Posted on 08/20/2009 4:26:09 PM PDT by chuck_the_tv_out
President Obama, once considered as politically agile and deft as a gazelle, is now looking increasingly like a deer caught in the headlights.
His poll numbers on everything from job approval to his handling of the economy, health care, taxes and bailouts are dropping faster than a cement shoe in the Hudson River. Perhaps even more worrisome, Rasmussen Reports shows that fewer Americans consider him “trustworthy.”
His popular support is hemorrhaging because all of his major initiatives are either failing in execution or in the legislative process. According to a new USA Today/Gallup Poll, 57 percent of Americans say the $787 billion economic stimulus is having no effect on the economy or is making it worse.
An even higher percentage -- 60 percent -- doubt the stimulus will improve the economy in the years ahead. A new Fox News/Opinion Dynamics poll shows a whopping 72 percent of Democrats, Republicans and independents would like to see the balance of the unspent stimulus money -- about $600 billion -- returned to taxpayers.
(Excerpt) Read more at washingtontimes.com ...
I know more about economics and finance than anyone on this site, and than anyone you have ever met or are likely to meet.
"how you can claim that letting banks create money"
Letting? Do they require anyone's permission in the matter? Why? What authority do you or anyone else have, to stop them from doing what they jolly well please in the matter? And if there is any, you will be driven to admit that the Fed is not causing their action, but cramping their style.
"in the process raise the cost of everyday goods"
Doesn't follow. For money creation to raise costs, the supply of it must grow faster than the demand for it. The demand for it does grow. And successful finance causes it to grow; so does all successful economic action. To increase the supply of money does no harm in itself. No one has any priori right for the quantity of money in existence to remain constant, or for its value to go on increasing indefinitely. No more than you have a prior right that no new cars should be produced, in an attempt to increase the value of one you already own.
There is unsuccessful economic action. It does have a tendency to increase prices. Anything that destroys capital also has that tendency, including allocating it to an unproductive use or otherwise frittering any value away. Since a greater capital apparatus in existence causes the real cost of goods to fall, reductions in the capital in existence cause that cost to rise, other things being equal. Do you then have a right to demand that no one else redeploy his own capital, because he might get it wrong, and raise your costs?
No meaningful economic freedom can survive under that principle. And there is no just claim behind it.
When you get a dollar, you have a right to that commodity, no more than no less. You do not have any right to its *purchasing power*, and in the nature of things you cannot, if anyone else can do anything. The value of any commodity you own is changed by every other economic act everyone else performs.
You do not own other men's money and you can't tell them what to do with it, or not to do with it. That the values of things you own can be and is affected by their choices in the matter does not change this one iota. It is theirs, and they can do what they jolly well please, and it is your responsibility to predict the consequences of their action, for the value of your owned commodities.
"depreciating the value of cash savings"
No one is forced to have any cash savings. Moreover, anyone with cash savings is free to contract for interest on them if he places them with anyone. He can name his rate, if anyone will meet it. He can demand a rate that equals or exceeds his expectations for inflation. If he doesn't find someone willing to borrow from him on those terms, he can take the other side of the transaction and borrow instead. He can hold any sort of commodities he pleases. If he voluntarily accepts a commodity he does so because he believes himself benefitted by doing so, compared to his actually available alteratives. Whether for reasons of convenience or safety or whatever moves him, if he does it without a gun to his head he has no equitable claim that it has harmed him in any way.
"Of course it causes harm"
One you are wrong, two you can't prove it, three even if it were provable you haven't begun to do so, or even to attempt it, four if you showed it did you would still barely have begun, because you must weigh the loss of freedom to other men against that harm before condemning it, and you are so far from having done so that you barely even acknowledge that anyone else's freedom is involved in the matter. You imagine instead that it is some omnipotent central action of a government in the sky, when it isn't remotely that.
"How many people have retired with a $40,000 annual income that looked great at the time?"
Um, who is responsible for increasing their income over time? Who is responsible for planning their own financial affairs generally? Are men children or are they free men? Who put a gun to their heads and said "retire or die"? Who hide the existence of step-up annuities from them? Who forced them to write contracts in dollars, or to use level amounts? Do you think any retiree would earn the same interest or see the same appreciation in his stocks clear to his retirement or during it, without an increasing money supply? You want the benefit side of the ledger as it was, and the part of it he didn't earn given to him as well.
One entry accounting is the source of most statistical malpractice. Men who have benefitted hugely from mild ongoing inflation and from abundant credit turn around and pretend all of those are theirs as a birthright, but in addition they are being robbed of half of it. It is sheer delusion.
You have no idea if you'd even have a job without freedom of credit, yet you pretend you know that it harms you.
LOL!
I'll take this one.
Banks loan out more money than they have as deposits or capital. Without the Fed as a lender of last resort and the cooperation of other banks doing the same thing they could not get away with it. It is a classic cartel. The bank takes in $1,000,000, loans out 5 or 10 times that much and collects interest on this phony credit that they created out of nothing. If all those with checking accounts that were created in the process decided to hold cash under the mattress instead the whole system would come crashing down. But it doesn't because the Fed will supply that cash if necessary. So in effect the banks are free to create the credit and it is perfectly equivalent to printing money. It is simply counterfeiting. And that's what they do and that's why there is no more nickel candy. There isn't even dollar candy anymore and one of these days there won't be ten dollar candy either.
While you brag about the Fed's ability to force them to loan out somewhat smaller multiples of their cash holdings than they would like. Big deal. Thanks for nothing.
Didn't think so...
How is that physically possible? Say a bank gets a single deposit of 10,000 $100 bills, $1 million dollars.
How do you imagine they can loan more than $1 million?
Run thru the steps if you would. Thanks.
Simply false as a pure point of fact. They have deposits for everything they lend out, they make position daily.
"Without the Fed as a lender of last resort and the cooperation of other banks"
In fact, the cooperation of other banks is useful in the matter, and sufficient, no one requires a Fed for it. Money supply expansion antedates the Fed, it antedates central banking, it antedates banking with fractional reserve, it antedates banking of any kind, it antedates finance. It is a simple natural phenomenon of free markets and there is nothing wrong with it whatever.
"It is a classic cartel."
On the contrary, anyone who likes can jump right in for $7 commission tomorrow, just buy bank stock. Or go to Prosper and make credit deals on your own hook if you prefer. Nothing cartel anything about it.
"The bank takes in $1,000,000, loans out 5 or 10 times that much"
Not remotely. You are recycling forms of slander designed for a commodity money system that do not remotely apply to fiat money banking.
What is actually involved is the little fact that when a bank loans money to someone that someone generally deposits it in a bank, sometimes the same bank. If he spends it then the one he pays does so instead. If that paid person deposits in another bank instead of the first one, the first bank can borrow from the second. As a result, for the banking system taken as a whole, new deposits are self-financing. Provided the loans made are actually good, are actually repaid, the increase in money supply that results is also matched by an increase in real value.
Which is simply saying the whole trick of banking is to make sound loans and refrain from making unsound ones, and no that is not remotely counterfeiting anything.
"collects interest on this phony credit"
There is nothing phony about credit. Nothing at all. Any promise a man actually performs tomorrow is every bit as valuable as an asset today. Economic transactions are not made more real if they are confined to the present, and intertemporal trades are no less real than any others. Any projection or assumption about values, present or future, can prove incorrect in the event, that is the most one can say.
"If all those with checking accounts that were created in the process decided to hold cash under the mattress instead the whole system would come crashing down."
False, the Fed would simply print more notes and checking accounts would contract as the note issue expanded, with no change in the money supply. In a gold commodity money, in which banks have made promises about paying checking accounts in gold if desired, it is possible for the banks to prove unable to redeem deposits in gold. But modern banks make no such promises and what they have promised, they can easily perform.
"the Fed will supply that cash if necessary"
Quite, and by prior contractual right, so the banks know they can perform exactly what they have promised, and they can, and they do, and there isn't a particle of your ancient slanders that survives the analysis.
"the banks are free to create the credit"
Everyone is free to create credit. Whether there is any Fed or not, and at all times. It takes an tyrannical government stomping on their natural economic liberty in the matter to reduce the freedom to create credit. And historically, all the attempts ever tried have failed to do so - they have regulated it, they have driven it elsewhere, and with it the capital and prosperity that are its creatures. But it cannot be destroyed while men breath and are free.
All credit it gratuitous, all credit creates a new value that wasn't there before, all credit is self financing if the predictions it was based upon hold true and destructive of capital if they do not - just like all other economic action. Which always adds value when right and destroys it when wrong.
"is perfectly equivalent to printing money"
No it is not, not remotely. Actual credit tells you exactly what you are getting and delivers what it says you are getting, counterfeiting is not credit. Counterfeiting is passing someone else's bills in place of your own. Anyone who issues his own IOUs as his own is not counterfeiting, he is engaging in a credit transaction and his counterparty is free to accept or not accept his script, but knows what it is he is accepting or not accepting.
The slander of all finance as counterfeiting is as ridiculous as Marx's claim that all profit is exploitation or Proudhon's that all property is theft. It is a mere lie and it has the same target, the resented rich financier. In fact it is merely the newest form of the old hatred of usury as supposedly unearned or fraudulent, and stems from the same abysmal ignorance of the nature of economic action.
Those peddling this smear of finance are Marxists to the bottom of their boots, and do not have a conservative bone in their bodies. That they typically do not know this does not help matters; neither did most of the actual communists of the last 200 years.
All those “moderates” who bought his shtick are finding out that Community Organizor “Agitator” is no qualification for becoming President, and the on the job training isn’t working.
Sarah Palin was more qualified than McCain and way more qualified than Obama and Biden.
Though obamma lamma ding dong has yet to pay for anyones heating bill or food bill he is still backed by 99 percent of blacks, 80 percent of Jews, and way to many other Americans.
So a bank takes in $1,000,00 and loans out $10,000,000. When then bank gets the $10,000,000 paid back what do they do with the extra $9,000,000? Do they get to keep it? That's a pretty good return... $9 mil plus interest. I should start a bank.
Hey, back of the line, bud.
Bernanke doesn't want your teeth to rot. Get a grip and go somewhere like Target instead of 7-11.
Of course they don't get to keep it. But they are paid interest on it while it is loaned out. So for your example they take in a million dollars and, in effect, earn 60% interest on that original million - assuming they loan out ten million. That's still a good business. The problem is that you now have an additional nine million dollars out in the system chasing the same goods. So prices rise.
You're no dunce. You understand how this works.
that’s the scary part
the Baraqqi coalition is still formidable because he gets nearly 100% support of many groups and these groups add up to a pretty big base
minorities
illegals
union members
idiot libs
dead voters
They create money out of thin air but don't get to keep it? Why not?
Did you ever explain how they can loan more than their deposits? I asked upthread......
They don't loan money. They loan credit. A demand for cash that is rarely exercised. The banks are a cartel so they just honor each other's credit. The money becomes just entries in the bank records. Money is rarely in cash. It is credit in a checking account. But you can still spend it at the store. It doesn't work unless all of the banks are in on the deal (and they are). In the long run it doesn't work unless the international banking system follows the same scheme - but they do. Go read up on the Bank of England some time.
If all they have are $100s, how do they loan anything but $100s?
The banks are a cartel so they just honor each other's credit.
You think a bank will honor a bad check from another bank?
Go read up on the Bank of England some time.
I'm only interested in American banks.
So, back to my example........Say a bank gets a single deposit of 10,000 $100 bills, $1 million dollars.
How do you imagine they can loan more than $1 million?
I'm Bank of America. I send you a statement that says you have $10,000,000 credit based on your new loan. You owe me $10,000,000 but you are free to write checks on your checking account. Do you know if there is any real money stored in vault at BofA? I don't think so.
No, I'm checking your math.
You owe me $10,000,000 but you are free to write checks on your checking account.
Great. I write a check to American Express for $2,000,000. How does American Express get the money from the bank which only has 10,000 $100 bills in the vault?
American Express makes a bookkeeping entry that says BofA owes us $2,000,000. That's all. They don't ask Brinks to go to the Bank of America and pick up $2,000,000 in cash.
And of course American Express is loaning out money and some of that money ends up at BofA. So the two banks just trade entries in their bookkeeping systems.
Like I said. The banks all have to be in on the deal for it to work. But they are.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.