Category: Uncategorized

The greatest living economist

Gary North nominates Thomas Sowell:

He applies simple but fundamental concepts of economics to real-world problems, which are often problems that are not widely perceived as being heavily influenced by economic categories.2. He relies exclusively on verbal communications, not graphs or equations, to explain these concepts and their applications. This keeps his expositions firmly within the realm of historical cause and effect.

3. He never begins his economic analyses with this phrase: “Let us assume. . . .” The only time he ever uses “let us assume,” is when it is followed by “for the sake of argument,” which is in preparation for a lambasting of some conventional political assumption.

4. He writes in well-honed English that is the product of over 30 years of writing newspaper columns: clear, precise, and rhetorically persuasive — in short, efficient.

5. He is the most creative economist in our era — or perhaps in any era — in implementing the division of labor in his writing. He hires astoundingly productive research assistants, and then he incorporates their remarkable but diverse discoveries into a single coherent narrative.

6. He is a better historian than he is an economist. Other economists have made observations similar to his. But no other historian matches him in his chosen specialty: economic motivations that have prompted the international migration and subsequent economic successes of modern racial, national, and religious groups.

I like Sowell and generally think well of him, but I lost an amount of respect for him when he resorted to handwaving in response to some errors of Michelle Malkin’s concerning Pearl Harbor.  I also find it remarkable that so many figures of the mainstream right originally hail from the Left.  Why is it that those who were dumb enough to get it wrong initially are most often hailed as heroes, while those who didn’t are customarily ignored?

I’m not sure who my nominee for the greatest living economist would be, but if I had to choose someone, my first thought would be Steve Keen.  I think he is deeply and profoundly wrong on a number of issues, but the work that he has done in exposing the incontrovertible flaws of neoclassical economics is truly remarkable.

How not to be SFWA president II

John Scalzi doubles down, not only in terms of jacking up his levels of emotion, irrationality, and vulgarity, but by expanding his attack on Random House to include ALL publishers who utilize a no-advance model:

So why are so many eBook-only publishers attempting to run with the “no advances” business model? If I had to guess, I would say because many of these then-erstwhile publishers assumed that publishing electronically had a low financial threshold of entry (not true, if you’re serious about it) and they fancied being publishers, so they started their businesses undercapitalized, and are now currently in the process of passing the consequences of that undercapitalization unto the authors they would like to work with. Alternately, as appears to be the case with Random House, they’re looking for a way to pass as much of the initial cost of publishing onto the author as possible, and one of the best ways to bring down those initial costs is to avoid paying the author anything up front. Both of these are bad business models, although one is more maliciously so, and both are to be avoided. Just because someone has stupidly or maliciously planned their business, doesn’t mean you’re obliged to sign a contract with them.

But, these publishers and their defenders may say (and have said), the publisher takes all the risk in producing a book! Yeah? Hey, to publishers and their defenders who say that: Fuck you. Fuck you for asserting that the author has shouldered no risk, when she’s invested the time, opportunity cost and material outlay required to create a manuscript. Fuck you for asserting the the author sees no risk to her own career from the choices that the publisher imposes on the publishing process that the author has no control of: everything from cover art (which, if horrible and/or out of step with the market, can sink a book) to the size and distribution of the initial print run, to the marketing plan the publisher has for retail.

Fuck you for lightly passing over the risk that the author has if the book fails — that any additional books in the contract might be cancelled or put out with the bare minimum of contractual obligation, that the author might not be able to sell another book to the publisher or other publishers because of a track record of poor sales — and for lightly passing over the fact the a publisher mitigates its own risk of the failure of a single book by having an entire portfolio of releases. If one single book fails but the publisher’s line holds up generally, then the risk the publisher encounters to its livelihood is minimal. The risk to the author, on the other hand, is substantially greater. Yes, to all of that, “fuck you,” is probably the politest thing to say in response.

Now, I could certainly point out that this is an incredibly stupid, unprofessional, and irresponsible thing to do, especially in light of how the Guardian has already mistaken one of his previous posts on the subject for the SFWA’s position.  So, given the dedicated journalistic commitment to calm and reasonable discourse, it would not be a surprise if we soon see headlines of this sort: SFWA To All Publishers: “FUCK YOU”.

However, I think that’s all readily apparent.  Being an Award-Winning Cruelty Artist, I happen to find it much more amusing to demonstrate that Scalzi simply doesn’t know what he’s talking about, and moreover, to show that his observed inability to understand the potential benefits of the no-advance, revenue-share system has already cost him hundreds of thousands of dollars in 2012 alone.

Scalzi has publicly stated that Tor sold
35,667 eBook versions of Redshirts at $11.99, 17,008 audiobooks at $19.95 and 26,604 hardcovers at $24.95.  If we assume that he gets the
standard 20% royalty on ebooks that Tor author Robert Sawyer says Tor is paying its authors, the customary 10(5K)-12.5(5K)-15% on hardcovers, and 8% on audio books, his royalty revenues under the traditional publishing model he is defending so vigorously are likely in the vicinity of the following:

Ebook: $59,870.62
Hardcover: $90,479.22
Audiobook: $27,144.77
Total royalties: $177,494.61

That’s excellent performance by any measure, almost surely in excess of whatever advance he received for Redshirts.  One must congratulate Scalzi on his ability to write fiction that people want to buy, regardless of what one thinks of the man or the fiction.  However, one also has to seriously question his financial acumen, because if he had the very sort of publishing deal that he is claiming is so dreadful and indefensible, he would have done considerably better.

Let’s be realistic and assume that in addition to the revenue-sharing model, his contract contains an amount of chargeable overhead as many of these 50/50 contracts do.  The largest of which I am aware permitted the publisher to charge the author up to a maximum of $10,000 from the author’s royalties.  Based on the same channel discount structure as above, but this time splitting the resulting revenue equally between Tor and the author results in the following figures:

Ebook: $149,676.57
Hardcover: $165,942.45
Audiobook: $84,827.40
Total royalties: $400,446.42
(less overhead charge $10,000)
Net author revenue: $390,446.42.  

In other words, Scalzi has already thrown away $212,951.81 in additional royalty revenue due to his insistence on an advance and his inability to understand that the no-advance, 50/50 revenue-sharing model is not intrinsically unfair, disadvantageous to the writer, or predatory.  In fact, if he wasn’t such an angry and short-sighted fool, he would go to Tor and very politely ask them to publish his future books under the very no-advance model he is so vigorously decrying.  As it stands, every dollar he henceforth collects from Tor on Redshirts represents $2.55 (and counting) that he would have received had he the courage and foresight to accept the risk of foregoing a pre-payment on his royalties.

No doubt some authors believe that it is a good idea to heed the advice of a successful author when it comes to book contracts.  And that is quite often true.  But is it really a good idea to avoid no-advance, 50/50 publishing deals on the advice of an author dumb enough to hand over 54.5 percent of his potential royalties to the publisher for nothing more than the privilege of collecting part of the income beforehand?

UPDATE:  John Scalzi demonstrates that he not only can’t do math, he can’t read either:

The
fellow in question has no idea how my contract is structured, so he
hasn’t the slightest idea what I’m making. I will say his estimates
amuse me. His estimates about production and marketing costs likewise
suggest a profound ignorance of the real world (that $10,000 would have
covered this for a week, at most). Additionally, if the fellow is trying
to use the example of an outlier (i.e., a bestselling author with a
large and healthy following) in an overly-simplistic “all other things
being equal” sort of comparison, grounded in bad numbers, to show why
these sorts of contracts might be beneficial to other writers,
particularly new writers, then he’s, at best, once again letting his
need to get his mancrush on get in the way of clear and rational
thinking, or useful advice to other authors.

Ignorant and
mendacious is not a great combination, basically. And that’s all I will
say about that. It’s nice he’s still making money for those various
organizations, however.

As noted here, I have no problems with
authors choosing not to take advances — or making any other sort of
contractual maneuvers they choose — when the author has decided that it
is in his or her own best interests to do so, based on several factors.
This is manifestly different from the publisher having “no advances” as
its default setting. Anyone who doesn’t recognize the difference between
those two probably should not be dispensing career advice to anyone
else.

First, Scalzi is attempting to have it both
ways here.  I cited the standard royalty rates for ebooks, hardcovers,
and audio books from Tor Books in doing my calculations.  It is entirely
possible that as one of their leading authors, he gets better royalty
rates from them, although I very much doubt he is getting the 50 percent
royalties that Hydra is offering or that I get from my publishers.  The
numbers are not bad, they are standard and other writers, particularly
new writers, are not likely to get better royalty rates than those I
cited.

They are certainly more relevant than the numbers
that John is keeping to himself, which is certainly his right, but to which he
cannot reasonably appeal.  And, insofar as his royalties depart from those that new writers will receive he is making the very outlier mistake that he
erroneously accuses me of making.

Furthermore, I said absolutely
nothing about “production and marketing costs”, but rather, referred to
a fixed amount that is expected to help cover the publisher’s overhead
costs involved in publishing the book.  In my various book contracts,
that fixed amount ranges from zero to $10,000 and comes out of my 50
percent share.  Far from showing any “profound ignorance of the real
world”, it simply showed Scalzi’s lack of reading ability and
unfamiliarity with the revenue-sharing model.

Notice that he is backing down now that his argument has been exposed as ridiculous and materially self-defeating.  Suddenly the problem isn’t “no advances”,  but “no advances as its default setting”.

UPDATE II: The little rabbits actually manage to make Scalzi’s inept response look downright intelligent when they try to weigh in:


“Claiming that 10000 USD cover all the expenses involved in marketing and
producing Redshirts (Posters. Book tours. Wil Wheaton. Cover designs.
Typesetting. Editing. Proofreading.) is so fallacious that it renders
every other point invalid.”

Well, I suppose it might if anyone had ever made such a stupid and fallacious claim.  But no one did anything of the sort, least of all me.

The high discourse of Twitter

Captain Beagle: Which is worse, work or rape? I know 2 women who were raped. Go fuck yourself #sorrynicepplhadtohearthat

VD: Hey, talk to @johnscalzi not me. I certainly didn’t rape them.

Captain Beagle: no your article suggested an increase in rapes was less harmful than women handing out resumes. Insensitive & absurd

VD: I didn’t suggest it, I proved it. By what metric do you claim that rape is more harmful to society than women working?

Captain Beagle: I was unaware one needed statistical data to prove rape is harmful.

VD: You need something, at any rate. What is your basis for claiming rape is worse for society than female employment?

Captain Beagle: thanx for this fascinating study in hyperbolic misogyny. I’m thinking of using you as the template for my next villain.

How to write a Great American Novel

I’ve been reading David Foster Wallace’s Infinite Jest, and while it is a well-written and entertaining novel, thus far I have found it to be neither brilliant nor sui generis.  It is intelligent, it features an expanded vocabulary, it is observant, and it is unusually detailed in both physical and psychological terms.

But at least thus far, it is, contra the book’s Introduction, far from unrecognizable.  By way of explanation, I should mention that in the aforementioned intro, Dave Eggers writes:

It’s possible, with most contemporary novels, for astute readers, if they are wont, to break it down into its parts, to take it apart as one would a car or Ikea shelving unit. That is, let’s say a reader is a sort of mechanic. And let’s say this particular reader-mechanic has worked on lots of books, and after a few hundred contemporary novels, the mechanic feels like he can take apart just about any book and put it back together again. That is, the mechanic recognizes the components of modern fiction and can say, for example, I’ve seen this part before, so I know why it’s there and what it does. And this one, too — I recognize it. This part connects to this and performs this function. This one usually goes here, and does that. All of this is familiar enough. That’s no knock on the contemporary fiction that is recognizable and breakdownable. This includes about 98 percent of the fiction we know and love.

But this is not possible with Infinite Jest. This book is like a spaceship with no recognizable components, no rivets or bolts, no entry points, no way to take it apart. It is very shiny, and it has no discernible flaws. If you could somehow smash it into smaller pieces, there would certainly be no way to put it back together again. It simply is. Page by page, line by line, it is probably the strangest, most distinctive, and most involved work of fiction by an American in the last twenty years.

Now, I haven’t finished the book yet, so it is entirely possible that it features depths as yet unplumbed by me.  But since I’ve been reading the book in the awareness of the statements made above, what has actually struck me in reading it is how absolutely familiar it was.

It genuinely makes me wonder if Eggers has ever read John Irving, Tom Robbins, or even Robert Anton Wilson.  While Infinite Jest is much larger in scope and looser in plot than any books I have read by either of the first two authors, and while Wallace is a noticeably more intelligent writer than Robbins and one apparently less obsessed with his formative years than Irving, there are elements in the work of all four writers that are every bit as recognizable as the elements one can recognize is Martin, Abercrombie, Erikson, and Sanderson, in Brooks, Goodkind, and every other would-be Tolkien, in the romance genre, in the wereseal genre, and in the vampire genre.

Take a few quirky but highly intelligent characters.  Go into excruciating detail concerning the minute-by-minute existence of their quotidian routines, especially regarding the sexual or toilet aspects, then throw in some highly implausible gonzo drama produced by their relationships with their cartoonishly dysfunctional families or inexplicably deformed lovers.  Be sure to have a strong amateur sporting element, be it wrestling or tennis.  At all times, be careful to utilize the high-low technique of an unfamiliar and elevated vocabulary taken straight from the OED alternating with the crudest vulgar slang.  The perspective, at all times, is one of vaguely bemused detachment; the narrator is more observer than actor.

The point, of course, is that there is no point, and life has no more meaning to it than the meaning one happens to find in the process of watching it proceed around one.  Now, perhaps I am incorrect about this, at least with regards to Infinite Jest, and I am quite willing to discover that I am wrong.  And yet, if I am not, that should speak volumes about the predictable nature of this supposedly flawless book.  Correct me if I am wrong, by all means, but my initial impression is that this is little more than an oversized member of the Garp genre.

I’m not saying I don’t like the book.  I do.  I’m not even saying it is not a great book that merits all the praise it has received.  I will not have an opinion on that until I finish it.  What I’m saying is that thus far, I am experiencing far too much literary deja vu to consider this anything more than a fine example of its particular genre.

Mailvox: Republican hatred of Ron Paul

Stickwick wonders why conservatives react in such a stereotypically liberal manner to Ron Paul:

I have a question about the conservative perception of Ron Paul. Rachel Lucas seems like a reasonable right-of-center person whose political views are moving towards libertarianism. In fact, she now refers to herself as a libertarian. However, she still hangs on to the idea of American interventionism. In a recent post she criticizes McCain for his criticism of Rand Paul and for his overly-interventionist policy, but agrees with Ace that *some* interventionism is necessary:

I don’t agree with it, but at least their position is stated reasonably. What I find odd is how her commenters are using this as an opportunity to dump all over Ron Paul. Here’s a typical example:

“For the record, I cannot STAND Ron Paul. Fiscally he makes sense, but in every other conceivable way he’s a senile, batshit crazy old fuck.”

Why do some right-of-center people get so vitriolic about Ron Paul? They go right past “I strongly disagree with his ideas on foreign policy,” and straight to “crazy old fuck.” This is exactly the sort of thing they denounce when the left gets personal in its attacks or calls right-of-center ideology a “mental disorder.”

Why do conservatives call Ron Paul crazy instead of just disagreeing with him? Would you shed some light on this?

It’s not at all hard to understand why so many conservatives hate Ron Paul with all the fury of a thousand suns.  The reason is that he shames them for their hypocrisy.  He reveals the inconsistency in their non-conservatism.  He forces them to confront the fact that they are not the proponents of small government and liberty they believe themselves to be.

Big government, international interventionist, and monetarist “conservatives” hate Ron Paul for exactly the same reason the Pharisees and Sadducees hated Jesus Christ.  Because he exposes their intrinsically false nature to themselves.  And the reason they dismiss him as crazy instead of responding rationally to the arguments he presents is because they know they cannot do so without losing.

Can’t say we weren’t warned

Some find significance in symbols:

Oh, dear. This is probably not the symbolism the White House wanted.

Hours after CIA Director John Brennan took the oath of office—behind closed doors, far away from the press, perhaps befitting his status as America’s top spy—the White House took pains to emphasize the symbolism of the ceremony.

“There’s one piece of this that I wanted to note for you,” spokesman Josh Earnest told reporters at their daily briefing. “Director Brennan was sworn in with his hand on an original draft of the Constitution that had George Washington’s personal handwriting and annotations on it, dating from 1787.”

Earnest said Brennan had asked for a document from the National Archives that would demonstrate the U.S. is a nation of laws.

“Director Brennan told the president that he made the request to the archives because he wanted to reaffirm his commitment to the rule of law as he took the oath of office as director of the CIA,” Earnest said.

The Constitution itself went into effect in 1789. But troublemaking blogger Marcy Wheeler points out that what was missing from the Constitution in 1787 is also quite symbolic: The Bill of Rights, which did not officially go into effect until December 1791 after ratification by states. (Caution: Marcy’s post has some strong language.)

That means: No freedom of speech and of the press, no right to bear arms, no Fourth Amendment ban on “unreasonable searches and seizures,” and no right to a jury trial.

How … symbolic?

It could be.  I find it more intriguing that Obama took both his oaths of office in private ceremonies after the first, public one was fluffed.

The lobotomy factories

One has to wonder what the argument for public school is supposed to be when four out of five of the GRADUATES of a major public school system can’t read, write, or do math:

It’s an education bombshell. Nearly 80 percent of New York City high school graduates need to relearn basic skills before they can enter the City University’s community college system.

This doesn’t even account for the dropouts, who account for at least 12.1 percent of the city’s students even if we take the more generous “current methodology” at face value.   “Since 2005, when the State began using its current methodology to
calculate graduation rates, New York City’s graduation rate has risen by
40.9 percent. In that same period, the dropout rate has fallen nearly
10 points from 22 percent to 12.1 percent.”

If we assume that the dropouts have similarly failed to learn the basic skills, that means that about 17.6% of the students in the New York City public school system are learning basic skills.

The public schools aren’t useless, they are worse than useless.  Forget online education and homeschooling, children would probably learn more from playing video games all day for 12 years.  And it would cost a lot less to provide every “student” with a PlayStation and a new game delivered every month.

UPDATE: It’s not just New York City and its vibrant community that are failing.  Consider Minnesota, which spends $12,966 per year per public school student

  • 23% of Minnesota students are not proficient in reading
  • 38% of Minnesota students are not proficient in math
  • 52% of Minnesota students are not proficient in science

By the way, the Minneapolis public schools spend $23,020 per student and 42.6% are not proficient in reading and 60.4% are not proficient in math.

    Tyler Durden does the math

    More debt buys fewer jobs:

    The media’s ecstatic read through of today’s Nonfarm payroll beat can barely end: after all, a print of 236k on expectations of 165K, why that has to be great. Well, it is. Until one looks to the number from February 2012, which happens to be 271,000. And even the Keynesian will agree that February follows January, which in 2013 was a downward revised 119K. January 2012? 311,000. In other words, the first two months of 2012 saw a 582,000 increase in non-farm payrolls. In 2013: 355,000.

    But something else happened between February 29, 2012 and February 28, 2013… Oh yes, the US government issued some $1,198,397,883,967.30 in debt. Oh, and the Fed monetized about half of this amount, and virtually all of the Treasuries issued to the right of the ZIRP period (i.e., risky debt). To summarize: $1.2 trillion in debt buys the US…. 61% of the jobs created a year ago.

    The Z1 report for Q4 2012 also came out today.  I’ll do a more detailed post on it this weekend, but here are the highlights.  Keep in mind that I keep track on an ongoing basis, so this ignores the quarterly revisions.

    Households, State and Local Governments almost insignificantly down.  Financial up, Federal up, Corporate up big at 3.56%, the third biggest quarterly increase since 2004.  Total credit market debt outstanding up 1.76%, still shy of the 2.36% 60-year historical average.

    Q4 2012 credit gap: $333.8 billion
    2012 credit gap: $3.1 trillion
    Post-2008 credit gap: $27.3 trillion

    Translation: debt-disinflation continues.

    Inflation vs Deflation VII

    In his post entitled Fiat or Shenanigans, Nate contested the idea that US money is credit money and not fiat money with the characteristics of credit money:

    Remember I said our money was fiat money… with characteristics of credit money.  Right?  Vox says I am wrong about that.  And… while I considered rushing off to donate some money to an unrelated charity in his name and make a video about it…  instead… I just decided I would address his well made point like an adult…  mostly…

    Vox said: “Nate’s first mistake is the identification of credit money as fiat money, even though he clearly has his suspicions concerning the problematic nature of the distinction as it applies to the US monetary system.  That this distinction is false can be demonstrated in two ways, first with a legitimate appeal to authority and history, and second by the money creation process.”

    He then provides a quote from Mises, that I agree, does indeed say that fiat money doesn’t yet exist and probably hasn’t existed.  Vox appeals to Mises who appeals to history.   And Nate points out… well shit…  this book was written in 1912…  it appears we have some more history to investigate before that holds water doesn’t it?  Well lets look at this new history then… especially… recent history.

    Say what does our buddy Murray have to say about fiat money?

    “Under a fiat money standard, governments (or their central banks) may obligate themselves to bail out, with increased issues of standard money, any bank or any major bank in distress. In the late nineteenth century, the principle became accepted that the central bank must act as the “lender of last resort”, which will lend money freely to banks threatened with failure. Another recent American device to abolish the confidence limitation on bank credit is “deposit insurance”, whereby the government guar­antees to furnish paper money to redeem the banks’ demand li­abilities. These and similar devices remove the market brakes on rampant credit expansion.”

    While the quote from Mises does date back to the 1912 text, Mises himself lived until 1973 and witnessed all of the innovations mentioned, even the removal of the convertibility to gold by President Nixon.  I am not aware of any point at which he changed his opinion on this matter, nor does Nate suggest that he did.

    Given the fact that the FDIC’s deposit insurance observably does not take the form of paper money being furnished to redeem the failing banks’ demand liabilities, but rather transfers those liabilities to other banks in the system without any paper money at all being furnished to anyone, I think it is safe to conclude that Murray does not have a sufficient grasp on the difference between fiat money and credit money for his statements to be relevant here.  Moreover, the statement that the central bank is “the lender of last resort” itself tends to underline the fact that the “deposits” are, in fact, credit and not pure fiat.  The central bank is not actually “lending money” to banks under duress, it is merely inflating the amount of credit at their disposal.

    Recall that when you make a payment from your ebanking account, the bank declares it will make the payment “provided there is sufficient credit” on your account.  It’s all credit, both in electronic form and paper form.

    Nate continues:

    Are we done?  No… no no no… we’re along way from done.   Remember.. Mises characterized fiat money by legal privilege.  Legal Privilege?   Consult the MisesWiki!  According to Hülsmann, there are four groups of legal privileges granted by the state (usually more than one is granted):

    1. legalized counterfeiting – the promises of banks are allowed to be more “elastic”. For example, a coin marked “an ounce of gold” will be allowed to have any amount of gold or none, and can have any meaning. Banknotes were named “promises to pay”, but were obscure on the details.
    2.  monopoly – only some monetary products may be produced by law, like a specific metal; or only the banknotes or coins of a certain bank. This limits the freedom of choice of users of money and benefits the producers and first recipients at the detriment of others.
    3. legal tender is a money, that must be accepted in exchanges under a predefined price. Some monies may be driven out of the market due to Gresham’s Law.
    4.  legalized suspension of payments allows banks to avoid paying their obligations, while receiving payments from their debtors. If a bank is freed from contractual obligations to redeem its money and it is also legal tender, its banknotes become genuine paper money. With legal privileges are the banks allowed to behave more irresponsibly, which increases moral hazard.

    Here we get to the crux of Nate’s error.  Nate is correct to point out that the Federal Reserve’s credit money is declared to be legal tender and is legally privileged by the federal government.  In this sense, he is correct in saying that the US monetary system is fiat money.  However, this only is the wider sense in which the Mises Institute defines the term:

    Often called paper money, fiat money is in a wider sense any money declared to be legal tender by government fiat (ie law). In the narrower sense used here, fiat money is an intrinsically useless good used as a means of payment and a storable object.

    The narrower sense of fiat money is clearly the sense Mises was using the term when he declared “most of those kinds of money that are not commodity money must be classified as credit money” and questioned whether fiat money had ever existed.  And that narrower sense cannot possibly apply to the Federal Reserve notes, as most “dollars” are a) not a good, useless or otherwise, b) not a storable object, and c) not a risk-free convertible claim to real money.

    Nate would be correct to claim credit money is fiat money in the wider sense, but then, I completely agree with that.  I am simply declaring that US currency is credit money that is not fiat money in the narrower sense.  Nate is incorrect to say that it is fiat money in the narrower sense, which is the sense that most people believe it to be.  Nate continues:

    Now are we done?  Well… not really.  Because what I’ve done here isn’t intellectually honest, in the sense that I have not represented the whole of Vox’s point.  The reason I hated Chapter three is not because of confusing terms like fiduciary media.  Its because Credit Money itself is a category error.

    Credit money is a description of leverage. But…  Leverage can be applied to all types of money….  Thus… Credit Money… is a subcategory.  Credit Money is what happens when you take money of any other type.. and then leverage it up for lending purposes….  Leverage is something that happens to Money Types.  It isn’t a money type itself.  Its like including cancer cells in a discussion of  human  cells because they form in the human body.  Cancer cells aren’t human cells.

    We must always go back to competition.

    Money is money because of the constant commodity competition   Every day the competition is on going… and every day one commodity is winning.  that one commodity that is winning… is the money.   The money types… are explanations of WHY the competition is being won.  Fiat money is fiat money because the government helped it win artificially and it wouldn’t have won otherwise.  Take away the government advantage… and its not the money anymore. Commodity money types?  Well they have no artificial government advantage.

    That is the true definition of sound money.

    Its money that wins the competition… every minute of every day…  the on going competition… not some past competition .. on its own without aid of the government.

    All modern paper currencies are fiat money.

    The bits that are loaned into creation from thin air?  Those are credit money too… but it is dishonest to ignore the fact that it is fiat money as well.  Loans may have created the individual dollar bills… but those dollar bills wouldn’t be money… if it wasn’t Fiat.

    May God have Mercy on my soul…   Ludwig Von Mises… was wrong.  You cannot disregard the fiat nature of the original money… just because most of it was created through leverage.

    So Fiat?  Shenanigans?

    The answer is both.  Not one.  Not the other.   Both.  To fail to grasp that… will totally blind you to the inherit problems of our current economic system.  The money is fiat money and credit money.. because much of which was created via leverage… but also much of it was created through counterfeiting.   This is why I created the word “clusterfutastrophe” while attempting to parse the US money supply.

    Nate is stumbling towards the truth here, which is that credit money is fiat money in the wider sense but not the narrower one, but is still stumbling.  He is still hung up on the basic concept of credit money, which is why he erroneously calls it a category error.  What he is failing to grasp is the central importance of credit in the monetary process, one which precedes the role that government plays in either guaranteeing the credit claims or establishing the legal privilege of those claims.

    “When all exchanges have to be settled in ready cash, then the possibility of performing them by means of cancellation is limited to the case exemplified by the butcher and baker and only then on the assumption, which of course only occasionally hold good, that the demands of both parties are simultaneous. At the most, it is possible to imagine that several other persons might join in and so a small circle be built up within which drafts could be used for the settlement of transactions without the actual use of money. But even in this case simultaneity would still be necessary, and, several persons being involved, would be still seldomer achieved.

    These difficulties could not be overcome until credit set business free from dependence on the simultaneous occurrence of demand and supply. This, in fact, is where the importance of credit for the monetary system lies. But this could not have its full effect so long as all exchange was still direct exchange, so long even as money had not established itself as a common medium of exchange. The instrumentality of credit permits transactions between two persons to be treated as simultaneous for purposes of settlement even if they actually take place at different times”
     – Mises, The Theory of Money and Credit, p. 282

    The important aspect of credit is not its ability to be leveraged, which is a consequence of the characteristics of money rather than an integral aspect of credit, but rather its ability to transcend time.  It is the fact that the credit is a claim to money rather than to some other commodity that permits its expansion beyond the existing money supply.

    “A person who has a thousand loaves of bread at his immediate disposal will not dare to issue more than a thousand tickets each of which gives its holder the right to demand at any time the delivery of a loaf of bread. It is otherwise with money…. The fact that is peculiar to money alone is not that mature and secure claims to money are as highly valued in commerce as the sums of money to which they refer, but rather that such claims are complete substitutes for money, and, as such, are able to fulfil all the functions of money in those markets in which their essential characteristics of maturity and security are recognized. It is this circumstance that makes. it possible to issue more of this sort of substitute than the issuer is always in a position to convert.  And so the fiduciary medium comes into being in addition to the money certificate. Fiduciary media increase the supply of money in the broader sense of the word; they are consequently able to influence the objective
    exchange-value of money.”
     – Mises, The Theory of Money and Credit, p. 267

    Note that the credit aspect not only predates the broader fiat aspects, but is, in fact, intrinsically necessary for the eventual expansion.  Nate concludes with a question

    Its not that there is no money.   I already explained that there is always money.  Money…is like energy.  It cannot ever be destroyed.  It can change forms… its velocity can change.  But it cannot be destroyed.  The problem is… our system is so screwed up through fiat and leverage… that we can’t even measure the money supply any more.  Come Vox… be sensible… you’re absolutely right to point out that the leverage can’t be ignored… but you were wrong to suggest that the fiat aspects can.  Now tell us Vox…  What IS the best way to measure the abomination posing as the US money supply?  He asked knowingly…

    First, I’ll point out that since we have a system “in which the actual transfer of money has been completely superseded by fiduciary media”, it doesn’t matter that we can’t measure the money supply anymore.  Because we’re no longer using actual money, we are merely using possibility of money in order to support the extensive system of potential claims to theoretical future money.  Or, as Nate rightly calls it, a financial abomination.  As strange as this sounds, it was anticipated at least 101 years ago, as Mises notes:

    “Use is made of money, but not physical use of actually existing money or money substitutes. Money which is not present performs an economic function; it has its effect solely by reason of the possibility of its being able to be present.”

    In answer to Nate’s question, the best way is to measure the sum total of all the current outstanding claims.  This is approximated in the Federal Reserve’s Z1 Flow of Funds Accounts, specifically the L1 credit market debt outstanding report.  And it is the expansion of this supply, though not strictly speaking “inflation” per se, that effects exchange value and therefore the prices of goods and services.

    Mailvox: rabbits gonna rabbit

    And Asher’s gonna asher:

    “He’s not dumb but when I point out that without science and
    philosophy everything that makes his art media possible wouldn’t exist.
    It doesn’t even register with him.”

    It clearly runs in the family.

    “The most obvious possibility is that the “it” refers to science being a necessary condition for various art media used by my brother. However, the reference doesn’t make any sense given the context which is that I am aware of the scientific advances that make my brother’s visual art possible.

    The other possibility for Vox’s “it” is that “things” don’t register for me. Fine, but that is, in itself, an empty reference. What things? Everything? Some things? If not everything then what set of things? Vox doesn’t make this clear, and, in doing so he ends up sounding like Amanda Marcotte.

    Yes, science being a necessary condition for various art media is clearly the most obvious possibility.  And yes, I sound EXACTLY like Amanda Marcotte.

    “Your “it” has no clear object of reference.”

    It is sufficiently clear to the sufficiently intelligent.  I often find Asher’s take on things to be more than a little fascinating.  It’s rather like watching a retarded Spock in action.  His attempts at ad hominem are the best; they resemble someone attempting to trash talk in a language they’ve studied for three semesters in college.

    “And I suppose you your mother find sex response to attract, yes?”