August 2011


There is a bit of a discussion revolving around what might end the current gold bull market. This stirred some thoughts. History shows us how the last bull market in gold ended, although, it can be argued on a nominal basis, which chart technicians would analyse as higher highs and higher lows, the bull market never ended. Certainly this is consistent with gold as a currency. Even on an adjusted basis, the chart indicates that price is nearing confirmation for new highs.

Now what if the government, against all rational thought, destroyed the fiat money through a hyper-inflation, what would happen to the POG? There are two scenarios: [i] they quickly introduce a new fiat money as the Weimar Republic did. [ii] Gold again becomes a world currency.

In scenario [ii] then where gold again becomes the world currency, what actually happens? Gold as money, now exchanges against all other commodities. What will be the market exchange rate or valuation? To assume that it stays the same or goes higher, misses an important variable, the possibility that it moves lower.

A dollar, or a pound sterling, are historical names that refer to a specific weight of gold. As such X dollars per barrel of oil etc, now simply have no quantifiable meaning. A new valuation will have to emerge on the market based on again, a defined weight of gold.

This valuation will be worked out through supply and demand of various producers and consumers, using gold as the intermediary of exchange, which again depends upon the total supply and demand for gold as money.

The purpose of money is to secure goods and services, either now, in the present, or in the future. This of course will have an important impact upon the valuation of money. What value for gold will these various relationships create for gold on the market? Can you rationally eliminate the possibility of a lower valuation than currently is suggested by the market price? In other words;

Diarmid Weir Says:

August 25, 2011 at 10:32 am e

Increasingly your use of arguments turns to fit the desired conclusion.

First off, I note that you ignored the primary argument.

Argument 2 invokes Karl Popper. The theory is valid, unless it can be falsified.

Falsification is irrelevant to a deductive argument. Anyway, never thought much of Popper’s answer to Hume. Why can the negation of a theory (as opposed to a universal predicate) be ‘confirmed’ by a single falsification? And you misread him. Popper never claimed that a theory was ‘valid’ until falsified. After all, this would mean that an untested theory would be valid.

With regard to falsification and deductive argument, true, just having a bit of fun. Again true, Popper simply claimed that you work with the theory until you can on the basis of further evidence reach a new conclusion. It’s just that Popper amongst market chaps is a bit of a cult.

You are free to trade your thoughts, ideas, it happens every day. What you cannot cede control of, as it is inalienable, is your mind.

You’re equivocating. So far we’ve accepted ‘owning your own mind’ as the right to think your own thoughts. This is clearly different from trading the expression of those thoughts.

I disagree. The mind is my property. The thoughts that it produces are also my property. As I can cede control of the product, in this case an idea, there is no contradiction nor equivocation.

Now I know from your bio. that you are an ex-GP. When you studied neuroscience at medical school, I don’t know what texts that you used, however, study of neurological anatomy and function reveals specific areas and cell types, joined via axon and dendrite association, for example Wernicke’s and Broca’s areas, that now account when taken as a whole, viz. central nervous system, for what the classics refer to as mind. I always liked Patten incidentally.

If I am Pavarotti, you may very well wish to exchange goods/services for my singing in your opera house.

Sadly, past tense required here. Well, the point is that I would want a share of the box-office. Pav’s teacher, cook, driver, mother and the orchestra would deserve their cut too. The point is, of course, that virtually no human endeavour is a sole enterprise.

I agree. However that sentiment has nothing to do with the argument that I put forward with regard to property rights.

Ownership is an attribute of “things” because things are scarce.

We often desire to own things because they are scarce. That we desire it, doesn’t mean we can or should. Ownership rights may be efficient, but that is induction. And not everything is scarce.

Ownership rights, I would argue are efficient. That they are efficient has been observed empirically, I agree. However they can also be theorized a priori, which I have argued for. The argument, assuming that you accept that property rights are efficient, becomes a chicken & egg argument.

I did not claim property rights from the ionosphere to the centre of the earth.

OK. What extent of rights would you claim, for how long and why?

I already answered that question in my rebuttal of your statement. Essentially the land mixed with my labour, and legal titles that can be traded, gifted, stolen and bequeathed.

Rights to material property over-ride the right to life, yes, because essentially, they can be the same thing.

Sure that’s coherent?

Yes I believe it is. Property rights are efficient and just as they are based on a rational ethic. If the land that I own is critical to my survival, then to preserve my own life, I am ethically correct in denying you access to my property.

If you disagree, then there are several million starving Africans that you can put up and feed on your dime and everyone else in the UK.

Fair point. Thus my serious doubts about the appropriateness of immigration controls and my desire to see a greater flow of wealth from North to South.

I would suggest that the problems in Africa stem from their government/King/Warlord corruption rather than a lack of wealth flowing from North to South. Money and charity has been flowing into Africa for as long as I can remember. Hell I even bought Sir Bob’s single the first time round.

I have thought on it. No hunting does not constitute or convey property rights over the land that they hunt on or fish in.

Habemus papam!

I’m guessing you don’t agree with that conclusion.

It is this rationality, the ability to make choices independent of instinct, that separates man from animal. So while animals certainly own their own minds and bodies, man has for another species fallen onto the might is right argument with regard to property rights for animals.

You mean, you don’t have a clue?

That’s probably pretty close to it.

By increasing the supply of money or fiduciary media, you reduce the purchasing power of each unit of money. You are claiming inflation to be a rise in prices which is incorrect.

You’re making up your own economics here. Good luck with that!

Far from it. As you have no argument, I’ll take it as a win.

I’ll think on that one.

Better do! Cogito ergo sum.

The original argument:

I assume you are aware that maintaining an absolute (rather than relative) distinction between the appropriateness of positive analysis in the physical and social sciences depends on the assumption of mind/body dualism. This is a position with serious difficulties. Just sayin’…

I am definitely maintaining an absolutist position. Relativism is replete with insuperable contradictions. If you had argued Hume’s is, ought then I could follow your logic. While I certainly accept that Descartes placed his escape on the assumption of there existing a god, I don’t see that as a major obstacle.

For news, Jackson Hole was a non-event. The market rises anyway. For the moment squiggly lines are as good a guide as any.

Greek yields are trading at 44%. Greece according to the Bond market is toast. That is probably a fair assessment, Greece will, and needs to default. Will that create a contagion effect that we saw with Lehman’s in 2008?

On the books, banks exposures to Greece are manageable. When was the last time you saw honest books out of a bank? The balance sheet of a bank means next-to-nothing. The off-balance sheet exposures are the point of interest, and does anyone actually have a clue, and I include the CEO’s in there as well?

Buying with a limit order @ $5.81

Diarmid Weir Says:

August 25, 2011 at 2:51 am e

…if I don’t own it [my body], who does, or can?

The answer might be no-one – perhaps the concept of ‘ownership’ is inappropriate here. That it is is for you to demonstrate to prove your deductive argument.

Very well, I shall advance two arguments.

[i] If “A” does not own his body then “B” must own it, or a combination of A+B own the body. If “B” owns “A” then A is B slave. B would then own the goods/services appropriated by, produced by or acquired by A. A however could not own B. In this we have two distinct classes of humans: slaves and owners. This definition fails the “Universalization Test” and is disqualified as a human ethic as to be able to claim to be a law, or just, it must be valid in all times and places for all.

If there was a shared ownership A+B, in this case of co-ownership, the requirement for equal rights for all is fulfilled. The activity of any individual requires the use and consumption of scarce goods and services. To be able to utilise scarce goods, the consent of all would need to be obtained. No such consent can be gained. If one were to follow the ethic of the ultimate collective, man would become extinct in short order.

[ii] Argument 2 invokes Karl Popper. The theory is valid, unless it can be falsified. Thus until you, or anyone, can show that if A owns his mind, that it can be shown that he doesn’t own his body, then the proposition stands.

With regards to the kidney it depends on the contract struck.

Surely you note the inconsistency here? I can trade away my kidney, but not my thoughts – so clearly there is some intrinsic difference between the two.

No inconsistency. You are free to trade your thoughts, ideas, it happens every day. What you cannot cede control of, as it is inalienable, is your mind.

Assuming that you now accept proposition two: then anything that I create, a good or service, with my mind and body, belong to me they are my property. As you do not provide an argument that calls into question the validity of the proposition, your protestation rather lacks any bite.

I wouldn’t assume that. Be that as it may, the argument I gave for rejecting the route from 2 to 3 was that your body and its product are not identical, nor can the product of your body be said to be part of your body. Therefore there seems no way to deduce that what applies to your body must apply to its product. Note again that this is your deduction; the onus is on you to make it watertight.

Assuming again that the second proposition is now accepted, the third logically follows utilising the same arguments that were presented for proving that A owns A’s body. If A owns his body, then A owns what his body produces.

…if the good or service created with your mind or body does not belong to you, to whom does it belong? If I sing a song, paint a picture, to whom does it belong if not me?

If you sing it in my opera house, or paint it on my wall I think I could reasonably claim part of it! And more generally, why is ownership an essential attribute of anything?

Tsk, tsk Dr.D simply changing the argument is not going to save you. The original argument states that I own what I produce, not that I violate your property rights in production of my goods or services. If I am Pavarotti, you may very well wish to exchange goods/services for my singing in your opera house.

Ownership is an attribute of “things” because things are scarce.

So if I plough a field and plant corn, that ploughed field, and the corn grown in the land, are my property.

I wouldn’t deny you some rights on this basis, but why should I grant you absolute rights from the ionosphere to the centre of the earth and for all time just because you once did a bit of digging and planted a few grains? This seems hardly proportionate, particularly once the supply of virgin land is exhausted.

Yet another straw man argument. I did not claim property rights from the ionosphere to the centre of the earth. I claimed property rights of land that I mixed my labour with. Second I did not claim that these rights pertained for all time. There are several ways that these rights can be transferred.

Do I, through denying them access to my property to grow food, violate their property rights to life. My answer is twofold: legally, my property rights over my land are inviolable. Morally however my behavior is not acceptable

Oups! Can of worms alert! Rights to material property over-ride the right to life? And legality, morality…? What is the relationship to ‘inalienable rights’ of these concepts you have suddenly introduced?

Rights to material property over-ride the right to life, yes, because essentially, they can be the same thing. Property rights flow from self-ownership, which is the right to life. As stated, if that land was essential to preserving my life and that of my family, then I have no hesitation in denying you use.

If you disagree, then there are several million starving Africans that you can put up and feed on your dime and everyone else in the UK. After all your land/food is their land/food as life trumps property according to your hierarchy.

Does hunting and fishing constitute mixing ones labour into land to establish property rights? I am going to think on it.

Think away. There can be no definitive answer, only negotiation.

I have thought on it. No hunting does not constitute or convey property rights over the land that they hunt on or fish in. The reason is that they have mixed no labour into the land to claim property rights. They mixed their labour into the hunt. The property rights accrue to the kill, not the land. If they had fenced the land, and bred new animals, then they would hold property rights over the land and animals.

This is why property rights are denied to animals, if they possessed them, that makes us chaps rather immoral.

Eh? I think you should read that again! Couldn’t we deny human property rights on the same specious grounds? Don’t animals ‘own their own minds’ also?

Originally, Aristotle claimed man as the rational animal. It is this rationality, the ability to make choices independent of instinct, that separates man from animal. So while animals certainly own their own minds and bodies, man has for another species fallen onto the might is right argument with regard to property rights for animals.

…you are flying your coercive colours again.

Not mine, I assure you! But there are others less delicate in such matters.

No doubt.

…for example an expansion of money and credit will always if maintained lead to an increasing inflation…

A counterexample: production of goods increases at the same rate as the expansion of money and credit – no inflation.

Incorrect. By increasing the supply of money or fiduciary media, you reduce the purchasing power of each unit of money. You are claiming inflation to be a rise in prices which is incorrect.

I assume you are aware that maintaining an absolute (rather than relative) distinction between the appropriateness of positive analysis in the physical and social sciences depends on the assumption of mind/body dualism. This is a position with serious difficulties. Just sayin’…

I’ll think on that one.

Steve Jobs has resigned the CEO position at AAPL. Currently, at about 0430 US time, AAPL is trading lower by 5%. Also 4% lower is gold. AAPL carries a significant weighting in the tech sector, and it could create a whole bunch of volatility. I hold some tech, so I’ll put my steel helmet on in preparation for the worst.

My position with regards to positivism models in economics is that they have it has no place.

A model can be neither positivist nor non-positivist. It is an abstraction. What we can say about a model is whether it is logically consistent. This of course depends not on inductive logic but deductive logic. (Which latter, thankfully, you allow.)

Accepted. I am perfectly willing to argue theory based upon models.

Now the starting point for the model of monopoly that I linked to is not actually that someone is a ‘sole supplier’.

Well the Etonian’s certainly took that position: A pure monopolist is the sole supplier in an industry Thus my objection. I think we are agreed, you and I, that the correct position for our argument is on the concept of the monopoly price.

The existence or possibility of existence of a ‘sole supplier’ as opposed to many suppliers is an empirical fact that the model cannot tell us anything about.

Accepted.

The model starts with particular functions represented as curves on a graph, and demonstrates relationships that follow from that. If these relationships follow deductively from those curves, the model is perfectly consistent and so as a model perfectly valid (useless, if in fact there are no sole suppliers, but valid nonetheless). Can you point to any logical inconsistency in this model?

Yes I can. At this point I recommend that you go get a fresh coffee as this might take some time. At this point let me reproduce their diagram.

The model relies on an assumption that is untrue, thus any deduced conclusions are false. This is the assumption that in the market there is a discernible, identifiable competitive price. From this assumption flows the identification of the monopoly price.

Thus the critical question is that at P1, does there exist a competitive price or a monopoly price? The authors are working on the assumption that it is a monopoly price. The truth of the matter is that there is no way of knowing. Contrary to the assumptions of the theory, there is no competitive price which is clearly established somewhere, and to which we can compare P1.

Second objection:

In this diagram increased demand is postulated. From the diagram, an increase in demand at AR2, is shown to increase profits due to a higher price and output at P2, Q2. The truth of this depends upon a perfect inelasticity of the demand curve.

Even if I were to to waive all the difficulties of discovering and identifying a demand curve [and this can only be done by the producer in a tentative manner] the price, if accurately established, will be set by the seller, so that the demand curve above P1 [our original monopoly price] will be elastic, thus assuming perfect inelasticity is an error, and false.

Now let me suppose that the producer decides that only producing Q1 rather than Q2 and thus lowering his marginal costs, that he will make more money as he can still sell at P2, does this signify a monopoly price? Could it not be argued reasonably that the price attained at P2 is rather the movement from a subcompetitive price to a competitive market price? In the real world, the demand curve is not simply handed to the producer, but must be estimated and discovered. Our producer really has no idea whether these prices are subcompetitive, competitive or monopoly. As we have already disposed of the authors original definition, viz. sole producer, I can assert this to be true.

When you point to actually existing suppliers and claim they are ‘sole suppliers’ you are stepping on your own forbidden territory by predicting that they will remain so.

Yes I am. In my previous post I recanted, or clarified more fully my position.

Were I to join you on that territory I would ask if you consider corn growers and salt miners also to be sole suppliers?

Corn, or salt, is a fungible commodity. However they can be and are different goods. Corn grown in the American midwest is a different good than corn grown in NZ.

Positivism is only at issue when we claim the model to be some sort of picture of reality and that there may be some evidence available which can confirm this. It is equally positivist to claim that the model is not a picture of reality and that there is some evidence to confirm this. If we are strictly non-positivist about the social sciences, all we can say is that any economic model is irrelevant.

Economic models are used to create a constant, against which variables, or a variable are compared, with the purpose of discovering a truth. This has value, because in the real economy, composed of human actors, there are no constants.

Positivism is a variant of historicism. History cannot predict. It is the purpose of a theory [economic] to predict, or evaluate the rationality of choosing specific means to achieve a specific end.

Now surely, the same applies to those competing ‘models’ of society – the socialist state-directed economy, the democratic mixed public/private economy, and the unfettered libertarian free market?

They are not competing models, they are competing theories. That only one theory is valid, which is the economic theory of capitalism, created the movement of liberalism in the late nineteenth century. This is of course incompatible with State power. Thus the attack on economic theory, and by extension capitalism, is motivated for political reasons.

If we are strictly non-positivist we cannot point to any empirical features of the real world that favour one over the others, either in terms of their existence or their desirability.

That is true. It needn’t actually be a problem, however that has never been my position. My position has always been that for the science of human action,[economics], positivism is categorically the wrong choice for investigating economics and creating a theory that purports to be predictive. How many times do you neoclassical chaps have to be embarrassed before you learn?

What we are left with, and what you have repeatedly done, is to provide an a priori, non-empirical justification for your point of view.

Double negative, obviously want to drive the point. Point taken; so what?

There is no other avenue available, yet you haven’t yet linked ‘owning your own mind’ – which I allow in the sense of being able to think your own thoughts – to the existence of ‘inalienable property rights’.

I have now. You just respond so quickly that I run about a day behind.

Diarmid Weir Says:

August 24, 2011 at 2:04 pm e

OK. Now we’ve got something to go on!

I own my mind [1]
I own my body [2]
I own what my body or mind produces [3]

I don’t see how 2 follows from 1. It seems to be a separate claim. And if I allow a kidney to be transplanted (whether for monetary payment or not) into someone else, do I have right to reclaim it later?

With regard to the statement “I own my body” derived from the proposition “I own my mind”, if I don’t own it, who does, or can? Even if a slave, the coercion is applied to the mind in order to control the body, whether that be psychological in nature, I shall kill your wife unless…or, physical torture to the body to inflict sensory pain that is understood or perceived by the mind.

With regards to the kidney it depends on the contract struck. If sold for money, obviously you have ceded legal title in exchange for money. If donating, you have again ceded legal title on a voluntary basis for psychic satisfaction, which again is an exchange. In these examples, there is no right to reclaim the kidney later.

If however the kidney was taken from you without any contract, viz. stolen, then you would have right to reclaim it even at the cost of causing the death of the thief.

Again I don’t see how 3 follows from 1 and/or 2.

Assuming that you now accept proposition two: then anything that I create, a good or service, with my mind and body, belong to me they are my property. As you do not provide an argument that calls into question the validity of the proposition, your protestation rather lacks any bite.

Be that as it may, again, I ask, if the good or service created with your mind or body does not belong to you, to whom does it belong? If I sing a song, paint a picture, to whom does it belong if not me?

If you require coronary artery surgery, and I am the last remaining cardiac surgeon, my skills belong to whom, assuming you wish surgery performed? You will compel me how, assuming that you, or someone other “owns” my skill?

Clearly, the product of my mind and body combined belong to myself, or any individual who combine their minds and bodies to produce goods or services.

I note that later you claim that ‘[voluntary slavery] is invalid logically unless you can cede control of your mind’ (which I assume you deny),

Correct.

but surely I can cede control of ‘what my body or mind produces’?

Yes you can. The question is how is this control ceded? Is it voluntary, viz. exchanged for something valued higher on an ordinal scale, or is it coerced, and thus stolen from me through force? If the latter, my property rights have been violated.

It doesn’t seem to me that this product is coterminous with my mind and/or body, and that therefore what applies to the latter cannot automatically be conferred on the former.

Deadly word, had to look that one up! See above.

I own the land if, I mix my labour with the Land.

Now I assume the implication that this is a deduction from 3 and the statement that no-one owns ‘virgin’ land.

Correct. The virgin land can have no ownership titles.

I’m not sure this is valid. Wouldn’t it be more consistent to deduce that if you and the virgin land (owned by no-one) combine to produce, then you own some proportion related to your effort, and the rest belongs not to you, but to no-one (and thus potentially to someone else)?

I was stating a principal. I agree, simply landing on a new land, and claiming ownership of all is not tenable, which is why I stated, the land that I mix my labour with. So if I plough a field and plant corn, that ploughed field, and the corn grown in the land, are my property. The land immediately adjacent, unploughed, I have no rights over. You are free to claim the land, and work it yourself, assuming no prior titles exist.

It seems that this would also help to resolve some tricky questions, such as:

1) How much labour should count as conferring absolute ownership? Marking the area on a map? Fencing it off? Ploughing it? Growing crops? Extracting every usable molecule?

Marking the area on a map is not sufficient. You have mixed no labour with the land. In fact this sounds rather like something government would contemplate.

2) Is it perfectly acceptable to deny a starving family the right to grow crops on my empty land?

It would seem that you are questioning the hierarchy of property rights. Do I, through denying them access to my property to grow food, violate their property rights to life. My answer is twofold: legally, my property rights over my land are inviolable. Morally however my behaviour is not acceptable, assuming the land truly is empty. For what if the land has just grown a crop and is being rested, to allow the land to regain the mineral deposits required to grow nutritious food again?

3) Do Native Americans actually own America (and the Māori Aotearoa)?

Simply being first on the land does not confer ownership. It requires taking virgin land and mixing labour with that land. Speaking with regard to NZ and maori, the land that they cultivated, was their land, and if it was stolen from them, should be returned. If however the land was not cultivated, then no theft can occur, assuming that those who laid claim to the land mixed labour into the land, and didn’t just mark it off as owned on a map.

Now Maori claim to own the seabed and foreshore, there are endless arguments and compensation claims in regard to this land. The question is did they mix labour into this land to secure a valid claim? This goes to the argument with regard to the hunting on land of bison, or Maori fishing of the sea. Does hunting and fishing constitute mixing ones labour into land to establish property rights? I am going to think on it.

4) What about wild animals…plants even…?

As to having property rights on land? This is why property rights are denied to animals, if they possessed them, that makes us chaps rather immoral.

Then it is incumbent upon those sceptics to advance an argument that refutes mine based on reason and logic. Unfortunately the sentiment expressed that inalienable rights are “bollocks” does not really accomplish this.

No, but a baseball bat and the will to use it might do the trick!

Tsk, tsk, Dr.D you are flying your coercive colours again.

If you lose money when randomness is the wrong paradigm, and the reality of any paradigm is impossible to determine…QED

I think you are going back to our arguments with regard to a priorism and empiricism. This argument centered around whether or not I believed in prediction. Let me clarify my position to remove any inconsistencies that I may have created.

A correct theory is predictive in all time and places. Economic theory derived deductively that elucidates economic laws, will thus be predictive: for example an expansion of money and credit will always if maintained lead to an increasing inflation, which if pursued to its logical conclusion, will result in a destruction of the money.

Humans make choices. Individually, their choices cannot be predicted, their choices for all intents and purposes, are random. Events are a coming together of human actions and circumstances, which again are unpredictable and random. I should have described this as psychology, which examines motivations rather than economics which evaluates means and ends. If certain means are chosen to achieve desired ends, economics can make predictions on the appropriateness of the means chosen to achieve the desired end. I’ll have to claim refuge in Keynes dictum.

An empirical study of economic data relies on the methodological process of the physical sciences, which seeks the causative agent of the data observed. This is in economics, illegitimate, as the causative agent is already known, man himself.

Watch tomorrows price action in gold.

Gold’s declines are likely to spill into tomorrow’s trading as brokers issue margin calls, says George Gero, vice president with RBC Capital Markets Global Futures.

Investors typically put down a small deposit, known as a margin, currently around $7,500 per contract, to trade gold futures. But the amount must be increased when prices move adversely to the investors’ bets.

“When you have abig selloff in gold, you have margin calls the next day. Many firms will call their customers intraday when you have an extreme price movement, and sometimes that accelerates the selling,” Mr. Gero says.

December gold tumbled 5.6% today to settle at $1,757.30 per ounce.

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