[{"content":"COMPONENTS OF THE INDIAN BANKING SYSTEM\nENTITIES LIABILITIES ASSETS EXAMPLES Individuals Mortgages, Loans, Taxes Deposits, Banknotes, Government Securities (G-Secs), Stocks, Bonds, Fund Units, SDLs, Benefit Payments High Net-Worth Individuals, Retail Investors, Family Offices, Other Individuals Businesses and Non-Profits Loans, Bonds, Equity, Commercial Paper, Taxes Deposits, Banknotes, Subsidies Tata Group, Reliance Industries, Infosys, Indian Red Cross Society, Small and Medium Enterprises Financial Institutions Deposits, Fund Units, Securities Issued, Taxes Loans, Mortgages, G-Secs, SDLs, Stocks, Bonds, Commercial Paper, Bank Reserves, Deposits, Banknotes, Bailouts State Bank of India, HDFC Bank, ICICI Bank, SBI Mutual Fund, Life Insurance Corporation of India Foreign Sector Deposits, Stocks, Bonds, Loans, Taxes G-Secs, Stocks, Bonds, Loans, Fund Units, Deposits, Banknotes Reserve Bank of Japan, Norges Bank Investment Management, Foreign Portfolio Investors (FPIs), Global Corporations Public Authorities, Government Trust Funds, State Governments Bonds, SDLs, Benefit Payments Government Securities, (State) Taxes Employees’ Provident Fund Organisation (EPFO), National Pension System (NPS Trust), State PSUs like NTPC, Indian Railways, Government of Maharashtra Reserve Bank of India (RBI) Banknotes, Bank Reserves Government Securities, Foreign Exchange Reserves, SDLs Reserve Bank of India (Mumbai, Regional Offices) Government of India Government Securities, Subsidies, Bailouts Taxes — NOTES\nThe components here are very similar to the Components of the US Banking System. Standard notes regarding the US system applies. There are some differences.\nThe Banknotes are Indian Rupees, issued by the Reserve Bank of India (RBI). Government Securities (G-Secs) are the US Treasuries analog. Foreign Exchange Reserves (US Dollars, Euro, Yen) form a significant part of the asset side of RBI. This is unlike the US case, which does not feature currencies other than US Dollars. (Thus, Bank Reserves and Foreign Exchange Reserves are delineated separately in the Indian case.) Foreign Exchange Reserves in the assets side of the RBI correspond to the bank reserves and banknotes in the liabilities side of the Federal Reserve and other significant central banks. Unlike the Federal Reserve, the RBI does not hold large quantities of Mortgage Backed Securities. Instead, it is heavily involved with the management of State Development Loans (SDLs) on its assets side. ","permalink":"https://blog.nath.page/posts/fiatindia/","summary":"\u003cp\u003e\u003cstrong\u003eCOMPONENTS OF THE INDIAN BANKING SYSTEM\u003c/strong\u003e\u003c/p\u003e\n\u003ctable\u003e\n\t\u003cthead\u003e\n\t\t\t\u003ctr\u003e\n\t\t\t\t\t\u003cth\u003eENTITIES\u003c/th\u003e\n\t\t\t\t\t\u003cth\u003eLIABILITIES\u003c/th\u003e\n\t\t\t\t\t\u003cth\u003eASSETS\u003c/th\u003e\n\t\t\t\t\t\u003cth\u003eEXAMPLES\u003c/th\u003e\n\t\t\t\u003c/tr\u003e\n\t\u003c/thead\u003e\n\t\u003ctbody\u003e\n\t\t\t\u003ctr\u003e\n\t\t\t\t\t\u003ctd\u003e\u003cstrong\u003eIndividuals\u003c/strong\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eMortgages, Loans, \u003cem\u003eTaxes\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eDeposits, Banknotes, Government Securities (G-Secs), Stocks, Bonds, Fund Units, SDLs, \u003cem\u003eBenefit Payments\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eHigh Net-Worth Individuals, Retail Investors, Family Offices, Other Individuals\u003c/td\u003e\n\t\t\t\u003c/tr\u003e\n\t\t\t\u003ctr\u003e\n\t\t\t\t\t\u003ctd\u003e\u003cstrong\u003eBusinesses and Non-Profits\u003c/strong\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eLoans, Bonds, Equity, Commercial Paper, \u003cem\u003eTaxes\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eDeposits, Banknotes, \u003cem\u003eSubsidies\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eTata Group, Reliance Industries, Infosys, Indian Red Cross Society, Small and Medium Enterprises\u003c/td\u003e\n\t\t\t\u003c/tr\u003e\n\t\t\t\u003ctr\u003e\n\t\t\t\t\t\u003ctd\u003e\u003cstrong\u003eFinancial Institutions\u003c/strong\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eDeposits, Fund Units, Securities Issued, \u003cem\u003eTaxes\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eLoans, Mortgages, G-Secs, SDLs, Stocks, Bonds, Commercial Paper, Bank Reserves, Deposits, Banknotes, \u003cem\u003eBailouts\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eState Bank of India, HDFC Bank, ICICI Bank, SBI Mutual Fund, Life Insurance Corporation of India\u003c/td\u003e\n\t\t\t\u003c/tr\u003e\n\t\t\t\u003ctr\u003e\n\t\t\t\t\t\u003ctd\u003e\u003cstrong\u003eForeign Sector\u003c/strong\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eDeposits, Stocks, Bonds, Loans, \u003cem\u003eTaxes\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eG-Secs, Stocks, Bonds, Loans, Fund Units, Deposits, Banknotes\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eReserve Bank of Japan, Norges Bank Investment Management, Foreign Portfolio Investors (FPIs), Global Corporations\u003c/td\u003e\n\t\t\t\u003c/tr\u003e\n\t\t\t\u003ctr\u003e\n\t\t\t\t\t\u003ctd\u003e\u003cstrong\u003ePublic Authorities, Government Trust Funds, State Governments\u003c/strong\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eBonds, SDLs, \u003cem\u003eBenefit Payments\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eGovernment Securities, \u003cem\u003e(State) Taxes\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eEmployees’ Provident Fund Organisation (EPFO), National Pension System (NPS Trust), State PSUs like NTPC, Indian Railways, Government of Maharashtra\u003c/td\u003e\n\t\t\t\u003c/tr\u003e\n\t\t\t\u003ctr\u003e\n\t\t\t\t\t\u003ctd\u003e\u003cstrong\u003eReserve Bank of India (RBI)\u003c/strong\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eBanknotes, Bank Reserves\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eGovernment Securities, Foreign Exchange Reserves, SDLs\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eReserve Bank of India (Mumbai, Regional Offices)\u003c/td\u003e\n\t\t\t\u003c/tr\u003e\n\t\t\t\u003ctr\u003e\n\t\t\t\t\t\u003ctd\u003e\u003cstrong\u003eGovernment of India\u003c/strong\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eGovernment Securities, \u003cem\u003eSubsidies\u003c/em\u003e, \u003cem\u003eBailouts\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003e\u003cem\u003eTaxes\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003e—\u003c/td\u003e\n\t\t\t\u003c/tr\u003e\n\t\u003c/tbody\u003e\n\u003c/table\u003e\n\u003cp\u003e\u003cstrong\u003eNOTES\u003c/strong\u003e\u003c/p\u003e","title":"Components of the Fiat Banking System (India-Centric)"},{"content":"This is a simplified depiction of the fiat banking system. Here, we will focus on the US system. Note how each liability of an entity corresponds to an asset of another entity and vice versa.\nCOMPONENTS OF THE US BANKING SYSTEM\nENTITIES LIABILITIES ASSETS EXAMPLES Individuals Mortgages, Loans, Taxes Deposits, Banknotes, Treasuries, Stocks, Bonds, MBS, Fund Shares, Benefit Payments High Net-Worth Individuals, Retail Investors, Family Offices, Other Individuals Businesses and Non-Profits Loans, Bonds, Stocks, Commercial Paper, Taxes Deposits, Banknotes, Subsidies Walmart, Caterpillar, American Red Cross, Powell\u0026rsquo;s Sweet Shoppe Financial Institutions Deposits, Fund Shares, MBS, Taxes Mortgages, Loans, Treasuries, Stocks, Bonds, MBS, Commercial Paper, Reserves, Deposits, Banknotes, Bailouts Bank of America, Vanguard, Fidelity Investments, Fannie Mae MBS Trusts, CalPERS Foreign Sector Deposits, Stocks, Bonds, Loans, Taxes Treasuries, Stocks, Bonds, Loans, MBS, Fund Shares, Deposits, Banknotes Bank of Japan, Norway Government Pension Fund Global, Foreign Corporations and Individuals Public Authorities and Government Trust Funds Bonds, Benefit Payments Treasuries Social Security Trust Fund, Medicare Hospital Insurance Trust Fund, Tennessee Valley Authority, Port Authority of New York and New Jersey Federal Reserve Banknotes, Reserves Treasuries, MBS Federal Reserve Bank of New York, Federal Reserve Bank of Chicago, Federal Reserve Bank of San Francisco US Federal Government Treasuries, Subsidies, Bailouts Taxes — NOTES\nFlow Items Interests are implied: loans include interest, deposits include interest, and so on. Similarly, obligations like pension obligations and insurance obligations are implied alongside fund shares. Taxes include seizures, tariffs, etc. Bailouts, subsidies, taxes are flows, not balance sheet items (as are interests and other obligations mentioned above). Regardless, I\u0026rsquo;ve chosen to include them to maintain a sense of who is liable to pay these to whom. These flow items have been italicized. Perhaps the more appropriate terms would be tax liability, taxing authority, benefits entitlement, benefits obligations, etc. Although, strictly speaking, these are not balance sheet items. Financial Institutions include Commercial Banks, Credit Unions, Money Market Funds, Mutual Funds, Pension Funds, Exchange Traded Funds, Insurance Companies. Mortgage Backed Securities (MBS) are formed by pooling and securitizing Mortgages through MBS Trusts. Agency MBS Trusts are formed by government-backed institutions like Freddie Mac and Fannie Mae. Private Trusts or Special-Purpose Vehicles are MBS Trusts formed by large private financial institutions like Goldman Sachs and Merrill Lynch. Private Label MBS are much less common than Agency MBS. Treasuries and Agency MBS account for over 95% of the Federal Reserve\u0026rsquo;s assets. Foreign Sector This includes Foreign Central Banks, Commercial Banks, Sovereign Wealth Funds, Governments, Corporations, Households. The liabilities are • Foreign Stocks, Bonds, Loans held by US entities, • US entities\u0026rsquo; deposits in Foreign Banks, and • Taxes owed by Foreign entities to the US Government. The assets are • US Treasuries, Stocks, Bonds, MBS held by foreigners, • foreign entities\u0026rsquo; deposits in US Banks, • (not included in this table) taxes/obligations owed by US entities to foreign governments/entities. Financial assets are featured above. These are items that are someone else\u0026rsquo;s liabilities. Thus, items like gold, equipment, real estate, infrastructure (in the case of Public Authorities) which do not have corresponding liabilities are not listed here. Arguably, inflation should be included as well. An asset for the government, liability for anyone holding the currency. See also Components of the Indian Banking System. ","permalink":"https://blog.nath.page/posts/fiat/","summary":"\u003cp\u003eThis is a simplified depiction of the fiat banking system. Here, we will focus on the US system. Note how each liability of an entity corresponds to an asset of another entity and vice versa.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eCOMPONENTS OF THE US BANKING SYSTEM\u003c/strong\u003e\u003c/p\u003e\n\u003ctable\u003e\n\t\u003cthead\u003e\n\t\t\t\u003ctr\u003e\n\t\t\t\t\t\u003cth\u003eENTITIES\u003c/th\u003e\n\t\t\t\t\t\u003cth\u003eLIABILITIES\u003c/th\u003e\n\t\t\t\t\t\u003cth\u003eASSETS\u003c/th\u003e\n\t\t\t\t\t\u003cth\u003eEXAMPLES\u003c/th\u003e\n\t\t\t\u003c/tr\u003e\n\t\u003c/thead\u003e\n\t\u003ctbody\u003e\n\t\t\t\u003ctr\u003e\n\t\t\t\t\t\u003ctd\u003e\u003cstrong\u003eIndividuals\u003c/strong\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eMortgages, Loans, \u003cem\u003eTaxes\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eDeposits, Banknotes, Treasuries, Stocks, Bonds, MBS, Fund Shares, \u003cem\u003eBenefit Payments\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eHigh Net-Worth Individuals, Retail Investors, Family Offices, Other Individuals\u003c/td\u003e\n\t\t\t\u003c/tr\u003e\n\t\t\t\u003ctr\u003e\n\t\t\t\t\t\u003ctd\u003e\u003cstrong\u003eBusinesses and Non-Profits\u003c/strong\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eLoans, Bonds, Stocks, Commercial Paper, \u003cem\u003eTaxes\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eDeposits, Banknotes, \u003cem\u003eSubsidies\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eWalmart, Caterpillar, American Red Cross, Powell\u0026rsquo;s Sweet Shoppe\u003c/td\u003e\n\t\t\t\u003c/tr\u003e\n\t\t\t\u003ctr\u003e\n\t\t\t\t\t\u003ctd\u003e\u003cstrong\u003eFinancial Institutions\u003c/strong\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eDeposits, Fund Shares, MBS, \u003cem\u003eTaxes\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eMortgages, Loans, Treasuries, Stocks, Bonds, MBS, Commercial Paper, Reserves, Deposits, Banknotes, \u003cem\u003eBailouts\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eBank of America, Vanguard, Fidelity Investments, Fannie Mae MBS Trusts, CalPERS\u003c/td\u003e\n\t\t\t\u003c/tr\u003e\n\t\t\t\u003ctr\u003e\n\t\t\t\t\t\u003ctd\u003e\u003cstrong\u003eForeign Sector\u003c/strong\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eDeposits, Stocks, Bonds, Loans, \u003cem\u003eTaxes\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eTreasuries, Stocks, Bonds, Loans, MBS, Fund Shares, Deposits, Banknotes\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eBank of Japan, Norway Government Pension Fund Global, Foreign Corporations and Individuals\u003c/td\u003e\n\t\t\t\u003c/tr\u003e\n\t\t\t\u003ctr\u003e\n\t\t\t\t\t\u003ctd\u003e\u003cstrong\u003ePublic Authorities and Government Trust Funds\u003c/strong\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eBonds, \u003cem\u003eBenefit Payments\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eTreasuries\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eSocial Security Trust Fund, Medicare Hospital Insurance Trust Fund, Tennessee Valley Authority, Port Authority of New York and New Jersey\u003c/td\u003e\n\t\t\t\u003c/tr\u003e\n\t\t\t\u003ctr\u003e\n\t\t\t\t\t\u003ctd\u003e\u003cstrong\u003eFederal Reserve\u003c/strong\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eBanknotes, Reserves\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eTreasuries, MBS\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eFederal Reserve Bank of New York, Federal Reserve Bank of Chicago, Federal Reserve Bank of San Francisco\u003c/td\u003e\n\t\t\t\u003c/tr\u003e\n\t\t\t\u003ctr\u003e\n\t\t\t\t\t\u003ctd\u003e\u003cstrong\u003eUS Federal Government\u003c/strong\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003eTreasuries, \u003cem\u003eSubsidies\u003c/em\u003e, \u003cem\u003eBailouts\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003e\u003cem\u003eTaxes\u003c/em\u003e\u003c/td\u003e\n\t\t\t\t\t\u003ctd\u003e—\u003c/td\u003e\n\t\t\t\u003c/tr\u003e\n\t\u003c/tbody\u003e\n\u003c/table\u003e\n\u003cp\u003e\u003cstrong\u003eNOTES\u003c/strong\u003e\u003c/p\u003e","title":"Components of the Fiat Banking System (US-Centric)"},{"content":"In earlier posts, I have regarded inflation as counterfeiting conducted by the government. This is not hyperbole. It is merely calling an activity its proper name.\nThe Illegal Case To understand this label, let us go over what happens when an ordinary criminal counterfeits money. Suppose these fake tokens are virtually indistinguishable from already circulating monetary units. The criminal and his associates are able to go to the market and buy goods and services at prevailing rates. These people benefit the most: they did not even have to part with anything of value to obtain these tokens.\nThen, the sellers who received these fake monetary units are able to purchase goods and services at prevailing market rates. They do not benefit as much as the criminals for they had to first sell something of value. Nevertheless, they see a short term rise in their profits, as the criminals present demand in excess of what they had prior to the counterfeiting.\nSoon, the fake tokens circulate in the neighborhood. The further you go from the criminals, the more diluted these increased profits become.\nAs the fake tokens spread throughout the economy, the effect on prices becomes apparent. We have more monetary tokens chasing the same supply of goods and services. Thus, the price levels increase. People geographically furthest from the counterfeiters receive the tokens last. They face increased prices before the tokens arrive in their neighborhoods. Consequently, they are hurt the most.\nEffectively, anyone receiving the fake tokens after the price increases pays to those who received the tokens before the prices rose. This illicit counterfeiting has caused an implicit wealth transfer.\nThe Legal Case Is the above not similar to what happens during inflation? The government spends in excess of its revenues and the central bank manipulates its databases to meet the shortfall. The central bank creates new reserves. This is counterfeit money in all but name. More monetary units than before will soon circulate in the economy, chasing the same amount of goods and services, thus, bidding up their prices.\nRecipients government subsidies, contracts, projects, etc. will receive these new monetary units the soonest. These beneficiaries will be able to conduct economic activities before the price levels rise and, thus, benefit from the inflation.\nNew reserves created by central banks become part of the assets of commercial banks. More assets allow these commercial banks to lend more. Entities who are able to avail large, low-rate, long-duration loans are also able to benefit from inflation.\nWhen prices rise, ordinary businesses, in response to growing input costs, are able to increase their selling prices, thus counteracting the adverse effects of inflation. However, large segments of the population are able to increase their incomes much later, if at all. Recipients of salary, pension, and other fixed income are the ones worst hit.\nThe main difference between the legal and illegal cases is the geographic factor of the illegal case. In the case of legal counterfeiting, physical proximity to the counterfeiter does not matter; instead the distance from the money printer in the fiat financial network does.\nIn both cases, wealth is being redistributed (without consent) from late receivers of new monetary units to the early ones. In both cases, the purchasing power of certain entities is getting stolen.\nArguably, legal counterfeiting is the more destructive form. Illegal operations are a rounding error compared to the legal ones. In the illegal case, the fake tokens may be detected and destroyed, and the criminals penalized. But in the legal counterfeiting scenario, the counterfeit money is, by decree, legal tender. And worst of all, the public has been propagandized not to view it as counterfeiting.\nReferences Rothbard, Murray. What Has Government Done To Our Money? Chapter 2. Related Notes Thinking Correctly About Inflation How Governments Generate Revenue Effects of Inflation ","permalink":"https://blog.nath.page/posts/inflation4/","summary":"\u003cp\u003eIn earlier posts, I have regarded inflation as counterfeiting conducted by the government. This is not hyperbole. It is merely calling an activity its proper name.\u003c/p\u003e\n\u003ch2 id=\"the-illegal-case\"\u003eThe Illegal Case\u003c/h2\u003e\n\u003cp\u003eTo understand this label, let us go over what happens when an ordinary criminal counterfeits money. Suppose these fake tokens are virtually indistinguishable from already circulating monetary units. The criminal and his associates are able to go to the market and buy goods and services at prevailing rates. These people benefit the most: they did not even have to part with anything of value to obtain these tokens.\u003c/p\u003e","title":"Inflation is Legalized Counterfeiting"},{"content":"Inflation (that is, the counterfeiting of money by the government) has several destructive effects on the economy. It transfers wealth from late recipients of newly issued monetary units to those who receive them relatively earlier. It hurts the ability of economic actors to perform economic calculation. It degrades the quality of goods and services produced in the economy. Furthermore, it causes boom and bust cycles in the economy.\nWealth Redistribution The overall effect of the introduction of new monetary tokens is a general increase in price levels. But this effect is neither smooth nor instantaneous. Not everyone acquires an equal amount of these tokens, or at the same time. Also, not all prices rise proportionately, or at the same time.\nThe early recipients of these tokens are able to buy goods and services at prevailing rates. Those they transact with, similarly, are able to conduct economic activities without experiencing a rise in prices. However, as the tokens spread throughout the economy, people start bidding up the prices: after all, there are more monetary tokens than earlier but the stock of goods and services are at the same level. Those who receive these tokens later, that is after the price levels of the goods and services they wish to purchase, suffer. Effectively, this is a wealth transfer from late receivers to the early receivers.\nIn the current economy, government contractors, subsidy recipients, corporate entities capable of borrowing large amounts at low rates, are the early receivers. In the middle are common businesses that, in response to rising input costs, can increase the prices of the goods and services they sell. Recipients of salary, pensioners, bond holder and so on, are at the end, losing the most.\nEconomic Miscalculations While inflation is taking place, it is impossible to distinguish a transitional rise in price from a permanent one. As a result, individuals and businesses budget inappropriately. Businesses set aside too little for the replacement of capital goods and end up overestimating profits. Stock and bond holders also overestimate their real gains. Due to illusory profits, economic actors end up consuming a part of their capital without meaning to.\nQuality Degradation Because consumers are more sensitive to nominal price increases, to preserve profits, businesses have to lower the quality of their offerings. Ingredients are replaced with cheaper alternatives, services are reduced, and even the quantity of goods in packages is reduced. The overall quality of goods and services in the economy falls.\nBusiness Cycles Inflation is responsible for boom and bust cycles. Illusory profits and access to cheap loans incentivize businesses to expand production, hire more labor, and borrow more. More businesses enter the industry. But after the permanent price rises become apparent, many of these investments are revealed to be malinvestments. They are forced to halt expansion, which leads to capital destruction in many cases. They are forced to lay off workers, leading to mass unemployment. Several businesses, unable to meet their debt obligations, are forced to exit the market. The injection of monetary tokens causes a cycle of exuberance and capital misallocation followed by capital destruction and mass misery.\nReferences Rothbard, Murray. What Has Government Done To Our Money? Chapter 2. Related Notes Thinking Correctly About Inflation When Money is Abundant, Everything Else is Scarce How Governments Generate Revenue ","permalink":"https://blog.nath.page/posts/inflation3/","summary":"\u003cp\u003eInflation (that is, the counterfeiting of money by the government) has several destructive effects on the economy. It transfers wealth from late recipients of newly issued monetary units to those who receive them relatively earlier. It hurts the ability of economic actors to perform economic calculation. It degrades the quality of goods and services produced in the economy. Furthermore, it causes boom and bust cycles in the economy.\u003c/p\u003e\n\u003ch2 id=\"wealth-redistribution\"\u003eWealth Redistribution\u003c/h2\u003e\n\u003cp\u003eThe overall effect of the introduction of new monetary tokens is a general increase in price levels. But this effect is neither smooth nor instantaneous. Not everyone acquires an equal amount of these tokens, or at the same time. Also, not all prices rise proportionately, or at the same time.\u003c/p\u003e","title":"Effects of Inflation"},{"content":"Private individuals and businesses must either sell something of value to acquire money or expend time and resources to mine it directly (think of gold mining in the case of a gold standard). Governments, in contrast, do not obtain payment for goods or services they produce; they generate revenues through the seizure of assets. In the past, they might have sent their agents to seize grains, cattle, coins, etc. from people. But in a monetary economy, they simply seize monetary assets, which is a lot easier to do.\nSuch seizure is commonly called taxation. This is often the main mechanism of revenue generation for governments.\nTo a lesser extent, governments engage in direct seizure of goods and services as well. Examples include seizure of land under eminent domain, quartering of troops in occupied lands, conscription, mandatory jury duty, forcing business to keep tax records and collect withholding taxes, etc. These also contribute to government revenues.\nThese two forms of revenue generation are quite transparent. Coercive, but apparent.\nThe third way, sometimes the largest way, in which they generate revenue is through counterfeiting of money, otherwise described as the expansion in the volume of monetary units, or inflation. This is a subtle form of seizure: through inflation (aka legalized counterfeiting), governments steal the citizens\u0026rsquo; purchasing power. They use these ersatz monetary units to acquire the public\u0026rsquo;s resources.\nUnlike monetary taxation and direct seizure, counterfeiting of money is less likely to generate public outrage due to its obscure nature.\nGovernments use these three forms of taxes to buy the goods and services they want, or pass on subsidies to various favored groups.\nReferences Rothbard, Murray. What Has Government Done To Our Money? Chapter 2. Related Inflation is Legalized Counterfeiting Effects of Inflation ","permalink":"https://blog.nath.page/posts/taxation/","summary":"\u003cp\u003ePrivate individuals and businesses must either sell something of value to acquire money or expend time and resources to mine it directly (think of gold mining in the case of a gold standard). Governments, in contrast, do not obtain payment for goods or services they produce; they generate revenues through the seizure of assets. In the past, they might have sent their agents to seize grains, cattle, coins, etc. from people. But in a monetary economy, they simply seize monetary assets, which is a lot easier to do.\u003c/p\u003e","title":"How Governments Generate Revenue"},{"content":"In a free banking system, various banks issue various banknotes. The banks set their policies independently and compete with other banks in the free market. This is distinct from the central banking system we experience today, where a central bank dictates key requirements the chartered banks must obey, and these banks issue a single fiat currency.\nOne important decision a bank needs to make in a free banking system is how much reserves it shall hold on to at any moment to meet the withdrawal demands of the depositors. If the reserves are less than 100% of the deposits, the bank engages in fractional reserve banking. (Setting aside the question of morality of such a system, free banks with fractional reserves have emerged in the free market and operated for a long time in the past.)\nWhat keeps these independent banks from setting a reserve that is too low? How does the market enforce a lower bound on the percentage of reserves a bank would hold? Or, equivalently, how does the market enforce an upper bound on the issuance of inflationary money substitutes (here, claims on deposits in excess of the reserves held)?\nThere would be people/entities who would not want to deal in banknotes at all. In order to deal with such entities, the banks would have to keep adequate amounts of the money (the base asset, perhaps gold). The amount of money substitute (banknotes) creation a bank may create would be proportionate to the size of their clientele. If a bank has two clients who only transact among themselves, the banknotes move from one client to another and no claim on the base asset is ultimately made. But suppose a client deals with a client of another bank, the banknotes issued by the first bank reaches the second bank, which then demands from the first bank a commensurate payment in money (the base asset). This compels the banks to hold reserves. The confidence of the depositors is key in this system. If they suspect that their bank is financially unsound, there will be a run on the bank, actualizing its bankruptcy. This holds even if the banks coordinate amongst themselves to accept each others\u0026rsquo; money substitutes without demanding settlement in money. In this case, anti-fractional reserve system advocates (Anti-Bank Leagues) would emerge, advocating for bank runs, compromising the reputations of the banks. These factors would force the banks to exercise prudence and maintain sufficient reserves. Those not careful would run the risk to being revealed to be bankrupt, and subsequently compelled to exit the banking industry.\nReferences Rothbard, Murray. What Has Government Done To Our Money? Chapter 1. Related Notes The Immorality of Fractional Reserve Banking ","permalink":"https://blog.nath.page/posts/freebanklim/","summary":"\u003cp\u003eIn a free banking system, various banks issue various banknotes. The banks set their policies independently and compete with other banks in the free market. This is distinct from the central banking system we experience today, where a central bank dictates key requirements the chartered banks must obey, and these banks issue a single fiat currency.\u003c/p\u003e\n\u003cp\u003eOne important decision a bank needs to make in a free banking system is how much reserves it shall hold on to at any moment to meet the withdrawal demands of the depositors. If the reserves are less than 100% of the deposits, the bank engages in fractional reserve banking. (Setting aside \u003ca href=\"https://blog.nath.page/posts/frb/\"\u003ethe question of morality of such a system\u003c/a\u003e, free banks with fractional reserves have emerged in the free market and operated for a long time in the past.)\u003c/p\u003e","title":"Natural Limits on Free Banking Reserve Requirements"},{"content":"Before discussing fractional reserve banking, let\u0026rsquo;s go over the concept of full reserve banking. Suppose a bank takes in total deposits worth $100 million from its depositors. The bank promises the depositors that they may withdraw their deposits anytime. The bank, in this case, simply acts as a warehouse for the money deposited, collecting fees from the depositors in return. At any time, all deposited money remains within the bank; and at any time, any or all depositors may come to collect the money they have deposited. This is full reserve banking: all the deposits remain in reserve.\nHowever, it is unlikely that all the depositors will arrive at an instance to demand all their deposits. Suppose the bank estimates that even if it simply holds on to $75 million, it will be able to meet the likely withdrawal demands of the depositors. Thus, the bank is able to lend out $25 million and earn interest on those loans. Due to these interest earnings, the bank is able to waive fees for its depositors, and perhaps even pay them a small amount of interest. This is fractional reserve banking. The bank is keeping only a fraction (here, 75%) of its deposits as reserve.\nRothbard asks the question, \u0026ldquo;Would fractional reserve banking be permitted in a free market, or would it be proscribed as fraud?\u0026rdquo; In the case above, the bank has lent out $25 million. Thus, if the depositors demanded any amount over $75 million at any instant, the bank would not be able to honor its promise. By lending, the bank has already entered a state of bankruptcy, although this bankruptcy will only be revealed if the depositors lose confidence and make a run on the bank. The bank has engaged in the act of issuing fraudulent promises worth $25 million. Which depositors will be defrauded, again, will only be revealed in the low-probability scenario of a bank run.\nThe bank is relying on the scenario in which its false promises is not caught. This is clearly immoral. The fact that a bank run is a low-probability scenario does not somehow make the fraud moral. It is simply not ethical to make promises we know are impossible to keep.\nLegality, however, is a different matter. Governments all around the planet make special exceptions for banks. Most countries have set their reserve requirements to 10%; several have set it to zero! A grand con game is in play. Depositors do not realize that they are merely the unsecured creditors of their banks.\nOne final point: credit is still possible under full reserve banking. There are honest ways to lend. One way is through term deposits. With these deposits, depositors are only able to withdraw their money after a certain term expires, and the bank may lend out the deposits during this time. Other ways involve not using banks at all: someone with the money to lend may directly lend to the borrower under the terms they agree on. The depositor/bank/lender might still lose money in these cases; after all, lending involves an element of risk. However, the fraud is not systematically embedded into the banking system.\nReferences Rothbard, Murray. What Has Government Done To Our Money? Chapter 1. ","permalink":"https://blog.nath.page/posts/frb/","summary":"\u003cp\u003eBefore discussing fractional reserve banking, let\u0026rsquo;s go over the concept of full reserve banking. Suppose a bank takes in total deposits worth $100 million from its depositors. The bank promises the depositors that they may withdraw their deposits anytime. The bank, in this case, simply acts as a warehouse for the money deposited, collecting fees from the depositors in return. At any time, all deposited money remains within the bank; and at any time, any or all depositors may come to collect the money they have deposited. This is full reserve banking: all the deposits remain in reserve.\u003c/p\u003e","title":"The Immorality of Fractional Reserve Banking"},{"content":"In no particular order, the following are some of my favorite anime shows. These are all completed series I have fully watched, sometimes multiple times.\nAvatar: The Last Airbender This is the series that really got me into watching anime. A fun story about the last airbender traveling through different lands and ultimately defeating the evil king in the fire nation. Simple, children\u0026rsquo;s cartoon with excellent characters and relatively predictable plotlines, but very well executed.\nDeath Note This is one of the first anime I watched. The premise got me hooked immediately. A shinigami drops a diary upon the earth. The diary is special: anyone who\u0026rsquo;s name is written on it dies. A high school student finds the Death Note and immediately starts to build a world reflecting his ethics. The ending drags on for a little, but an overall gripping story.\nAssassination Classroom Another weird premise: An octopus monster has blown up the moon and threatens to do so to the earth unless he is allowed to teach Class 3E of Kunugigaoka Junior High School. The monster turns out to be very caring. He teaches the kids, among other things, how to be top assassins so that they can kill him before the term ends. A surprisingly wholesome show with an emotional ending.\nCastlevania A vampire hunter, a mage, and Dracula\u0026rsquo;s son endeavor to stop Dracula\u0026rsquo;s genocide of the human race. Perhaps the most complex characterization of Dracula. Great storytelling, fine fight choreography, and some of the sharpest, wittiest dialogues I\u0026rsquo;ve seen in any anime. The show drags on for a season too long; nevertheless it remains engaging throughout.\nSteins Gate The best time travel story. The MC and his friend build a time machine, which causes them to get involved in an intricate plot where every little action has unwanted knock-on effects. The MC has to go on a seemingly hopeless journey across multiple timelines to save his childhood firend, his girlfriend, and the world. Watch both Steins Gate and Steins Gate: Zero. The latter gives new meaning to the last few episodes of the former.\n","permalink":"https://blog.nath.page/posts/animerec/","summary":"\u003cp\u003eIn no particular order, the following are some of my favorite anime shows. These are all completed series I have fully watched, sometimes multiple times.\u003c/p\u003e\n\u003ch3 id=\"avatar-the-last-airbender\"\u003eAvatar: The Last Airbender\u003c/h3\u003e\n\u003cp\u003e\u003cimg loading=\"lazy\" src=\"/images/an_atla.webp\"\u003e\nThis is the series that really got me into watching anime. A fun story about the last airbender traveling through different lands and ultimately defeating the evil king in the fire nation. Simple, children\u0026rsquo;s cartoon with excellent characters and relatively predictable plotlines, but very well executed.\u003c/p\u003e","title":"Some of My Favorite Anime"},{"content":"Any amount of money in an economy is \u0026lsquo;abundant\u0026rsquo; provided it can be divided and combined according to the needs of the economic actors. That\u0026rsquo;s not the kind of abundance I\u0026rsquo;m referring to in the title. I\u0026rsquo;m instead referring to monetary inflation. More than the absolute stock of money, what\u0026rsquo;s relevant is the rate at which it is increasing.\nThe Medium of Exchange Problem As discussed in Price and Money, a price is simply the exchange rate between two goods/services. Money is a good that acts as a medium of exchange, negating the need for double coincidence of wants. Due to the prevalence of money, Adam can sell his service to \u0026lsquo;buy\u0026rsquo; money, and then \u0026lsquo;sell\u0026rsquo; the money to buy goods he wants. This renders unnecessary for the sellers of those goods to desire Adam\u0026rsquo;s service before Adam may have his wants met.\nWhen the volume of money increases, if the stock of goods and services remains the same, we can expect the price levels to rise. Even with perfect information about how much the volume of money is increasing by, predicting how much the prices of each goods and services will increase by is impossible. Entrepreneurs become unable to planning production and expansion properly. Facing the prospect of growing input costs without a guaranteed increase in revenues, they hesitate to expand or cut back on production. Thus, the supply of goods and services fall, or do not grow at the rate they would if the money was more reliable.\n(Note that obtaining such perfect information about monetary expansion is impossible too. While this inflation is taking place, we cannot know how much the inflation is. Only later do (estimates of) these numbers get published. Furthermore, predicting the inflation rate in the coming weeks and months is also impossible.)\nThis is what I\u0026rsquo;m calling the medium of exchange problem with inflationary money: Inflationary money causes the supply of goods and services to fall.\nThe Store of Value Problem We expect money to be a decent store of value. A unit of money we have saved up through hard work should be able to buy in the proximate future roughly what it buys today. Inflation makes a joke out of this idea.\nWhile the purchasing power of inflationary money drops, we note that things that are increasing in supply at lower rate than money hold on to their purchasing power better. They function as better \u0026lsquo;money\u0026rsquo; than the canonical money itself! (Sure they bring frictions that a medium of exchange is designed to negate, but overall, due their better store of value function, they act as better monetary units.) Thus, the store of value problem with inflationary money: Inflationary money causes other things to act as money.\nPeople who simply wish to save are forced to gamble on stocks, bonds, real estate, metals, and all manner of things. The problem is particularly apparent in real estate. People with money they would like to save buy second and third homes just to park their money there. Prices of homes bid up because they now have a monetary premium associated with them. Meanwhile, the young and the poor face a scarcity of housing.\nThe medium of exchange problem creates scarcity, while the store of value problem exacerbates it further.\nRelated Notes Gresham\u0026rsquo;s Law Clarified Gresham\u0026rsquo;s Law and Price Ceilings Thinking Correctly About Inflation Effects of Inflation ","permalink":"https://blog.nath.page/posts/inflation2/","summary":"\u003cp\u003eAny amount of money in an economy is \u0026lsquo;abundant\u0026rsquo; provided it can be divided and combined according to the needs of the economic actors. That\u0026rsquo;s not the kind of abundance I\u0026rsquo;m referring to in the title. I\u0026rsquo;m instead referring to monetary inflation. More than the absolute stock of money, what\u0026rsquo;s relevant is the rate at which it is increasing.\u003c/p\u003e\n\u003ch2 id=\"the-medium-of-exchange-problem\"\u003eThe Medium of Exchange Problem\u003c/h2\u003e\n\u003cp\u003eAs discussed in \u003ca href=\"https://blog.nath.page/posts/price/\"\u003ePrice and Money\u003c/a\u003e, a price is simply the exchange rate between two goods/services. Money is a good that acts as a medium of exchange, negating the need for double coincidence of wants. Due to the prevalence of money, Adam can sell his service to \u0026lsquo;buy\u0026rsquo; money, and then \u0026lsquo;sell\u0026rsquo; the money to buy goods he wants. This renders unnecessary for the sellers of those goods to desire Adam\u0026rsquo;s service before Adam may have his wants met.\u003c/p\u003e","title":"When Money is Abundant, Everything Else is Scarce"},{"content":"Central bankers and economic textbooks will have you believe that economic inflation is \u0026ldquo;an increase in the general price levels.\u0026rdquo; Due to inflation, your money is worth less than before—its purchasing power lower than it used to be. Capitalism, fall in supply, rise in demand, etc. are blamed. Everything but the main culprit is discussed. This is an instance of exclusionary detailing. Learn to see through the smoke and mirrors.\nThink of other contexts in which the word is used. A balloon or a tire tube is inflated. Inflation of the universe followed the Big Bang. In each of these cases, \u0026lsquo;inflation\u0026rsquo; is a volumetric concept.\nThis is no different in economics. Inflation refers to the increase in the volume of the money circulating in the economy. Why does this happen? Because governments spend more than they collect. This deficit is met by central banks manipulating numbers in their databases and creating new monetary units from thin air, thereby expanding money supply.\nNow a consequence of this inflation is that price levels rise. To distract us from the core issue, central bankers and economists working for the government have in recent years redefined inflation as \u0026ldquo;price level rise.\u0026rdquo; So essentially an action has been redefined to refer to the outcome of that action, so that the cause of that outcome is obscured.\nExpansion of M2 money supply, 1980-2018. Image by Wikideas1 - Data: https://fred.stlouisfed.org/graph/?g=1ajW#0\nRelated Notes When Money is Abundant, Everything Else is Scarce Inflation is Legalized Counterfeiting Effects of Inflation ","permalink":"https://blog.nath.page/posts/inflation/","summary":"\u003cp\u003eCentral bankers and economic textbooks will have you believe that economic inflation is \u0026ldquo;an increase in the general price levels.\u0026rdquo; Due to inflation, your money is worth less than before—its purchasing power lower than it used to be. Capitalism, fall in supply, rise in demand, etc. are blamed. Everything but the main culprit is discussed. This is an instance of exclusionary detailing. Learn to see through the smoke and mirrors.\u003c/p\u003e","title":"Thinking Correctly About Inflation"},{"content":"Just found out about this neat tool called imagemagick. I’m using it to compress jpg images small webp images for use on this blog.\nInstall it (in arch-based linux) using this command.\nsudo pacman -S imagemagick Then run\nmagick image.jpg -resize 1600x -quality 75 image.webp to create a compressed version of the image. Here the max pixel width is set at 1600 px, and the quality is at 75 (moderate compression).\nI was able to get a 2 MB image down to under 50 KB without a discernible drop in the image quality.\nThis tool also has other functions. For example, it can be used to remove image metadata (GPS, camera data, etc.) using the -strip option.\nmagick image.jpg -strip -resize 1600x -quality 75 image.webp Resources ImageMagick website Sunny Srinidhi Medium article ","permalink":"https://blog.nath.page/posts/imagemagick/","summary":"\u003cp\u003eJust found out about this neat tool called \u003ccode\u003eimagemagick\u003c/code\u003e. I’m using it to compress jpg images small webp images for use on this blog.\u003c/p\u003e\n\u003cp\u003eInstall it (in arch-based linux) using this command.\u003c/p\u003e\n\u003cdiv class=\"highlight\"\u003e\u003cpre tabindex=\"0\" style=\"color:#f8f8f2;background-color:#272822;-moz-tab-size:4;-o-tab-size:4;tab-size:4;-webkit-text-size-adjust:none;\"\u003e\u003ccode class=\"language-bash\" data-lang=\"bash\"\u003e\u003cspan style=\"display:flex;\"\u003e\u003cspan\u003esudo pacman -S imagemagick\n\u003c/span\u003e\u003c/span\u003e\u003c/code\u003e\u003c/pre\u003e\u003c/div\u003e\u003cp\u003eThen run\u003c/p\u003e\n\u003cdiv class=\"highlight\"\u003e\u003cpre tabindex=\"0\" style=\"color:#f8f8f2;background-color:#272822;-moz-tab-size:4;-o-tab-size:4;tab-size:4;-webkit-text-size-adjust:none;\"\u003e\u003ccode class=\"language-bash\" data-lang=\"bash\"\u003e\u003cspan style=\"display:flex;\"\u003e\u003cspan\u003emagick image.jpg -resize 1600x -quality \u003cspan style=\"color:#ae81ff\"\u003e75\u003c/span\u003e image.webp\n\u003c/span\u003e\u003c/span\u003e\u003c/code\u003e\u003c/pre\u003e\u003c/div\u003e\u003cp\u003eto create a compressed version of the image. Here the max pixel width is set at 1600 px, and the quality is at 75 (moderate compression).\u003c/p\u003e","title":"ImageMagick"},{"content":"\nIn Saifedean Ammous\u0026rsquo; podcast with Thomas Massey, Hayek is accused of being a little too socialist and his book The Road to Serfdom overrated. He is praised, however, for being diplomatic enough with the mainstream to remain relevant until winning the Swedish Central Bank Prize (the so-called Nobel Prize), and then speaking the anarchist language.\nThe Road to Serfdom is the only book by Friedrich Hayek that I have read, and based on just that, I have to disagree with the socialist-lite characterization. The ideas he promotes are libertarian. He does not go up against the Keynesians, but then, the book was meant to target socialists, which it did.\nHayek confines the roles of the government to formulating a legal framework for all economic actors to function within, and enforcing predetermined penalties upon lawbreakers. Is this what\u0026rsquo;s regarded as socialism-lite?\nI don\u0026rsquo;t know what an anarchist critique to this position would be. If I am to speculate, it is that even creating a legal framework by government entities is top-down (hence, coercive) and unessential. Laws emerge from interactions among men over time. In the past, governments simply adopted these emergent laws to boost their legitimacy, just like governments adopted gold (the money that naturally arose from free commerce) as currency to boost their legitimacy. A government is no more needed for making laws than it is needed for making money. Courts and other enforcement mechanisms would emerge naturally in the free market without government meddling, and they would serve us better than governments would.\n","permalink":"https://blog.nath.page/posts/rtsnote/","summary":"\u003cp\u003e\u003cimg alt=\"Hayek\" loading=\"lazy\" src=\"/images/hayek.webp\"\u003e\u003c/p\u003e\n\u003cp\u003eIn \u003ca href=\"https://www.youtube.com/watch?v=o6GTrNuCkP4\"\u003eSaifedean Ammous\u0026rsquo; podcast with Thomas Massey\u003c/a\u003e, Hayek is accused of being a little too socialist and his book \u003cem\u003eThe Road to Serfdom\u003c/em\u003e overrated. He is praised, however, for being diplomatic enough with the mainstream to remain relevant until winning the Swedish Central Bank Prize (the so-called Nobel Prize), and then speaking the anarchist language.\u003c/p\u003e\n\u003cp\u003e\u003cem\u003eThe Road to Serfdom\u003c/em\u003e is the only book by Friedrich Hayek that I have read, and based on just that, I have to disagree with the socialist-lite characterization. The ideas he promotes are libertarian. He does not go up against the Keynesians, but then, the book was meant to target socialists, which it did.\u003c/p\u003e","title":"Is Hayek Socialist? A Note on The Road to Serfdom"},{"content":" Did Qifrey just wipe Nolnoa\u0026rsquo;s memories? How much of them did he wipe? This cannot be good.\nWitch Hat Atelier was much anticipated, and I have been watching each episode as it\u0026rsquo;s getting released. Little pre-teen girl casts a spell that kills/traps her mother, gets adopted into an atelier, and begins her journey into the precarious world of witchcraft. The artwork and animation are great. The over the top expressions often are too annoying. The character-work is excellent.\nAlthough some themes are heavy, it is hard to see how the anime gets a \u0026lsquo;seinen\u0026rsquo; tag. Shonen too have dark themes often.\nBut 1x8 showed us glimpses of why the show will turn increasingly seinen. We just had a character we love cast a curse on an innocent old man who was helping him.\nBeautiful setup by the way. We dealt with memory deletion thrice in the episode: first, right at the outset when the knight started the process on Coco; then in the admonishment to Coco and Agott from Qifery; and finally at the end, off-screen.\nNolnoa did Qifrey a favor and got attacked. Will Olruggio face something similar in the future?\nQifrey is setting up too many enemies around him. All is fine now, but they will collapse all at once.\nSeeing such a jovial, kind, and friendly being capable of attacking the old man was shocking. I was expecting it to go in the direction of Nolnoa discussing the matter with the Knights Moralis and Qifrey getting in trouble but somehow managing to convince the knights of his fair intentions. But now with the attack he has really done something wrong.\nTrying to advocate for Qifrey here. We don\u0026rsquo;t know enough about him at this point. Despite the similarities in the character designs, Qifrey is not Satoru Gojo, openly going against the higher ups because of his unquestionable superiority. We don\u0026rsquo;t know how strong Qifrey is and whether he is putting himself in mortal danger.\nIs there a way to justify his deed? Maybe he does not trust the Knights Moralis with the power. Perhaps he views them as corrupt/corruptible/or somehow linked with the enemies. Or perhaps he has realized that the ways of the Knights Moralis would not stand against the brimmed caps.\nAlso now Qifrey has told a major lie to Coco. She is being led to believe that Nolnoa accidentally gave her a potent ink, resulting in the mishap. Qifrey is hiding the enemy\u0026rsquo;s interference. Coco has no idea this is something to guard against.\nThis lie has to backfire in a big way.\n","permalink":"https://blog.nath.page/posts/wha1x8/","summary":"\u003cp\u003e\u003cimg alt=\"witch hat atelier 1x8\" loading=\"lazy\" src=\"/images/wha-1x8.webp\"\u003e\nDid Qifrey just wipe Nolnoa\u0026rsquo;s memories? How much of them did he wipe? This cannot be good.\u003c/p\u003e\n\u003cp\u003eWitch Hat Atelier was much anticipated, and I have been watching each episode as it\u0026rsquo;s getting released. Little pre-teen girl casts a spell that kills/traps her mother, gets adopted into an atelier, and begins her journey into the precarious world of witchcraft. The artwork and animation are great. The over the top expressions often are too annoying. The character-work is excellent.\u003c/p\u003e","title":"Witch Hat Atelier 1x8"},{"content":"Note that the law applies not just to a particular type of coins, but to the exchange rates between different money commodities as well. Suppose in a bimetallic standard, metal A is pegged to metal B at a ratio of 1:10, but the market value of a unit of metal A is 12x that of metal B. In this case, we have a price ceiling whereby metal A is artificially undervalued, and per Gresham\u0026rsquo;s Law, will be driven out of circulation.\nLet\u0026rsquo;s revisit the concept of price. Rothbard notes that price, in essence, refers to purchasing power. Consider the statement \u0026ldquo;The price of a cup is $5.\u0026rdquo; This means that the purchasing power of $5 is a cup, but also, reflexively, the purchasing power of a cup is $5. In the latter formulation, the cup-seller can think of buying five dollars with a cup.\nNow what happens if the government inflates the dollar supply? There are more dollars in circulation, but the stock of goods and services in the economy remains the same. The prices bid up, so now the cup costs, say, $7. The purchasing power of the dollar has fallen, and the purchasing power of the cup has increased. (One of the desired properties of money is that of \u0026ldquo;store of value.\u0026rdquo; But in this dollar inflation scenario, we note that the cup is serving as a better store of value than the canonical money.)\nNow suppose the government enforces a price ceiling on cups using the pretext of protecting consumers. The government would really be asking people to pretend that something worth $7 (the cup) is worth $6 (the six dollar bills). In this case, by Gresham\u0026rsquo;s Law, we would expect cups to be hoarded, or taken out of circulation (perhaps exported to another country or sold in black markets.)\nThus, Gresham\u0026rsquo;s Law dooms price ceilings. Anything artificially undervalued by such mechanisms will suffer removal from circulation.\nRelated Notes Thinking Correctly About Inflation When Money is Abundant, Everything Else is Scarce Gresham\u0026rsquo;s Law Clarified References Rothbard, Murray. What Has Government Done To Our Money? Chapter 1. ","permalink":"https://blog.nath.page/posts/greshamslaw2/","summary":"\u003cp\u003eNote that the law applies not just to a particular type of coins, but to the exchange rates between different money commodities as well. Suppose in a bimetallic standard, \u003ccode\u003emetal A\u003c/code\u003e is pegged to \u003ccode\u003emetal B\u003c/code\u003e at a ratio of 1:10, but the market value of a unit of \u003ccode\u003emetal A\u003c/code\u003e is 12x that of \u003ccode\u003emetal B\u003c/code\u003e. In this case, we have a price ceiling whereby \u003ccode\u003emetal A\u003c/code\u003e is artificially undervalued, and per Gresham\u0026rsquo;s Law, will be driven out of circulation.\u003c/p\u003e","title":"Gresham's Law and Price Ceilings"},{"content":"\nGresham\u0026rsquo;s Law is frequently oversimplified as \u0026ldquo;bad money drives good money out of circulation.\u0026rdquo; This phenomenon has been observed in history whenever debasement of coins has occurred. In such cases, people choose to collect coins with the greater precious metal content and spend the debased coins. Over time, the \u0026lsquo;good\u0026rsquo; money, the coins with more precious metal in them, get driven out of circulation by \u0026lsquo;bad\u0026rsquo; money, the debased coins.\nMurray Rothbard issues a clarification in What Has Government Done To Our Money?. Gresham\u0026rsquo;s Law actually means \u0026ldquo;money overvalued artificially by government will drive out of circulation artificially undervalued money.\u0026rdquo;\nIn a free market for money, coins with lower precious metal content would be valued lower than coins with higher precious metal content. With appropriate valuation, the incentive to take the more precious coins out of circulation would be negated and \u0026lsquo;bad\u0026rsquo; money would not be able to drive out the \u0026lsquo;good\u0026rsquo; from circulation.\nOnly when a government enjoys a monopoly over coinage can it coerce the population to pretend that two coins with distinct values are alike. Nevertheless, reason prevails: economic actors take the artificially undervalued coins out of circulation, and put them to other uses, perhaps illicit, but certainly more rational.\nRelated Notes Thinking Correctly About Inflation When Money is Abundant, Everything Else is Scarce Gresham\u0026rsquo;s Law and Price Ceilings References Rothbard, Murray. What Has Government Done To Our Money? Chapter 1. ","permalink":"https://blog.nath.page/posts/greshamslaw/","summary":"\u003cp\u003e\u003cimg alt=\"debased_coin\" loading=\"lazy\" src=\"/images/debased-coin.webp\"\u003e\u003c/p\u003e\n\u003cp\u003eGresham\u0026rsquo;s Law is frequently oversimplified as \u003cstrong\u003e\u0026ldquo;bad money drives good money out of circulation.\u0026rdquo;\u003c/strong\u003e This phenomenon has been observed in history whenever debasement of coins has occurred. In such cases, people choose to collect coins with the greater precious metal content and spend the debased coins. Over time, the \u0026lsquo;good\u0026rsquo; money, the coins with more precious metal in them, get driven out of circulation by \u0026lsquo;bad\u0026rsquo; money, the debased coins.\u003c/p\u003e","title":"Gresham's Law Clarified"},{"content":"A price is simply a ratio of something in terms of something else. It need not necessarily be in terms of a fiat currency. The price of a certain watch may be ten pairs of a certain brand of shoes, or equivalently, an hour of consulting service of a certain expert, and so on. The ratios in terms of some goods become more prevalent due to their characteristics: durability, recognizability, divisibility, scarcity; these goods begin to acquire monetary recognition as individuals start accumulating them for the express purpose of exchanging them (as opposed to consuming them). These goods are traded more frequently than other goods due to their utility as media of exchange. The most traded good, thus, emerges as money, and market participants find it convenient to denominate prices in terms of this money, which, historically, has been gold.\nPhoto by Zlaťáky.cz on Unsplash.\n","permalink":"https://blog.nath.page/posts/price/","summary":"\u003cp\u003eA price is simply a ratio of something in terms of something else. It need not necessarily be in terms of a fiat currency. The price of a certain watch may be ten pairs of a certain brand of shoes, or equivalently, an hour of consulting service of a certain expert, and so on. The ratios in terms of some goods become more prevalent due to their characteristics: durability, recognizability, divisibility, scarcity; these goods begin to acquire monetary recognition as individuals start accumulating them for the express purpose of exchanging them (as opposed to consuming them). These goods are traded more frequently than other goods due to their utility as media of exchange. The most traded good, thus, emerges as money, and market participants find it convenient to denominate prices in terms of this money, which, historically, has been gold.\u003c/p\u003e","title":"Price and Money"},{"content":"I recently revisited the chapter titled \u0026ldquo;Why the Worst Get on Top\u0026rdquo; from FA Hayek\u0026rsquo;s The Road to Serfdom. The essay discusses the sociopolitical dynamics within a totalitarian system that inevitably encourage and enable bad actors to gain power while sidelining decent people.\nThe worst features of totalitarian governments are not accidental or avoidable; they are features totalitarianism produces given enough time to operate. Just as a socialist planner must choose between either assuming dictatorial powers or abandoning his plans, a totalitarian dictator must renounce morality or fail. Socialism produces a totalitarian society, which places at its helm a dictator not bound by common morals, and from this system we get social and economic repression, destruction of life and property, elimination of political alternatives, conscription, etc.\nThe imposition of a totalitarian regime on a population does not initially require the support of the majority. The totalitarian leader begins by gathering a small, highly organized group of followers who voluntarily embrace the discipline of committing to the leader\u0026rsquo;s cause, obeying his commands without opposition, and disallowing common morals from getting in the way. The followers then coerce this totalitarian discipline upon larger bodies of people, gaining political power along the way.\nAt some point, in order to exert meaningful political influence over a state, the totalitarian leader must gain support from a large group of followers. This large group of people is likely to comprise of the worst elements of any society. Hayek presents three reasons why.\nA large group strong enough to impose its views on the rest cannot be formed out of those with highly differentiated and developed tastes; it must be composed of the masses, the least original and independent.\nThe leader requires the support of the docile and gullible, those without their own convictions, those willing to accept a ready-made system of values frequently presented to them.\nIt is human nature to agree on a negative, such as the hatred of an enemy, than on a positive.\nThose acting on behalf of a group are frequently able to overcome the moral obstacles they would face as individuals. As Reinhold Niebuhr notes, there is \u0026ldquo;an increasing tendency among modern men to imagine themselves ethical because they have delegated their vices to larger and larger groups.\u0026rdquo;\nTo serve the totalitarian state, one must be prepared to break any moral code if it ever seems necessary to achieve the goal served to him by his leader. Only the dictator determines the ends, so the followers must not have their own convictions, lest they should pose unneeded hurdles. The followers must be completely unprincipled, fully committed to the dictator, and capable of executing any assigned task.\nPositions of power in such a regime have nothing to offer to those with moral beliefs of any kind. People with morals either do not contest for political and administrative positions, or give up on promotion opportunities, thus remaining in positions with little to no power. Ultimately, only those willing to wield power, those willing to act unscrupulously, contest for and occupy positions of power, and rise to the top.\n","permalink":"https://blog.nath.page/posts/hayekworst/","summary":"\u003cp\u003eI recently revisited the chapter titled \u0026ldquo;Why the Worst Get on Top\u0026rdquo; from FA Hayek\u0026rsquo;s \u003cem\u003eThe Road to Serfdom\u003c/em\u003e. The essay discusses the sociopolitical dynamics within a totalitarian system that inevitably encourage and enable bad actors to gain power while sidelining decent people.\u003c/p\u003e\n\u003cp\u003eThe worst features of totalitarian governments are not accidental or avoidable; they are features totalitarianism produces given enough time to operate. Just as a socialist planner must choose between either assuming dictatorial powers or abandoning his plans, a totalitarian dictator must renounce morality or fail. Socialism produces a totalitarian society, which places at its helm a dictator not bound by common morals, and from this system we get social and economic repression, destruction of life and property, elimination of political alternatives, conscription, etc.\u003c/p\u003e","title":"Why the Worst Get on Top"}]