Sophonomics (Long Post)

[Dylan Lawrence Moore]

I was going to put this under "Statists say the darndest things" thread but I think it's a little too long.

 

A week or so ago a friend of mine asked me to reply to a comment he received on Facebook regarding a meme criticizing the Federal Reserve. Normally I avoid Facebook discussions like the plague, but my buddy (who I have recently gotten interested in logic/sophistry) suggested that I respond by looking at the guy's logical fallacies. I figured what the heck, I could consider it practice and at least try to get some useful sources out to whoever would be reading it.

 

Anyway, I figured I would post it here for a.) everyone's amusement and b.) criticism of my logical analysis at the end.

 

It all starts with this meme:

 

 

To which our Statist in question makes the original comment:

 

 

I call it "Bad Perspective".



Ask yourself this question. If the meme writer is correct, where is the inflation?
 

There is no such thing as fake money unless you call it all fake. (You can't eat paper money but neither can you eat gold! ) And increasing the money supply through quantitative easing does not necessarily result in inflation, just as quantitative tightening does not necessarily reduce inflation. It all depends on very specific economic forces. If this meme were true the economic stimulus and quantitative easing instituted in 2009 would have resulted in massive inflation.....But it didn't. Why? Because we were experiencing deflation, and you can't have inflation and deflation at the same time. Increasing the money supply mitigated the fall in GDP, exactly as it was intended to do. When the economy finally starts to grow too fast and inflation becomes a genuine threat, taxes must be increased and the money supply tightened to address the deficit and slowly cool the economy to prevent runaway economic growth. Modern macroeconomics is a delicate balancing act that encourages slow and deliberate growth over the boom and bust cycles that plagued the world economy in previous centuries.



So, who ever wrote this meme is either a Rand Paul libertarian economic loon or someone who doesn't really understand economics. A commodity backed currency would NOT be superior in a large global economy. The Great Depression proved this powerfully. Why? Think about it. Would you rather have an economic system where the size of our money supply can be adjusted against economic realities and international financial pressures, or one where your money supply is uncontrollable, determined by the market value of a commodity like gold? Do you really want your national economy vulnerable to any commodity's market value? Imagine..... another nation or private entity could, on any given day, conspire to corner the market on the commodity supporting your national currency and control YOUR economy like a puppet on a string? Not so good!



The fiat system is certainly not perfect, and is vulnerable to abuse by unscrupulous bankers, investors and international speculators, but compared to a commodity backed currency, it is far superior due to its inherent flexibility. In truth all currency value is based on emotional factors like faith. The U S Dollar's value is based on international faith in our 17 trillion dollar economy and our national stability. It's the same with others like the The EU's Euro, Switzerland's Swiss Franc, Japan's Yen, etc..... This is why the Tea Party's hyjinks concerning the debt ceiling are so incredibly wrongheaded, and in my opinion treasonous. In a global economy you DO NOT screw with an international investor's faith that we will pay our bills. The Tea Party faithful are idiots, behaving like economic arsonists. It's like threatening to burn down your own house if you don't get a new roof. It's nuts! You do not burn the house down if the roof leaks, you just fix the roof.

 

 

My initial reply:

 

 

According to that graph, the inflation is every year from 1956 onward. From eyeballing the inflation numbers on the graph (anyone got a ruler?), I calculated that it takes $8.70 now to buy what you could buy what you could buy with $1.00 in 1956. That's a 770% total increase in inflation, or that is to say, the dollar has about 11.5% of the buying power it had in 1956. It looks like Nixon's nixing of the "gold standard" in 70s was the biggest reason for it, but if you go back even farther we can see WWII was a wonderful spending spree (when the governments of the Western world finally decided to give up on pre-WWI gold-to-specie reserves), and in 1913 which is, of course, the infamous founding of the Federal Reserve.



Quick point: Apparently it's the Federal Reserve's official policy to aim for 2% inflation every year: http://www.federalreserve.gov/faqs/economy_14400.htm . If this were actually accomplished, that means the value of the dollar would be cut in half every 35 years. Of course, looking at the graph you provided shows that this 2% mark is wishful thinking, and more recent years have been more like 4%, which would cut the value of the dollar in half every 17.5 years.



(Personally, I think 4% is still wishful thinking and the numbers are probably cooked, and it's much worse than that.)



Also pointing out: the meme doesn't suggest adopting a gold standard. It's probably trying to get at that the Federal Reserve, a bank which is owned entirely by private bankers (secretly, to boot), has the monopoly on the money supply in the US, and under the continued legislation of the Federal Reserve Act of 1913, the US government is subservient to it for its monetary needs and has no oversight over it short of adopting new legislation (minus the president's ability to appoint the chairman). Seeing as Congress has done this a total of zero times since 1913, I wouldn't hold my breath. Basically, this boils down to the Federal Reserve having the monopoly to concoct the Nation's medium of exchange out of thin air, charge interest on it (and interest on that interest), which has to be paid back by the real wealth and labor of the current citizens (via taxes) and the wealth and labor of unborn children (via treasury bonds). If someone asked me to come up with a better description of a vampire, I'm not sure I could do it. So yea, I'm pissed off.



To reiterate, it looks like the meme is bashing and (hopefully) creating awareness of the Federal Reserve System of the US (or the central banking system gripping the entire earth), not commenting on the "backing" of the US currency.



Further recommended viewing:



The Money Masters http://www.youtube.com/watch?v=HfpO-WBz_mw

The Best Thieves Ever! A History of Banking http://www.youtube.com/watch?v=903C5XxKFM4

Fall of the Republic http://www.youtube.com/watch?v=VebOTc-7shU

(Loosely Connected) The Ultimate History Lesson http://www.youtube.com/watch?v=YQiW_l848t8



Further Recommended Listening:



Peace Revolution Podcast 066 http://peacerevolution.podomatic.com/.../2012-11-07T14_53...

Peace Revolution Podcast 022 http://peacerevolution.podomatic.com/.../2011-04-04T08_54...



Further Recommended Reading:



The Lost Science of Money by Stephen Zarlenga

The Creature From Jekyll Island by G. Edward Griffin

Tragedy and Hope by Carroll Quigley

 

 

Did I sound reasonable? I sure thought I sounded reasonable. Here's the sophisticated response I got from Mr. Statist:

 

 

Okay....LOL



Uhhh no. Now I'm convinced. Neither you guys or the meme writer really understand a how a modern capital economy works, and yes, he IS talking about a fiat currency system in addition to the management of private capital (The Fed). You can't really separate his talking point from fiat currency. It's impossible. That's why he had to mention "fake" money. Reading behind the lines, what the meme writer seems to be advocating for is pure socialism. That's fine, but there's not a pure socialist economy operating anywhere in the world and not a single example has ever been successful. Frankly I have no problem with any economic system as long as its equitable and provides opportunity and a superior quality of life. One day maybe we'll find one.



As for the Federal Reserve, being made up of private bankers, of course it is. We live in the Unite States of America. Our founders adopted capitalism as our economic system. In capitalism, the government is not in the business of owning capital, the private sector is. The Fed was created because the management of capital without any government oversight was out of control. The 1800's saw huge economic boom and bust cycles. Industrialization only exacerbated these massive economic swings and wealth inequality. Boom and bust cycles always benefit the rich and devastate the workers because the workers do not have the surplus capital to survive the bust. The Fed is actually on the side of the worker, trying to reign in the plutocrats desire for a laissez faire economy. Without the Fed and our fiat currency, a system like Keynesian Economics, one which significantly benefits the working class would be impossible in the USA.



I must admit I laughed out loud at the video's linked by Mr Laurensios. This is the kind of conspiracy nonsense I expect from extreme right Tea Party types. It's tempting and easier to create a boogy man and blame him for all our ill's, but the fact is our system is not perfect and never will be perfect. Yes, there are malevolent forces at work, greed being among the most powerful, but that is human nature, not a characteristic of any specific economic system. Blaming the Fed is totally ignoring the real problem. If you think for a second that greed would not flourish in socialism or communism, you were not paying attention to the last century. Eliminating the Fed would only unchain the beast that is unbridled capitalism.



Lastly...Inflation. WTF? Yes, you want slight inflation. Why? Did Mr Laurensios even read his own link? You will never have economic stasis. It's impossible, so you hedge towards the safest alternative that creates stability. What defines stability? Employment! Deflation ( Dropping GDP) means hoarding of wealth. Hoarding of wealth mens people stop spending, which leads to a people losing their jobs and the stagnating of business investment. Hell, we just witnessed this! It's not rocket science. Another huge benefit of slight inflation is the fact that it make paying off debt easier as tomorrows dept represents less real value than it does today. If I take out a loan today, it's value remains in todays dollars. As the loan progresses in time it is paid off with future dollars whose value has been influenced by slight inflation. This is like a discount on the loan. If over ten years, slight inflation decreases the dollars buying power by 5%, at the end of 10years i'm enjoying a 5% discount on my purchase by taking out a loan. This encourages people to spend, instead of hoard, which increases GDP, which increases employment. It's not a conspiracy, its capital economics! Now if the meme writer doesn't like regulated capital economics, that's fine. He should just say so. Instead, he misrepresents the system in a way that is either ignorant or disingenuous.



I suggest staying away from the conspiracy theorists and other " the sky is falling economic quackery" Educate yourself in solid economic theory and form opinions based on fact and economic history. And if you decide you don't like regulated capitalism, that's fine, but that's our system. I'm not sure I can recommend another place outside one adhering to capitalism that works any better.

 

 

Before I answered this well-rounded, polite, and rational post, I just wanted to check:

 

 

So... you a sophist by training or does it come naturally?

 

 

Statist response:

 

 

Ha ha ha.... Nice try Mr Laurensios but I refuse to be offended. Surely you are referring to the original Greek example.

 

 

My response:

 

 

That wasn't an insult. That was honest.



I'm referring to the modern-day variety.

 

 

Statist:

 

 

Then prove it with actual facts. The meme writer is the one being a sophist. The last sentence is a prime example of a specious argument. It sounds believable to those unfamiliar with economic theory or history, but when held up to scrutiny if fails the test.

 

 

Oooookay. If you want some facts, I guess I'll just feed you yours. I took a few days to ruminate on it and to make sure I calmed down a bit before dissecting his initial response to me, but here's what I came up with:

 

 

Sorry my post is a bit delayed. Better late than never, right?



So as I mentioned, I was not throwing insults when I asked if you were a sophist by training or it came naturally—I meant it honestly. You replied by telling me to prove it with actual facts. As I'm a newbie to the Trivium (i.e. the liberal arts of grammar, logic, and rhetoric) and identifying sophistry, I figured this would be a great opportunity to get some practice in.



And as I was asked if I had been referring to the ancient Greek variety of sophist, I'll make a modest guess that you don't know what a sophist is (and thus it comes naturally to you, instead of being trained). A sophist is someone who uses arguments specifically created with logical fallacies in order to have his point of view dominate an opponent in an argument, usually by discrediting the other side. This is in contrast to a dialectic argument, where two sides with opposing viewpoints discuss with each other in order to achieve the truth.



The real trick to sophistry is for the sophist to make his argument appear as dialectic, and thus deceive his opponent and any listeners that his argument is valid. Because sophistical arguments are by definition antithetical to reason and logic, it does not take a great leap in understanding to see that a person engaged in sophistry isn't trying to persuade via reason, rather the person is engaged in bullying.



The following analysis of your post breaks down the reasons why I used the term sophist:



(Note: here are some handy resources about logical fallacies:

http://www.iep.utm.edu/fallacy/#H6

https://yourlogicalfallacyis.com/.../FallaciesPosterHighe... )



1. “...and yes, he IS talking about a fiat currency system in addition to the management of private capital (The Fed). You can't really separate his talking point from fiat currency. It's impossible.”



This isn't so much a logical fallacy as untrue. While the meme writer probably IS a gold-standard advocate, that doesn't mean you can't separate his talking point from fiat currency. Two of the sources I provided in my original post (The Lost Science of Money and the Money Masters, both from the American Monetary Institute) make a pretty compelling case for a fiat currency without the usage of private central banking (in our case, The Fed). Historically speaking (or better, my current knowledge of history speaking), fiat currency without central banking has existed in the US and pre-US three times: in the colony of Pennsylvania, continental currency during the Revolutionary War, and Lincoln's Greenbacks during the Civil War. Thus it is possible to separate his talking point from fiat currency (although, like you mentioned, that probably isn't the meme writer's intention).



2. “Reading behind the lines, what the meme writer seems to be advocating for is pure socialism.”



This is a hasty generalization fallacy. “Reading between the lines” is not enough supporting evidence to claim that the meme writer is advocating for pure socialism. Further investigation would be required to determine this.



3. “That's fine, but there's not a pure socialist economy operating anywhere in the world and not a single example has ever been successful. That's fine, but there's not a pure socialist economy operating anywhere in the world and not a single example has ever been successful. Frankly I have no problem with any economic system as long as its equitable and provides opportunity and a superior quality of life. One day maybe we'll find one.”



This is a strawman fallacy, also known as “arguing beside the point”. This is a technique where a person will create a new argument which appears similar to his opponent's original argument, then proceed to disprove the new argument. As the topic of socialism was arrived at by another logical fallacy (hasty generalization), disproving the effectiveness of a “pure socialist economy” is arguing beside the point.



4. “As for the Federal Reserve, being made up of private bankers, of course it is. We live in the Unite States of America. Our founders adopted capitalism as our economic system. In capitalism, the government is not in the business of owning capital, the private sector is.”



Ambiguity fallacy. “Capitalism” here has not been clearly defined. While I indeed did say that the Federal Reserve is owned by private bankers, I did in no way suggest that they are a part of the private sector. As the Fed possesses monopoly powers of the nation's currency, this means they cannot be part of the private sector. This presents a contradiction in definition. That is, if the government is not in the business of owning capital, and the Federal Reserve is able to express monopolistic money-printing powers via government power, that would make the Fed at least partially governmental. So the definition of capitalism remains vague here: is the Fed an expression of capitalism or not?



5. “I must admit I laughed out loud at the video's linked by Mr Laurensios. This is the kind of conspiracy nonsense I expect from extreme right Tea Party types.”



Ad hominem fallacy and the genetic fallacy.



The ad hominem fallacy is a technique where you attack the person making the argument instead of the argument itself. While I obviously wasn't attacked in the active tense (i.e. “He IS an extreme right Tea Part type who spouts conspiracy nonsense”), the message was pretty clear: name-calling.



The genetic fallacy is a technique that judges the validity of an argument based on where it comes from (example: “He's wrong because he's young.”). As the links I provided were sources that would be expected from extreme right Tea Party types, they are thus conspiracy nonsense and worthy of laughter in the form of ridicule. This does not address the content of any of the sources and thus is a clear usage of the genetic fallacy.



6. “It's tempting and easier to create a boogy man and blame him for all our ill's,



Strawman fallacy/arguing beside the point. I did not blame any boogy man for all our ills.



7. “...but the fact is our system is not perfect and never will be perfect.”



This is a false dichotomy fallacy (also known as the false dilemma or black-and-white fallacies). This is a technique where only two options for an argument are given, and one option is considered correct once the other has been disproved. This is especially effective if the unwanted option presented is very easy to see as incorrect. “Perfection can never be attained in our system (a very reasonable statement), therefore our system is correct/good.” This a very clear example of the false dichotomy fallacy.

 

8. “Yes, there are malevolent forces at work, greed being among the most powerful, but that is human nature, not a characteristic of any specific economic system.”



Appeal to nature fallacy. This is where something is considered valid, justified, inevitable, or ideal because it is “natural”. This is in addition to the previous false dichotomy fallacy: Greed is human nature and thus inevitable, therefore our system cannot be perfect, therefore our system is correct/good.



9. “Blaming the Fed is totally ignoring the real problem. If you think for a second that greed would not flourish in socialism or communism, you were not paying attention to the last century.”



Another strawman argument/arguing beside the point. It was never suggested greed would not flourish in socialism or communism. This strawman argument in particular was useful in creating another ad hominem, that “I was not paying attention to the last century”, which is to claim I am ignorant of the subject.



Also, I thiiiiink I may have just been associated with socialism or communism, which would be another ad hominem and/or loaded language fallacy.



10. “Eliminating the Fed would only unchain the beast that is unbridled capitalism.”



Loaded language and ambiguity fallacies.



Loaded language is used to express a value judgment, which can cause a listener to adopt values when no good reason has been given for doing so. “Unbridled” is clearly accomplishing this here.



Ambiguity: It has been very unclear as to what is meant by capitalism up until this point.



11. “Lastly...Inflation. WTF? Yes, you want slight inflation.”



Strawman argument. I never said I didn't want inflation. Along with the original graph which was posted, you wrote the question: “Ask yourself this question. If the meme writer is correct, where is the inflation?” As the graph itself very clearly showed where the inflation was (every year since 1913 except for 1921, 22, 28, 29, 30, 31, 32, 33, 38, 39, 49, and 55), I made an effort to show that the inflation was indeed there in order to answer your question. I never mentioned one way or another whether this inflation was good or bad. The reason I posted the link was to show the presence of the inflation, not to provide an argument for or against it.



This strawman was clever because it was really quick—the entire rest of the paragraph was spent explaining why some inflation was good, which is often a useful technique to get another person caught up in the strawman argument by forgetting what the original point was.



12. “Now if the meme writer doesn't like regulated capital economics, that's fine. He should just say so. Instead, he misrepresents the system in a way that is either ignorant or disingenuous.”



Hasty generalization again. While the meme writer may be expressing disagreement with *a* regulation or a group of regulations, it is jumping to conclusions to say he “doesn't like regulated capital economics”.



13. “I suggest staying away from the conspiracy theorists and other " the sky is falling economic quackery"”



Genetic fallacy and loaded language. I'm not really sure what I'm supposed to understand with the term “conspiracy theorist”, but it is clearly being used as loaded language to question the value of the sources I provided. This of course leads to the genetic fallacy again, as it does not address the content of the sources, merely their supposed origin (i.e. “conspiracy theorists”). So then, which conspiracy theorists and which “sky is falling quackery” should I stay away from, which have I been associating with, and why?



14. “Educate yourself in solid economic theory and form opinions based on fact and economic history.”



Loaded language. It gives the impression, without supporting evidence, that I have not “educated myself in solid economic theory and formed opinions based on fact and economic history” already.



15. “And if you decide you don't like regulated capitalism, that's fine, but that's our system.”



I think this might be a 3-in-1. There is a “begging the question” fallacy (also known as circular logic), appeal to nature fallacy, and an ambiguity fallacy.



Begging the question: Basically, this says that it's okay if I develop opinions against regulated capitalism, but it's irrelevant and ultimately false, because nature of our system (appeal to nature) is regulated capitalism.



Ambiguity: The word “capitalism” still hasn't been adequately defined.



16. “I'm not sure I can recommend another place outside one adhering to capitalism that works any better.”



Another 3-in-1: Personal incredulity fallacy, hasty generalization fallacy, and ambiguity fallacy.



Personal incredulity: Finding something un-understandable or inconceivable does not affect its truth.

Hasty generalization: I never said, suggested, or implied that any system outside one adhering to capitalism is better.

Ambiguity: Capitalism is still undefined.



17. “The meme writer is the one being a sophist. The last sentence is a prime example of a specious argument. It sounds believable to those unfamiliar with economic theory or history, but when held up to scrutiny if fails the test.”



Tu quoque fallacy (a.k.a. the “you too!” fallacy), followed by a strawman argument. The meme writer being a sophist is a possibility, but that does not change and sophist techniques that you may use. The following reasons used to prove his sophistry is a strawman argument/arguing beside the point, as it does not address the original claim, which was that you are a sophist.

 

 

 

To which I received no response. Ah well. Maybe I got someone to look into sophistry or the sources I linked.

 

-Dylan

[GRosado]

That is what I call a total whoop ass lmao. You got him line by line. Another point for him as to why there isn't high price inflation but high monetary inflation is because banks are sitting on all the newly printed money from quantitative easing & as soon as they begin to loan that out on the near zero interest rate prices are gonna shoot up & we will experience Hyperinflation.