Why are some people anti-Federal Reserve?

Perhaps because it’s the greatest scam in history? It’s a private organization which has the exclusive right to print paper money for the US Government. It has the ability, and the right, to create as much money as it wants out of thin air, give it to whomever it wants, and never be held responsible. For more information, see this link: http://www.politicalbooks.us/2010/01/24/end-the-fed-book-summary-chapters-1-3/

I got a big problem with the Fed competing with me.

They print money out of thin air… and it’s valuable?

I print money out of thin air… and it’s a crime?

Because they enjoy the bigger, less-controlled financial boom and bust cycles that come more often without a central bank?

Seriously, though, there are people that profit from that sort of thing. And profit is a common motive for people to like almost anything.

We know they don’t even have to print it any more @CaptainHarley. Today they can just increase your digits on a keyboard. Increasing someone’s wealth is now just a few keyboard strokes away.

I’m actually amazed at this. Getting away from a gold standard is at the heart… no, the deepest roots of the so called banking crisis. When money doesn’t represent anything solid, but instead it stands for just some arbitrary idea of perceived value, and that ghost is governed by those who have no incentive to promote equality… a most deceptive evil is in our midst.

They lend us ghosts that don’t mean anything other than what they say it means. And then they make us pay back more ghosts than we borrowed. And we thank them for screwing us.

@RealEyesRealizeRealLies – Re: “They lend us ghosts that don’t mean anything other than what they say it means”

How do we know gold is money? Because people say it is.

Gold isn’t money. It is simply considered a valuable asset which can be used in many different ways. It has retained its hard asset value throughout history as the most precious thing.

Money is supposed to represent that thing… Not be that thing.

I can’t print or make more gold out of thin air. I can print as many dollars as I wish.

Why is it not illegal for them to print out money out of thin air? Is there really NOTHING we can do???

Another reason why people hate it is because we’re paying for America’s debt.

@chelle21689 – What country makes its own Treasury illegal? Is there a country that doesn’t reserve the right to coin money?

This is a very good and funny video!

http://www.youtube.com/watch?v=ZPWH5TlbloU&feature=share

it explains how money became what it is which dates back to trading. And like the person said above..money was supposed to represent gold…now it basically doesn’t.

I feel a lot of these answers disagree with what is taught in a macroeconomics course. This is where my conspiratorial suspicions arise. Why do the nay-sayers think the universities teach us differently about the function of the Fed? Why does the Fed print money if not to increase the money supply to combat deflation?

You know sometimes conspiracy is reality. It’s our entrenched beliefs that don’t want to face the ugly truth.

Deflation of what?

If money represents gold, or oil, or national resources, then printing more money slices the pie up… but it doesn’t change the inherent value.

Now they print money with no hard asset to back it up. Their feelings determine what value is and is not. This ruined everything because we are currently at the mercy of their feelings with no hard asset to back it up with.

@Garebo I do know that conspiracies are sometimes real. However I need to be convinced before believing them. Can you give concrete examples of our nation’s central bank being part of a conspiracy?

How much of our alleged wealth is based on speculation about what things might be worth in the future? Think about that for a moment.

I believe that the root of the problem is the Fed knows the price of everything but the value of nothing.

@jerv That’s a bit cryptic. Can you elaborate? I can think about that, but it won’t tell me exactly what you think.

It is a privately owned central bank. That is the problem. our money is controlled by a privately owned bank that we don’t even really know who owns part of it.
http://www.jesus-is-savior.com/Evils%20in%20Government/Federal%20Reserve%20Scam/quotes_on_the_federal_reserve.htm

I don’t think it combats deflation if it’s just putting our nation in debt when all America is doing is owing them money. Then we have to pay for it with taxes for their mistakes.

Has anyone had macroeconomics? I’m not saying that to be condescending, I’m wondering if you’ve had the typical education about the Fed yet evolved different feelings.

@Russell_D_SpacePoet You’re seriously giving me a Jesus is Savior link to support your argument? And @CaptainHarley , my computer warned me of a virus when I went to yours. Can you provide a different one?

Gold standard prevents a nation from over spending. We can only spend as much as we have in gold reserve.

But when there is no hard asset, and value is arbitrary, then we can spend as much as we like because all we need do is print up more… or increase magical value digits…

THEY CHARGE US FOR ACCEPTING THEIR PERCEIVED VALUE

Return to Gold Standard within five years

@chelle21689 What is the function of any central banking system in any nation?

What I proclaimed could easily be countered, so its a waste of time. I just feel that the power brokers have an agenda. I have read way to much and could go on all night, but it would be pointless. I just know a lot of people of a lot higher standing in the financial markets, people I follow, and 30 years of playing and watching the financial markets leads me to know without question it is more rigged and f’d up than ever!

Hopefully a Central Banking System would manage our hard assets…

It certainly shouldn’t be a private organization that charges us for renting their ideas.

@Russell_D_SpacePoet, It’s not privately owned. It’s a weird public-private hybrid with the board of directors nominated by the President and ratified by the Senate. The annual profits are shipped to the Treasury to pay down the debt.

Folks may also be interested in some points here.

@Garebo If you have good information, I’d like to hear it. I don’t want to necessarily argue, I want to understand why people are anti-Fed. If there is sound reasoning that shatters my preconceptions, I’m all ears.

@RealEyesRealizeRealLies Do you think the amount of wealth on the planet should be limited by the physical amount of gold? How would a nation without ample gold mines ever leave the stone age?

cockswain u should really watch that link i sent you above. like i said it explains a bit about trade and how it became that way to the standard of gold being “money”

Notice in my above post, I also said oil or other natural resources.

My savings account is in vintage camera lenses. What I paid $50 for ten years ago can now be sold for $1000. That’s a hard asset which cannot be duplicated or replaced by modern technology.

It’s owned by extremely wealthy banker, and in most cases there lineage goes way back.
I suggest read Robert Chapman’s, International Forcaster if you want to get depressed. I have been following him now for years now. And yes, he’s partially whacked, rightfully so, but he’s right 90% of the time. The only reason I have any money now, is because I followed his advice 5 years ago and bought silver as he suggested. Besides, there are not to many blogger authors that will answer you like he does.

Data point, if I may.

Let’s suppose that all the gold in the world were to magically move to the US, and that we replaced every dollar in existence with a gold coin. Assuming we’re setting out to break even, that would make the dollar coin weigh about 1/1900th of an ounce.

It gets worse, if we replace all the money in the world with gold. Assuming the world money supply equals the Bank of International Settlements’ statistics for all bank deposits in the world, then it would take about $7000 to replace each ounce of gold. This makes gold seem quite the bargain, at $1769.60 per ounce, just now.

Link.

No one knows do they, how much Gold is in Fot Knox? Now that is conspiracy, but a good question. Fluther already answered it I am sure.

@chelle21689 I may watch the link later. Have you had macroeconomics?

@RealEyesRealizeRealLies Ok, so the nation with gold trades with the nation with oil?

nope, just microeconomics, maybe macro would’ve been more interesting.

Fear. Nobody seems to have answers, even the brightest minds. Time will, of course, heal all wounds, even the economic ones. The fed’s lack of success makes them a target.

Oh @laureth I agree… there is not enough gold on the planet to even come close to balancing even to the dollar. The dollar would have to be devalued tremendously… and everyone would really have to cut back.

We’d have to pay the price of the mess we are in no doubt. But at least we wouldn’t be adding to the problem by continuing on current course.

@Garebo Ha! One of the very first questions I asked on this site was “What is the purpose of the gold in Fort Knox.”

I’ll see if I can find the author you mention. I’m very skeptical though. If you say he’s been right 90% of the time, that’s a fine track record though.

Re: Microeconomics vs Macroeconomics:

I think the main problem, is like the grand unifying theory in physics: Relativity and quantum mechanics don’t really play nice together. Similarly, insisting that macroeconomic analysis be based on microeconomic thought is like insisting relativistic time dilation must take quantum uncertainty into account. The great Neoclassical objection to Keynesian economics is that it isn’t built on microeconomic theory. But Keynes was working on a question of why entire economies weren’t functioning as the economics of his day, built on those same assumptions of rational individual behavior, said they should.

That is a good point, I didn’t think about that. How there is a ton of money and probably not enough gold on this earth to total up to that…BUT the only thing I’m mainly concerned with is how it affects us citizens.

@RealEyesRealizeRealLies Do you think the human race would be better off if we had never allowed paper money to exist, and kept the value tied to hard goods? I bet it would have kept the population from ever reaching 3 billion.

@cockswain No I wasn’t. Forget the jesus bullshit and look at the numbers. Look up central bank of England. We are one of the most powerful countries in the world and we don’t even print our own money.

@RealEyesRealizeRealLies re “and everyone would really have to cut back.”

Money is a tool meant to serve the needs of people. I don’t think that human suffering should necessarily be a tool to serve the needs of money.

Look at what massive deflation did to people during the Great Depression. That’s a little more than just “cutting back.”

Paper money is fine as long as it represent something other than itself.

The medium is not the message… never ever.

Evil arises when people are deceived into believing that it is.

@chelle21689 In a global economy, I don’t think we can ever only consider how it affects the US since the entire system is intertwined. Greece got a cold, and we caught the flu.

Either way, I admire the nut case. He knows his stuff-been there and done that. You will definitely enjoy, if if you don’t get too depressed-you know them gold bugs. Otherwise, if you’re into “the facts man” as you seem to be, you can scroll to his stats towards the end of his weekly and get some valuable info.

Paper money is fine as long as it represent something other than itself.

Can you clarify that?

And it be so cute and cuddly.

@Garebo I’m definitely a facts man. How else can I avoid deception?

By believing “facts”.

I don’t understand your second comment @laureth.

The tool of money is there for a couple of simple reasons.

I don’t have to carry around large heavy objects to buy things.

And supposedly, if my money is lost, stolen, or damaged, the real value of the hard asset hasn’t been affected whatsoever. Technically, with paper money, it’s like a check. If that’s lost, it is replaceable. Unfortunately people don’t realize that paper dollar is supposed to just be a note.

@RealEyesRealizeRealLies I feel you’re disproving your initial position now.

@cockswain “Can you clarify that?”

If you have a note proves ownership of a gold bar… and that gold bar sinks to the bottom of the ocean in a shipwreck… you still own the gold bar because the note says you do.

But if your dollar sinks to the bottom of the ocean… you got nothing.

Most Americans think they are part of a democratic process, but we are really just puppets to a higher nobility and control. That’s why the manifesto is really pretty on target.

@Garebo I think less and less Americans are feeling the system is fair these days.

Do you have a deed to a house?

The deed represents your ownership of the house… the hard asset.

Which is more important? Which is the real value? Which would you like to live in?

Which would you be more upset if it burned?

What if someone just sold you a deed… a piece of paper… and said “OK go live in it”?

“Where’s the house”?

“I didn’t sell you a house… I sold you a worthless piece of paper that you think is of the same value as a house… but you’re not getting a house friend”

Paper notes are meant to represent value… not be value.

I can get the title of my car replaced much easier than I can get my car replaced.

I can get my birth certificate replaced much easier than I can get my life replaced.

Its about time they wake up, and its time we vote with our individual conscience and not some others.

If my house burned, the insurance company will give me a check, which I have faith will be able to eventually be traded to replace my house. Obviously I don’t want to argue about how the value of my house is determined, nor if the insurance company will give me a hassle. Money has value because we have faith we can trade it for something else. The ease of which stimulates economic activity. You seem to think that’s horrific and it isn’t clear to me why.

@Garebo I’m convinced nothing positive and substantive will occur unless many unaffiliated, charismatic, and honest people are all elected to Congress, turn their backs on the corporations that helped them all get there, and commit political suicide in the process of turning things around.

Faith? If the currency doesn’t have a hard asset to back it up with… then it’s blind faith.

Consider this scenario…

I apply for a loan. The bank checks credit and wants to see my asset list. I show them my asset list and they request to see the real assets, rather than just take my word for it. I invite them over to see my cars, my house, my tools, my cameras… and they can see that the words on my asset list (my note) actually means something.

Now… they (a normal bank) say OK, we’ll loan you $200,000. based upon the information you provided.

I say ok… I’d like to see your asset list. WHAT? Well yes of course… you’re giving me a note that says it has $200,000K worth of value. I want to see the real value that your note is supposed to represent. That normal bank can take me around the neighborhood and show me all the houses that they own. My faith is an educated one because I see they have hard assets to justify them giving me the note which represents real value.

But nobody asks the Fed to see their asset list. They don’t have anything real to back up their claims. How are they lending money without any real hard asset to back up the real value with? We are at the mercy of whatever they say value is… it is… just because they say so? That is evil.

BTW… Great Question. With all the rukkus so fast I forgot the GQ you.

@chelle21689 “Another reason why people hate it is because we’re paying for America’s debt.”

Yes. They lend us money that has no hard asset to back it up. But they can claim our hard assets if we don’t pay it back.

If bailout money doesn’t have anything to back it up… and a country doesn’t pay back the bailout money… then nothing has been lost by the lender.

Literally… if money doesn’t stand for anything… but you print me up some dollars… and I don’t pay it back… you’re hoping to repossess my car. Imagine your surprise if I just printed up some dollars and handed them back to you… “THAT’S WHAT YOU GAVE ME”… so that’s what you’ll get back. You didn’t give me a car… you printed paper and gave it to me. I’ll print paper and give it right back to you. We’re even.

I’m just going to throw my hands up in the air and hope most of you have never taken a class on macro. If you have you should ask for a refund.

I’m astonished at some of the answers here. Money is a medium of exchange, nothing more. It’s something that everyone universally agrees upon (and in the US, the currency is established by the Government). The job of the Fed is to slow the market when it gets out of control and to boost it when things are too slow. It’s like a thermostat that kicks in the AC when your house gets too hot or turns on the heater when it gets too cold. Before the Fed, the economy whipsawed violently, (just read up on tulip bulbs to see how economies behaved before central controls were put in place when money was represented with “real assets”).

@johnpowell well said GA!

@gorillapaws

So now we have a situation where the Fed has printed and disbursed trillions of dollars, triggering inflation, which steals value from the money people hold in the form of savings, incomes, etc. So I suppose the “thermostat” is busted, yes?

@CaptainHarley :: The CPI hasn’t really moved in years. Inflation is actually pretty close to where they want it. 3% a year is considered historically normal by economists.

Edit :: Should probably add this…

The Consumer Price Index (CPI) is a measure of the average change in price over time in a fixed market basket of goods and services bought by consumers for day-to-day living. The All Items CPI for the U.S. is the broadest, most comprehensive index, and is often quoted as the source for the “rate of inflation”.

Are you guys saying that the Fed doesn’t lend money to banks? That wasn’t listed in your “job of the Fed” @gorillapaws.

@gorillapaws “Money is a medium of exchange”

Of what?

@gorillapaws “It’s something that everyone universally agrees upon”

Well yes, the currency… but not the value.

@CaptainHarley low-to-moderate inflation is a good thing for the economy, and it only “steals” money from people if they keep it under the mattress. If you invest your savings then they will move with the market. Hyperinflation is bad, but so is deflation. As @johnpowell has pointed out, that things are in pretty good shape as far as inflation goes (especially considering how badly the Republicans managed to fuck everything up, and then get in the way of the attempts to repair the damage they’ve caused).

If you look at the banking crisis that happened, our economy is a million times better off than if the Fed wasn’t there. There would have basically been a total collapse of the entire US banking system. This would have resulted in a run on the banks. The government would have had to pay out trillions in FDIC payments to people who lost their entire life savings. Nobody would have been able to get a loan, so people like myself (who have good credit and a big downpayment) wouldn’t be able to buy the house that I did. The housing market would have tanked MUCH worse than it did as a result. Nobody would be able to relocate to find employment elsewhere; everyone would be underwater in their mortgages; business that were doing fine but might’ve needed a short-term bridge loan would have been unable to get them and would have failed resulting much greater job losses, new companies would have been unable to start up, and the US economy would look something on par with the Democratic Republic of the Congo.

The Fed was able to exert damage control and prevent a chain-reaction full-scale panic that could have permanently decimated the country’s economy.

@RealEyesRealizeRealLies money is a medium of exchange for goods and services. It’s necessary if you want to have things like loans, investments, etc. In such a world without the ability to get a college or business loan, it’s nearly impossible for people to rise above the class they were born into. Read up on how economies and societies were 150 years ago. I can assure you that life sucked for everyone except for nobility, factory/mine/railroad owners.

The value of currency is determined by supply and demand. If I want to buy a super-yacht for $200 million dollars that’s being sold by a company in the Netherlands, then I need to exchange dollars for euros. This means I have a demand for euros and a supply of dollars. If lots of people are demanding euros, and less are demanding dollars then the value of the dollar drops and the euro goes up.

@RealEyesRealizeRealLies, re: not understanding my comment.

I’m not sure what part you do not understand. Do you not know what privations occurred during the Great Depression, and how that was related to massive deflation? The cash supply was not big enough at the time to handle the needs of the people. For example, farmers in California had crops they needed to bring in, but not enough physical cash to hire workers for the job. People in California cities were starving, but didn’t have enough physical cash to buy food. Until some brilliant folks devised a work exchange whereby hungry people brought in the crops and were paid in food (the organizers of which, iirc, were brought down as “Communists”), people would have suffered and died for lack of physical cash, not for lack of food or willing labor. That’s why people, lacking currency, used things like clamshells as ersatz (“fiat”) currency during the Depression, to serve their needs and keep things rolling.

You say that since there’s not enough hard gold to serve as currency (our economy has long been too big for all the physical gold in the world to back), you seem to see that as a feature that will keep us from “spending too much,” and people will have to “cut back.” The starving times are not a level of “cutting back” that I ever want to see in my country.

If you see starvation and suffering as a necessary evil to “serve money” (i.e., right-size the supply of cash to your taste), rather than seeing a need for a money supply that grows to meet the needs of the people in commerce, I have no place for your monetary philosophy, I’m afraid.

@gorillapaws re: “Read up on how economies and societies were 150 years ago. I can assure you that life sucked for everyone except for nobility, factory/mine/railroad owners.”

I’m convinced that’s why some folks want a second Gilded Age, or, really, a feudal system again. They probably think they’d be the neo-Aristocracy, and that’s a great position to be in (for them). Not so much for the rest of us. And that neo-Aristocracy is who tends to fund outlets that say a return to the gold standard would be a Good Thing.

@CaptainHarley, re: “So now we have a situation where the Fed has printed and disbursed trillions of dollars, triggering inflation, which steals value from the money people…”

Why didn’t I hear folks complaining during the Bush II administration, when inflation was higher than it is now?

Let me give you an example. If Social Security paid its recipients correctly ( adjusted for inflation ), most of us would be getting about three times what we actually get.

@CaptainHarley The same could be said of wages for most Americans.

I’m so far led to conclude, barring me finding a well-substantiated position when I read Robert Chapman as @Garebo suggested, that the anti-Fed position is not supported.

@laureth The cutback doesn’t have to be directed just at the common citizen. I suggest beginning with America trading in some of its war machine and the continued costs involved with just keeping it alive.

We could expand the dollar backbone by including natural resources as well. The system wouldn’t be based entirely upon gold. Run the country as a corporation where the citizens are the shareholders of all hard assets.

@gorillapaws Your supply and demand argument is not supportable upon it being based upon the supply and demand of dollars or euros. The Yacht is the supply… it’s the real asset. The ability to sell it determines the demand. There isn’t much demand for a Yacht in the middle of a desert. Currency of choice should have nothing to do with fulfilling the demand for a Yacht purchase. I could use wheat or frequent flyer miles just as effectively to barter for the Yacht. The value of the hard asset remains stable. The supply and demand for the hard asset remains much more stable than any paper currency which can be inflated at the behest of those who print it.

@jerv

Exactly! And that is the definition of inflation, and when performed with intent, it is the definiton of stealing!

@RealEyesRealizeRealLies – It seems like you might not understand what it means to have less actual physical (or pixel) money, and no ability to make more. Reducing government spending is just one time a dollar is used.

Re: “Run the country as a corporation where the citizens are the shareholders of all hard assets.”—> Nationalize the means of production, you say?

Also, A Country is Not a Company.

@RealEyesRealizeRealLies It’s not a “argument” it’s a statement of economic fact. You can read about how the supply and demand of currencies work. The reason we need currencies is that Dutch Yacht-builders may not be interested in having their cars washed 50million times (if that’s what your business happens to be). They want you to have your employees wash those cars and get a medium of exchange and use it to purchase the yacht. I get the sense that you’ve never taken an into level course on macroeconomics. Here’s a link to free recordings from a Macro class on iTunes U; you might find it enlightening.

@gorillapaws

Easy. No need to get snippy! : P

I get the impression that some people think the Fed only increases the money supply. Sometimes they decrease it, which takes money out of circulation. This is to combat inflation. The argument that “they are printing money! There will be permanent inflation!” isn’t valid.

@CaptainHarley I wasn’t trying to be snippy. It seems that there is some genuine interest in the subject and I was directing @RealEyesRealizeRealLies to where he could learn more about how the markets work. Some of his statements indicated that there were some basic principles of how the markets work that he had never learned. I was trying to be helpful.

@gorillapaws Perhaps you noticed that way back, I asked how many people have had a macroeconomics course. Only one person replied, and that person had not.

@gorillapaws

Ok then. : ))

@cockswain

I had a minor in economics in my undergraduate program. It included both macro and micro economics, as well as a really great course on the Austrian School of Economics. : )

Then knowing what I and any other person with a macro class knows, why do you think the Fed only prints money without abandon and never contracts the money supply?

@cockswain

Kindly tell me where I have said that, and I will immediately retract it.

I guess that’s what I’m gathering from this:
So now we have a situation where the Fed has printed and disbursed trillions of dollars, triggering inflation, which steals value from the money people hold in the form of savings, incomes, etc. So I suppose the “thermostat” is busted, yes?

And other history I have discussing economics with you. Last I recall was you telling me hyperinflation was on the way, I pointed out inflation was really low at the moment and asked why you thought that, and all you said was “wait and see.”

So I’m wondering why you think the Fed printing money to combat deflation at the outset of the recession triggered inflation.

Have you heard of “Quantitative Easing?” That’s simply printing more money backed by nothing. This is one of the primary causes of inflation. Read Von Mises.

They didn’t buy bonds or securities to create the money?

@cockswain I have not taken any formal economics classes (like most things, I learned it through self-study) and yet even I know that money isn’t created like that. Maybe you are simplifying it to the point of inaccuracy, but the relationship between Federal Reserves and the money supply is not nearly so direct.

Regardless of the hair-splitting details, the value of Treasury Securities is variable enough that any currency backed by them is also of questionable (and some may say “arbitrary”) value. A little common sense will tell you that that leaves a lot of wiggle room.

Possibly I’m oversimplifying it, but generally everything I’ve seen the Fed do over the last few years is consistent with macroeconomic theory. And while you may have a point, I’d at least like to start there as a point of discussion rather than jump around and get side-tracked.

See Creature from Jekyll Island if you really want to know about the Federal Reserve.

Jump to Part 4 to get past the history of its secret inception, and learn why it is a huge scam… the biggest lie ever told to the American people, and perhaps the entire world.

For a quicky course… Check IT Out for a fun little teaser.

You can call it all conspiracy if you wish… but consider refuting the actual claims with evidence before you do.
________

@CaptainHarley @gorillapaws I never took offense with anything GP said. I don’t really know what you’re talking about.

@gorillapaws Perhaps we’ve been misunderstanding each other. I understand the facts you provide are the way the system works. I’m not arguing against that. I’m arguing that it the “fundamental factors” should be limited to hard asset alone. Thanks for the link… pretty pictures.

Regardless of our position on economic policy, my intention is to answer the OP about the Federal Reserve. That’s all I’m addressing here.

Beyond the secrecy… Beyond the cartel conspiracy theory…
I’m against the deceptive practice of Quantitative Easing.
From Business Insider (which backs up the Jekyll Island video/book):
A central bank does this by first crediting its own account with money it has created ex nihilo (out of nothing).… What gives them the right to do that? If you or I did that, we would be jailed. Criminals are in league with our government… plain and simple.
_______

@laureth… Thanks for the link. Here’s one for you.
_______

@cockswain I haven’t taken an economics class since high school… over thirty years ago. I know what I know because like you, I had grown tired of all the whining conspiracy theorists talking about how evil the Fed Res system is. I thought I’d check out some of the claims… and whada-ya-know… some of the claims are worth consideration.

@gorillapaws “If you look at the banking crisis that happened, our economy is a million times better off than if the Fed wasn’t there.”

If the Fed wasn’t there, it would never have happened in the first place. There wouldn’t have been a source of magic money available to allow private banks to lend .90 cent more on every dollar that they actually had in reality. The banking crisis is here because private banks lend money that doesn’t exist… and the Fed gives it to them. They sell ghosts. And they’ll take your real house away if you don’t pay them back in spades.

@chelle21689
That was a great link
Thanks

He who sacrifices freedom
for security deserves neither.

B. Franklin

@CaptainHarley – That is only one half of quantitative easing. The other half is when they take that money out of the economy. You and I talked about this before, here. And remember how, of all people, Ron Paul suggested not doing the second half of QE in order to get out of the debt ceiling impasse? Good times.

For those of you with the time and patience to hear him out, this is a great video of an interview with Thomas Sowell on economics and related matters. Watch it if you dare. : )

http://www.humanevents.com/UncommonKnowledge.php

@cockswain Here is the reason people don’t like the fed.
http://www.silverbearcafe.com/private/10.11/gaoaudit.html
http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3

@Russell_D_SpacePoet

Nice article. I even agree with most of it. And beyond that, the money the Fed printed for those monumental bailouts generated inflation which made the money people save and earn less valuable, thus constituting, for all intents and purposes, another tax.

The real question is: “Where did all that money go, and what was it used for?”

@CaptainHarley That is the 16 trillion dollar question. where did it all go?

It’s still sitting in bank vaults. The intent was to make it easier for banks to make needed loans, but they’ve gotten so risk-averse that they’re sitting on the money, and the loan market is still squeaky tight. That money won’t do any good until it gets out there on the street.

I don’t care where it went. I care where it came from.

Making money from nothing?… News Flash! There’s no free lunch.

As @CaptainHarley and so many others suggest, that make believe pretend money will eventually be extracted from the common citizen in the form of lost quality of life.

Printing money from nothing = Placing deceptive undue and unjustifiable burden upon society.

You want to jump start the economy? Take that same 16 trillion and write a $50,000. check to every adult man and woman in the US and make it only usable for goods which employ American workers. The money would still be a lie… but the lie would at least be able to do some good.

@RealEyesRealizeRealLies I don’t think you realize the full implications of abandoning the fractional reserve banking system that’s worked successfully for centuries. The key is to have strong regulations in place to ensure banks make low-risk investments, and to have a large diversity of banks so that if one bank fails, it’s not a total catastrophe on the system.

If we were to shrink the US money supply by 1000% so that everyone would have 10 cents for every dollar they owned, we would be looking at a financial armageddon. First of all the credit market would basically dry up nearly completely. People would still need loans to buy houses, cars, get educations, start businesses, to pay bills if someone gets sick or looses their job, cary a business through a short-term rough-patch, etc. so they would have to seek loans from other countries that didn’t nuke their lending industries. As a result the demand for foreign currency for loans would skyrocket, and so would the lending rates, meanwhile the value of the dollar would plummet (even a gold-backed dollar).

Consumer spending would dry up, and most businesses would fail as a result. Foreigners would begin to buy up US assets at bargain prices, and you would see a return to 19th century economic conditions. I.e. 90%+ of US workers would be employed by foreign companies working for slave wages in unsafe working conditions for exhausting hours. No thanks.

I’d much prefer to give the FED more teeth, boost enforcement, increase the number of investigators and do a much better job of policing the markets. If we spend the same number of dollars in police enforcement dollar-for-dollar that we do for robberies and larcenies that we do for investigating the theft of billions of assets in the corporate sector, I think the US would be a much better place. The system can and does work well when it’s being properly overseen, but people pushing too much deregulation have allowed massive corporate conglomerations that have way too much power, and are “too big to fail.” In my opinion, nothing should ever be allowed to grow to the size that it’s too big to fail. Risk of failure is part of what keeps markets honest. So does a healthy choice of alternatives that promotes competition in the markets which is when Capitalism is at its best.

@gorillapaws The real problem with fractional reserve banking is that it can be overdone. It’s one thing to lend out 10 times as much as whatever reserves you have, but it’s another when you lend out so much that your assets are 99.999% IOUs. When you have too little reserves, you run an increased risk of having some defaults topple the house of cards whereas keeping things a little tighter will allow the economy as a whole to be more robust.

It’s a delicate balancing act.

It is simply not the case that we can cheaply and easily buy things with money because it is valuable. It is, instead, the case that money is valuable because we can cheaply and easily buy things with it.

@jerv I completely agree. I think the money multiplier needs to be carefully regulated.

All the money now in circulation in the USA is called “fiat” money. This is because it is money because the government SAYS it’s money. As long as people accept their word on it, things are fine, but when people no longer trust the government, what happens to the money?

@CaptainHarley – As long as folks keep taking dollars for just about anything, they will be good in trade for just about anything. They can go on forever like that. Until some numbnuts decides that dollars aren’t good enough (because he doesn’t trust all the other numbnuts out there to keep taking dollars), and he demands gold. His neighbors might laugh at him for a while, not taking perfectly good dollars, but if enough of them are big enough conspiracy theorists that think he’s on to something, over time, their confidence falters. It becomes a self-fulfilling prophecy. In other words, yes, if confidence fails, the dollar fails. But the thing that makes confidence fail, doesn’t have to happen if people decide not to let it happen.

What happens when people realize that gold is just a pretty shiny metal, but you can’t eat it and it is too soft to make a good knife? There’s nothing inherently valuable about gold except that people say it’s valuable. It’s fiat money just as much as paper is.

In fact, it’s arguable that von Mises and Karl Marx both saw money the same way, and both missed the point entirely.

Gold has intrinsic worth because the world has a very limited supply of it. That’s called “scarcity.” Dollars have fiat worth because the Fed can print money until we’re all ass-deep in it. That’s called… frankly, I don’t know WHAT that’s called! Sigh!

Four people stranded on a desert island together.

One has $100 cash.

One has an ounce of gold.

One has a McDonalds Happy Meal.

One has a bag of seed.

Who holds the most valuable commodity?

@CaptainHarley – Something in short supply doesn’t necessarily make it valuable. I only have one left pinkie fingernail, but just you try selling it on eBay. ;) What makes the scarce thing valuable is not its scarcity, but the demand for it. Scarcity can affect demand, but it’s not something that marches in lockstep.

Oxygen, on the other hand, is all over the place, and is valuable because you can’t live without it. It’s very much in demand.

LOL! Gold is also portable in small quantities, is easily malleable into sheets or wires ( or computer components, etc ), does not rust, does not lose its luster, etc. This also helps generate high demand, which ( as you note ) generates value. : )

If the government falls, and with it the dollar, people will have worse things to worry about than whether or not their little hoard of gold will be valuable because of its limited use in electronics, or because you can easily pound it into a conveniently flat sheet and because it stays pretty, even in water. Those don’t help you procure food or protect yourself, which will be far more valuable in that worst-case scenario.

Ah HA! BUT… gold DOES hold its value under those circumstances, and as a matter of fact, becomes one of the mediums of exchange.

And why does it become a medium of exchange? Not because it helps you get food or water, but because people say it is valuable. The same reason paper dollars are valuable – because people say they are, and they’re in demand.

Paper dollars and gold coins are both abstract symbols of value.

Yet gold always dispaces paper money as a preferred medium. I think we’re seeing this happen right now.

Gold is valuable because it is extremely rare, difficult to procure, and a finite quantity.

There is nothing rare or limited about cash or electronic money that can be created out of thin air.

Uh…. I THOUGHT that’s what I said earlier. Hmmm. Perhaps I’m getting forgetful in my old age. : P

Let me put it this way. Lets say, for example, that people lose confidence in gold. If you can’t spend your gold on things you need, you’re just as screwed as if you had that paper money you hate so much.

Money (gold coins, paper dollars, clamshells, anything) is backed by exactly one thing: what you think you can get in exchange for it later. That is all.

@laureth Even if people lose confidence in gold, it is still worth something because it can be used for something other than currency. Paper money can’t be used for anything except currency. So gold is a safer medium for exchange because even if it’s worth was to drop, it will always be worth something, which cannot be said of paper money.

@amujinx – I disagree, for the most part. As you say, gold does have some uses; it has a bit role in electronics, and it’s pretty. Like I say, if the government is in disarray and people are out looking to trade their little gold stash for food from other desperate people, electronics is not going to be the reason gold is valuable (even if it’s possible to use it for that). And if I am starving, “pretty” won’t mean one bit to me. Food will.

Saying that gold is valuable because of those things like like saying paper dollars are valuable as kindling. They are! You can totally light a fire with them. That might even be more important in Mad Max times than being able to build a tiny part of a computer with your gold coins. Computers won’t matter very much.

It sounds as though people here are conflating “money” with “wealth,” which is easy to do, but so very wrong. Money – any kind of money – is a symbol of wealth. But if you can’t trade it for actual wealth, it won’t do you any good. Unless, for some reason, you need some kindling. Or a “use in electronics.” Or a piece of bling. None of it will feed you, though.

However, if anyone reading this really thinks that their paper and pixel money is worthless, they are free to drop it to me in the mail, or in a wire transfer. I’ll take that worthless crap off of your hands! ;)

@laureth ”...if anyone reading this really thinks that their paper and pixel money is worthless, they are free to drop it to me…”

It’s worth is based upon the arbitrary inclinations of those who create it and have something to gain at the expense of others by controlling it, loaning it, and creating it out of nothing.

But the worth of my hard assets is based upon my personal wants and needs. It can’t be created out of nothing. And the value I attribute to it is not dependent upon others. Nor does it benefit me by lowering the quality of life for others.
__________

My loaf of bread has a set worth, regardless of money. The Fed simply decides if that worth is represented by $1 or $10. It doesn’t change the worth… It changes the ability to exchange that worth… and it is to their own benefit to control that ease of exchange.
__________

Ford sets the worth of the cars they sell based upon manufacturing costs, profit margin, demand, and competition. The Fed doesn’t change any of that. But they do change the ease in which Ford and the customer can conduct effective transactions. They profit by getting in the way.

A really excellent article on gold as a medium of exchage: http://www.321gold.com/fed/greenspan/1966.html

If you want to prevent banks from “making money out of nothing,” you pretty much have to make it illegal to borrow or lend anything. (If you just say “banks can’t loan money,” you’ll have companies spring up that perform the same function of taking money on deposit and loaning it to others, but technically aren’t banks.) That results in a LOT stricter economic repression than anything any Communist nation has done in the last century.

Fractional reserve banking has been in existence since the 13th century in Genoa, folks. Cap’n, I’ll pick your article apart later. ;)

That article is convincing…

…to the already-convinced. Otherwise, the gratuitous insults seem designed to prevent people like me, who disagree but prefer reasonable discourse, from finishing it. (I did finish it, however, I fail to see any point in tearing it apart, since it would be more useful to bang my head on a brick wall, and I have better things to do.)

@laureth

Hell! I’d pay to SEE that! LOL!

@CaptainHarley – From you, I accept only gold. :P

Hahahahaha! : ))

Here’s a little article most of you might find interesting:

From The National Inflation Association, 11/30/11

The Federal Reserve along with the European Central Bank, Bank of Canada, Bank of Japan, Bank of England, and the Swiss National Bank are all lowering their U.S. dollar swap rates by 50 basis points! This is going to create massive worldwide monetary inflation and flood the world with U.S. dollars!

The Fed claims that these coordinated actions will enhance their capacity to provide liquidity support to the global financial system in order to “ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.”

It was also announced this morning that arrangements have been made to establish temporary bilateral liquidity swap arrangements so that liquidity can be provided in each jurisdiction in any of their currencies should market conditions so warrant. Although the Fed said, “there is no need to offer liquidity in non-domestic currencies other than the U.S. dollar” at this time, the stage is now set to create massive worldwide monetary inflation in other fiat currencies as well. The whole entire global fiat currency system could soon come to an end. The only solution to the upcoming hyperinflationary crisis will be a global digital gold backed currency.

NIA believes China will soon announce that they have dramatically increased their gold holdings to backup their rapidly growing foreign currency reserves, which have now reached $3.2 trillion.

The blog you posted that from, found here, has the tagline, “Preparing Americans for Hyperinflation.” I sense an agenda? ;) While an agenda isn’t, of itself, a sign that they’re unreliable, I went to their “about” page to see what they had to say.

1. “Pretty soon, NIA believes the Federal Reserve will be the only buyer of U.S. treasuries and there will be a rush out of the U.S. dollar,” they assert. How soon is soon? The last time the US Treasury wanted to sell 10-year bonds, the market offered $2.64 for every dollar the Treasury wanted to borrow.

2. They mention the “buying up of Treasuries,” which the Right loves to hate, but they don’t mention the other side of QE, the selling off of those assets and the “blipping out of existence” of that money, when actual inflation becomes a possible problem.

3. You quote them saying, “NIA believes China will soon announce that they have dramatically increased their gold holdings to backup their rapidly growing foreign currency reserves, which have now reached $3.2 trillion.” Contrast this Bloomberg article from today, where China is cutting its reserve requirement. “The central bank cut the requirement amid signs that inflation is slowing, manufacturing data is “disappointing” and the European debt crisis has worsened, said Hao Hong, global equity strategist of China International Capital Corp., the top- ranked provider of China research in Asiamoney’s survey.”

There may be more, but I have to get to work. My point here is that, they seem to be paying attention to only the data they’re cherry-picking, which leads me to believe one of two conclusions: either they are incapable of more complete research, in which case they are unreliable, or they are pushing an agenda and carefully trimming the data to fit, in which case they are unreliable. In fact, @CaptainHarley, it reminds me of our exchange here, but without the part where you agree. ;)

@laureth

LOL! Without having access to the full database from which they worked, I would have a real problem decoding that.

I found this excellent chalkboard-style talk on Khan Academy about the benefits of being off the gold standard. In the interest of continuing this discussion, I hope those opposed to leaving the gold standard watch it and comment.

@cockswain

There are so many things wrong with that talk that I have no idea where to begin.

How about trying anywhere? I mean, he basically summarizes what I and many others believe.

He talks about the gold standard being “restrictive,” but doesn’t go on to explain that it’s restrictive in the sense that it doesn’t permit of massive debt accumulation. He seems to believe that a large gold reserve is a waste of good resources and doesn’t “do anything.”

Yes, but he explains why he thinks that. If we don’t find more gold, or a golden meteor doesn’t land in the US, then this limits the amount of economic activity possible, stifling innovation and commerce. He also mentions how the Spanish finding a lot of gold didn’t really improve their national economic situation. It’s innovation, not gold.

While I know an argument from authority is a not a perfectly valid way to support something, you should know that the speaker, Salman Khan, holds three degrees from the Massachusetts Institute of Technology: a BS in mathematics, a BS in electrical engineering and computer science, and a MS in electrical engineering and computer science. He also holds an MBA from Harvard Business School. He also worked as a hedge fund manager until he quit to become an educator. So this guy is no idiot and understands economics. If you are just going to be dismissive of him, I think you are doing your mind a disservice.

It’s relatively easy to be “dismissive” of him, since he obviously has no concern for ever-increasing mountains of debt. Then again, we have done SO well in this regard, yes? [ sarcasm ]

@CaptainHarley I think @cockswain was addressing the actual problems with his position, and not dismissing him outright. I’d be interested in hearing your thoughts on how an economy can grow if it’s limited by a fixed amount of mineable gold in the Earth’s crust. If I’m a company that produces 1 million hammers a year, and there isn’t a discovery of an equivalent value of gold to back up those new products in the marketplace, what happens to the value of those hammers? How do I pay my employees? How do I borrow money and expand my facilities, hire more workers, etc if I can’t get a loan, because the lending institutions are required to have 100% of their assets in a vault? What happens to the US economy if we shrink the money supply by 1000%?

I respect your insight, and previous education regarding these issues, so I’d love to hear how that is supposed to work out. Every pro-gold person I’ve spoken with previously hasn’t had the fundamental knowledge in basic macroeconomic principles to answer these questions. I’m genuinely interested in hearing how these problems could be addressed.

@gorillapaws I think you’re just asking the same question I asked him more elaborately. How can economies grow if growth is tied purely to gold discovery? What is anyone’s motivation to innovate if there isn’t enough gold available to reward the innovator?

Khan mentions the gold island in his talk. Would you rather crash land on a gold island, or one with oil, cattle, fresh water, and fruit trees? Which is actually wealth?

I think if we stayed on the gold standard, @CaptainHarley is correct. There would not be mountains of debt. There probably would be a couple less billion people on the planet too, or we’d the US would look far less developed than it does. Not that either of those are necessarily awful, just different.

Growth isn’t “tied to gold discovery.” Where in the world did THAT come from? I’m not advocating using actual gold as a medium of exchange, only returning to a gold standard.

How is growth not tied to it? If at any point anyone can exchange their notes for actual gold, there would only be a limited amount of gold available to support the notes. Hence a limited amount of notes that can exist for economic growth.

If you are not advocating return to gold as a medium of exchange, can you explain to me how returning to a gold standard is any different? It’s a cosmetic difference – hauling around convenient paper bills instead of gold coins – but if every paper bill must be backed by a little piece of gold somewhere, it’s the same problem.

I’m not sufficiently conversant in how the gold standard works to be able to effectively respond.

I could look it up, but am not sufficiently motivated to do so. There is a surfiet of information on the ‘Net I’m sure.

Are you freaking kidding me? You post all this stuff about how important it is and now say you don’t understand it? At least you’re admitting it. Here’s a clue: it works like the video I posted. Embrace that, let go of the other crap, and move on.

No, the video you posted illustrates the theories of John Maynard Keynes. I favor the Austrian School and Ludwig Vin Mises. Just because I don’t know the details of how the gold standard can allow for expansion doesn’t mean I don’t understand economics in general.

Hmmm, you’ve stumped me a bit. This Von Mises school is something I need to read up on more, and I’ve been meaning to for a while now. I’m guessing you’ve been thoroughly exposed to both, right? Why do you reject Keynesian economics over Von Mises? What makes more sense about Von Mises to you?

Well, since Keynesian economics has worked soooo WELL… ! : /

Perhaps I’m just statistically averse!

http://en.wikipedia.org/wiki/Austrian_School

Captain, let me illustrate with an example. Saying that you don’t care to explain why you think the gold standard works better, is like putting that explanation in a vault where none of us can get to it. And further, saying that the explanations are “out there on the ‘Net” is like creating a paper argument, to give us in lieu of a real argument. Somehow, we are supposed to just accept that as a real argument, when it’s known the world over that just anyone can put a screed up on the ‘Net that isn’t worth the pixels it’s written with? I think not, good sir! As far as arguments from those whose credit isn’t stellar, I accept only specie. There are fewer of them, and they mean more in their rarity. However, if you decline to provide a good-as-gold argument, I shall try not to fall into a depression.

So, consider this to be an aggregate failure in demand for your fiat arguments. You may supply more and more of them, but as you do, they are worth less and less, and I’ll respond by expanding the argument economy where there are better products, produced more reliably. Even though they cost more of my time, I find they have a higher rate of return. ;)

Seriously, though, if there are only a couple of people trying to talk to each other, though, a good-as-gold argument is worthwhile. Trying to expand the argument to many people, you can’t spend as much time talking to any one of them, and fiat argument links sometimes work better as the demand for argument grows, and the supply must keep up with the demand. In short, a gold standard might work OK for a very small economy, such as one that won’t exceed the amount of gold available. But the bigger your economy grows, the more transactions that are made, eventually you won’t have enough gold – whether it’s in the form of gold coins, or pieces of paper backed by gold in a vault somewhere. And then your argument (or economy) doesn’t have enough fuel to continue, and you end up talking to a chat room by yourself because everyone’s left, or standing there trying to buy an iPhone in an economy only big enough to accommodate some goat herders and wheat farmers.

So you like Von Mises mainly because it isn’t Keynesian? I think Keynesian has worked pretty well. What it didn’t really take into account is how rigged a free market system can become for the super rich and powerful, and that money will corrupt a political system. It’s missing all of that, and history is showing this corruption to be a significant influence.

@cockswain

There’s an element ot truth to that. I agree that our entire culture has been hijacked by those who are power-motivated. I also agree that they have deeply affected the economy. I believe that shifting back to a gold standard would help alieviate that.

@laureth

I honestly don’t have an answer for that. I’m not trying to dissimulate. Tell you what… I’ll see if I can find an answer to that for ya. No charge. : )

No matter what currency you use as a medium of exchange, those with more of it will rig the system in their favor, whether it’s gold, paper, clamshells, salt, or anything else you can name. The problem is not with the form of currency, the problem is with human nature.

@laureth

Now THERE is something upon which we can definitely agree! : D

This article explains it pretty well:

http://www.reasonforliberty.com/current-affairs/fiat-money-versus-gold-standard-privatization-of-currency.html

@CaptainHarley from the article you posted: “So if economy grew by 10% last year, which means every calculation about gold, will now have to presume the weight of gold less by 10%. So if you were accepting 1 KG of gold by your employer every month, now you will accept only 900 grams. Everything you pay for will now cost 10% less.”

This is effectively massive deflation which will encourage people to horde their gold instead of spending it. The result is a paralysis of the economy similar to what happened to Japan. As I understand the author’s argument, it seems if the economy grows faster than the supply of gold backing it, there will be massive deflation. The author seems to think this is perfectly reasonable, and ignores that such a problem is as bad or worse than hyperinflation that he’s so afraid of.

@gorillapaws nailed it. Massive deflation is why bimetallism was such a necessity, at the very least, as far back as the gilded age.

It’s not deflation which is the problem. It’s massive, runnaway inflation that’s the problem. It’s a hidden tax on every man, woman and child in the world, and a massive tax on generations yet unborn. It’s tatamount to outright thievary.

Captain, I suppose you’re using the Austrian definition of “inflation,” which means “an increase in the amount of cash in the cash supply,” which isn’t necessarily a bad thing.

Example: I normally keep a certain amount of food in the house, for just me and my husband to consume. But if I’m having a dinner party, or the family over for Thanksgiving, I must “inflate” the amount of food in the house to be able to feed everybody. Otherwise, 10 people are fighting over a can of tuna, and that leads to problems.

The deflation we’re talking about? That’s ten people fighting over a can of very expensive tuna. The thing you call “massive, runaway inflation” is when I go out and buy enough tuna so that everyone can eat dinner. (Or, when we have enough cash in circulation that people can transact for goods and services, instead of resorting to ersatz currency, as people did with clamshells in the Great Depression, so to avoid starvation.)

Sorry, but your example doesn’t hold water. Tuna can actually be used for something, money cannot. : )

@CaptainHarley you’re ignoring mortgage payments which would get progressively more expensive, and would be a much worse overall tax for the majority of Americans. If the deflation-adjusted cost of my mortgage increased by 10%/year, it wouldn’t take very long for me to go bankrupt.

Furthermore, you’ve not addressed the point that deflation encourages hoarding which paralyses the economy. If your little sack of gold can buy 2x as much in a year as it can now, you’re going to live like my depression era grandmother did (she had plenty of money, but never spent any of it). Now I think many Americans in general could stand to learn a lesson or two from that lifestyle, and it’s certainly better than running up mountains of debt, but if the nation collectively went into depression granny mode, you’ll see the economy shrivel up faster than my balls in an ice-bath. Nobody want’s to invest in stocks when they can make more by simply sitting on the cash and not risking loosing it. Stock prices plummet, people get fired, nobody hires. It’s a really ugly situation.

Now I agree that hyperinflation is terrible, but a slow rate of 2.5 give or take a point or so is a very healthy, if not ideal rate of inflation. It encourages people to invest their savings in interest-bearing securities, which lubricates the the lending markets and drives domestic growth and innovation. It’s not a tax if it’s factored into the returns, and really only hurts people who have large sacks of cash that are hidden away under the mattress (which is actually a behavior that’s not good for the economy in general), or when congress refuses to raise the minimum wage laws to keep up with inflation.

Deflation is a decrease in the general price level of goods and services.

Deflation occurs when the inflation rate falls below 0% (a negative inflation rate).

Inflation reduces the real value of money over time; conversely, deflation increases the real value of money – the currency of a national or regional economy. This allows one to buy more goods with the same amount of money over time.

People are more likely to horde gold when inflation is high, than when deflation occurs.

@CaptainHarley Everything you said above is true except: “People are more likely to horde gold when inflation is high, than when deflation occurs.”

If I can buy a sack of grain for $20 dollars worth of gold, and then next week buy that same sack for $18 dollars worth of gold next week, I’m going to hold off on purchasing it. I might buy the bare minimum to get by, but I won’t be making expensive luxury purchases or hiring new employees because it keeps getting cheaper to do so later. The result is that the economy becomes paralyzed. All of the economic incentives are geared to hoarding in a deflationary economy.

Likewise, I’m not going to invest in the US grain market because I can get a better return by burying my money in the backyard and don’t have to take the very high risk that I might loose money in the market (which is likely during a deflationary period).

Just don’t put me in the position of advocating deflation. I am not. I just want sound money that is actually WORTH something.

I read the wiki article on Von Mises economic philosophy a few days ago. I’m too busy to offer an in-depth view of my thoughts, but in a nutshell @CaptainHarley has a very different view of how economics works than us (so does Ron Paul). Von Mises has a very different definition of inflation. I’m not saying it’s a waste of time to discuss this, but we really need to delve into the philosophical differences methodically or else we’ll just go round and round.

Maybe I should start a new question. The Fed operates on Keynesian philosophy, as do most central banks worldwide. If Ron Paul was a president with an radically different philosophy, I can only imagine the chaos that would create.

One quick thought though: Paul Volcker defeated inflation in the early 80s by targeting the money supply and let interest rates do what they will. This was a departure from the converse, which was to use interest rates to combat inflation. It worked, albeit painfully. It seems to me that Volcker successfully employed Von Mises principles in his execution.

I definitely see some wise points in Von Mises. I also see some glaring deficiencies, like a rejection of general statistical and scientific methodology. But it is definitely worthy of a good Fluther discussion.

@cockswain

Well, thank you for that. At least you didn’t get confused about the facts because your mind was already closed. : ))

No problem, that’s how I roll. Close-minded would be to utterly reject something in the face of logic.

@cockswain

Precisely. : )

Keep in mind you’re the guy that thinks Obama is a Muslim though too.

Cap’n, riddle me this. Assume there are 100 people that want a Porsche, but only one Porsche. This is situation A. Now, in situation B, there are 100 Porsches, but 1000 people that want one.

What is the relative value of a Porsche – is a Porsche worth more in Situation A than in Situation B?

Scarcity is always a factor in price.

Ah, but there are still 100 people that want every Porsche.

@laureth I’d personally say that the Porsche that is in demand by a ratio of 100:1 vs. 10:1 is of greater value, but possibly that needs to be explored further. Is that what you think?

My bad, then. I meant to keep the ratio the same, and typo’d a zero.

Oh. In that case, the demand ratios are the same. However, I could argue that if that one Porsche is the only one in the world, it will be more valuable than each of the hundred. By how much I can’t say. Like the Hope Diamond is more valuable than if there were 100.

But this detracts from the line of thought you’re going down at the moment, sorry.

Eh, my point is that for something to remain at the same level of valuable-ness (and not become super-duper valuable, like “the only Porsche in the world,”) is for it to remain at a similar ratio to the demand. My larger point: When we had only a few million people and a very basic agriculture-based economy, the economy was much smaller and you might have been able to get away with using gold for currency. However, we now have multitudes more people, and many more economic transactions (because there are more things to buy, like iPods, not just bushels of wheat), so the economy is exponentially bigger, requiring us to have more little tokens in circulation so all the people can more readily buy all the stuff.

Well I agree, and the advocating of the return to the gold standard by Von Mises is one of the errors in the philosophy. I need to read more to fully understand it, but essentially, yes, you are right. Our world got sufficiently large and our commerce so advanced that we’ve evolved away from a gold standard. But obviously I’m not the one you need to convince.

I started reading more Von Mises stuff, but there’s just so much of it I’m having a difficult time deciding what is worth reading. Since they don’t use data, it’s tough to find anything besides their deductive reasoning about economics. While it makes sense on the surface, it’s not easy to tell if it would bear out in reality.

If we had stayed on a gold standard, the world would have far less people and pollution at the moment. Also far less innovation and a lower level of technology. We may not have the internet cheaply accessible to all of us for some time to come. Whether or not this is a bad thing is a matter of opinion.

@laureth

Not actually put gold itself in circulation, but gold certificates, or silver certificates,

Same thing though. The physical amount of gold limits the amount of certificates available, right?

@cockswain – Re: “Since they don’t use data, it’s tough to find anything besides their deductive reasoning about economics.”

Some people view economics as a science, as something you can test with predictions, and, if the predictions turn out more wrong than right, the better economists try to learn from it.

And some people view economics as a sort of ideology, where data and the scientific method are beside the point, and if the predictions (should they make them) come out wrong, that’s beside the point.

I prefer the first kind.

Well, would you say that the results of the Kensyian “experiment” with fiat money has turned out well??

Just because proper laws and regulations weren’t followed or enforced doesn’t imply the Keynesian theory is flawed. It’s not Keynesian theory that forced us to accumulate massive debt, nor the 2008 recession. It was people abusing the system and acting irresponsibly. Sort of a guns don’t kill people, people kill people thing.

As far as I know, there isn’t an economic system that plans for how those with wealth and power will behave.

Heh! Kinna sad, eh? : )

If we were doing it the Keynesian way, the stimulus would have been much bigger (big enough to fix the problem) instead of a piss-trickle, and we wouldn’t have needed QE at all.

Yes, this is how politics interferes with economics. I wish there was a way to separate the two. The Fed is the closest thing we have to that that I’m aware of. I’m sure that statement will cause some people to freak out.

My wife once wrote a paper where she had to take the position that Pinochet’s dictatorship allowed him to make rapid economic moves that helped far more than whatever democratic nation she was contrasting it to. She made a great case, despite the fact that we obviously abhor such a gov’t. To that extent, maybe Congress should have less power over budgeting decisions.

That was a major part of why the Federal Reserve was created in the first place, as I understand it… to take the politics out of economic decisions. Unfortunately, all it succeeded in doing was handing over the Nation’s monetary policy to a group of crooks.

Well, now we’ve just come full circle to my original question: why are some people anti-Fed? Are you just calling them crooks because you think Von Mises is a more sound theory than Keyensian theory?

@CaptainHarley – Let’s say Congress did all the things you think the Fed does. Would you think they’re less of a bunch of crooks? The Treasury (who prints the actual dollar bills) is part of the Executive – do you think they are less like crooks there? In short, if you distrust government and you distrust banks, you’re going to have a monetary system run by “crooks” no matter who does it.

You could advocate for “just let anyone print money,” but wouldn’t you see that as an immense amount of inflation (using the Austrian definition, not the usual definition).

@laureth

1. It would be best, IMHO, if a quasi-governmental organization handled those things, with legally-limited oversight by Congress. The Fed is not quasi-governmental, but private.
2. The Treasury does not print money.
3. Allowing more than one organization to print money would be, IMHO, a big mistake.

@cockswain

I am anti-Fed for a number of reasons, the primary one being lack of accountability.

Um. The Fed is quasi-governmental. It’s a weird public-private hybrid with the board of directors nominated by the President and ratified by the Senate. The annual profits are shipped to the Treasury to pay down the debt.

The Treasury prints money, too. See?

How would you like to impose “accountability” on the Fed, too, since apparently oversight by the GAO and auditing by the private firm Deloitte & Touche LLP (as you can see in their annual report here) is not up to your satisfaction?

When was the last time the Federal Reserve was audited?

I stand corrected. The Treasury does still print money. My apologies.

March, 2011

Really? Surprising.

Any idea how “independent” the audit actually was?

About as independent as any of Deloitte & Touche’s corporate audits, I reckon.

I honestly wouldn’t know. We’re getting into unknown territory here, as far as I’m concerned. I do know that billlions of the taxpayers’ dollars have disappeared as though down a rabbit hole, and no one seems to know where it went or to whom.

On that audit, I remember Bernie Sanders claiming it was the first ever audit of the Federal Reserve. Any clue on how accurate that is?

@amujinx – The Fed is audited annually in March, plus at other times by the GAO. If Bernie Sanders is claiming that it’s unique, I’m not sure that Bernie Sanders knows enough about the workings of the Fed to go talking about it like that. Seriously, if I can do a few minutes’ of research on the Internet and find this stuff out from reputable sources, I don’t know why Bernie Sanders (or Ron Paul, for that matter) can’t do the same.

@CaptainHarley, it’s only unknown territory if people have an interest (personal or professional) in keeping it thus. I know it’s fun and interesting and darn near irresistible to believe in conspiracy theories (especially if they fit one’s agenda), or to believe the very worst about people who oppose one’s agenda. Also, I know that a lot of sites stoke fear and inspire outrage, more than they attempt to genuinely inform, as a means of promoting their own (or their backers’) agenda. It’s not always easy to slog through the sensationalism, or to go the extra mile to find data when it might burst the illusion that one treasures, but I find I’d rather have my illusions and conspiracy theories burst by real data, than to believe something appealing and untrue. Do you feel the same?

@laureth

I try very hard to do so, yes.

@amujinx

I have heard that too, but I haven’t pursued any verification.

@CaptainHarley Would you at a minimum say that perhaps, just maybe, you are having doubts about your position in the face of all this information, and just possibly you may wish to reconsider it in light of the education you are receiving on the subject at this time? Maybe?

To echo @CaptainHarley‘s fears a bit, I do think there needs to be a better check on the Fed. Perhaps the Judicial branch is the appropriate place for such a measure. Something like making it a crime for members of the Fed to act in bad faith, or to behave in a way that is grossly negligent or incompetent with a severe penalty (20 years or something along those lines) for conviction. The original jurisdiction for such a crime could be the Supreme Court.

The trick is allowing it to operate insulated from the crackpot political whims of the time, while preventing it from behaving in an abusive manner.

@cockswain

I would say that you’ve given me cause to review the entire case for eliminating the Fed. : )

Excellent!

The Federal Reserve was formed for one reason and one reason only, to protect the assets and profits of the banks at taxpayers expense. If you follow the trail you’ll realize that our National Debt was created by the actions of the FEDs when they changed our currency. It was once backed by precious metal so you couldn’t spend what you didn’t have but in the 1930s the Federal Reserve Note came out, backed by nothing. It allowed Congress to spend more than what we took in and borrow the rest. Who did they borrow from? They borrowed from the FEDs. JFK saw this coming and issued EO11110. That was an executive Order to remove the Federal Reserve notes and put back our gold standard currency. He was killed before it could all happen and no president has ever followed up.

The FEDs are owned by the large banks. The large banks get no interest loans from the FEDs. When we had this stimulus thing go on the banks cried losses and asked for the money. There were no losses. How do you lose money when you’re allowed to lend 10X what you have in assets? How do you lose money when all of your loans were bought by Fannie & Freddie? If you look at bank of America for example they paid back what they borrowed in a few months. It was all a smokescreen to make Americans believe we were fixing the problem. The housing mess was caused by banks deliberately in order to make more money. They drove housing prices down and hurt lots of people. Forced foreclosures but guess what? They had already sold the mortgages to Fannie & Freddie so when houses sold below what was already owed and passed back to the banks the taxpayers paid the difference. Talk about the biggest scam in history, the Federal Reserve and their large bank owners take that distinction.

The fix is to abolish the Federal Reserve and take back our country from these greedy Perps. We also need to regulate banks so they act as profit making corporations that follow prescribed guidelines

Unless the Federal Reserve is dismantled and removed we will continue to decline as a Nation.

@laureth Producing financial statements is not an audit. The independent auditors (Deloitte and Touche) do not audit the Fed’s actual books, just as they don’t when it comes to IBM or GM or any private company. They simply certify that the process for data collection and interpretation is in accord with (GAAP for private companies) Federally established accounting rules (which are different from GAAP and much looser).

What has been suggested by many Libertarians is a full audit, something more akin to what the IRS does with your taxes or the SEC does than what Deloitte does to financial statements.

This would include many of the “off balance sheet” activities within the Fed, such as loans to other major Central banks (which are not reported in the financial statements), relationships of board members and senior decision makers, how the Fed decides exact asset purchase levels and sources (the latter is critically important to independence).

The question of whether or not the Fed should have a full Audit is far more complex than simply arguing that Mr. Paul has not somehow not discovered the financial statements. Rather, those statements are referenced within his proposed legislation as support for the rational behind auditing.