here, i would like to point out the dishonesty that trancer-x enjoys using so much.

quote:

Originally posted by Trancer-X Before the creation of the Federal Reserve, Friedman and Schwartz noted, bank panics were typically handled by banks themselves – for example, through urban consortiums of private banks called clearinghouses. If a run on one or more banks in a city began, the clearinghouse might declare a suspension of payments, meaning that, temporarily, deposits would not be convertible into cash. Larger, stronger banks would then take the lead, first, in determining that the banks under attack were in fact fundamentally solvent, and second, in lending cash to those banks that needed to meet withdrawals. Though not an entirely satisfactory solution – the suspension of payments for several weeks was a significant hardship for the public – the system of suspension of payments usually prevented local banking panics from spreading or persisting. Large, solvent banks had an incentive to participate in curing panics because they knew that an unchecked panic might ultimately threaten their own deposits. It was in large part to improve the management of banking panics that the Federal Reserve was created in 1913. However, as Friedman and Schwartz discuss in some detail, in the early 1930s the Federal Reserve did not serve that function. The problem within the Fed was largely doctrinal: Fed officials appeared to subscribe to Treasury Secretary Andrew Mellon's infamous 'liquidationist' thesis, that weeding out "weak" banks was a harsh but necessary prerequisite to the recovery of the banking system. Moreover, most of the failing banks were small banks (as opposed to what we would now call money-center banks) and not members of the Federal Reserve System. Thus the Fed saw no particular need to try to stem the panics. At the same time, the large banks – which would have intervened before the founding of the Fed – felt that protecting their smaller brethren was no longer their responsibility. Indeed, since the large banks felt confident that the Fed would protect them if necessary, the weeding out of small competitors was a positive good, from their point of view. In short, according to Friedman and Schwartz, because of institutional changes and misguided doctrines, the banking panics of the Great Contraction were much more severe and widespread than would have normally occurred during a downturn. … Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again. - Fed Chairman "Helicopter" Ben Bernanke

its interesting that trancer decides not to quote the rest of that speech given by bernanke. and tries to make it say something its not.

what bernanke was really saying about the great depression and the role of the fed in it, was this:

quote:

he Federal Reserve no longer had an effective leader or even a well-established chain of command. Members of the Board in Washington, jealous of the traditional powers of the Federal Reserve Bank of New York, strove for greater influence; and Strong's successor, George Harrison, did not have the experience or personality to stop them. Regional banks also began to assert themselves more. Thus, power became diffused; worse, what power there was accrued to men who did not understand central banking from a national and international point of view, as Strong had. The leadership vacuum and the generally low level of central banking expertise in the Federal Reserve System was a major problem that led to excessive passivity and many poor decisions by the Fed in the years after Strong's death. --- We don't know what would have happened had Strong lived; but what we do know is that the central bank of the world's economically most important nation in 1929 was essentially leaderless and lacking in expertise. This situation led to decisions, or nondecisions, which might well not have occurred under either better leadership or a more centralized institutional structure. And associated with these decisions, we observe a massive collapse of money, prices, and output.

he also goes out of his way to talk about how the gold standard played a significant role in the great depression, both in scope and in longevity.

quote:

Friedman and Schwartz's insight was that, if monetary contraction was in fact the source of economic depression, then countries tightly constrained by the gold standard to follow the United States into deflation should have suffered relatively more severe economic downturns. Although not conducting a formal statistical analysis, Friedman and Schwartz gave a number of salient examples to show that the more tightly constrained a country was by the gold standard (and, by default, the more closely bound to follow U.S. monetary policies), the more severe were both its monetary contraction and its declines in prices and output.

quote:

Subsequent research (for example, Choudhri and Kochin, 1980) has identified other countries that, like China, did not adhere to the gold standard and hence escaped the worst of the Depression. Two examples are Spain, where the internal instability that ultimately led to the Spanish Civil War prevented the country from re-adopting the gold standard in the 1920s, and Japan, which was forced from the gold standard after being on it for only a matter of months. The Depression in Spain was quite mild, and Japan experienced a powerful recovery almost immediately after abandoning its short-lived experiment with gold.

quote:

The second category consisted of countries that had restored the gold standard in the 1920s but abandoned it early in the Depression, typically in the fall of 1931. As Friedman and Schwartz observed (p. 362), the first major country to leave the gold standard was Great Britain, which was forced off gold in September 1931. Several trading partners, among them the Scandinavian countries, followed Britain's lead almost immediately. The effect of leaving gold was to free domestic monetary policy and to stop the monetary contraction. What was the consequence of this relaxed pressure on the money stock? Friedman and Schwartz noted (p. 362) that "[t]he trough of the depression in Britain and the other countries that accompanied Britain in leaving gold was reached in the third quarter of 1932. [In contrast, i]n the countries that remained on the gold standard or, like Canada, that went only part way with Britain, the Depression dragged on."

quote:

Third were countries that remained on gold but had ample reserves or were attracting gold inflows. The key example was France (see p. 362), the leader of the Gold Bloc. After its stabilization in 1928, France attracted gold reserves well out of proportion to the size of its economy. France's gold inflows allowed it to maintain its money supply and avoid a serious downturn until 1932. However, at that point, France's liquidation of non-gold foreign exchange reserves and its banking problems began to offset the continuing gold inflows, reducing the French money stock. A serious deflation and declines in output began in France, which, as Friedman and Schwartz pointed out, did not reach its trough until April 1935, much later than Great Britain and other countries that left gold early.

quote:

They found that the countries that remained on gold suffered much more severe contractions in output and prices than the countries leaving gold. In a highly influential paper, Eichengreen and Sachs (1985) examined a number of key macro variables for ten major countries over 1929-35, finding that countries that left gold earlier also recovered earlier. Bernanke and James (1991) confirmed the findings of Eichengreen and Sachs for a broader sample of twenty-four (mostly industrialized) countries (see also Bernanke and Carey, 1996), and Campa (1990) did the same for a sample of Latin American countries. Bernanke (1995) showed that not only did adherence to the gold standard predict deeper and more extended depression, as had been noted by earlier authors, but also that the behavior of various key macro variables, such as real wages and real interest rates, differed across gold-standard and non-gold-standard countries in just the way one would expect if the driving shocks were monetary in nature. The most detailed narrative discussion of how the gold standard propagated the Depression around the world is, of course, the influential book by Eichengreen (1992). Eichengreen (2002) reviews the conclusions of his book and concludes largely that they are quite compatible with the Friedman and Schwartz approach.

so, why the selective emphasis out of a document that supports everything ive been saying? dont worry, i dont expect a response from you, because youre a coward and an intellectual fraud.

___________________

quote:

Originally posted by Capitalizt The dollar today is worth just .04 of the 1920's dollar.

irrelevant. people of today have 10,000x the amount of money they had in 1920. are you really trying to argue that your average american was economically better off in 1920?

quote:

Originally posted by Capitalizt Our purchasing power has collapsed,

again, that statistic is irrelevant on its own.

quote:

Originally posted by Capitalizt A true gold standard is the enemy of activist government. It forces governments to run tight financial ships, balance their budgets, and generally stay out of areas that don't concern them.

yes, except for one little problem: the gold standard doesn't work. but dont let that little issue get in the way.

quote:

Originally posted by Capitalizt This is reason enough to oppose the fed IMO...but let's look at the fed's noble mandate..to maintain "economic stability". Has the business cycle been eradicated by leaving the gold standard and embracing central banking? Nope.

of course not. nobody is arguing that it ever could. let's not go erecting straw men shall we?

quote:

Originally posted by Capitalizt If anything the booms and busts are far more severe today than they were in the late 1800 and early 1900s.

are you really going to compare 19th century capitalism to 21 century capitalism in this manner? in any case, youre wrong. the capitalist economies of the past were no more stable than they are today, and the single biggest economic failure in living memory was in part due to the adherence to gold.

its that simple. the gold standard doesn't work. its never worked. the system we have now isn't perfect, but it is far better and the citizens in all like countries are far better off than they were. im not sure why you keep ignoring the obvious rise in living standards and economic freedom over the last 100 years. it boggles my mind

quote:

Originally posted by Capitalizt When the cost of money is largely determined by central planning

the ultimate irony of this of course is that the gold standard represents 'central planning' far more than fiat money does the government rigidly controls the price of gold clown!

quote:

Originally posted by Capitalizt rather than market forces, you are going to see the results of imperfect knowledge on the part of the central bankers. The crisis we have today across the globe is a direct result of their imperfect knowledge and poor policy decisions.

its due to a lot of factors, not the least being the greedy and self-interested investors/lenders/consumers of your capitalist society. in your blind rhetoric you accuse the fed of keeping rates 'artificially low' when it was your commercial banks that actually did so. the fed doesn't set interest rates for commercial lending.

but you refuse to see it.

quote:

Originally posted by Capitalizt I'm sorry Pk...You can provide a million more links from authors that worship the fed and fawn over the brilliance of intervention and central banking, but I refuse to accept that such a small group of unelected people should have such a huge influence over what happens to billions of people. It's that damn stubborn capitalist in me I suppose.

yeah, but the "capitalist in you" doesn't really understand how capitalism works, why there's a necessity for central banks, the benefits of fractional reserve lending, or why archaic monetary practices were abolished.

___________________

quote:

Whether the single medium is gold, silver, seashells, cattle, or tobacco is optional, depending on the context and development of a given economy. In fact, all have been employed, at various times, as media of exchange. Even in the present century, two major commodities, gold and silver, have been used as international media of exchange, with gold becoming the predominant one. Gold, having both artistic and functional uses and being relatively scarce, has significant advantages over all other media of exchange. Since the beginning of World War I, it has been virtually the sole international standard of exchange. If all goods and services were to be paid for in gold, large payments would be difficult to execute and this would tend to limit the extent of a society's divisions of labor and specialization. Thus a logical extension of the creation of a medium of exchange is the development of a banking system and credit instruments (bank notes and deposits) which act as a substitute for, but are convertible into, gold. A free banking system based on gold is able to extend credit and thus to create bank notes (currency) and deposits, according to the production requirements of the economy. Individual owners of gold are induced, by payments of interest, to deposit their gold in a bank (against which they can draw checks). But since it is rarely the case that all depositors want to withdraw all their gold at the same time, the banker need keep only a fraction of his total deposits in gold as reserves. This enables the banker to loan out more than the amount of his gold deposits (which means that he holds claims to gold rather than gold as security of his deposits). But the amount of loans which he can afford to make is not arbitrary: he has to gauge it in relation to his reserves and to the status of his investments. When banks loan money to finance productive and profitable endeavors, the loans are paid off rapidly and bank credit continues to be generally available. But when the business ventures financed by bank credit are less profitable and slow to pay off, bankers soon find that their loans outstanding are excessive relative to their gold reserves, and they begin to curtail new lending, usually by charging higher interest rates. This tends to restrict the financing of new ventures and requires the existing borrowers to improve their profitability before they can obtain credit for further expansion. Thus, under the gold standard, a free banking system stands as the protector of an economy's stability and balanced growth. When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a world-wide division of labor and the broadest international trade. Even though the units of exchange (the dollar, the pound, the franc, etc.) differ from country to country, when all are defined in terms of gold the economies of the different countries act as one -- so long as there are no restraints on trade or on the movement of capital. Credit, interest rates, and prices tend to follow similar patterns in all countries. For example, if banks in one country extend credit too liberally, interest rates in that country will tend to fall, inducing depositors to shift their gold to higher-interest paying banks in other countries. This will immediately cause a shortage of bank reserves in the "easy money" country, inducing tighter credit standards and a return to competitively higher interest rates again. A fully free banking system and fully consistent gold standard have not as yet been achieved. But prior to World War I, the banking system in the United States (and in most of the world) was based on gold and even though governments intervened occasionally, banking was more free than controlled. Periodically, as a result of overly rapid credit expansion, banks became loaned up to the limit of their gold reserves, interest rates rose sharply, new credit was cut off, and the economy went into a sharp, but short-lived recession. (Compared with the depressions of 1920 and 1932, the pre-World War I business declines were mild indeed.) It was limited gold reserves that stopped the unbalanced expansions of business activity, before they could develop into the post-World Was I type of disaster. The readjustment periods were short and the economies quickly reestablished a sound basis to resume expansion. - Alan Greenspan, Gold and Economic Freedom, 1966 << FULL TEXT >>

quote:

Originally posted by pkcRAISTLIN again, that statistic is irrelevant on its own.

To you perhaps.

quote:

yes, except for one little problem: the gold standard doesn't work. but dont let that little issue get in the way.

Though we haven't yet had a true gold standard, I agree it will not work when we have a central bank that works against it.

quote:

the single biggest economic failure in living memory was in part due to the adherence to gold.

Wrong.. The bubble and the crash would not have occured had we been under an honest money system. The central bank expanded the money supply far beyond available gold reserves. They lowered interest rates and extended credit lines to speculators which made the huge 1920s bubble (and crash) possible. As for the depression...I already acknowledged that abandoning the gold standard helped us inflate our way out of it...but that doesn't change the fact that it would not have occurred were it not for the fed..an institution who's principles are contrary to everything gold stands for.

quote:

the system we have now isn't perfect, but it is far better and the citizens in all like countries are far better off than they were. im not sure why you keep ignoring the obvious rise in living standards and economic freedom over the last 100 years. it boggles my mind

Rise in living standards...Orly? 40 years ago nearly any job provided enough income to raise a family of four. Today, two income households are a necessity for most people to make ends meet. Inflation has greatly eroded the purchasing power of the common citizen. It has outpaced wage growth for more than a decade.. The fact that the dollar is depreciating faster than incomes are rising may not mean much to you, but to the average family it means a great deal. It means more work and less leisure time. As for economic freedom...Have you known anyone who has tried to start a business? Please ask them about that experience and get back to me. With the endless fees and red tape state, federal, and local levels, I can safely say we are far LESS free economically than we were at the turn of the century. China is absolutely raping the "liberal democracies" around the world in terms of productivity and wage growth..because they interfere far less with the private sector.

You used to be a Marxist and saw the error of your ways.. Why can you step back and recognize how far we've gone down that path? Central planning/intervention/regulation/taxation/mandates/etc.. You know that these things are bad for the health of an economy and the fed is at the heart of it all.

I don't know how the markets in Austrailia are doing but they can't be much better than America right now... This turmoil was caused by central bank stupidity.. Bernanke and Greenspan acknowledged that the fed created the boom/bust of the 20's..and it looks like they've done it again in 2008. Central banks caused this cancer to spread..and if you want to cure a disease, you've got to attack the source..rather than pumping the patient full of painkillers (bailouts) and hoping he will survive a few more years.

Ron Paul lays it down on Kudlow & Company



http://www.youtube.com/watch?v=k8hdgVA75hk

quote:

Originally posted by Capitalizt Rise in living standards...Orly? 40 years ago nearly any job provided enough income to raise a family of four. Today, two income households are a necessity for most people to make ends meet. Inflation has greatly eroded the purchasing power of the common citizen. It has outpaced wage growth for more than a decade.. The fact that the dollar is depreciating faster than incomes are rising may not mean much to you, but to the average family it means a great deal. It means more work and less leisure time. As for economic freedom...Have you known anyone who has tried to start a business? Please ask them about that experience and get back to me. With the endless fees and red tape state, federal, and local levels, I can safely say we are far LESS free economically than we were at the turn of the century. China is absolutely raping the "liberal democracies" around the world in terms of productivity and wage growth..because they interfere far less with the private sector.

If CEO pay can rise hundreds of times in just 20 years, that is an indication that companies are paying their executives more, and their workers less. This would not be due to inflation. The problem is not inflation, the problem is companies paying their workers less, and their executives more.

As for starting a business. Go to www.legalzoom.com, and start one online. It's incrediably easy. This red tape...it's not so red...China does interfere with their private sector. First off, they manipulate their currency to keep it devalued. Secondly, to get anything done, permits, zoning, etc., an entreprenuer must pull some strings with the people in power. Take them out to expensive restaurants, gifts, etc. I don't think you've even researched how business is done in China man...

quote:

You used to be a Marxist and saw the error of your ways.. Why can you step back and recognize how far we've gone down that path? Central planning/intervention/regulation/taxation/mandates/etc.. You know that these things are bad for the health of an economy and the fed is at the heart of it all.

Do you realize that the gold standard is more centrally planned than a fiat currency? At least a fiat currency is floated on the international currency exchange, whose value is decided by the FREE MARKET. What about the gold standard? Well, THE GOVERNMENT SETS THE VALUE OF GOLD. NOT THE MARKET.

___________________