Talk:Real bills doctrine/Archive 1

Call for expert help

Right now the article contains a lot of material but has serious deficiencies in structure and style and no citations whatsoever. It needs a lot of TLC from people that know the subject matter and Wikipedia's style conventions well. Added templates accordingly

The article hasn't been helped by the addition of a lot of new material by an anonymous contributor who likes to use phrases such as "Whether the Austrians are right or wrong, ignoring their point of view is neither fair nor helpful in an honest endeavor to detect the truth". I'm reluctant to just revert since some of the commentary they've added to the example may have some value.Dtellett (talk) 11:57, 11 January 2012 (UTC)

Please see 2019 book published by the Cato Institute and written by Thomas M. Humphrey and Richard H. Timberlake: Gold, the Real Bills Doctrine, and the Fed.--Mitzi.humphrey 12:42, 5 June 2019 (UTC)

Article should be rewritten from scratch

This article is on a subject of high importance, relating to the basic operation of money systems, and especially the gold standard (pre 1914). International trade under the gold standard was based primarily on flows of real bills and their discount up until WWI.

It should be rewritten from scratch, taking the perspective of supporting the doctrine, explaining why it holds true. Then introduce any evidence and observations which supporting the theory. Then introduce criticisms and evidence (if any) contradicting the doctrine.

The article now simply looks like a diatribe against the whole idea. The RBD had wide support during the era of redeemable money and very widespread international use of bills of exchange. Much of the article and talk seems confused about what real bills are, and a separate page on real bills is a good idea. The period of 1600-1900 saw inflation of the British pound averaging 0.2% per annum, during a period when real bills became commonplace and gold per capita was rising slowly (compared to 4.1% per annum after real bills were forced out (1900-2000)). So historic data is compatible with the theory.

RBD is perfectly compatible with (and complementary to) Quantity Theory (which states P = (MV)/Q hence not allowing price to be predicted from quantity). And it is complementary to the Fiscal Theory too. The article should draw on contemporary (pre-1914) sources, since they focus on the money/banking system as it was. Instead, there is a ridiculous list of books and papers as references, almost all drawn from the modern fiat money era, mainly openly hostile to or ignorant of real money systems. Is anyone working on this? Do you have time DelftUser? Thisson?

— Preceding unsigned comment added by 81.53.57.9 (talk) 20:30, 5 April 2012 (UTC)

Deleted the "Responses" section

I just deleted the "Responses" section - it read like the author arguing directly against his sources. Looking at the source of the text, I can't be sure who the original author of that argument was, and therefore what expert (if indeed an expert) the argument might be attributed to. In any case, judging by the section on Bank Runs, the criticism that it's responding to is completely valid. --Brilliand (talk) 11:26, 15 July 2012 (UTC)

Agreeing with objections above tried to fix it

As I agreed with the objections, I rephrased the page, added explanations, and deleted some parts. ngeorgak (talk) 06 November 2012 —Preceding undated comment added 21:26, 6 November 2012 (UTC)

A few days after the above, someone anonymous undid my changes with no explanation. I reinstated them and they undid them again. Fun as this game may seem, I will not play it. All I can say is if a user wants to see a version of this page that makes sense (especially the farmer-gambler example), view it as it was after my edits, on November 6, 2012. It seems that we have an anonymous ideologue that believes in the gold standard and fears fiat money as potentially causing inflation. The answer to this person comes from the financial crisis and the response with the TARP program, creating 700 billion dollars of new money. The new money did not cause inflation because the economy was shrinking. If the US had adhered to the gold standard and not printed any new money then the recession would have become another great depression. Which brings us to the real issue here. Not only is the statement that the RBD prevents inflation wrong, but also the problem with the gold standard is deflation and depression. A look at the history of inflation and deflation in the 19th century in the US shows that. — Preceding unsigned comment added by Ngeorgak (talk • contribs) 15:08, 5 March 2013 (UTC)

Inflation and deflation in the 19th century US is closely associated with money issue by banks against land via mortgages on farms. The bank is in this case is discounting long-term, non-real "bills". A ten year mortgage is not "at sixty days' date", and is not "commercial paper". The economic cycles at that time say nothing about validity of RBD. (I have not edited this article) 212.194.48.112 (talk) 13:57, 30 March 2013 (UTC)

Most of the article should be scrapped

It's pretty clear that most of this article is confused and confusing at best, and I'd say plain wrong. The writers simply don't understand the doctrine as far as I can tell. The confusion begins with terminology. In the first paragraph, it talks about "money" being issued, then explains it as the bank issuing "notes". But "money" is understood to be what settles debts - under the gold standard, this is gold (coined or bullion). A bank's "notes" are not "money", since they don't settle debts, simply represent a debt owed by the bank. The "bills" concerned are not the "commercial paper" (which are mainly now financial bills/promissory notes) as indicated, but negotiable bills of exchange - essentially orders made by one person to another to pay money to a third person. These bills must relate to real commercial transactions and may indicate what the transaction was for.

Amazing, for an article about how bills of exchange can be used by banks, there isn't even a link to the Wikipedia article on bills of exchange! Could we please have a reminder of what a bill of exchange is, how it is used in a commercial (non financial) transaction, and a link to the appropriate Wikipedia page?

The "informative example" talks about "future production" as "collateral" for an IOU. But the production isn't really collateral at all - it's the goods which are about to be delivered on the farmer's sale to the customer, and can't be seized by the banker if the production failed, nor if the customer defaulted on payment. The gambler and his house as collateral for a debt says nothing about the RBD, since there is no bill of exchange involved - it's irrelevant.

The discussion on "convertibility" is not helpful. It does not mention real bills at all. What it says about bond transactions doesn't relate in any way to RBD (bonds are not real bills).

The section on "Inflation" is unsatisfactory, since it talks about the varying silver value of the dollar, even though the dollar is actually defined (under a metallic standard) in terms of metal. It talks about the gambler again (who doesn't have real bills to discount). RBD does not talk about inflation as a result of inadequate backing as far as I know - in fact it says the banker "cannot go wrong" in issuing notes for good bills.

The section on "use" is hilariously wrong. The RBD cannot conceivably be restated as "So long as money is only issued for assets of sufficient value, the money will maintain its value no matter how much is issued". The doctrine is about the banker's safety in swapping of financial bills for short-dated real bills of exchange. It isn't talking about underlying assets (productive or not) or collateral (the bill of exchange is commonly for a service where there is no asset or collateral). The doctrine doesn't even say anything about money - just the two forms of bills of exchange. It doesn't say anything about value either. It does however talk about maturity being crucial, but this section says this can be stripped and maturity is irrelevant - sixty years is as good as sixty days(!)

The section on "bank runs" returns again to the example of the gambler's IOUs (not real bills!), and again confuses the bank's notes (ie debt instruments) with money (ie what settles debts). It talks about bank customers bringing assets in exchange for new money - again nothing to do with RBD, which relates banks' notes (financial bills of exchange) to private real bills of exchange - not assets for money.

The article's failure is probably a result of the authors and those of some of their references failing to understand how the terms used have changed significantly in the past century. They seem to have applied modern economic analysis and the principles of contemporary monetary systems to what they think is being said, and then mould it to conform to their expectations. The discussions of the gambler's IOUs, bonds and loan collateral have no place in an article RBD. The gamblers IOUs should have been immediately removed as totally off-topic, but have actually been in this article for eight years.

If Wikipedia had a contest for "worst article", I'd nominate this straight away. How do we fix it? I would rewrite it from scratch myself if I thought people would accept it, and we wouldn't get into an edit war. It's more important that the article be correct than comprehensive and lengthy. I consider the topic to be of considerable importance, since it covers the basic principles of how monetary systems used to work, and it sheds light on the global financial crisis. 212.194.48.112 (talk) 23:59, 30 March 2013 (UTC)

Please do rewrite from scratch Dtellett (talk) 22:57, 13 April 2013 (UTC)

Drafting a possible new entry

I'm working on some ideas which may help resolve the issues in this article. Draft is here. Please email constructive ideas and factual corrections to me (rbd (at) adrianwrigley.com). Thanks. Andronico (talk) 14:11, 19 April 2013 (UTC)

@Andronico: I've revised the article and will possibly use some part of your draft, thanks. Jonpatterns (talk) 13:15, 28 October 2018 (UTC)

This article is wrong

For starters, the "T-account", which one would normally just call a balance sheet, is backwards - a deposit of silver (or anything) in a bank is a liability of the bank. In fact, it is the loan that is made with the silver as collateral that is the bank's asset.

" For example, economists all recognize that if GM stock is currently selling for $60 per share, then GM can issue 1 new share, sell it for $60, and there will be no change in the price of GM shares, since assets will have risen exactly in step with the number of shares issued."

This is false - any economist or financier who knows anything about stocks knows about stock dilution. The resulting change in price is observable in stock prices after a split or a rights offering.

I don't know enough about the real bills doctrine however to correct the article completely, although I do know that even at the time when this theory was in vogue they were aware of these things and this isn't what the doctrine meant. Equilibrium007 (talk) 04:21, 31 December 2015 (UTC)

@Equilibrium007: material you mentioned appear to be in copyright violation, see topic below. Jonpatterns (talk) 13:05, 28 October 2018 (UTC)

Responses section NPOV issue

In light of all the other issues discussed above, particularly the 'rip off of someone's personal webpage' one, it seems almost besides the point to say that this section presents opinion as fact, without sources. And yet it is. Helvetius (talk) 15:30, 10 August 2016 (UTC)

@Helvetius:Discussion about copyright violation below. Jonpatterns (talk) 13:05, 28 October 2018 (UTC)

Not Commerical Paper but Bankers' Acceptances were the "real bills" the Fed was founded on

I fixed this problem. It is true that commercial paper was also considered a real bill. But more importance was put on acceptances and after 15 years of support the volume of acceptances outstanding was about three times that of commercial paper (see Banking and Monetary Statistics of the US - 1914 -1941) For explanation see for example: - P. M. Warburg. federal reserve system, its origin and growth. 1930. - R. Lowenstein. America’s Bank: The Epic Struggle to Create the Federal Reserve. 2016. - J. P. Ferderer. Institutional innovation and the creation of liquid financial markets: The case of bankers’ acceptances, 1914–1934. The Journal of Economic History, 63(03):666–694, 2003.

--Marc.1337 (talk) 11:59, 10 April 2017 (UTC)

Potential copyright violation

Some sections of this article seem to have been lifted straight from a website maintained by someone called Mike Sproul (I've flagged the sections).

Mike Sproul's website http://www.csun.edu/~hceco008/realbills.htm

Page text has appears to be taken from http://www.csun.edu/~hceco008/realbillsintro.htm

Possible options for ways to precede

1) Material isn't worth keeping - delete it.

2) Material is worth keeping - rewrite it.

3) Material is worth keeping - request permission from Sproul to use.

4) Remove tags - Sproul probably took the information from Wikipedia not the other way around.

Jonpatterns (talk) 13:05, 28 October 2018 (UTC)

I've just notice a paper by Michael Sproul is in the external links. If the material is kept this could be a useful reference.

http://www.econ.ucla.edu/workingpapers/wp774B.pdf

Jonpatterns (talk) 15:28, 28 October 2018 (UTC)

Unsourced material added in 2015

Lede and unreferenced material added in 2015:

https://en.wikipedia.org/w/index.php?title=Real_bills_doctrine&type=revision&diff=702379158&oldid=680027782

I restore and rewrote the lede. However, the unsourced material is still in the article - needs to be checked and referenced. Jonpatterns (talk) 13:37, 28 October 2018 (UTC)

issuing vs issuing in 'exchange'

The following was inserted into the article:

The RBD is not about ISSUING real bills. It actually says that as long as new bank notes are only issued IN EXCHANGE for real bills, the new bank notes will not cause inflation.

The meaning of banknote has changed over time - it can refer to other instruments other an central banknotes.

It would helpful if the anonymous editor could clarify (inc ref). Jonpatterns (talk) 21:15, 3 November 2018 (UTC)

Deletion

I've just deleted this page because extensive amounts of content, dating back to the article's earliest history in 2005, were copied (without any evidence of permission) from http://www.csun.edu/~hceco008/realbillsintro.htm. Pages kept at AFD may not generally be speedy-deleted, but there's specifically an exemption for newly discovered copyright infringements. Talk pages of deleted articles should generally be deleted, but since this is a very old article with an obviously notable topic, I expect that the article will be recreated, and trashing the talk page wouldn't be helpful. Anyone with questions or requests for assistance is welcome to contact me. Nyttend (talk) 22:31, 16 May 2019 (UTC)

Here are the article's citations, external links, etc.

Extended content

References Bibliography Ashton, T. S., and Sayers, R. S., Papers in English Monetary History, London: Oxford University Press, 1953. Bagehot, Walter, Lombard Street, 1873. Reprinted by Richard D. Irwin, New York, 1962. Bell, J. F., A History of Economic Thought, New York: Ronald Press Co., 1953. Black, Fischer, "Banking and Interest Rates in a World Without Money" in Journal of Bank Research, vol. 1, number 3, Autumn 1970, pp. 9–20. Bosanquet, Charles, Practical Observations on the Report of the Bullion Committee, London: Printed for J. M. Richardson, 1810. Calomiris, C. W., "Institutional Failure, Monetary Scarcity, and the Depreciation of the Continental" in Journal of Economic History, volume 48, 1988, pp. 47–68. Farrer, Studies in Currency, 1898. Reprinted by Augustus M. Kelley, New York: 1968. Gilbart, J. W., The History, Principles, and Practice of Banking (1882). Reprinted by Greenwood Press, New York: 1968. Green, Roy. "real bills doctrine", The New Palgrave: A Dictionary of Economics (1987), v. 4, pp. 101–02. Hayek, Friedrich A., Monetary Theory and the Trade Cycle (1933). Reprinted by Augustus M. Kelley, New York City: 1966. Meltzer, Allan. A History of the Federal Reserve, Volume 1: 1913–1951. Chicago: The University of Chicago Press, 2003. Mishkin, Frederic S., The Economics of Money, Banking, and Financial Markets, New York, Harper Collins, 1995. Ricardo, David, Economic Essays (1811). Reprinted by G. Bell and Sons, Ltd., London: 1926. Salin, Pascal, Currency Competition and Monetary Union, Boston: Martinus Nijhoff, 1984. Samuelson, Paul A., Economics, eleventh edition, New York: McGraw-Hill, 1980. Samuelson, Paul A., "Reflections on the Merits and Demerits of Monetarism," in Issues in Fiscal and Monetary Policy: The Eclectic Economist Views the Controversy, ed. James J. Diamond (DePaul University, 1971), pp. 7–21. Sargent, Thomas J., "The Ends of Four Big Inflations", in Robert Hall, editor, Inflation: Causes and Effects, Chicago: University of Chicago Press, 1982. Sargent, Thomas J., "Some Unpleasant Monetarist Arithmetic" (1981), in Sargent, Thomas J. (ed.) Rational Expectations and Inflation, second edition, New York: Harper Collins, December 1992. Selgin, G. A., "The Analytical Framework of the Real Bills Doctrine" in Journal of Institutional and Theoretical Economics, volume 145, (1989), p. 489. Siklos, Pierre L., "The Link Between Money and Prices Under Different Policy Regimes: The Postwar Hungarian Experience" in Explorations in Economic History, volume 27, 1990, p. 468. Smith, Bruce D. "American Colonial Monetary Regimes: The Failure of the Quantity Theory and Some Evidence in Favour of an Alternative View" in Canadian Journal of Economics, volume 18, August 1985, pp. 531–65. Smith, Bruce D., "Some Colonial Evidence on Two Theories of Money: Maryland and the Carolinas" in Journal of Political Economy, volume 93, number 6, December 1985, p. 1178. Smith, Bruce D., "The Relationship Between Money and Prices: Some Historical Evidence Reconsidered" in Federal Reserve bank of Minneapolis Quarterly Review, volume 12, Summer 1988, pp. 18–32. Sproul, Michael F., "Backed Money, Fiat Money, and the Real Bills Doctrine", University of California at Los Angeles working paper 774B, online http://www.econ.ucla.edu/workingpapers/wp774B.pdf, cited January 16, 1998. Taylor, Dean, "Official Intervention in the Foreign Exchange Market, or, Bet Against the Central Bank" in Journal of Political Economy, volume 90, number 2, April 1982, pp. 356–68. Thornton, Henry, The Paper Credit of Great Britain (1802). Reprinted by Augustus M. Kelley, New York: 1965. Timberlake, Richard,(a) "Gold Standards and the Real Bills Doctrine in U.S. Monetary Policy", Econjournalwatch, vol. 2 number 2, August 2005, pp. 196–233. http://www.econjournalwatch.org cited August, 2005. Tresch, Richard, Principles of Economics, St. Paul, Minnesota: West, 1994. Wallace, Neil, "A Modigliani-Miller Theorem for Open-Market Operations" in The American Economic Review', vol. 71 (1982), pp. 267–74. Wallace, Neil, "The Overlapping Generations Model of Fiat Money", in John H. Kareken and Neil Wallace (eds.), Models of Monetary Economies, Minneapolis: Federal Reserve Bank of Minneapolis, 1980, pp. 49–82. Wicksteed, Phillip H., The Common Sense of Political Economy, volume II, 1910. Reprinted by Routledge & Kegan Paul, Ltd. London: 1957. External links Monetary Economics 101 by Antal E. Fekete Backed Money, Fiat Money, and the Real Bills Doctrine by Mike Sproul Don't Fix the Price of Gold! by Antal E. Fekete Opposing theory Real Bills, Phony Wealth by Robert Blumen Fool's Gold by Sean Corrigan Fool's Gold Redux by Sean Corrigan Clearing the Air by Sean Corrigan Robinson Crusoe & the Curse of 'Real' Bills by Sean Corrigan 'Rothbardian' Errors Exposed? by Sean Corrigan Supporting theory Cranks in the Gold Community by Nelson Hultberg Detractors of Adam Smith's Real Bills Doctrine by Antal E. Fekete The Future of Gold As Money: An Analysis of Antal Fekete's Plan for a Parallel Gold-Coin Standard by Nelson Hultberg A Response to the Real Bills Doctrine by Douglas V. Gnazzo Real Bills, Gold, and the Big Picture by Nelson Hultberg The Real Bills Doctrine and Honest Money by Douglas V. Gnazzo Real Bills: an Emergent Market Phenomenon a detailed refutation of Sean Corrigan's Fool's Gold, by Bill Koures

Nyttend (talk) 22:40, 16 May 2019 (UTC)