Ongoing questions about Obama's birth certificate

Davian wrote:There are a lot of issues with the Austrian School too though...having species based currency makes its very easy to collapse banks and it makes it very difficult to get an economy out of a recession as you get deflation which causes people to hoard cash reserves which aggravates the issue even more....those those huge dips on the chart.

Better that the people hoard it than the banks.

lsayre wrote:... the specter of the fractional reserve banking racket looming over us ... under fractional reserve banking even a gold standard is merely a facade ... net inflation since the Federal Reserve has been positive ...

I don't think you can make a strong argument against fractional reserve banking. It can by definition increase the money supply, but whatever the fraction is, the increase is self-limiting, not endless. So although it modifies the constraints otherwise imposed by a gold standard, it does not eliminate them.

The attractiveness of a gold standard is that it appears to be concrete, though in fact it isn't, and makes a poor target to which to tie our money. A strong argument can be made in favor of the Federal Reserve's ability to increase and decrease the money supply. It is not bad in itself, and is potentially beneficial in smoothing boom and bust cycles. However, over the long term it seems the Fed should tie the average amount of money to SOMETHING concrete, probably to total goods and services in the overall economy. But they constantly invent new ways to untie rather than tie. Unlike fractional reserve banking,I'm not at all sure the Fed's inflationary impact is self-limiting.

lsayre wrote:

Davian wrote:There are a lot of issues with the Austrian School too though...having species based currency makes its very easy to collapse banks and it makes it very difficult to get an economy out of a recession as you get deflation which causes people to hoard cash reserves which aggravates the issue even more....those those huge dips on the chart.

Better that the people hoard it than the banks.

Hoarding on either side is bad. The market needs liquidity to function. Its the same when you concentrate a large chunk of the wealth in a small group of hands as it doesn't work for you at that point. Traditionally, middle class spending drives our economy...when you pull that money out of circulation, you tend to hurt growth significantly.

jpete wrote:
Why must we infinitely grow? Is that even possible?

What do people do when they pull money out of circulation? Stick it under their mattress?

Actually that's pretty much what they did back before the Fed insured bank deposits. Or they buried it in the back yard, etc etc.

jpete wrote:Where did all those "robber barons" get all that money?

In a word, by robbery. Similar to what we saw happen in Russia after the fall of communism and the breakup of the USSR.

jpete wrote:Must we provide "liquidity" by printing infinite dollars from thin air?

Sometimes, yes -- dollars, but not "infinite dollars". Moderation in all things!
Nobody is really arguing with you about the excesses, just defending the fundamental principles, which alas have been badly abused.

jpete wrote:So how did the economy grow? Where did all those "robber barons" get all that money?

Because honest money is merely a faith and trust based proxy (substitute) for real wealth, and the seriously badly mis-named and maligned 'Robber Barons' productive enterprise yielded wealth in its only true and pure and honest form. Short version: They earned it and they deserved it! And back then paper currency was convertible (redeemable) in gold or silver on demand, so trust in its ability to serve as a highly mobile and transferable proxy for real wealth was high.

OTOH, printing currency that is redeemable in nothing does not produce wealth. The true Robber Barons are not the producers, they are the unwarranted currency printers.

Wealth is what you achieve by turning something of lesser value into something of greater value by applying ingenuity and labor to it. For example: The difference in value between a tree trunk and the chairs one can make from it is wealth. If I take some blank pages and write a novel upon them I have created wealth. If I take up an instrument or an assortment of them and create music, I have created wealth. If i teach a child to read, write, and cypher, and the child grows into being productive and/or creative, I have created wealth. This is how new wealth is created, and there is no other means whereby to create wealth.

Debased proxy is all you can create with a runaway currency printing press (or with runaway currency creating keystrokes on a computer). Since there is no redeemability, trust (and faith) in the "good faith and promises" of the government is all you have now, and they are violating that faith and trust with every new dollar they create for which the economy has no real wealth to justify it.

jpete wrote:That's crazy talk Larry! Everyone knows that we must allow the government to counterfeit our currency or else all human endeavors would grind to a halt!

Jpete...What color is the sky in your neck of the woods!?

jpete wrote:

Davian wrote:
Well, its probably because deflation is far more damaging to the economy than inflation overall...so the Fed (and the other Central Banks) try to avoid it as much as possible).

Also, I think you are underestimating the dangers of those Panics during the 19th century and early 20th century. Several of them were as bad or worse than the Great Depression. The Panic of 1873 was called the Great Depression prior to the 1930s for example. The Panic of 1837 was a pretty brutal deflationary event and a fine example of why deflation sucks so bad.

Why are lower prices so bad?

Because it makes it harder to pay off debt because it typically leads to lower wages THEN lower prices...which causes businesses to fail which cause people to lose their jobs which leads to bank failures when people make a run on the bank. It doesnt dropped fixed costs like your mortgage or car payment, thus that debt because an even larger percentage when you calculate your debt to income ratio...which kills credit which kills liquidity.

Decreased prices lead to lowered production of goods which leads to lower wages and demand. It compounds itself and gets worse. Its a big part of why the Crashes were so bad before the Central banking system. Low inflation is far better for economic growth than a typical inflation/deflation cycle. We dont have much inflation right now despite the spigot being wide open on borrowing costs (ie the historically low interest rates). Even with all that artificial help, the economy is still barely growing. Deflation is very very bad overall.

jpete wrote:So why is everyone happy when gas is $2 and pissed off when it's $5?

Businesses can and should fail from time to time. It's not a bad thing.

It's like a forest fire. You need to clear out the dead things to allow new stuff to grow.

Maybe we should amend the Constitution to remove all the bankruptcy stuff if collapsing businesses are so bad.

We'll just make everything too big to fail and then nothing bad will happen to anyone ever again.

If that doesn't sound reasonable then you have some idea of how you sound to me arguing for "just enough" regulation. The government would f*ck up a wet dream. I can't imagine they'd have any idea how to manage something as complex as a "free market".

Do you agree with anyone other than yourself?!