Brians Blog: Gresham's Thresher

Monday, February 7, 2011

Gresham's Thresher

Perhaps you have heard of Gresham's law? It is usually phrased like this, "Bad money drives out good" or "Bad money drives out good if their exchange rate is set by law".

An example of this occurred in 1965, when the United States minted quarters made of cupro-nickel when previously they were made of 90% silver. The 1964 and previous quarters immediately were saved by their owners, while the new quarters circulated in daily commerce. This happens because the face value of the 2 coins (the bad and the good) was the same, while it was obvious to everyone that the silver quarter was worth much more. Thus, the bad (cupro-nickel) quarter with the same legal tender, face value drove out the good (silver) quarter.

Of course, this all happened before I was born, and I am sure it happened very rapidly, as soon as the government announced the debasement of the currency. By the way, Battelle proudly claims ownership for the idea of the 1965 "sandwich" coin. (That would look great on your resume if you were applying to replace Robert Mugabe as dictator of Zimbabwe.) I think Battelle was at least 2,000 years late. Debasement has been around a very long time - think Romans.

Nonetheless, our own dear FED has continued its inflation at a much more humble rate than Zimbabwe. Don't believe me? Check the government's own CPI calculator here. One cent in 1965 would buy what 7 cents will buy in 2010.

The debasement of the coinage continued in 1982 when copper-clad zinc pennies were introduced and copper pennies were phased out. Then, however, the difference between the face value of the penny and the metal value of the coin was quite small. But wait, the FED is ever relentless with its inflation and the difference in the face value and the metal value grew to about 2 to 1 in 2006. However, because of this small difference and the small absolute value of a penny, I suspect that Gresham's Law was slow to take affect. (This really means that people didn't think that it was worth their time to sort the pennies. Compare the current 3-to-1 ratio of copper and copper-clad pennies to the 21-to-1 ratio of the silver quarters and cupro-nickel quarters.)

So, I did what any engineer who sees an opportunity would do. I built a machine that would sort the pennies by the thousands at a time.

First, I bought 20 or 30 dollars worth of pennies from a local credit union and asked my kids to help sort them into 3 piles; pre-1982, 1982, and post 1982. The "1982" category was necessary because the US Mint issued both types of penny that year. From that exercise, I concluded that about 25% of the pennies in circulation were of the copper variety.

Next, I studied what physical property would most differentiate the two types of penny. I tried an eddy current sensing technique with a high end oscilloscope and the help of my friend John, an EE. But I ultimately decided that the resistivity (reciprocal of conductivity) of zinc and copper would provide the greatest discriminator.

Copper has a resistivity of 1.68 x10-8 ohms*meter, while zinc's resistivity is 5.90 x10-8 ohms*meter. This is why the wiring in your house is made of copper and not of zinc. This also means that when a copper penny passes through a magnetic field, a larger current will be induced in it and a correspondingly larger opposing force will resist the passing of the copper penny as compared with the mostly zinc penny.

Without further boring you with the developmental details, I will show you photos the working prototype.

Modified coin sorter and bin that sends the pennies down the track

Ten pairs of neodymium magnets at the end of the track

Pennies come off the end of the track at the left and land in the pink or white containers

The zinc pennies fly farther (moving left to right) and land in the white bucket, while the copper pennies are slowed more by induced eddy currents as they pass through the pairs of magnets and land in the container with the pink cloth (to keep them from bouncing)

Details of the transition from the coin sorter to the track

Clear acrylic track

Oh, did I mention that the pennies I bought for one cent now have a metal value of three cents? That's better than any stock, bond, or mutual fund I ever bought, by far! I just need to decide when to take the profit before the table collapses.

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Culture

The self-educated individual – confident in his gender, his heritage, his religion, and the traditional culture that he seeks to project into the future – stands as a threat to the very existence of the state: He does not need its ministrations.

Where then to begin the creation of capitalist culture? The destruction of the moral pretenses of the state is the irreducible first step toward the realization of a capitalist culture….

Terry Hulsey

I would add:

The destruction of the moral pretenses of the state is the irreducible first step toward preserving traditional culture.

Delusionists

The delusionists are those who believe that the current system can be reformed, made more efficient, streamlined. The delusionists believe that government bureaucracies act on market-like incentives. The delusionists believe that those in government bureaucracy can be convinced to reduce their role and influence. The delusionists believe that the president is in control of the bureaucracies. The delusionists believe that government bureaucracies are led by good people just trying to do the right thing. The delusionists believe that individuals, acting as central planners, are even capable of identifying the right thing to do.

Bionic Mosquito

The State

"A state is absolute in the sense which I have in mind when it claims the right to a monopoly of all the force within the community, to make war, to make peace, to conscript life, to tax, to establish and disestablish property, to define crime, to punish disobedience, to control education, to supervise the family, to regulate personal habits, and to censor opinions. The modern state claims all of these powers, and, in the matter of theory, there is no real difference in the size of the claim between communists, fascists, and Democrats." - Walter Lippmann

Solving the Crisis of American Schooling

"The logic of compulsory schooling in the middle of a democracy is a contradiction of the original national charter; it breaks the contract of the Bill of Rights, using as its justification the excuse that kids can't learn any other way, that they can't be trusted with responsibility. The truth is exactly the opposite: unless they are trusted with responsibility they cannot learn much, and under the thumb of central compulsion the lessons they do learn are bad ones."

John Taylor Gatto, "A Different Kind of Teacher", pg. 193-194

Robert P. Murphy

In particular, the market interest rate coordinates the "intertemporal" (i.e., across-time) activities of investors, businesses, and consumers. If consumers become more future oriented and want to reduce consumption in the near term in order to provide more for later years, what happens in the free market is that the increased savings push down interest rates, which then signal entrepreneurs to borrow more and invest in longer projects. Thus resources (such as labor, oil, steel, and machine time) get redirected away from present goods, like TVs and sports cars, and the freed-up resources flow into capital or investment goods like tractors and cargo ships.

Now when the Federal Reserve artificially reduces interest rates below their free-market level, it sends a false message to entrepreneurs. Firms begin expanding as if consumers have increased their savings, but in fact consumers have reduced their savings (due to the lower interest rates). Businesses that churn out durable goods, such as furnaces, cargo ships, and, yes, houses will find business booming, because these sectors respond positively to low interest rates.

On the other hand, other sectors don't need to contract, because (unlike the scenario of genuine savings) nobody is cutting back on consumption. This is precisely why the Fed-induced boom is unsustainable — real resources have not been released from consumer sectors in order to fuel the expansion of the capital sectors. Because modern economies are so complex, the charade can continue for a few years, with entrepreneurs cutting corners and "consuming capital" (i.e., postponing necessary replacement and maintenance on equipment) while both investment and consumer goods keep flowing out of the pipeline at increased rates. But the music eventually stops, since (after all) the Fed's printing of green pieces of paper doesn't really make a country wealthier. When the Fed "cuts interest rates" it isn't really creating more capital for businesses to borrow; it is instead distorting the signal that the market interest rate was trying to convey.

From mises.org

Gary North

Gary North recently wrote a great article on the politico-economic outcome caused by the anti-nuclear media forces following the Japanese earthquake and tsunami:

"Energy is the key to output. This has been true for over 200 years. To control a primary source of energy is to get rich. China will be able to buy uranium by means of its output from uranium. It will convert uranium into wealth. It will do so with the lowest energy cost-per-output ratio of any nation. Its people will find employment.

I think this has shifted the balance of economic power away from India. India will face public resistance to nuclear power. China will not. India has a lot of advantages: English, the legal system, the free flow of ideas, and a lot of motivated, well-educated people. I am not saying that India will fall behind the world. It will advance. But with respect to the job market for millions of recent arrivals from rural districts, nuclear power will give China the edge.

The anti-nuke forces will never talk about this in public. They will never say publicly, "We have delivered the world's economy into the hands of China." But they will have done just that."

Lew Rockwell - again

The beauty and glory of economic science is that it consists in a series of laws and principles that do not change according to time and place. The prescription for prosperity and stability and human economic flourishing is always and everywhere the same: freedom of association, freedom of contract, freedom of enterprise, freedom to trade across borders without penalty, sound money that is redeemable in something besides paper, private property rights, wages and prices that adjust by market conditions, and a legal structure that shores up these institutions rather than undermines them.

James H. Polve

“Mechanical engineers design and manufacture machines, machines to help mankind, to ease his burden and to make like more abundant. Machine work supplants slave labor and provides power far in excess of muscle power to free men from hard labor and yet provides the means to accomplish. Automobiles, airplanes, tractors, electrical and nuclear power plants, steam plants and many other similar kinds of plants and machines are typical examples of design and manufacture by the mechanical engineer. His special abilities are aimed at coupling natural laws with natural materials to produce work. He channels energy available on earth, and wherever possible in the universe, through devices into more usable forms to aid man. He can multiply man’s strength and quickness through hydraulic, pneumatic, and electrical devices. He can transport men and goods faster, further, and more efficiently than man can walk or carry. He provides for warmth in the winter and coolness in the summer. He is aided and yet constrained by the physical laws and the characteristics of resources that surround him; and yet he has made great advances to free men somewhat from the edict ‘In the sweat of thy face shalt thou eat bread, til thou return unto the ground’ (Gen. 3:19).”

Ted Rockwell - The Best Quote Ever

That tactic, of making problems out of advantages—making sow’s ears out of silk purses, I call it—permeates the whole nuclear enterprise. The advantage that radioactivity continually and automatically gets less and less toxic every day, is converted to, “it stays toxic for thousands of years.” And this is implied to pose an unprecedented problem that humanity is not equipped to deal with. And breakable light bulbs containing mercury are called “green,” and radioactivity is called uniquely hazardous.

http://www.nucleartownhall.com/blog/townhall-qa-rickover-to-the-renaissance/

Thesis Topics for Research

How much money will UTOPIA ultimately consume? Currently they have spent $516 million. I bet the total goes over $700 million before bankruptcy is declared.
Why does lightning occur with earthquakes? Is Harold Aspden's theory about this correct?
Where was Joseph, the Carpenter when Christ was crucified? Had he already died?
What was it like to be a Christian in the 1st century, when the Apostles were still alive?
What influences Americans against nuclear power?
Chinese Trade - what was it paid with in AD 800?
History of Property Taxes in Utah. When Brigham Young said "This is the right place", there weren't any property taxes.
What determines left or right-handedness?

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Monday, February 7, 2011

Gresham's Thresher

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