, and the decreased additional marginal value of additional work, caused by the tax on that additional work. At some point, the decrease in the marginal value of an additional hour worked is greater than the increase in marginal value of the income due to decreased overall income. Up to that point, taxation increases production, beyond that point, taxation decreases production. That point is different for each person, so it is impossible to say in absolute terms what the effect is, which provides cover to those making the argument. Perversely, the gov't tends to install progressive taxes, which have the effect of increasing revenues, which is the real goal of taxation. Progressive taxes decrease production by putting a higher negative benefit on those people for whom the marginal benefit of additional hours worked is least, to themselves; but greatest, in terms of additional production to the economy.

You already lost the argument when you conceded that "it worked during the Depression." The U.S. spent its way into debt during the Depression. Debt was the effect, not the cause of FDR's policies. The question begging to be asked here is whether we spent our way to recovery. That is the great ideological debate of our time, and it is being answered, not by learned men and crafty argument, but by the hard facts of reality. Obama is trying to spend his way to recovery. He will fail, for the very same reasons FDR failed. If not for exigent factors (WWII), FDR would have continued to direct the flow of money by whimsical experimentation, stifling the ability of individuals to make long term economic plans and decisions. Men capable of making smart plans under those circumstances were next in the cross-hairs of the government's taxation. FDR continually drained capital from successful sectors to unsuccessful, out of a sense of fairness, but with the effect of punishing success, rewarding failure, diverting resources to their least efficient use, and spawning a rush of looters eager to profit from FDR's well-intentioned larceny. The onset of WWII meant that the effort of the U.S. had to be directed towards a clear goal. This constraint on economic tinkering by FDR and his Communist inner circle (fact, not assertion) was all the American businessman needed to re-engage in long term planning. All that was needed for a robust post-war U.S. recovery and a consequent reduction in government debt, was the destruction of the rest of the world's industry, which was provided graciously by Nazi Germany, the Soviet Union and the Japanese Empire. Unless Obama lucks his way into a similar conflagration (maybe we make our own luck?), there is no way for central direction of the economy to bring about recovery or to reduce debt. Human nature, to be commanded, must be obeyed.

I don't buy Graham's differentiation between investment and speculation. Any investment involves risk, and the interest earned (for instance) has to justify the amount of risk anticipated. Purchasing AAA bonds from company X is not more or less an investment than purchasing ABB bonds from company Y. At first glance you might agree with SWNerd that expectation of profit captures the essence of investment in the context of money's abstraction of goods and production. But... The question I still have is whether purchasing a house is an investment. If you consider that housing is a facilitator for production (an indirect factor/cost of labor), and that the value of that resource will gain value, that is, will be required for future production, then, if the productive capacity of an area is expected to increase, then the demand for housing in that area will increase in order to attract workers from other areas. Therefore, speculative purchase of Real Estate could be considered investment in the future production of an area. Problem is, once you go down the road of abstracting future production as the defining characteristic of investment, could you then say that buying a loaf of bread is investment, since the energy you gain from it will go into your own future productivity? Is buying cheap consumables now in the expectation that their price will rise an investment in your ability to invest saved money later on? Is any exchange to be considered divestment from the relinquished good or service, and investment into the gained good or service? If so, you've smeared all meaning from the term. Contrariwise, is purchasing stock in a company on an exchange, when that purchase in no way puts new resources directly into that company (but may provide an incremental increase to the means by which it can raise money later) really an investment? Or is it merely speculation (the purchase of a good on the expectation that its price will rise)? The defining characteristic of an investment would seem to be the conversion of a relatively near-term consumable resource into a (consumable) resource intended to increase production in the relatively far-term future. The saving of grain for seed stock, or the exchange of seed stock for aluminum for a silo, or the conversion of aluminum materials into an aluminum smelter, are all investments. But the conversion of an aluminum smelter into into sheet aluminum, or seed stock, or grain for this winter's stores, or tonight's feast, are all divestment for nearer-term consumption. Any of these exchanges might be desired for survival or comfort, and may even show monetary profit. So, in my view, profit is not the defining, but the motivating, characteristic of investment. Relative futurity is the defining characteristic.

Anyone make any sense of this graph? It shows that consumer loans were up over $350 B from two months ago! Most of that is credit card debt. WTF???

This is a travesty of a mockery of a sham of a mockery of a travesty of two mockeries of a sham.

I read carefully. But, okay, since other human beings don't exist outside the "S.C." and you object because specifically shooting another human being is metaphysically impossible, why don't we say that outside the SC you have the option of shooting anything you feel like shooting, but inside the SC, you have to first determine if that thing is, or belongs to, a human being. Therefore, your options have been diminished due to the sudden existence of entities called "others." I notice you don't address the burning down of the house and trees, which I provided as a clearer example against your premise. Your identity belongs to you. Your reputation belongs to you. The fruits of your efforts, of your life, of your mind belong to you. The value that others would trade in exchange for the established value of your capabilities, integrity, etc., belongs to you. When someone uses your identity and reputation to gain value, that value properly belongs to you, not to them, so they are stealing from you. As surely as if they copied the words of a novel or song written by you, and sold them as their own.

You're making my point, which is that you don't have freedom or rights outside of a social context, and you don't derive rights from what you would be free to do if you were completely alone. Which is what he was trying to assert.

You're kidding, right? You're saying that because killing another person is metaphysically impossible outside of a social context, that is why it is denied to you in a social context? So, is voluntary trade likewise denied to you in a social context? What principle allows voluntary trade in a social context, but not murder, given that both are metaphysically "denied to you" outside of a social context? To address this from the other side, outside of a social context, it would not be metaphysically denied to you to burn down the house and to set fire to the trees around it. In a social context, however, where the concept "property" has a meaning, the laws of causality would inform you that the actions you take directly, as well as the consequences of those actions on others and their property, need to be considered when determining the proper limits of your freedom. You are committing the ultimate act of context-dropping here, dropping all context and expecting to divine some truth about "rights" and "freedom" from the absence of context, without realizing that "rights" and "freedom" have no meaning or existence, outside of that context. As Peikoff points out: And actually, identity theft is theft from the person whose identity is being used. It is fraud when it results in obtaining material values without their owner’s informed consent, under the pretense of the assumed identity. If I use your identity to perform acts for which you are held responsible, that is theft. If I default on a loan that was based on your credit record, it is fraud against the person making the loan.

Okay, let's play dueling Ayn Rand: Read every word in those two statements. In the first, she is writing about a right and a man. A right defines his freedom. Right is a universal, that is, the right of the man and the right of all others in society. In this context, though, it is the right of others that defines the man's freedom of action ("freedom to"). Defines it, how? That is answered in the second statement. A man's freedom of action may not include physically coercing another. That is a limitation on his freedom of action. Others' rights define a man's freedom, limiting what he may do to others. A man's rights define the freedom of others (his "freedom from"), limiting what others may do to him. "Rights" and "freedom" are flip sides of the same coin, but they are reciprocal to each other. The statement that Cainscalia called me on was: What Cainscalia wrote was: Now read every word in those statements. "Freedom is a right." "You cannot have your rights infringed in the protection of your rights." You see the problems here? In addition to conflating "right" with "freedom" as one-and-the-same concept, he is context-dropping. If your rights and your freedoms are the only things to consider, there is no social or political context, which is essential to Rand's definitions. It is the rights of others that define and limit your freedom of action, and your rights that define and limit their freedom of action. You wrote: This is an Objectivist forum. I don't mind being accused of intellectual dishonesty, or even fraud, as long as my accuser is willing to rationally back that accusation with something other than bald assertions and flimsy logic. (I won't hold my breath.) By the way: Physical force, breach of contract, fraud, and theft are the primary examples of force, as defined by Objectivism. Trespassing is the unauthorized use of another's property, and is equivalent to theft. A person's identity is his "property" in that only he has the right to take any actions in his own name, therefore identity theft is theft, regardless of the harm done.

Interesting assertion (your final sentence). Suppose a government were to imprison a murderer, arguably "its worst." Would that be a warning about how it will treat its best? Or would you recognize that "its worst" are those who would initiate force against rational citizens, and that they are properly removed from society in order to protect the rights of men, which is the only rational function of government? This bill seeks to strip the judicial rights reserved specifically to U.S. citizens from those who hold loyalty to an aggressive foreign entity. You would think that the active support of a foreign enemy would be enough to expose any pretense of citizenship and justify the revocation of any special treatment reserved for U.S. citizens. Apparently, your view is that those who choose foreign enemies over their own nation should retain all rights of a citizen of that nation. Please provide an argument to back that conclusion.