Sandeep Jaitly: Here’s where Ludwig von Mises was Wrong on Gold

We’ve enjoyed being present for a number of lectures by Sandeep Jaitly and had some informative discussions with him too in recent years.  There’s plenty to learn in this short video with him being interviewed by Max Keiser of the Keiser Report, (you can now see the Keiser Report regularly on RT available here in NZ on SkyTv). The interview covers a range of topics  including:

1. The Austrian economics of Carl Menger versus Ludwig von Mises.  How Mises mistakes included how he:

• Didn’t look back to Mengers original axiom that value does not exist outside your own consciousness.
• Didn’t observe that there is always a bid and offer when it comes to price
• Didn’t want to admit that interest was a market phenomenon
• Thought a promise to gold is the same as the object of a promise to gold
• Gold does not have value in and of itself. It has value because it satisfies humans ends.

2. The big mistake on gold that many libertarians make.

3. On Bernanke and his statement that gold is not money:

• Money is the universally accepted ultimate extinguisher of any debt. This has always been gold or silver.
• Bernanke and Co do not realize the consequences of their monetisation of debt.
• You don’t need more QE, for asset prices to start escalating. You just need what’s been printed to start spinning more quickly.
• Then nothing can slow it down, including no central bank, without sending the whole world economy into the 2nd dark age.

4. On escalation of debt and GDP growth:

• Keiser: When you reach a certain debt saturation point you enter into a debt spiral, then you try to extinguish the debt by creating more debt. and so remain stuck in a debt trap.
• What did Menger have to say on this?
• Jaitly: Menger couldn’t even comprehend what we are currently doing with completely fiat currency the world over.  He existed only during a gold standard.

5. How extending credit does not cause boom and bust cycles:

• It’s when you extend credit beyond the duration for which it was intended that the problems occur.
• i.e. Borrowing short to lend long. You don’t match the purpose for which the credit was taken with the purpose for which the credit was granted.
• It’s fraud to borrow short to lend long, as you are disobeying the principles of a bailment which is that a demand deposit must be accessible at all times.
• [Definition of Bailment from wikipedia- Bailment describes a legal relationship in common law where physical possession of personal property, or chattel, is transferred from one person (the 'bailor') to another person (the 'bailee') who subsequently has possession of the property. It arises when a person gives property to someone else for safekeeping.]
• How you can’t have your money available at all times and earn interest on it. The two don’t make sense and so we get what we deserve in the end.