Posted on 06/22/2013 1:25:44 AM PDT by blam
When both parties are on the same side of an issue, in this case tariffs, you know something stinks in Denmark.
I’m sorry, but I disagree. The Fed is not us. It is owned by private entities.
The government buys things to give out to the public.
It needs money to pay for them.
It does not get enough revenue to pay for it all.
It borrows from the Fed.
The Fed creates the money to lend to the Treasury.
When the bills come due, the treasury pays the Fed.
We pay the treasury through our taxes.
If we don’t agree on that, there isn’t much more I can add.
I do, however, agree that the policies of the government for many years have made us overspend, so that the borrowing of money from third parties to finance those services and goods are necessary. Ultimately, it is the people wanting things for free.
The Great Recession Of 1920-21 And What It Can Teach Us Today
See this debunking article that examines the claims made in that book and destroys them.
I'll post some excerpts here... but go to the article and for each myth there is a well written article that complete debunks it.
Not really. It's ownership and control are unlike any other business. See this article
"The government buys things to give out to the public. It needs money to pay for them. It does not get enough revenue to pay for it all. It borrows from the Fed."
It usually does not borrow from the FED. It usually borrows from the public or even foreign lenders like Japan and China. The FED only started buying treasuries in mass after the 2008 crisis and then to lower interest rates to help unemployment. Congress was able to rack up almost $8 trillion in debt going into the 2008 crisis without the FED's help.
The Fed creates the money to lend to the Treasury. When the bills come due, the treasury pays the Fed. We pay the treasury through our taxes. If we don’t agree on that, there isn’t much more I can add.
The treasury borrows money from whomever, sometimes it's the FED. And government spends that money for whatever, sometimes it's giveaways. Sometimes it's for unemployment caused by government's failure to protect our market and industries. But the point is, yes the government spent the money. So whether they borrowed from China or the FED, when the treasury repays they are using tax payer money to repay.
We as individuals can loan money directly to the Treasury by buying treasuries. The fact that we get repaid the loan, doesn't change the fact that the government spent the money and our taxes will eventually pay for them repaying the loan to us.
Same thing with the FED. When the FED loans it's not much different than us loaning directly. But there is still a bill due and it's paid from our taxes.
It's just not the FED's fault, it's Congress's fault. They're the authorizers of spending and the authorizers of borrowing.
You do not address what Central Banks worldwide have done that have been the primary cause of the boom & bust cycles as well as mis allocation of capital.
Check out David Stockman’s new book ‘The Great Deformation” and his take on the holiest of holies - The Fed’s Potemkin village. The long-standing Wall Street mantra held that the American consumer is endlessly resilient and always able to bounce back into the malls. In truth, however, that was just another way of saying that consumers were willing to spend all they could borrow. That was the essence of Keynesian policy, and to accept the current situation as benign is also to deny that interest rates will ever normalize. The implication is that Bernanke has invented the free lunch after all - zero rates forever. Implicitly, then, Wall Street economists are financial repression deniers.
No it doesn't.
The Fed creates money because the constitution said congress had to and they're doing it though the Fed. The Fed's money printing doesn't 'permit' overspending any more than it 'permits' the phases of the moon. Congress would overspend no matter what the Fed did.
And the Fed has made a total hash of it.
If the Fed kept the money supply stable, the government would have to go to the markets for its borrowing. Absent Fed manipulation of the interest rate, the cost to borrow would be much higher than now.
I realize that's no guarantee it wouldn't overspend, but the crisis would come much sooner. As it is now, the borrowing is next to costless [to the government]. There is a cost, of course, but we pay it through lost purchasing power.
Oh, I agree with you that currency's primary function is as the medium of exchange and that it is not a store of value. But let's not forget that those of us who use dollars are losing purchasing power as its value drops. And businesses cannot perform accurate calculations because its value does not drop evenly across all prices; but hits different sectors of the market unevenly and at different times.
Inflation is not the nice, smooth process you inflationists pretend it to be.
And that value is dropping because of government interference. No such thing would happen if the citizens still owned the money as they did before FDR socialized it by confiscating their gold. Government-caused inflation is evil: it is the theft of money from its own citizens.
Correctamundo. The ONLY cure for inflation is unemployment. And right now, we are experiencing high unemployment, while at the same time increasing food and gasoline prices. I hate to think how ugly it is going to get once unemployment falls below 5% (if it ever does).
The bottom line right now is that inflation and unemployment are both higher than our government is reporting. They have been caught lying to us about everything else, so why then do people trust these numbers.
Ah yes, our run away hyperinflation that we hear so much of on these threads --straight out of 'shadowstats':
It's a crock. There is no inflation -hyper or non-hyper- and that's the point of the article. We've got a very serious threat of deflation --far worse than inflaion-- something brutally clear with the collapse of comodity prices.
The official numbers are a crock, of course, excluding food and energy as they do [not to mention equities]. The Shadowstats figures of around 7% or 8% are probably pretty good.
That isn't "run away hyperinflation" to be sure, but 7% or 8% price inflation is very damaging. Tell me, why do you defend pumping money into the country that no one had to work for or produce something tangible for?
Citizens and businesses must work to earn money [unless, of course, they're on welfare and someone else works in their place]. When the Fed prints more money and gives it to the banks to spend, it is expecting that these dollars created out of nothing compete for goods and services with the same money we had to get up in the morning and work for.
The money we had to mortgage our houses to start a new business with.
The money we had socked away for retirement or maybe a house.
The money we buy groceries with.
The new money now competes with ours and drives prices higher. How can you possibly defend that?
Post Hoc ergo propter hoc.
Just because prices fall in a depression does not mean that falling prices cause depressions. Falling prices can be caused by productivity improvements or caused by the result of underlying imbalances in the economy.
You seem to be advocating a purchasing power variant of the doctrine of underconsumptionism. We need more money to to bolster spending in the face of rising productivity. However, what underconsumptionists fail to realize is that no one demands a nominal amount of money, but rather a certain degree of purchasing power. Prices can fall in nominal terms, but the return can be a rising real one.
In fact, when you advocate the creation of money in the face of rising productivity, you fail to realize that the demand for loans is not the demand for money. The demand for loans is what can be purchased with those loans,i.e., capital goods or durable consumers' goods.
What makes you believe that businesses cannot adjust to falling prices as well as they adjust to rising prices? No businessman cares a wit for the "price level", but relative prices, viz., input vs output prices.
If input prices fall at the same rate, then businesses are not subject to losses. And if productivity improvements make input prices fall to a greater extent, then it benefits everyone.
The great recession which we are now in, wasn't caused by the FED, it was caused by stupid trade policies which off-shored too many of our jobs, deregulation of the banking industry, and the failure to adequately prepare for another oil price shock after the 70's.
How did trade policies cause a general depression in trade? How did it enable people to over leverage themselves?
How did trade policies cause bubbles in various commodities and a bubble in housing to boot?
How did trade policies cause capital markets to collapse before consumption goods markets?
If I understand you correctly, then the off shoring of jobs should hit consumers' goods industries first and to a greater extent. Those companies who save by using "slave-labor" should have rising equity values.
In a deflationary environment, you can increase your purchasing power just by holding cash. You don't need to invest. And that's one of the reasons it causes depressions, is that people stop investing.
Just out of the blue? Where do depressions come from?
Suppose every boom is caused by trade policy. If we are suffering because China has received our jobs and investment, then that fails to explain why they are busting as we speak. Why do they have declining equity values and a massive housing bust?
If you look at the year to year swings of the value of the dollar, the dollar since the FED has had less than half the variablity of the dollar under the gold standard. Under the gold standard we had year to year swings in the value of the dollar sometimes in excess of 20%. And that is bad for business.
That was a faulty interpretation of non-homogenous data.
The NBER‘s chronology has nonetheless been faulted for seriously exaggerating both the frequency and the duration of pre -Fed cycles and for thereb y exaggerating the Fed‘s contribution to economic stabili ty . According to Christina Romer (ibid., p. 575) , whereas the NBER‘s post -1927 cycle reference dates are derived using data in levels, those for before 1927 are based on detrended data. This difference alone, Romer notes , results in a systematic overstatement of both the frequency and the duration of early contractions compared to modern ones. 22
http://www.cato.org/sites/cato.org/files/pubs/pdf/WorkingPaper-2.pdf
I know the 100 year charts of the value of a dollar looks scary. But the fact is that only hurts people who wanted to hoard their money in their mattress for 100 years. It doesn't hurt people who put it in a savings account and make some interest or who invest in business and earn much more.
No one wants to do what you assert. Checking accounts and Savings deposit accounts are used (by and large) for a reason. There is a great risk keeping your savings at home(and the opportunity cost of not earning interest to boot).
And even if people began hoarding the purchasing power of money would adjust, and the real balance effect would kick in. People do no endlessly hoard, prices will fall and make real cash balances greater vis-a-vis items of purchase. What is wrong with individual choice? Protectionists always rail against the freedom of the individual to choose his own path.
Somebody please do me a favor and post the BLS link explaining how the CPI-U includes food'n'energy. This is giving me a headache...
When is the gold/DJIA ratio going to be 1?
Yes it does.
No.
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.