4T? What 4T?

[Kinser79]

(05-22-2016, 03:51 AM)Galen Wrote:

(05-22-2016, 01:23 AM)pbrower2a Wrote: There is no magic in gold. Bismuth would do just as well.

Probably not.  Repeal the legal tender laws that force people to accept dollars in all transactions in the US.  I bet we would find out real fast what was really money.  I am pretty sure that it wouldn't be Federal Reserve notes or other pieces of paper.

I'd say that the following commodities would likely pop up to replace the dollar at least initially. Cigarettes, Hard Liquor Alcohol, ammunition and marijuana. It would take time for enough specie to be put into circulation either through government or through private entities to replace the dollar. That said those four commodities have at least two features that a medium of exchange requires fungibility and intrinsic demand. Smokers will want to smoke, drinkers want a drink and I of course want herb--also bullets are good cause those who have all their assets either in cash or instruments denominated in dollars will try to take from those who have because they have not.

[Galen]

(05-22-2016, 04:22 AM)Kinser79 Wrote:

(05-22-2016, 03:51 AM)Galen Wrote:

(05-22-2016, 01:23 AM)pbrower2a Wrote: There is no magic in gold. Bismuth would do just as well.

Probably not.  Repeal the legal tender laws that force people to accept dollars in all transactions in the US.  I bet we would find out real fast what was really money.  I am pretty sure that it wouldn't be Federal Reserve notes or other pieces of paper.

I'd say that the following commodities would likely pop up to replace the dollar at least initially.  Cigarettes, Hard Liquor Alcohol, ammunition and marijuana.  It would take time for enough specie to be put into circulation either through government or through private entities to replace the dollar.  That said those four commodities have at least two features that a medium of exchange requires fungibility and intrinsic demand.  Smokers will want to smoke, drinkers want a drink and I of course want herb--also bullets are good cause those who have all their assets either in cash or instruments denominated in dollars will try to take from those who have because they have not.

Yes, in the short term you are correct.  I still would bet that gold and silver would come out on top.  In fact it seems likely that a floating exchange rate between the two metals would arise which would eliminate the problems the fixed ratio bi-metallic system of the nineteenth century had.

[Kinser79]

Probably not entirely. A drastic drop in the price of gold or silver would flush the other out of circulation relatively quickly. That said the fixed system was somewhat unwieldy and did not respond quickly to market forces or such things as finds of mineral deposits.

While I think we will be faced with mineral scarcity on earth there is nothing preventing the development of mining operations on other celestial bodies other then perhaps the absence of a lunar base.

[Galen]

(05-22-2016, 05:10 AM)Kinser79 Wrote: Probably not entirely.  A drastic drop in the price of gold or silver would flush the other out of circulation relatively quickly.  That said the fixed system was somewhat unwieldy and did not respond quickly to market forces or such things as finds of mineral deposits.

It would entirely eliminate the problems of the fixed ratio bi-metallic standard because markets respond to changes very quickly.  Remember that Gresham's Law does not apply unless coercion, usually supplied by the state, overvalues one metal relative to the other.  In a market this state of affairs never lasts very long.

[Mikebert]

There is a reason why there is no longer a gold standard.  The supply of gold is limited.  It expands at a slow rate.  The world output of goods and services (GDP) grows at a much faster rate than the supply of gold (S).  If gold was used as money, its value would be directly related to the ratio of GDP to S.  This means gold sitting in a safe draws a return and anyone would has more gold than they need to pay for living expenses would hang on it to.  This would reduce S and increase the value of gold further.  Thus by not using gold for purposes other than paying for consumption (i.e. investing) owners of gold would maximize their returns.

The economy would be in a permanent depression, which would eventually force world growth to slow down to match the rate of gold increase.  It would not take long for someone to propose an alternative and you would be back to fiat currency in short order.

Benjamin Graham proposed an alternative to the gold standard.  A "commodity standard" composed of a fixed basket of industrially-important commodities.  The inflation indices are a version of this kind of idea, but use a much bigger basket which is not fixed.  Central banks have moved towards targeting an inflation rate rather that a fixed level.  The reason for preferring a positive rate was to provide an incentive for holders of surplus money to invest it.

[Kinser79]

(05-22-2016, 10:32 AM)Mikebert Wrote: There is a reason why there is no longer a gold standard.  The supply of gold is limited.  It expands at a slow rate.  The world output of goods and services (GDP) grows at a much faster rate than the supply of gold (S).  If gold was used as money, its value would be directly related to the ratio of GDP to S.  This means gold sitting in a safe draws a return and anyone would has more gold than they need to pay for living expenses would hang on it to.  This would reduce S and increase the value of gold further.  Thus by not using gold for purposes other than paying for consumption (i.e. investing) owners of gold would maximize their returns.

The economy would be in a permanent depression, which would eventually force world growth to slow down to match the rate of gold increase.  It would not take long for someone to propose an alternative and you would be back to fiat currency in short order.

Benjamin Graham proposed an alternative to the gold standard.  A "commodity standard" composed of a fixed basket of industrially-important commodities.  The inflation indices are a version of this kind of idea, but use a much bigger basket which is not fixed.  Central banks have moved towards targeting an inflation rate rather that a fixed level.  The reason for preferring a positive rate was to provide an incentive for holders of surplus money to invest it.

All of that assumes that representational money is an impossibility, which just by the mere existence of silver certificates we know is not the case. Remember I do have a collection of paper currency which includes things from Soviet Rubles to Rentenmarks to MPCs from the Vietnam Era.

Even if we say used a basket of commodities (I'd recommend only the ones most vital to the modern economy) we'd end up with a representational currency anyway. Furthermore it would be far more difficult for banks to hold in reserve tons of steel or coal or pounds copper.

That being said by using sound money based on specie yes there would be deflation but there is likely not going to be a depression. Rather a gold dollar or won or yen would have substantially more purchasing power than they do currently.

There is such a thing as fractional banking. If I deposit 1000 gold dollars into my bank then the bank should in theory be able to issue up to 5000 dollars in gold certificates because except where there is a run on the bank not everyone is going to demand their gold all at once. It isn't perfect but it is less prone to failure than fiat currency which is doomed to failure. If money is created by adding some zeros to an account book or turning on a rotary press the powers that be have no problem with using that to pay the bills. The only problem is that without the force of the state as a factor, those outside of the country are under no obligation to accept that paper for payment of anything.

I know this will as the other day I just received in the mail a 50 million rentenmark note, it was from the hyperinflation in 1923 in Weimar Germany. Getting it in good condition was difficult because by that time Germans were just burning their money cause it was cheaper then trying to buy coal.

[Galen]

(05-22-2016, 10:32 AM)Mikebert Wrote: There is a reason why there is no longer a gold standard.  The supply of gold is limited.  It expands at a slow rate.  The world output of goods and services (GDP) grows at a much faster rate than the supply of gold (S).  If gold was used as money, its value would be directly related to the ratio of GDP to S.  This means gold sitting in a safe draws a return and anyone would has more gold than they need to pay for living expenses would hang on it to.  This would reduce S and increase the value of gold further.  Thus by not using gold for purposes other than paying for consumption (i.e. investing) owners of gold would maximize their returns.

This is its virtue because it protects from the arbitrary inflation we are subject to now.  Yes, we would get a mild deflation of about one to two percent as a consequence of increased.  This would make it much easier to save for retirement because in the days before the Federal Reserve this did happen.  In most cases this was simply deferred consumption and that gold would later be spent.  Bank deposits were loaned out for capital expansion which gave savers a return much greater than the passive return of one or two percent inflation.

Keep in mind that under the gold standard and laissez-faire the US has some of the greatest economic growth and increase in living standards ever.  People were living better than they ever had before even if it doesn't seem like that by current standards.

[Ragnarök_62]

(05-22-2016, 03:51 AM)Galen Wrote:

(05-22-2016, 01:23 AM)pbrower2a Wrote: There is no magic in gold. Bismuth would do just as well.

Probably not.  Repeal the legal tender laws that force people to accept dollars in all transactions in the US.  I bet we would find out real fast what was really money.  I am pretty sure that it wouldn't be Federal Reserve notes or other pieces of paper.

Perhaps not.  Gold as legal tender may be coming to a state near |Rags.
http://retirementblog.ncpa.org/texas-gold/

Bismuth,  nawwww.

Tellurium is much better.

http://www.cbsnews.com/news/how-first-so...ar-panels/

http://www.amazon.com/99-99%25-Tellurium...=tellurium

[pbrower2a]

(05-22-2016, 09:29 PM)Galen Wrote:

(05-22-2016, 10:32 AM)Mikebert Wrote: There is a reason why there is no longer a gold standard.  The supply of gold is limited.  It expands at a slow rate.  The world output of goods and services (GDP) grows at a much faster rate than the supply of gold (S).  If gold was used as money, its value would be directly related to the ratio of GDP to S.  This means gold sitting in a safe draws a return and anyone would has more gold than they need to pay for living expenses would hang on it to.  This would reduce S and increase the value of gold further.  Thus by not using gold for purposes other than paying for consumption (i.e. investing) owners of gold would maximize their returns.

This is its virtue because it protects from the arbitrary inflation we are subject to now.  Yes, we would get a mild deflation of about one to two percent as a consequence of increased.  This would make it much easier to save for retirement because in the days before the Federal Reserve this did happen.  In most cases this was simply deferred consumption and that gold would later be spent.  Bank deposits were loaned out for capital expansion which gave savers a return much greater than the passive return of one or two percent inflation.

Gold became the definitive coinage metal because:

1. it is dense. Metals denser than gold are even rarer -- or radioactive. That made detection of metals offered as fakes easy, as shown by Archimedes over 2000 years ago.
2. It is unique in color.  (OK, cesium has a gold-like color, but it was not discovered until 1860, and it is difficult to handle due to its chemistry which is about as unlike gold as any other metal could be. A recently-developed substance, titanium nitride, has a gold-like color -- but it is hard and abrasive enough to be used on drill bits. But its abrasiveness and hardness would make it easy to distinguish from gold.
3. It is extremely malleable, which like its density makes fakes of gold difficult to get away with.
4. It is extremely unreactive. It does not corrode or tarnish. Not even acid mine discharge can corrode it. (Aqua regia, a combination of nitric and hydrochloric acids can can do so, which makes possible a story about some Nobel Prize winner dissolving his medal, which the Nazis prohibited him from keeping, and storing the gold in a solution of the aqua regia. He returned the gold to Sweden for reconstitution as his medal. The Nazis would have of course confiscated gold metal.
5. It typically appears uncombined. A rock that contains gold can often be destroyed chemically, and the gold emerges unscathed. Such limited the availability of gold.
6. It is rare, so it has few uses. Because it is so soft it could never be used as a structural material.


...its supply is extremely limited.

Quote:Keep in mind that under the gold standard and laissez-faire the US has some of the greatest economic growth and increase in living standards ever.  People were living better than they ever had before even if it doesn't seem like that by current standards.

The gold standard created prosperity? Mere coincidence in contrast to technological innovation, rarity of corporate bureaucracies, hard work, recent discoveries of raw materials, lax regulation and some of the most amoral entrepreneurialism to have ever existed. Sure, John D. Rockefeller practically invented the refining of petroleum and the fuel pipeline, but people were also concocting some of the most hideous patent medicines ever made.

[/quote]

Ther beginning of the end:

[Kinser79]

You're missing a few facts PBR as usual. Gold does have industrial uses, but those only became apparent after the harnessing of electricity (though like I said except for highly specialist applications copper is just as good). Also structural use of metals was a rarity until the 19th century.

As for prosperity you are mostly right but the biggest factor you're missing is that bureaucracy was not only mostly missing from corporate structure but governmental bureaucracy was also extremely limited. With entrepreneurial innovation one has to accept that some are out for a quick buck if there is going to be any advancement in technology, business practices and etc--progress rarely is created by congressional committees.

As for patent medicines it should be remembered that during the 19th century so-called established medicine was pretty terrible too. A great deal of it was still using pre-scientific technique.

[Odin]

(05-24-2016, 12:04 AM)Kinser79 Wrote: You're missing a few facts PBR as usual.  Gold does have industrial uses, but those only became apparent after the harnessing of electricity (though like I said except for highly specialist applications copper is just as good).  Also structural use of metals was a rarity until the 19th century.

As for prosperity you are mostly right but the biggest factor you're missing is that bureaucracy was not only mostly missing from corporate structure but governmental bureaucracy was also extremely limited.  With entrepreneurial innovation one has to accept that some are out for a quick buck if there is going to be any advancement in technology, business practices and etc--progress rarely is created by congressional committees.

As for patent medicines it should be remembered that during the 19th century so-called established medicine was pretty terrible too.  A great deal of it was still using pre-scientific technique.

Gold is commonly used in high-quality electronics, IIRC.

[pbrower2a]

(05-24-2016, 07:35 AM)Odin Wrote:

(05-24-2016, 12:04 AM)Kinser79 Wrote: You're missing a few facts PBR as usual.  Gold does have industrial uses, but those only became apparent after the harnessing of electricity (though like I said except for highly specialist applications copper is just as good).  Also structural use of metals was a rarity until the 19th century.

As for prosperity you are mostly right but the biggest factor you're missing is that bureaucracy was not only mostly missing from corporate structure but governmental bureaucracy was also extremely limited.  With entrepreneurial innovation one has to accept that some are out for a quick buck if there is going to be any advancement in technology, business practices and etc--progress rarely is created by congressional committees.

As for patent medicines it should be remembered that during the 19th century so-called established medicine was pretty terrible too.  A great deal of it was still using pre-scientific technique.

Gold is commonly used in high-quality electronics, IIRC.

Kinser -- Gold is an excellent conductor of electricity; it is a better material than copper for wiring because it does not oxidize or tarnish as do some other good conductors of electricity (copper, silver, and aluminum). It is easy to shape, unlike graphite (a good conductor, but not a metal). Mercury is a good conductor, but it is liquid (no shape) and highly toxic, so it is out of the question in almost all cases. For high-value electrical use, cost of a small amount of a component is not much of a concern.

If it were inexpensive it would be in much more extensive use; I once saw Julia Child show how good gold would be as material for a cooking pan. Remember -- no oxidation, and it is an excellent conductor of heat.

More gold exists in jewelry, and the gold value is close in almost all cases to the value of the jewelry. Class rings of the deceased get melted down all the time.

Odin -- the use in high-quality electronics is a very modern phenomenon.

[pbrower2a]

Bureaucracies and regulation --

The first big assaults on pure, unscrupulous, exploitative capitalism were labor unions (largely a failure until the 1930s), and on the patent medicines and the use of child labor (great successes). Successful capitalists in other activities (like Rockefeller, Ford, and Edison) saw the patent medicine business as harmful to their profits. People were dying, becoming addicted, and going insane because of those horrible concoctions. The Pure Food and Drug Act required a disclosure of contents, and a public hostile to alcohol and opiates did not want them sold without justification. Big Business other than the patent medicine business and the medical profession wanted people to see a physician about some pain that just did not go away instead of self-medicating with some questionable panacea. If the physician says that one must use a narcotic for the pain, then so be it.

Child labor was cheap and pliant. It did not fit the consumer society emerging around 1900. Children's wages were not buying big-ticket items; they were replacing pay that their physically-wrecked parents could no longer earn because industrial workers of the time were generally worn out at age 35. Children working in mines and mills were especially vulnerable to industrial accidents, and about everyone knew that the work was stunting their development. The general abolition of child labor was associated with later ages of school-leaving and better working conditions for adults.

Enforcement of laws against patent medicines and against child labor was comparatively easy and not at all disruptive to the overall economy.

...I have a thread on the business life-cycle, and the final stage of business life is often a rigid bureaucracy. Highly-bureaucratized organizations tend to be terribly inefficient, inflexible, and lacking ability to innovate. Except in banking and insurance, where bureaucracy is a means of ensuring that payments go to the right people, bureaucracy generally creates barriers to progress. To be sure, there are people who prefer shuffling papers to doing real work, and they might prefer working for a company on life support to working where they need get tangible results... but in general if you see a company in its bureaucratic phase and you are a young adult, then maybe your degree is more useful elsewhere.

The biggest office building in the world is the Pentagon. That should say plenty.

[Mikebert]

Kinser Wrote:All of that assumes that representational money is an impossibility

My argument had to do with the relative rate of world GDP growth relative to money supply growth. This is a red herring. 

Quote:That being said by using sound money based on specie yes there would be deflation

That’s my point

Quote:..but there is likely not going to be a depression.

On what basis do you make such a grand pronouncement?  When the gold standard was in common use, world GDP growth was less than the rate of gold supply increase.  The system had no built-in deflation. Local deflation (such as that in late 19th century America) was the result of fiscal policy (the government ran surpluses to pay down Civil War debt).  If you actually work with the numbers you can see this quite clearly. If you look at a larger period, such as the century before 1932, the price level was approximately constant, the late 19th century deflation pretty closely offset Civil War inflation.  That is what a gold standard is for.
 
The idea that a gold standard prevent secular inflation  is simply wrong. What about the sixteenth century price revolution or the earlier Medieval price revolution, both of which occurred when specie was money.

Quote:There is such a thing as fractional banking.  If I deposit 1000 gold dollars into my bank then the bank should in theory be able to issue up to 5000 dollars in gold certificates because except where there is a run on the bank not everyone is going to demand their gold all at once.

Except they do occasionally. These times are called financial crises (or in gold-standard times, panics).  We had one in 2008, so they still happen.
 
Also, you ignore the issue that if one can obtain a return by not lending, why lend?  After all some gold owners will hoard their gold, which will remove it from the money supply, driving up the price of gold, and incenting speculators to acquire gold seeking a corner.  If gold is limited, the sky is the limit for the price of gold.  Look what happened with Nixon closed the gold window in 1971.  In just 9 years the price rose 20-fold.
 
The gold standard can only work when the rate of gold production exceeds the rate of world GDP growth, because only then can gold producers make a fortune by releasing their gold reserves on the market when the price spikes, reaping a nice profit at the speculators expense. That is, the market needs to be able to break corners.

Quote:I know this will as the other day I just received in the mail a 50 million rentenmark note, it was from the hyperinflation in 1923 in Weimar Germany.

And my dad had stamps from that time, 2 million, 4 million, 6 million, 10 million marks.  I am well aware of the German hyperinflation of 1923 (my German grandparents came here that year) and was acquainted with it as a child.  That is a meaningless comparison, which you would know if you understood these things.

[Odin]

What people invoking Weimar Hyperinflation for polemic purposes forget was that it was done intentionally by the German government to deal with the punitive reparations imposed on Germany at Versailles, it was not a "natural" economic situation.

[Kinser79]

(05-27-2016, 07:08 PM)Odin Wrote: What people invoking Weimar Hyperinflation for polemic purposes forget was that it was done intentionally by the German government to deal with the punitive reparations imposed on Germany at Versailles, it was not a "natural" economic situation.

I can't speak for others here, but it seems reasonable to me that if one can inflate their currency to deal with punitive reparations they can do the same for trillions in unfunded liabilities. If anything the latter is worse, that is a debasement of the currency by choice rather than due to the impositions of foreigners.

Also Odin, I don't think you're in a position to determine what people remember or have forgotten. The cause does not matter in hyperinflation, only the results.

[Kinser79]

(05-27-2016, 03:14 PM)Mikebert Wrote:

Kinser Wrote:All of that assumes that representational money is an impossibility

My argument had to do with the relative rate of world GDP growth relative to money supply growth. This is a red herring. 

No it is not a red herring. You are implying that fractional reserve banking incorporating a representational currency (gold certificates, silver certificates and the like) is an impossiblity. We know that it is not impossible because most of the countries on the gold standard in the 19th and early 20th century used just such a format

Quote:

Quote:That being said by using sound money based on specie yes there would be deflation

That’s my point

Obviously not a point that is in dispute then.

Quote:

Quote:..but there is likely not going to be a depression.

On what basis do you make such a grand pronouncement?  When the gold standard was in common use, world GDP growth was less than the rate of gold supply increase.  The system had no built-in deflation. Local deflation (such as that in late 19th century America) was the result of fiscal policy (the government ran surpluses to pay down Civil War debt).  If you actually work with the numbers you can see this quite clearly. If you look at a larger period, such as the century before 1932, the price level was approximately constant, the late 19th century deflation pretty closely offset Civil War inflation.  That is what a gold standard is for.
 

All of this is true, but you're ignoring one key factor. A deflating currency ends up having greater purchasing power. In 1933, before the US went off the gold standard, an ounce of gold cost $20.00. A suit also cost $20.00. In 1972 an ounce of gold cost $35.00, a suit likewise cost $35.00. Now an ounce of gold costs $1,212.80 a suit around $1200. Prices of comparable goods will stabilize at their actual values in gold. Which means that a gold dollar will buy more things than the current paper dollars.

Deflation only becomes a problem for those who are heavily leveraged as it makes the price of money much more dear for them to pay off their debts. Inflation, however, taxes the poor most stealthily and most heavily destroying their purchasing power and consequently their demand--causing depressions of greater proportions.

Quote:The idea that a gold standard prevent secular inflation  is simply wrong. What about the sixteenth century price revolution or the earlier Medieval price revolution, both of which occurred when specie was money.

You'll forgive me if I'm not conversant in your model du jour--mostly because I don't care and mostly because you'll have a new one next week.

As for the price revolutions in the Medieval period and Sixteenth Century both are linked to large finds of gold and silver deposits, neither of which are likely to be replicated here on earth.

Quote:

Quote:There is such a thing as fractional banking.  If I deposit 1000 gold dollars into my bank then the bank should in theory be able to issue up to 5000 dollars in gold certificates because except where there is a run on the bank not everyone is going to demand their gold all at once.

Except they do occasionally. These times are called financial crises (or in gold-standard times, panics).  We had one in 2008, so they still happen.

So then obviously fiat currency is not the solution to that problem now is it. That being said 2008 was far less a bank run like you're alluding to, and the only real problem specie as currency has, but was instead the result of massive price inflation resulting from the massive creation of debt-currency instruments. QEinfinity has merely added to the problem by expanding the balance sheets of the fed and blowing up an other bubble. One does not cure cocaine addiction by giving the addict more cocaine.

Quote:

Quote:I know this will as the other day I just received in the mail a 50 million rentenmark note, it was from the hyperinflation in 1923 in Weimar Germany.

And my dad had stamps from that time, 2 million, 4 million, 6 million, 10 million marks.  I am well aware of the German hyperinflation of 1923 (my German grandparents came here that year) and was acquainted with it as a child.  That is a meaningless comparison, which you would know if you understood these things.

[/quote]

It matters not what causes hyperinflation, what matters is the result of hyperinflation. The USD will lose reserve status, and it will lose it soon if we do not start exporting goods instead of debt. One can only inflate their currency so many times before the effects take hold. This was true in Rome, It was true in Zimbabwe, It is true in Venezuela. Fiat currencies always fail and eventually everyone goes back to precious and semi-precious metals eventually.

[Galen]

(05-27-2016, 08:43 PM)Kinser79 Wrote: Deflation only becomes a problem for those who are heavily leveraged as it makes the price of money much more dear for them to pay off their debts.  Inflation, however, taxes the poor most stealthily and most heavily destroying their purchasing power and consequently their demand--causing depressions of greater proportions.

This is why governments and liberals hate the use of commodity money because it limits government spending and power.  When the gold standard was in operation prices declined one to two percent a year while nominal wages remained static.  This improved life for everyone, particularly the poor.  This made the accumulation of capital much easier, particularly the poor, and allowed people to save for the future.  The bank panics, caused by artificial credit expansion, tended to last no longer than about two years unlike the eternal recessions that seem to plague the US after the twenties.

The Panic of 1819 was one of the worst and it was caused by the First Bank of the United States, an early experiment in central banking.  Murray Rothbard did his PhD thesis on this topic and it is still considered the authoritative work on the subject even by mainstream economists and historians.  This will no doubt annoy Odin and Eric the Obtuse.

[Mikebert]

[Kinser wrote] Panic of 1819 was one of the worst.

Mike: In what way was it worst?  If we look at the stock market, it peaked at 2.95 in Jun 1818 and bottomed at 2.51 in July 1819, a 15% decline. How does that compared to other panics like the one in in 1837? This panic saw prices drop from a peak of 3.23 in January 1837 to the bottom at 2.44 in June 1837, a 24% decline.  The 1857 Panic saw a 42% decline from 2.26 in Jan 1857 to 1.30 in October 1857.  The 1873 panic saw a 47% drop from 5.15 in Feb 1873 to 2.73 in June 1877.  And finally there is the 27% decline for the 1893 panic, from 5.61 in Jan 1893 to 4.08 in Aug 1893.  In terms of the stock market, the worst of the 19th century panics was the one in 1873.
 
What about the economy?  Well the panics were all associated with recessions.  Dates are available after 1853.  We have an 18 month recession for1857, 65 months for 1873 and 6 months for 1893. In terms of recession length 1873 was  the worst. The antebellum economy was largely agrarian so cotton prices/output might be a better indicator.  For the 1819 panic prices fell 42% and output fell 4%.  For the 1837 panic prices fell 36% and output 27%. 

For the 1857 panic prices were little affected and output did not decline at all.  The 1857 panic is known as a railroad crash.  This term and the lack of significant impact on cotton suggests that it largely affected the industrial economy and its financiers.  The broader agrarian economy was largely unaffected. On the other hand the 1837 crash showed by far the largest impact on cotton production, and is known as the cotton crash.  Land sales fell by 73% from 1856 to 1857.
 
Now the 1819 panic had a small impact on cotton output and stock prices suggesting that it had a small economic impact. It almost certainly was not one of the worst panics economically. On the other hand, land sales also declined by 73%, which means 1819 was as much a big a deal for the land speculation business as the 1837 panic. Assume that the price of land is derived from the potential profits that can be derived from best potential use of the land. With the invention of the cotton gin in 1794, the cotton-growing business had become super-hot.  The keenest measure for the profit potential for this industry would be the price of cotton.  It follows that land value should be correlated with cotton price.  The fact that the 1819 panic showed the largest decline in cotton prices, suggests that it showed the largest decline in land prices too.  This means that from the point of view of a land speculator (or least a Southern one) 1819 was one of the worst panics.
 
And why is this important?  Andrew Jackson was a land speculator.  He was in a position to rhetorically translate the impact of central bank tightening in 1818 to bottom-line impact on ordinary Americans, leading to his meteoric rise in the 1820’s as the defender of working-class Americans against what he characterized as the oppression of a wealthy elite epitomized by the central bank. How much of a role the central bank played in the panic is unclear, economists debate this.  But reality does not matter politically, perception does.  And the perception was that the bank was responsible, just as "billionaires are rigging the economy against the middle class" is a perception of the cause of working class woes today.
 
Although not all that important economically, the 1819 panic was very important to the political-economy.  Here is a passage from the introduction to the Rothbard article  you cited:
 
What profoundly distinguishes Rothbard’s approach from the prevailing approach is his insistence upon treating economic quantities and processes as unique and complex historical events. Thus, he employs the laws of economic theory in conjunction with other relevant disciplines to trace each event back to the nonquantifiable values and goals of the particular actors involved. In Rothbard’s view, economic laws can be relied upon in interpreting these nonrepeatable historical events because the validity of these laws—or, better yet, their truth—can be established with certainty by praxeology, a science based on the universal experience of human action that is logically anterior to the experience of particular historical episodes.  It is in this sense that it can be said that economic theory is an a priori science.
 
Rothbard’s approach treats economic quantities and processes as unique and complex historical events. For example, the 1819 panic is simultaneously an economic process and a complex historical event.  That is, the 1819 is one of the most important events in the political-economy of the 19th century. The way you presented this was as if you thought the 1819 Panic was one of the most severe economic downturns of the era, like the recent recession was. It was nothing of the sort.  But it was one of the most important events in the political economy.  Recall, the first economic philosophers referred to their field as political economy.  Von Mises is still operating in that sense.

My problem with Austrians is that what they offer is not science. Theory is not an explanation for observed reality that improves by comparison of theoretical prediction with reality, as is done in science.  Austrian theory is derived independently of evidence: “anterior to the experience of particular historical episodes.” I have a problem with their "praxeology", in which they derive a theory of what makes humans tick from "self evident" facts. To me this resembles a proven inadequate path to knowledge.  Replace praxeology with theology and you get Thomism, whose "scientia" was supplanted centuries ago by modern science.

[Galen]

(05-28-2016, 06:48 PM)Mikebert Wrote: [My problem with Austrians is that what they offer is not science. Theory is not an explanation for observed reality that improves by comparison of theoretical prediction with reality, as is done in science.  Austrian theory is derived independently of evidence: “anterior to the experience of particular historical episodes.” I have a problem with their "praxeology", in which they derive a theory of what makes humans tick from "self evident" facts. To me this resembles a proven inadequate path to knowledge.  Replace praxeology with theology and you get Thomism, whose "scientia" was supplanted centuries ago by modern science.

The problem is that you can't run repeatable experiments in the field of economics.  Deducing what is happening from what is known about human behavior is the best that you can do.  All that we have is logic, what can be observed about the human condition and the historical record.  You might also want to note that the mainstream economists never seem to be able to spot a bubble until it blows up.