Vox Day Takes His Confusion to the Misesian Level

Vox Day has responded to my earlier criticism of his view, .

As per my policy with these guys, I won't respond to all their confusions, misinterpretations, etc., but I will bring in the whoppers. Vox Day's entire post is littered with confusions, but I will stick to fixing the real stinky litter.

Vox Day has brought the views of Ludwig von Mises into the picture by quoting him out of context, spinning Mises views in ways that Mises would never take them and giving the outrageous impression that Mises would be a greenbacker.

Vox Day writes:

And what is a "dollar"? A dollar is presently a credit instrument, specifically, a credit instrument known as a Federal Reserve Note. This is what Mises defines as "credit money", and not, as is commonly assumed, "fiat money", nor is it "commodity money", as was the case with the historical dollar, which was defined in 1792 as 24.056 grams of silver.

Vox Day states this without reference because he would never be able to find such a reference in the writing of Mises.

It simply boggles my mind that these guys think that a dollar is some kind of credit instrument. It's not. But further, it would make no difference if it was a credit instrument.

Later in his post, Vox Day quotes Mises and reveals his own confusion. He writes:

While I'm tempted to cut Wenzel some slack due to his support of Ron Paul, that is unfortunately not my idiom. So, to end my response with all the tender mercy of Van Helsing driving home a stake, I shall conclude by quoting Ludwig von Mises:

In a developed monetary system, on the other hand, we find commodity money, of which large quantities remain constantly in circulation and are never consumed or used in industry; credit money, whose foundation, the claim to payment, is never made use of;* and possibly even fiat money, which has no use at all except as money.
- The Theory of Money and Credit, p. 103 (1953)

What this has to do with the debate, I'm not sure. To me it sounds terribly misleading, as though Mises is making the claim that a Federal Reserve note is a credit instrument that is currently circulating. In fact, what Mises was doing at that point in his discussion was stating that many things have been used as money. In the sentence above the quote that Vox Day selected, Mises refers to the time when "An ox or a sack of corn" were used as money.

In other words, Mises discussion has nothing to do with Federal Reserve notes. It's slick copy and pasting by a confused Vox Day.

What is relevant to my debate with Vox Day and comes from the same book Vox Day quotes, The Theory of Money and Credit, is when Mises writes:

To regard note-holders or owners of current accounts as granters of credit is to fail to recognize the meaning of a credit transaction. To treat both notes and bills of exchange in general (that is, not merely sight bills) as "credit instruments" alike is to renounce all hope of getting to the heart of the matter.

There it is, Mises speaking from the grave directly to Vox Day about his crazed thinking that notes should be treated as "credit instruments." As Mises says, the Vox Day view renounces "all hope of getting to the heart of the matter."

Vox Day Gets Caught in the Denninger Quicksand

Karl Denninger confusion can swallow up all kinds of people. Vox Popoli is caught in the quicksand hailing Denninger nonsense.

Vox Day at Vox Popoli writes in support of Denninger:

It should be obvious that credit is a form of money, for the obvious reason that you can exchange it for goods. I further note that it is presently of near-equal value with cash. (This is a reference to the zero-percent interest rate presently maintained by the Federal Reserve.)

The conventional response has been to claim that all credit does is shift demand forward... but that can only be true if the credit is repaid. A credit default is therefore the equivalent of burning paper currency. This is why I have often stated that the inflation/deflation question hangs on the matter of whether the governments can and/or will print faster than they default.

First off, credit is not money. Money in the United States at present is the dollar. The Federal Reserve can create more money by buying credit instruments, but they could buy anything.

As Murray Rothbard notes in The Mystery of Banking:

From the point of view of the money supply it doesn't make any difference what asset the Fed buys; the only thing that matters is the Fed's writing of a check, or someone writing the Fed a check.

It is also true that because of the fractional reserve system, banks create money in Fed orchestrated fashion by issuing credit, but again the banks could buy any asset, including, Salavdor Dali paintings or stock equity,  and expand the money supply. The key factor to understand is that it is not credit creation, but the money creation that is at the heart of an expanding money supply. If the Treasury borrowed money but it was bought by investors, without any involvement by the Fed, the money supply wouldn't expand at all.

Second, the interest rate maintained by the Fed is not "zero-percent...presently" and it never has been during the crisis. The current effective Fed Funds rate is 0.07%.

I have no idea where Denninger or Vox Popoli get the idea that credit "shifts demand forward".  Credit transfers money from one person to another. If someone invests, say, in a newly issued Treasury Bill, he is foregoing consumption but the money ends up with the government which then spends it. Money invested in a capital good creates future consumer goods, but that doesn't mean that there is no current demand. It merely means that the current demand is for the capital goods.

Finally, defaults, in and of themselves, have nothing to do with deflation/inflation in the system. If the Fed buys Treasury bills and creates money to do so, the money is out in the system. If the Treasury defaults on the Bills issued that doesn't mean the amount of money in the system shrinks. A credit default is thus not "the equivalent of burning paper currency."

Denninger nonsense, and apparently Vox Popoli's, is complex, but when pulled apart at any strand, it doesn't hold up. It has taken six paragraphs to refute two Vox Popoli confused paragraphs. Denninger and Vox Popoli make bold statements without the logic to back them up. It takes many statements to refute their bold ones because the foundation has to be  established.

As I said, I am not going to debate these characters on every point. They shift too much without consistency or substance, you could spend decades trying to refute them and they will simply come out with some new statement that doesn't reference their earlier points.

I will only refute them when I see major whoppers or new major characters spouting their nonsense. Just know that their arguments in general are disjointed, tend to ignore reality and tend to use technical terms and/or themes in a manner not used by anyone else on the planet---thus adding even more layers of  complexity and confusion to their arguments.