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Originally posted by Shakka This is KEY and is so often overlooked or completely forgotten when people discuss Keynesian economics. Sadly, the U.S. hasn't had a real surplus in decades.

Indeed. It's why I supported the first set of Bush tax cuts but not all the subsequent bullshit to follow. Completely unnecessary.

Replace the word Keynesian in all of my posts with interventionist.. That's what they all are oc (Friedman, Keynes, etc)..and it is government interventionism that led us to the mess we are in today.. The idea that the fed or congress have a primary role to play in influencing the economy has led to the acceptance of state/federal governments sucking 40-50% of the wealth from major countries every year. This is the root of all of our problems and all of the negative numbers rolling in...the global embrace of interventionism and the fixing of the price and quantity of money at a central location. That is the point I'm getting at.

You say you won't debate further until I present numbers of my own.. I say we CAN'T have a debate because the numbers are largely meaningless. If you took a step back you would realize that it is the artificial creation of money and credit that leads to structural imbalances that precipitate crashes in the first place. Adding to the money stock only compounds the error and prevents a much-needed correction from occurring. Lassiez faire is the only reasonable approach when it comes to economics. Japan didn't get this in the 90's and Bernanke doesn't get it today. The fed is distorting everything on a such a grand scale that any debate about what economic policy is best is pointless until they are bound in shackles.

Keynes, Friedman, Bernanke, and every other mainstream economist has deluded themselves (and apparently you) into thinking by shifting money from the left pocket (future taxpayers) to the right pocket (today's taxpayers) can enhance the total amount. They don't see deficit spending and controlling the money supply for what they really are..the enemies of capitalism..forces that chisel away at the foundation of free markets and the laws of supply and demand. All government intervention distorts price signals, making retailers look like profiteers and deceiving workers into thinking their wages have gone up. It pushes families into higher income tax brackets without increasing their real purchasing power..In short, it undermines capitalism by destroying the rationale for dedicating a portion of today's earnings to savings. Accumulated savings provide the capital that finances projects that generate higher future returns; it's how an economy grows, how a healthy society reaches higher levels of prosperity.

THE INTERVENTIONISTS DONT SEE IT THIS WAY. Bernanke (and nearly every fed chairman before him) has convinced himself that we can grow the economy over long periods purely on credit expansion...that credit expansion can be a substitute for true capital (Bernanke said this himself during his recent congressional testimony). Men like these have created a system where our money has lost its capacity to serve as an honest measure, a meaningful unit of account. So as long as the value of money is arbitrarily controlled at a central location, any chart posted or argument made about "policy x" vs "policy y" is moot.

quote:

Originally posted by Capitalizt Replace the word Keynesian in all of my posts with interventionist.. That's what they all are oc (Friedman, Keynes, etc)..and it is government interventionism that led us to the mess we are in today.. The idea that the fed or congress have a primary role to play in influencing the economy has led to the acceptance of state/federal governments sucking 40-50% of the wealth from major countries every year. This is the root of all of our problems and all of the negative numbers rolling in...the global embrace of interventionism and the fixing of the price and quantity of money at a central location. That is the point I'm getting at.

The Fed and Congress have a regulatory role to play. Whoever said they have a primary role? And where did you get this 40-50% figure of wealth from? The root of all our problems is government policy? That is utterly ridiculous.

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I say we CAN'T have a debate because the numbers are largely meaningless.

So because you can't come up with hard facts to support your radical libertarian ideology, the debate is meaningless?

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If you took a step back you would realize that it is the artificial creation of money and credit that leads to structural imbalances that precipitate crashes in the first place. Adding to the money stock only compounds the error and prevents a much-needed correction from occurring.

If YOU took a step back you would realize that without a standardized currency and credit, we would be still stuck in the Middle Ages. Seems you still haven't realized how archaic this ideology you'r espousing really is.

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Lassiez faire is the only reasonable approach when it comes to economics.

Already been tried and failed. Laissez-faire capitalism is like North Korean communism, bound to collapse in economic ruin. So, you'd like to see 9 year olds working 12 hours a day? Sweat shops? People making $1 an hour? When huge asset bubbles appear and collapse, you want the entire economy to be dragged down with it? Again, we come back to my traffic regulation metaphor. Capitalizt advocates no traffic laws, and trusts that motorists will regulate themselves. A very ridiculous idea.

quote:

The fed is distorting everything on a such a grand scale that any debate about what economic policy is best is pointless until they are bound in shackles.

All you have to say to OCC is, "this debate is pointless"? As of now, he is pwning you in this debate. I mean, gee, hard facts? Peer-reviewed, highly researched, papers. THE MONETARY HISTORY OF THE UNITED STATES!? My God, he's using facts!

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Keynes, Friedman, Bernanke, and every other mainstream economist has deluded themselves (and apparently you) into thinking by shifting money from the left pocket (future taxpayers) to the right pocket (today's taxpayers) can enhance the total amount. They don't see deficit spending and controlling the money supply for what they really are..the enemies of capitalism..forces that chisel away at the foundation of free markets and the laws of supply and demand.

Deficit spending and control of the money supply is not the enemy of capitalism. It is an integral part of a stable prosperous capitalistic society. Supply and demand still reign far supreme, and if you can provide anything to the contrary, please do so.

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All government intervention distorts price signals, making retailers look like profiteers and deceiving workers into thinking their wages have gone up. It pushes families into higher income tax brackets without increasing their real purchasing power..In short, it undermines capitalism by destroying the rationale for dedicating a portion of today's earnings to savings. Accumulated savings provide the capital that finances projects that generate higher future returns; it's how an economy grows, how a healthy society reaches higher levels of prosperity.

Accumulated savings do provide lots of capital but is far insufficient to fund the vast economic growth we have enjoyed in the last 60 years. Apparently, you'v completely ignored the fact that millions upon millions of Americans have been lifted out of poverty in the last 100 years because of the system which you so radically want to change.

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THE INTERVENTIONISTS DONT SEE IT THIS WAY. Bernanke (and nearly every fed chairman before him) has convinced himself that we can grow the economy over long periods purely on credit expansion...that credit expansion can be a substitute for true capital (Bernanke said this himself during his recent congressional testimony). Men like these have created a system where our money has lost its capacity to serve as an honest measure, a meaningful unit of account. So as long as the value of money is arbitrarily controlled at a central location, any chart posted or argument made about "policy x" vs "policy y" is moot.

When there is a huge car accident, do you not expect the police, ambulances, and fire trucks to arrive? That system, is the reason our country is the economic powerhouse of the world, and why millions have been lifted out of poverty. Have you studied the effects of an unstandardized monetary system, such as what we had in the 1800's? You seriously need some education in economics because your arguments are almost totally void of logic and reason. And when OCC or anyone else debunks your wild claims, all you'v got to say is... "any chart posted or argument made about "policy x" vs "policy y" is moot."

Having fun plugging your ears and singing "la la la".

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Originally posted by Krypton The Fed and Congress have a regulatory role to play. Whoever said they have a primary role? And where did you get this 40-50% figure of wealth from? The root of all our problems is government policy? That is utterly ridiculous.

Absofrakkinlutely. Add up city/state/local + federal spending at it easily takes up 35% of GDP in America.. If you factor in the hidden cost of tariffs and excise taxes that get indirectly passed on to consumers, it is well over 40%...and even higher in more socialist countries.

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If YOU took a step back you would realize that without a standardized currency and credit, we would be still stuck in the Middle Ages.

We won't know until alternatives to fiat notes are legal now will we?

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Already been tried and failed. Laissez-faire capitalism is like North Korean communism, bound to collapse in economic ruin. So, you'd like to see 9 year olds working 12 hours a day? Sweat shops? People making $1 an hour? When huge asset bubbles appear and collapse, you want the entire economy to be dragged down with it? Again, we come back to my traffic regulation metaphor. Capitalizt advocates no traffic laws, and trusts that motorists will regulate themselves. A very ridiculous idea.

Nonsense x 1000...and we've been over this 1000 times it seems. Reducing government power has not been tried on any meaningful scale in a modern economy. We have been on an inexorable trend towards socialism for the past 70 tears. As for sweat shops.. We've been over that entire argument as well.. I thought we concluded that the need for sweatshops naturally disappears once an economy's infrastructure is developed and the population stabilized.. Sweatshops are part of a developing economy with little infrastructure and a large influx of immigrants (like America a few hundred years ago). This situation exists in Chinese cities today, but no longer exists in America..so even if minimum wage laws and every other lefty ideal were abolished today, we would not see a return to $1/hr labor in America.. And don't start that traffic light strawman again krypt. We've been over this..and you know even the most wacked out libertarian favors laws that protect people from theft and physical violence. Traffic laws certainly apply.

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All you have to say to OCC is, "this debate is pointless"? As of now, he is pwning you in this debate. I mean, gee, hard facts? Peer-reviewed, highly researched, papers. THE MONETARY HISTORY OF THE UNITED STATES!? My God, he's using facts!

Like I said..the fox guarding the henhouse. Those arguments are based on an incorrect interpretation of history..and is sorely lacking when it comes to addressing the ROOT CAUSE of depressions and slowdowns. All Keynesian/monetarist arguments conveniently overlook what causes them in the first place, and this puts their credibility less than 0% in my book. They don't recognize that the fault lies mainly with government and central bank policy..and this ignorance was proven when the very experts who wrote those glorious "peer reviewed studies" didn't have a frakkin clue what was going to happen in 2007-08. They didn't see the tremendous bubble being created by the easy credit and artificially low rates set by the fed. The only school that accurately predicted these bubbles subsequent bursts was the Austrian school, and it's the only school that recognizes the futility of central planning an economy on anything larger than a tribal scale.

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Deficit spending and control of the money supply is not the enemy of capitalism. It is an integral part of a stable prosperous capitalistic society. Supply and demand still reign far supreme, and if you can provide anything to the contrary, please do so.

We are talking about the supply and demand of MONEY..the price of MONEY..the price of the unit of account that everything else revolves around.. When a small group of people has complete power over the price of money, they control the markets..they practically control the world. They have the power to change minds and behavior..influencing millions of people on a whim.. That is decidedly anti-capitalistic in my book.

quote:

Accumulated savings do provide lots of capital but is far insufficient to fund the vast economic growth we have enjoyed in the last 60 years. Apparently, you'v completely ignored the fact that millions upon millions of Americans have been lifted out of poverty in the last 100 years because of the system which you so radically want to change.

Indeed..and what we are seeing today is that we went too far, too fast. The market is trying to adjust to that reality, and as always the fed is refusing to let it happen. I wouldn't object as much if they just OCCASIONALLY allowed the excesses to correct and malinvestments to be purged..if they just allowed markets to work every once in a while, but they never do. They inflate inflate inflate every single time without exception..devalue the currency to cover up the malinvestment and get things moving again. It's not a healthy thing. The root causes are not being addressed. If you and oc want to ignore this...If you are content to watch Bernanke giving aspirin to a cancer patient then plugging his ears and singing "la la la" and pretending all is well, go for it.

quote:

Originally posted by Capitalizt Absofrakkinlutely. Add up city/state/local + federal spending at it easily takes up 35% of GDP in America.. If you factor in the hidden cost of tariffs and excise taxes that get indirectly passed on to consumers, it is well over 40%...and even higher in more socialist countries.

Can I get some source for your data figures?

quote:

We won't know until alternatives to fiat notes are legal now will we?

...there are alternatives...You can buy gold/silver, bonds, real estate, at any time, as much as you want. What are you complaining about?

quote:

Nonsense x 1000...and we've been over this 1000 times it seems. Reducing government power has not been tried on any meaningful scale in a modern economy. We have been on an inexorable trend towards socialism for the past 70 tears. As for sweat shops.. We've been over that entire argument as well.. I thought we concluded that the need for sweatshops naturally disappears once an economy's infrastructure is developed and the population stabilized.. Sweatshops are part of a developing economy with little infrastructure and a large influx of immigrants (like America a few hundred years ago). This situation exists in Chinese cities today, but no longer exists in America..so even if minimum wage laws and every other lefty ideal were abolished today, we would not see a return to $1/hr labor in America.. And don't start that traffic light strawman again krypt. We've been over this..and you know even the most wacked out libertarian favors laws that protect people from theft and physical violence. Traffic laws certainly apply.

Reducing government power? In what way? Abolishing the Federal Reserve?

Sweatshops did not disappear because the economy's infrastructure was developed. It disappeared because government came in and passed legislation outlawing child workers, instituting minimum wage, protecting unions, and limiting the work day to 8 hours in some industries like auto manufacturing. If you believe the corporations did this themselves, then you'v got a lot to learn. Again, you'r believing that motorists will police themselves, not speed down the highway, not drive in the opposite lanes...it's a ludicrous assumption.

quote:

Like I said..the fox guarding the henhouse. Those arguments are based on an incorrect interpretation of history..and is sorely lacking when it comes to addressing the ROOT CAUSE of depressions and slowdowns. All Keynesian/monetarist arguments conveniently overlook what causes them in the first place, and this puts their credibility less than 0% in my book. They don't recognize that the fault lies mainly with government and central bank policy..and this ignorance was proven when the very experts who wrote those glorious "peer reviewed studies" didn't have a frakkin clue what was going to happen in 2007-08. They didn't see the tremendous bubble being created by the easy credit and artificially low rates set by the fed. The only school that accurately predicted these bubbles subsequent bursts was the Austrian school, and it's the only school that recognizes the futility of central planning an economy on anything larger than a tribal scale.

What makes your interpretation of history so far and above men like Bernanke? The root cause of recessions is moot. Every economy, whether laissez-faire capitalist or marxist-communist has asset bubbles. If you believe that adhering to some radical libertarian ideology is going to do away with asset bubbles, then I'd have to seriously question your understanding of economics.

Government and regulators certainly do take some fault for the mortgage bubble but that is a far too simplistic view. There were many actors, lenders, brokers, borrowers, regulators, ratings agencies, whose actions all culminated in the collapse we now see. Nobody held a gun to the banks head to force them to make subprime loans. Nobody held a gun to the subprime borrowers head to sign on the dotted line.

Additionally, the Fed does not "centrally control" the economy. They control the money supply.

quote:

We are talking about the supply and demand of MONEY..the price of MONEY..the price of the unit of account that everything else revolves around.. When a small group of people has complete power over the price of money, they control the markets..they practically control the world. They have the power to change minds and behavior..influencing millions of people on a whim.. That is decidedly anti-capitalistic in my book.

Again, you'r throwing out completely wrong assumptions. The Fed does not control the price of money. It controls the SUPPLY of money. The FOREX markets control the price of money. Additionally, the Fed is accountable to Congress, and by extension, the American people. Whoever you'r getting this "information" from, their paranoia is rubbing off on you.

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Indeed..and what we are seeing today is that we went too far, too fast. The market is trying to adjust to that reality, and as always the fed is refusing to let it happen. I wouldn't object as much if they just OCCASIONALLY allowed the excesses to correct and malinvestments to be purged..if they just allowed markets to work every once in a while, but they never do. They inflate inflate inflate every single time without exception..devalue the currency to cover up the malinvestment and get things moving again. It's not a healthy thing.

We went too far too fast...Yea, that's the normal business cycle.

The market is trying adjust itself...Yea, it's been doing that quite well for the past year. Have you seen the 50% drop in stock values? How about the collapse of real estate values? How about the huge drop in commodities values? Sounds like a market adjusting to me. The Fed has been stabilizing the banking sector. Even though they are a bunch of crooks, if we let the banking sector collapse, they will take all of us down with them. In essence, we are their hostages.

Mal-investments are being purged. How many trillions of dollars have been written off balance sheets?

Allowing the market to work once in a while? Hmmm....IT IS WORKING...actually, it's working specifically because the Fed kept it working by infusing liquidity into the system. Thank you Feds.

Inflation is a normal effect in a capitalist economy. IT'S NORMAL. Now, currently, we are more in a deflationary economy, than inflationary. Asset prices have plummeted substantially. Deflation. This caused a dangerous lack of liquidity in the system, thus, the Fed was obliged to, shall we say, inject a blood transfusion into the body of the economy. Thank god they did it. Are we going to have higher inflation in the future. Maybe. But a large part of that is offset by the huge deflation we'r suffering at the moment. Looking at the Dow Jones, prices there have fallen an average 50%.

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The root causes are not being addressed. If you and oc want to ignore this...If you are content to watch Bernanke giving aspirin to a cancer patient then plugging his ears and singing "la la la" and pretending all is well, go for it.

The root causes? What are the root causes. Tell us, oh, all knowing economist. Because we are specifically addressing every single point you make, and you'r the one who tells us, "this debate is pointless." It appears that you are the one plugging your ears singing "lalala", not us. We'r not ignoring you. We strongly disagree with you and see many flaws in your arguments. Most alarmingly, your understanding of the role of the Federal Reserve. I mean, you just said the Fed controls the price of money, which is clearly wrong.

You asked where I got the 40% figure..I'm honestly not sure. It was in a report by Cato a few years back..but if history is any guide it certainly hasn't shrunk. I googled and found this page..It seems fairly close to 40%: http://www.usgovernmentspending.com/

2009 GDP: $14.29 trillion
Government spending (federal + state + local): $6.383 trillion.

and krypt, as for asset bubbles..Yes they can happen in a pure capitalist economy..but in a free market, there are always forces at work to correct these things quickly. Fads go in and out of fashion in the real world. You used CROX as an example a few months ago in your investors club I think.. Once a high flier with a blazing $20+ stock price..then the fad for those shoes died and..the euphoria dissolved and the stock crashed to $1.

Crox was priced incorrectly. This was the result of a market bubble..and fortunately in that case the damage was contained. It was contained because market forces were allowed to work and act on the bubble. Because Crox operated in a free market, market forces had the ability to correct the problem and relatively few people were hurt in the process. But as far as the fed is concerned, there are NO market forces to work with. An authoritarian group controls the cost of money and people can't voice their dissatisfaction with the product. When the fed increases the money supply, there is no recourse among dollar holders and no instantaneous feedback mechanism like the stock market. Instead everyone in the world must either suck it up and accept the devaluation or rush to place risky bets in hoping of outpacing the loss of purchasing power. When this happens..when something like the value of money is controlled by non-market forces, the malinvestments and bubbles are INSTITUTIONALIZED. They are fused into the system and guaranteed to be immeasurably larger and more dangerous than anything the private sector could dream of.

You are a market man krypt.. You've studied markets. You know they are the most efficient means of allocating resources...of exhanging products, information, and ideas.. Why are you so against the idea of putting a little market pressure to bear on the fed? Perhaps if competition were legalized they'd be a bit more open to the public and less likely to hand out trillions of dollars to their corporate buddies.

quote:

Originally posted by Capitalizt Replace the word Keynesian in all of my posts with interventionist.. That's what they all are oc (Friedman, Keynes, etc)..and it is government interventionism that led us to the mess we are in today.. The idea that the fed or congress have a primary role to play in influencing the economy has led to the acceptance of state/federal governments sucking 40-50% of the wealth from major countries every year. This is the root of all of our problems and all of the negative numbers rolling in...the global embrace of interventionism and the fixing of the price and quantity of money at a central location. That is the point I'm getting at. You say you won't debate further until I present numbers of my own.. I say we CAN'T have a debate because the numbers are largely meaningless. If you took a step back you would realize that it is the artificial creation of money and credit that leads to structural imbalances that precipitate crashes in the first place. Adding to the money stock only compounds the error and prevents a much-needed correction from occurring. Lassiez faire is the only reasonable approach when it comes to economics. Japan didn't get this in the 90's and Bernanke doesn't get it today. The fed is distorting everything on a such a grand scale that any debate about what economic policy is best is pointless until they are bound in shackles. Keynes, Friedman, Bernanke, and every other mainstream economist has deluded themselves (and apparently you) into thinking by shifting money from the left pocket (future taxpayers) to the right pocket (today's taxpayers) can enhance the total amount. They don't see deficit spending and controlling the money supply for what they really are..the enemies of capitalism..forces that chisel away at the foundation of free markets and the laws of supply and demand. All government intervention distorts price signals, making retailers look like profiteers and deceiving workers into thinking their wages have gone up. It pushes families into higher income tax brackets without increasing their real purchasing power..In short, it undermines capitalism by destroying the rationale for dedicating a portion of today's earnings to savings. Accumulated savings provide the capital that finances projects that generate higher future returns; it's how an economy grows, how a healthy society reaches higher levels of prosperity. THE INTERVENTIONISTS DONT SEE IT THIS WAY. Bernanke (and nearly every fed chairman before him) has convinced himself that we can grow the economy over long periods purely on credit expansion...that credit expansion can be a substitute for true capital (Bernanke said this himself during his recent congressional testimony). Men like these have created a system where our money has lost its capacity to serve as an honest measure, a meaningful unit of account. So as long as the value of money is arbitrarily controlled at a central location, any chart posted or argument made about "policy x" vs "policy y" is moot.

Led to the acceptance of the state/federal governments sucking 40-50% of the wealth? Ummm yea you might want to brush up on your tax (or wealth sucking as you put it) history. Tax rates are, for all intents and purposes, at their lowest in the current period than they were ever just going back to 1913. Try going back to the 50s and 60s when marginal tax rates for the highest brackets were at 91%. Here are tax rates going back to 1913:

http://www.taxfoundation.org/files/...ry-20080107.pdf

Gee I suppose there should be clear correlation of GDP growth with less �wealth sucking� if one were to analyze the numbers.

Or how about this � since the Fed was only created in 1913 and we have 200+ years of economic history before a fiat currency, before a central bank with the following slew of recessions:

Panic of 1797
Depression of 1807
Panic of 1819
Panic of 1837
Panic of 1857
Panic of 1873
Long Depression (1873-1896)
Panic of 1893
Panic of 1907
Post WW1 Recession
Great Depression
Recession of 1953
Recession of 1957
Recession of 1960-61
1973 oil crisis
1980-82 recession
90-91 recession
2001-2003 recession

Now given this 200+ years of economic data available from periods before the Federal Reserve and periods of increasing/decreasing government intervention, CLEARLY you should have a wealth of data that corroborates correlation of greater intervention with negative GDP growth � however since you believe numbers to be meaningless, which is remarkably convenient since you don�t have to find ANY empirical evidence whatsoever to support your theories, that is why I consider a continuation of this argument to be pointless. I could throw a wealth of economic data at you, outline the mathematical proofs for the economic theories I�m referring to, or possibly even provide an affidavit from God and you would simply disregard all of it as �meaningless�. Blah blah austrian school, whatever. Give me something I can dig my teeth into that's NOT a blog or ideological trite. There's a REASON why economics is a PHD level study that requires understanding not only of sociology but higher level math. To quote one of my favorite lines from a movie ... this ain't checkers it's fucking chess. Give me something ... ANYTHING published in a god damned peer reviewed journal that I can actually refute. I�ve participated in these types of �debates� in the past; they�re reminiscent of past debates on evolution with creationists, and quite frankly I learned that I can be far more productive doing other things with my time. So that being said, until you start deferring to ALL economic data to support or detract from your arguments, as opposed to selectively cherry picking whatever data supports your ideology and disregarding all the rest (another habit creationists love to do), I�m done with this debate.

quote:

Originally posted by Capitalizt You asked where I got the 40% figure..I'm honestly not sure. It was in a report by Cato a few years back..but if history is any guide it certainly hasn't shrunk. I googled and found this page..It seems fairly close to 40%: http://www.usgovernmentspending.com/ 2009 GDP: $14.29 trillion Government spending (federal + state + local): $6.383 trillion.

What exactly is your point? The less government expenditure, the better? While in theory, this seems logical, in reality it isn't that easy. A better argument is, when the economy is good, the government should spend less. When economy is bad, they should spend more. And that is exactly what's going on. I'd like to see it drop below 40% again, and preferably, hover at 30% of GDP, but the times call for increased government expenditure.

quote:

and krypt, as for asset bubbles..Yes they can happen in a pure capitalist economy..but in a free market, there are always forces at work to correct these things quickly.

What makes you think the market has not been correcting for the last year? Clearly it has, even with government intervention. The purpose of government intervention isn't to stop a correction, it's to soften the inevitable blow from such a correction. Do you want our economy to fall on rocks or sand?

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Fads go in and out of fashion in the real world. You used CROX as an example a few months ago in your investors club I think.. Once a high flier with a blazing $20+ stock price..then the fad for those shoes died and..the euphoria dissolved and the stock crashed to $1.

CROX was a purely speculative pick. I would have never invested in it. But how is this relevant to the Fed? Are you saying monetary policy is a fad?

quote:

Crox was priced incorrectly. This was the result of a market bubble..and fortunately in that case the damage was contained. It was contained because market forces were allowed to work and act on the bubble. Because Crox operated in a free market, market forces had the ability to correct the problem and relatively few people were hurt in the process.

Again, what makes you think the market isn't correcting? How much has the major stock indexes fallen? 50%? Citigroup is at $2 per share. AIG is less than $1. If that's not a major correction, then what the hell is?

quote:

But as far as the fed is concerned, there are NO market forces to work with. An authoritarian group controls the cost of money and people can't voice their dissatisfaction with the product. When the fed increases the money supply, there is no recourse among dollar holders and no instantaneous feedback mechanism like the stock market. Instead everyone in the world must either suck it up and accept the devaluation or rush to place risky bets in hoping of outpacing the loss of purchasing power. When this happens..when something like the value of money is controlled by non-market forces, the malinvestments and bubbles are INSTITUTIONALIZED. They are fused into the system and guaranteed to be immeasurably larger and more dangerous than anything the private sector could dream of.

THE FED DOES NOT CONTROL THE COST OF MONEY. I REPEAT. THE FED DOES NOT CONTROL THE COST OF MONEY. It influences the cost of BORROWING money, and only the minimum cost at that. Banks can charge as high of an interest rate as they want. Credit cards routinely charge 20% interest rates. Foreign exchange markets price the dollar relative to other currencies. THERE ARE PLENTY OF MARKET FORCES AT WORK OUTSIDE OF THE FED.

When the Fed increases the money supply, there are plenty of recourses among dollar holders. They can buy assets! Real estate, stocks, bonds, gold/silver, other currencies, etc. etc. You are clearly wrong in your assumption of helplessness towards inflation, which is a normal function of all monetary economies.

Clearly, you are deficient in macro-economics. Your basic assumptions are demonstrably false. The Fed does not control the cost of money as absolutely as you think. The Fed is not all powerful.

quote:

You are a market man krypt.. You've studied markets. You know they are the most efficient means of allocating resources...of exhanging products, information, and ideas.. Why are you so against the idea of putting a little market pressure to bear on the fed? Perhaps if competition were legalized they'd be a bit more open to the public and less likely to hand out trillions of dollars to their corporate buddies.

The markets are efficient!? LOL. If that were true, I would never make money. My strategy is based on the assumption of an INEFFICIENT market. I profit from arbitrage of market value and intrinsic value. If the markets were efficient, market value and intrinsic value would be the same.

The short-term markets are HORRIBLE at allocating resources. They always put too much or too little into something! There is never equilibrium. Putting a little market pressure to bear on the Fed? What market pressure is this? Reverting back to an economy with multiple currencies floating around domestically? What a horrible idea.

I and OCC have both demonstrated the absolute ridiculousness of "competing currencies". Again, look at the banking system of the 1800's in which every state had its own currency.

Additionally, the system you are so against has been the same system to lift millions out of poverty. Might want to think about that. Yes, it has flaws, but what you are proposing is economic suicide.

quote:

Originally posted by occrider Led to the acceptance of the state/federal governments sucking 40-50% of the wealth? Ummm yea you might want to brush up on your tax (or wealth sucking as you put it) history. Tax rates are, for all intents and purposes, at their lowest in the current period than they were ever just going back to 1913. Try going back to the 50s and 60s when marginal tax rates for the highest brackets were at 91%. Here are tax rates going back to 1913: http://www.taxfoundation.org/files/...ry-20080107.pdf

Thanks. I think inflation adjusted numbers would be more interesting though. Here's another chart for ya.


Data behind the chart is here: Link

Krypt and I weren't even discussing income tax rates so I'm not sure why you brought it up. We were talking about the size of government relative to GDP. The fact that rich people were taxed 80% doesn't mean much when the government was a much smaller fraction of the economy than it is today.

We all know government does not produce wealth, so a government that is 40% of GDP is naturally "sucking" more wealth away from the economy than a government that is 20% of GDP. Despite the lower rates they are getting revenue somehow or else borrowing it from future generations. Just look at the link posted above. It doesn't take a genius to recognize that the current trend is not sustainable. When a parasite consumes more than half it's host, they are both very likely to die. Do I have a chart to prove growth into the 50-60% range will hurt the economy? Nope..just common sense based on everything I've seen in nature. If you want to ignore logical arguments like this because they don't have a corresponding pie chart, that's your choice.

quote:

Or how about this � since the Fed was only created in 1913 and we have 200+ years of economic history before a fiat currency, before a central bank with the following slew of recessions

Wow..are you actually quoting panics that took place in the pre-cowboy days?

I really don't think any economic data from the pre 1900s can reliably compared to modern societies...but there certainly were several panics and recessions before the fed was created. Suffice it to say they weren't nearly as damaging and widespread as the current-day crisis..but they were unpleasant for sure. The 1700-1800's were volatile times in America and I'm no expert on the events you posted..but I just did some reading on each one and noticed that in at least half the cases there was some major government action or policy change that preceded the panics/recessions. Government is not always responsible of course, but from historical observation I think we can safely deduce that federal interventions cause financial instability in markets, and that the large scale interventions as we are seeing today are likely to cause large amounts of instability in the coming years.

quote:

Now given this 200+ years of economic data available from periods before the Federal Reserve and periods of increasing/decreasing government intervention, CLEARLY you should have a wealth of data that corroborates correlation of greater intervention with negative GDP growth � however since you believe numbers to be meaningless, which is remarkably convenient since you don�t have to find ANY empirical evidence whatsoever to support your theories, that is why I consider a continuation of this argument to be pointless. I could throw a wealth of economic data at you, outline the mathematical proofs for the economic theories I�m referring to, or possibly even provide an affidavit from God and you would simply disregard all of it as �meaningless�. Blah blah austrian school, whatever. Give me something I can dig my teeth into that's NOT a blog or ideological trite. There's a REASON why economics is a PHD level study that requires understanding not only of sociology but higher level math. To quote one of my favorite lines from a movie ... this ain't checkers it's fucking chess. Give me something ... ANYTHING published in a god damned peer reviewed journal that I can actually refute. I�ve participated in these types of �debates� in the past; they�re reminiscent of past debates on evolution with creationists, and quite frankly I learned that I can be far more productive doing other things with my time. So that being said, until you start deferring to ALL economic data to support or detract from your arguments, as opposed to selectively cherry picking whatever data supports your ideology and disregarding all the rest (another habit creationists love to do), I�m done with this debate.

My data is your data OC. There are no magical numbers from the Austrian school. We are interpreting the same thing here.. All I've done this entire thread is point out that the crises and panics have grown progressively worse over the years. The old panics you mentioned were immeasurably LESS damaging than what we are experiencing today. Without an all encompassing government/fed to absorb the costs and guarantee everyone happiness and wellbeing, there was pain..but it was localized (and usually short-lived) pain...not systemic as it is now.

On this subject of economic contraction, I think we can both agree that most recessions/depressions happen when a cluster of errors or bad decisions happen all at once. This always has been the case. Some of your examples involved clusters of errors in the railroad industry, the banking industry, mining industry, etc. Since the advent of the fed, the boom-bust cycle has become much more intense, and the cluster of errors we had in 2007/08 was across not just one industry, but across MANY industries (manufacturing, autos, finance, real estate, etc). In any free society it is not likely that entrepreneurs across different industries will all make many stupid mistakes and miscalculations simultaneously. The magnitude of this collapse can only be explained by an external factor that was acting in some way on all of these industries..and the only entities that have this power today are the US government and federal reserve. Bad policy from those powerful bodies influences everything else. There is certainly blame to go around the individual banks, but the main fault for the current crisis can be laid at the feet of bad policies by the fed, congress, and the Bush administration.. In short, by interventionism.

quote:

Originally posted by Capitalizt but I just did some reading on each one and noticed that in at least half the cases there was some major government action or policy change that preceded the panics/recessions.

yeah, but you're simply horrible at apportioning 'blame' and understanding cause and effect.

quote:

Originally posted by Capitalizt Government is not always responsible of course, but from historical observation I think we can safely deduce that federal interventions cause financial instability in markets, and that the large scale interventions as we are seeing today are likely to cause large amounts of instability in the coming years.

i cannot believe people are clinging to these sentiments in the current climate of systemic market failure. it boggles my mind.

quote:

Originally posted by Krypton What exactly is your point? The less government expenditure, the better? While in theory, this seems logical, in reality it isn't that easy. A better argument is, when the economy is good, the government should spend less. When economy is bad, they should spend more. And that is exactly what's going on. I'd like to see it drop below 40% again, and preferably, hover at 30% of GDP, but the times call for increased government expenditure.

Even if I agreed that your theory is good (I don't think so) you've got to take a look at history man. Look at the link I posted for occ above. I'd like government to drop below 40% of GDP as well, but if history is any guide it's not gonna happen. The widespread acceptance that government MUST intervene is what is leading us to a future government/GDP ratio of 50%+

quote:

What makes you think the market has not been correcting for the last year? Clearly it has, even with government intervention. The purpose of government intervention isn't to stop a correction, it's to soften the inevitable blow from such a correction. Do you want our economy to fall on rocks or sand?

I would argue that the cost of softening the blow this time is much worse than if we just let the blow fall. Bad companies aren't being allowed to fail and be bought out or restructured. Instead of facing the pain, they are falling on "sand" as you call it..but the sand is the back of US taxpayers. True..they aren't failing and many jobs might be saved, but the cost to us in the form of future debt and inflation is a greater evil in my opinion. This is our main philosophical difference. This has been a mammoth intervention on a scale never before seen in human history. I can't predict how bad future inflation is going to be because we are truly in uncharted waters here. It's difficult to predict the repercussions, but the world will most certainly start feeling the effects in 5-10 years.

quote:

CROX was a purely speculative pick. I would have never invested in it. But how is this relevant to the Fed? Are you saying monetary policy is a fad?

No, I was just making a point that a small scale bubble like Crox causes causes much less financial damage and affects far fewer people than the institutional bubbles created by government policy.

quote:

Again, what makes you think the market isn't correcting? How much has the major stock indexes fallen? 50%? Citigroup is at $2 per share. AIG is less than $1. If that's not a major correction, then what the hell is?

The market is TRYING desperately to correct but the process is being dragged out by government. They are only prolonging our suffering with this foolishness.. They are doing the same sort of nonsense Hoover did in the 1920's..propping up insolvent businesses and trying to prevent nature from taking it's course. As you know, he turned an event that could have been a short and painful recession into a much longer affair. I fear we are doing the same thing today.

quote:

THE FED DOES NOT CONTROL THE COST OF MONEY. I REPEAT. THE FED DOES NOT CONTROL THE COST OF MONEY. It influences the cost of BORROWING money, and only the minimum cost at that. Banks can charge as high of an interest rate as they want. Credit cards routinely charge 20% interest rates. Foreign exchange markets price the dollar relative to other currencies. THERE ARE PLENTY OF MARKET FORCES AT WORK OUTSIDE OF THE FED. When the Fed increases the money supply, there are plenty of recourses among dollar holders. They can buy assets! Real estate, stocks, bonds, gold/silver, other currencies, etc. etc. You are clearly wrong in your assumption of helplessness towards inflation, which is a normal function of all monetary economies.

krypt, I'm afraid you're the one that needs a refresher on macro. The cost to borrow money IS the cost of money.. The fed has a big influence on interest rates and IT CONTROLS THE QUANTITY OF MONEY IN CIRCULATION. Let me use all caps again because it's fun.. IT IS IMPOSSIBLE TO UNDERSTATE THE AMOUNT OF POWER THEY HAVE!

Seriously. FFS, they have the power to create money krypt. It's not much of an exaggeration to say they have the power of God at their fingertips.

quote:

The markets are efficient!? LOL. If that were true, I would never make money. My strategy is based on the assumption of an INEFFICIENT market. I profit from arbitrage of market value and intrinsic value. If the markets were efficient, market value and intrinsic value would be the same. The short-term markets are HORRIBLE at allocating resources. They always put too much or too little into something! There is never equilibrium. Putting a little market pressure to bear on the Fed? What market pressure is this? Reverting back to an economy with multiple currencies floating around domestically? What a horrible idea.

I'm not just talking about the stock market.. I'm talking about all markets krypt. The markets you face when you walk out the door every day..the markets that created every object in your house right now. Thousands of people were involved in getting that 2-liter into your fridge..the chemists who made the plastic, the farmers who grew the sugar cane, the companies that made the food coloring..the label..the dye on the label..the carbonated water..the company that made the carbonation machines..the steel that went into the carbonation machines..the iron miners who dug up the rocks to make the steel..the delivery truck drivers..the truck manufacturer...and on and on.. Thousands of people were involved in making that 2-liter but they managed to get the product into your hands for around a buck...no central planning involved. It's f*ckin miraculous when you stop and think about how efficient the market system can be. Markets are not perfect but they are by far the best thing we have. Profit and loss...the price structure..supply and demand. It's true there is never equilibrium but they do tend towards equilibrium over time. The alternative to markets is rule by fiat..arbitrary control and pricing at a central level. This has been a proven failure when various communist societies tried to determine the value of goods in absence of a market.. Central planning is a universal failure wherever and whenever it is tried yet for some reason you have faith in central planning when it comes to controlling the value of our most important asset, money.

quote:

I and OCC have both demonstrated the absolute ridiculousness of "competing currencies". Again, look at the banking system of the 1800's in which every state had its own currency.

As I said to OCC..The 1790's and 1800's were a volatile time in America's history. We had no national infrastructure and were not an established country. We had lawlessness across much of the west, an economy built on slave labor and a civil war. That was a different era in world history which makes it difficult to draw many parallels to modern society. It's like a paleontologist a digging far enough to reach a different sedimentary layer with new fossils. The situation that existed in one age will not necessarily happen in another. We don't know what would happen if competing currencies were legalized in the modern world...but given how efficient markets tend to be over time, I'm all for giving them the chance. If the fed is a sound steward of our dollars, they should have nothing to fear from a little competition. The dollar is backed by faith..If that faith were questioned by a competitor, the fed would likely be much more careful about who they give money to. If competition were legalized, they will be less likely to devalue our money on a whim or lend trillions of it out with no public disclosure. It will be in their self interest to protect the the value of your earnings and savings.

quote:

Additionally, the system you are so against has been the same system to lift millions out of poverty. Might want to think about that.

No, the system that has lifted millions out of poverty has been free market capitalism, and it is rapidly being destroyed by the forces of central planning and interventionism. Unfortunately all governments are on the same path.. They are all smothering the goose that laid the golden egg.

quote:

Originally posted by Capitalizt I would argue that the cost of softening the blow this time is much worse than if we just let the blow fall. Bad companies aren't being allowed to fail and be bought out or restructured. Instead of facing the pain, they are falling on "sand" as you call it..but the sand is the back of US taxpayers. True..they aren't failing and many jobs might be saved, but the cost to us in the form of future debt and inflation is a greater evil in my opinion. This is our main philosophical difference. This has been a mammoth intervention on a scale never before seen in human history. I can't predict how bad future inflation is going to be because we are truly in uncharted waters here. It's difficult to predict the repercussions, but the world will most certainly start feeling the effects in 5-10 years.

So you'd have our entire economy be dragged down into the hole by the financial sector? Do you realize how much worse off we would be right now without the government's intervention? The FDIC would have been broken. Bank runs. Loss of deposits. This is economic meltdown which we have averted but which you'd like to oddly see happen.

quote:

No, I was just making a point that a small scale bubble like Crox causes causes much less financial damage and affects far fewer people than the institutional bubbles created by government policy.

The government never held a gun to the bank's metaphorical heads to make ridiculous, fraudulent loans. Nor was that their intention.

quote:

The market is TRYING desperately to correct but the process is being dragged out by government. They are only prolonging our suffering with this foolishness.. They are doing the same sort of nonsense Hoover did in the 1920's..propping up insolvent businesses and trying to prevent nature from taking it's course. As you know, he turned an event that could have been a short and painful recession into a much longer affair. I fear we are doing the same thing today.

The market is not "trying" to correct. The market IS correcting. 50% decline is not an attempt at correcting. It IS correcting. You don't realize that which is strange...

quote:

krypt, I'm afraid you're the one that needs a refresher on macro. The cost to borrow money IS the cost of money..

Says who? You?

quote:

The fed has a big influence on interest rates and IT CONTROLS THE QUANTITY OF MONEY IN CIRCULATION. Let me use all caps again because it's fun.. IT IS IMPOSSIBLE TO UNDERSTATE THE AMOUNT OF POWER THEY HAVE! Seriously. FFS, they have the power to create money krypt. It's not much of an exaggeration to say they have the power of God at their fingertips.

Do you honestly believe banks would collectively lower interest rates in the interest of slowing down or speeding up the economy? The Fed should control the money supply. And this "power" which you believe the Fed has, is illusionary. Apparently the Fed didn't have the power to realize what was happening 2003-2007. The Feds are on their asses right now, and if that's power to you, then that really sucks. The Fed has a lot which is out of their control. Otherwise we wouldn't have a capitalist economy.

quote:

I'm not just talking about the stock market.. I'm talking about all markets krypt. The markets you face when you walk out the door every day..the markets that created every object in your house right now. Thousands of people were involved in getting that 2-liter into your fridge..the chemists who made the plastic, the farmers who grew the sugar cane, the companies that made the food coloring..the label..the dye on the label..the carbonated water..the company that made the carbonation machines..the steel that went into the carbonation machines..the iron miners who dug up the rocks to make the steel..the delivery truck drivers..the truck manufacturer...and on and on.. Thousands of people were involved in making that 2-liter but they managed to get the product into your hands for around a buck...no central planning involved. It's f*ckin miraculous when you stop and think about how efficient the market system can be. Markets are not perfect but they are by far the best thing we have. Profit and loss...the price structure..supply and demand. It's true there is never equilibrium but they do tend towards equilibrium over time. The alternative to markets is rule by fiat..arbitrary control and pricing at a central level. This has been a proven failure when various communist societies tried to determine the value of goods in absence of a market.. Central planning is a universal failure wherever and whenever it is tried yet for some reason you have faith in central planning when it comes to controlling the value of our most important asset, money.

Must I repeat our economy is not "centrally planned"? How many times must I repeat this? Supply and demand are still the main driving forces of this economy. The Fed does not control this. They simply guide the economy in the right direction.

quote:

As I said to OCC..The 1790's and 1800's were a volatile time in America's history. We had no national infrastructure and were not an established country. We had lawlessness across much of the west, an economy built on slave labor and a civil war. That was a different era in world history which makes it difficult to draw many parallels to modern society. It's like a paleontologist a digging far enough to reach a different sedimentary layer with new fossils. The situation that existed in one age will not necessarily happen in another. We don't know what would happen if competing currencies were legalized in the modern world...but given how efficient markets tend to be over time, I'm all for giving them the chance. If the fed is a sound steward of our dollars, they should have nothing to fear from a little competition. The dollar is backed by faith..If that faith were questioned by a competitor, the fed would likely be much more careful about who they give money to. If competition were legalized, they will be less likely to devalue our money on a whim or lend trillions of it out with no public disclosure. It will be in their self interest to protect the the value of your earnings and savings.

The dollar ALREADY has competition. The euro, yen, real, ruble, rupee, etc. etc. If the dollar sucks so much, use euros. Buy gold. But as legal tender, there should be no other currency but the dollar. You are more than free to accept or try to use, as payment, other means than the dollar. So your wish, as I'v repeatedly stated numerous times, is already fulfilled.

quote:

No, the system that has lifted millions out of poverty has been free market capitalism, and it is rapidly being destroyed by the forces of central planning and interventionism. Unfortunately all governments are on the same path.. They are all smothering the goose that laid the golden egg.

The Fed has been in existence since 1913, and the economic system of which it is a part of, is very much responsible for bring millions out of poverty. That system is free market capitalism, of which the Fed DOES NOT CENTRALLY PLAN. It'd be nice if we didn't have to go around in circle after circle about this. The Fed is not Gossplan. And if you look at the industrialized countries of the world, every single one of them has a central bank. You are clearly wrong in your opposition to a macro-economic entity which prevents markets from running wild in good times, and prevents them from utter meltdown in bad times. Your gold standard or laissez-faire dream, will never prevent assets bubbles, nor cares if one sector of the economy drags the entire system down into collapse.

quote:

Originally posted by Krypton So you'd have our entire economy be dragged down into the hole by the financial sector? Do you realize how much worse off we would be right now without the government's intervention? The FDIC would have been broken. Bank runs. Loss of deposits. This is economic meltdown which we have averted but which you'd like to oddly see happen.

No, what I would like to see happen is individual firms who made stupid mistakes go into bankruptcy restructuring or be bought out by stronger firms that didn't make stupid mistakes. I'm against corporate welfare..and the scale of corporate welfare we've seen over the past 12 months is monstrous. Everything has a price in a free market. Citigroup got down to .70 a share. I think at .50 a share JP Morgan would have probably gobbled them up, fired the top brass, and cleaned up their operations..all voluntarily and without taxpayer support. The government has been mucking around in the markets so this sort of thing isn't happening as it otherwise would.

quote:

The government never held a gun to the bank's metaphorical heads to make ridiculous, fraudulent loans. Nor was that their intention.

Of course you are right, but to ignore the role played by Fannie/Freddie + the community reinvestment act + very cheap credit that was made available to banks is to like ignoring the teacher who passed out tons of candy to the kindergartners in my earlier example. The kids f*cked up the classroom on a sugar high and should be blamed, but you can't ignore the teacher who enabled their actions.

quote:

The market is not "trying" to correct. The market IS correcting. 50% decline is not an attempt at correcting. It IS correcting. You don't realize that which is strange..

A correction would mean bankruptcy or at least the firing of a great many people who were in charge of these institutions. Our official government policy is that there will be no more failures..Bernanke basically said this during the 60 minutes interview. Sorry krypt, but to quote Allan Meltzer, "Capitalism without failure is like religion without sin. Bankruptcy and losses focus the mind on prudent behavior." With a policy that major banks will be kept on life support indefinitely at the expense of the taxpayer, we are creating moral hazard of the highest degree.

quote:

Do you honestly believe banks would collectively lower interest rates in the interest of slowing down or speeding up the economy?[quote] No, banks will do what is in their self interest..just like everyone else. When people stop borrowing due to tough economic times, banks are likely to lower rates to induce more borrowing. They have nothing to gain from charging high rates when the demand isn't there. In a booming economy with high demand for loans, they would be quick to raise rates to compensate for the increased demand. If the fed had this type of market feedback to respond to, they would likely have increased rates much sooner. [quote]Must I repeat our economy is not "centrally planned"? How many times must I repeat this? Supply and demand are still the main driving forces of this economy. The Fed does not control this. They simply guide the economy in the right direction.

They control the supply of money. When one institution controls the supply of the lifeblood of the economy, I think we can safely say that is a form of planning.

quote:

The Fed should control the money supply. And this "power" which you believe the Fed has, is illusionary. Apparently the Fed didn't have the power to realize what was happening 2003-2007. The Feds are on their asses right now, and if that's power to you, then that really sucks.

You are correct...For the most part, they didn't realize what was happening. And the few that did see the bubble forming in housing did not attribute it to the fed.

quote:

The dollar ALREADY has competition. The euro, yen, real, ruble, rupee, etc. etc. If the dollar sucks so much, use euros. Buy gold. But as legal tender, there should be no other currency but the dollar. You are more than free to accept or try to use, as payment, other means than the dollar. So your wish, as I'v repeatedly stated numerous times, is already fulfilled.

But those are all fiat currencies too.

quote:

The Fed has been in existence since 1913, and the economic system of which it is a part of, is very much responsible for bring millions out of poverty. That system is free market capitalism, of which the Fed DOES NOT CENTRALLY PLAN. It'd be nice if we didn't have to go around in circle after circle about this. The Fed is not Gossplan. And if you look at the industrialized countries of the world, every single one of them has a central bank. You are clearly wrong in your opposition to a macro-economic entity which prevents markets from running wild in good times, and prevents them from utter meltdown in bad times. Your gold standard or laissez-faire dream, will never prevent assets bubbles, nor cares if one sector of the economy drags the entire system down into collapse.

Just legalize competition krypt.. Come on. Live free..lol Seriously, I know this is a somewhat extreme suggestion but I'm open to any alternatives. Anything that might make the fed more open, accountable, and less likely to inflate away value is good in my book. I admit that I don't have a perfect alternative. The gold standard failed because it was too restrictive, and the current system is way too loose. Perhaps we can find middle ground somehow. A balanced budget amendment to the Constitution would be a good start. It will keep the government from printing its way out of a mess when they can't raise enough tax revenue. They will have to make cuts in the military or other departments rather than funding their excessive spending through debt.

P.S. The FOMC announced today the fed is "injecting" another $1.25 trillion into the economy by buying long term treasuries and mortgage backed securities. Another day, another trillion in stimulus..no congressional approval needed. Woo!

i've been following this (the current economic crisis & this thread)
closely

even though i can't propose a solution to the current crisis, (no one here actually has)
i don't believe the current one that is being implemented is the right one.


Occ, much respect and everything, but even with all your data and statistics -if implemented/interpreted incorrectly- there could be the possibility that you are wrong on this one M8.

quote:

Originally posted by daydreamer there could be the possibility that you are wrong on this one M8.

You know I think that sentence holds true for pretty much everyone.

quote:

Originally posted by Capitalizt Thanks. I think inflation adjusted numbers would be more interesting though. Here's another chart for ya. Data behind the chart is here: Link Krypt and I weren't even discussing income tax rates so I'm not sure why you brought it up. We were talking about the size of government relative to GDP. The fact that rich people were taxed 80% doesn't mean much when the government was a much smaller fraction of the economy than it is today. We all know government does not produce wealth, so a government that is 40% of GDP is naturally "sucking" more wealth away from the economy than a government that is 20% of GDP. Despite the lower rates they are getting revenue somehow or else borrowing it from future generations. Just look at the link posted above. It doesn't take a genius to recognize that the current trend is not sustainable. When a parasite consumes more than half it's host, they are both very likely to die. Do I have a chart to prove growth into the 50-60% range will hurt the economy? Nope..just common sense based on everything I've seen in nature. If you want to ignore logical arguments like this because they don't have a corresponding pie chart, that's your choice. Wow..are you actually quoting panics that took place in the pre-cowboy days? I really don't think any economic data from the pre 1900s can reliably compared to modern societies...but there certainly were several panics and recessions before the fed was created. Suffice it to say they weren't nearly as damaging and widespread as the current-day crisis..but they were unpleasant for sure. The 1700-1800's were volatile times in America and I'm no expert on the events you posted..but I just did some reading on each one and noticed that in at least half the cases there was some major government action or policy change that preceded the panics/recessions. Government is not always responsible of course, but from historical observation I think we can safely deduce that federal interventions cause financial instability in markets, and that the large scale interventions as we are seeing today are likely to cause large amounts of instability in the coming years. My data is your data OC. There are no magical numbers from the Austrian school. We are interpreting the same thing here.. All I've done this entire thread is point out that the crises and panics have grown progressively worse over the years. The old panics you mentioned were immeasurably LESS damaging than what we are experiencing today. Without an all encompassing government/fed to absorb the costs and guarantee everyone happiness and wellbeing, there was pain..but it was localized (and usually short-lived) pain...not systemic as it is now. On this subject of economic contraction, I think we can both agree that most recessions/depressions happen when a cluster of errors or bad decisions happen all at once. This always has been the case. Some of your examples involved clusters of errors in the railroad industry, the banking industry, mining industry, etc. Since the advent of the fed, the boom-bust cycle has become much more intense, and the cluster of errors we had in 2007/08 was across not just one industry, but across MANY industries (manufacturing, autos, finance, real estate, etc). In any free society it is not likely that entrepreneurs across different industries will all make many stupid mistakes and miscalculations simultaneously. The magnitude of this collapse can only be explained by an external factor that was acting in some way on all of these industries..and the only entities that have this power today are the US government and federal reserve. Bad policy from those powerful bodies influences everything else. There is certainly blame to go around the individual banks, but the main fault for the current crisis can be laid at the feet of bad policies by the fed, congress, and the Bush administration.. In short, by interventionism.

Dude really ... what do we have to talk about? You have made things abundantly clear to me with:

quote:

"I say we CAN'T have a debate because the numbers are largely meaningless"

and

quote:

"So as long as the value of money is arbitrarily controlled at a central location, any chart posted or argument made about "policy x" vs "policy y" is moot."

So when I reference modern economic data you say that it's meaningless as per the above rationale. When I ask you to substitute this "tainted" data with other data from our robust history of economic data of booms and busts prior to the Federal Reserve you state that that data is unreliable. Look I'm not an idiot, I can recognize a catch-22 when I see one. Any hard statistics I reference based on ANY data from ANY time period will be dismissed in the face of broad based platitudes that are simply not mathematically cogent. It is not without some amusement that I see you continue to mix and match economic data in your arguments whilst completely disregarding the economic data that I reference in mine. However, the same reasons that make my economic references irrelevant, according to your logic, also apply to you.

Ho hum ... you win however, because I lack your tenacity to continue this banal diatribe.

quote:

So when I reference modern economic data you say that it's meaningless as per the above rationale. When I ask you to substitute this "tainted" data with other data from our robust history of economic data of booms and busts prior to the Federal Reserve you state that that data is unreliable. Look I'm not an idiot, I can recognize a catch-22 when I see one. Any hard statistics I reference based on ANY data from ANY time period will be dismissed in the face of broad based platitudes that are simply not mathematically cogent. It is not without some amusement that I see you continue to mix and match economic data in your arguments whilst completely disregarding the economic data that I reference in mine. However, the same reasons that make my economic references irrelevant, according to your logic, also apply to you. Ho hum ... you win however, because I lack your tenacity to continue this banal diatribe.

ho hum..no oc, as I mentioned your data isn't meaningless because it's the same data I see. We just draw different conclusions from it. All I've tried to do is point out that interventionist policy can destabilize things despite the best of intentions. It's often used to cover up malinvestment, which exacerbates future corrections and pushes the boom/bust cycle to an extreme. You can still argue in favor of an active government/fed for many reasons (good ones!)..but we should both be able to agree that it does lots of unintentional harm as well. *extends hand in friendship*

I love it when the government buys worthless paper.

quote:

Originally posted by mndeg I love it when the government buys worthless paper.

What's that?

quote:

Originally posted by Capitalizt ho hum..no oc, as I mentioned your data isn't meaningless because it's the same data I see. We just draw different conclusions from it. All I've tried to do is point out that interventionist policy can destabilize things despite the best of intentions. It's often used to cover up malinvestment, which exacerbates future corrections and pushes the boom/bust cycle to an extreme. You can still argue in favor of an active government/fed for many reasons (good ones!)..but we should both be able to agree that it does lots of unintentional harm as well. *extends hand in friendship*

Well I won't disagree with you in that respect. Our ideologies are very similar 99% of the time except in tail end events such as these. At any rate, while we might disagree quite vociferously on some of these issues, the occasional barbed remark made in exasperation should not be confused as disrespect. I tend to lay the sarcasm on a lot thicker in those instinces where I'm actually trying to offend someone ...

So cheers, it's all good.

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