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Ron Paul: Something Big Is Going On (pg. 3)
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| Capitalizt |
holy ****, damn you pk...I don't have time to answer 15 questions. I'm going to try to do it just once, and I'm sure you're not gonna like my answers and probably pwn me on a few points. Don't take offense when I don't respond cuz it takes too long for me to write these responses and I'm just getting too old for this sh!t. gg :wtf:
| quote: | Originally posted by pkcRAISTLIN
oh come now, let's be serious shall we? cyclical economic conditions is part and parcel of capitalism. could you tell me how fiat money contributed to the 'bust', the Great Depression? ;)
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Fiat money led to the false boom..a HUGELY false boom. Not only were there low interest rates, but margin requirements by banks were insanely low. Back then, you could actually put up $1 in real assets and buy $50.00 worth of stock. This was only possible under a fractional reserve system, where banks were permitted to create credit (money) out of thin air with no backing whatsoever. Naturally with such easy money available, prices were bid into the stratosphere..much higher than the fundamentals justified, and when prices dropped and margin calls were made, there was no "real" money behind all of the stock purchases so the prices crashed...It was fiat money...money created and lent by banks on a whim, just as the fed creates it today.
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Technically speaking, there is no such thing as "artificially low" rates. rates are rates are rates.
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There actually can be artificially low rates. You were correct earlier in pointing out that inflation is going to exist regardless of a central bank or not...but in a free market, the rate of interest will always find a natural equilibrium with the rate of inflation...providing a positive (if small) return for savers. When the fed is involved in setting rates, we've had periods (today included) where the real interest rate charged by banks is NEGATIVE...which means below the rate of inflation. So if you have money earning 3% with inflation running at 4%, you are losing purchasing power in that account. Through a policy of low rates, the fed is discouraging saving and encouraging risk taking, spending, and speculation...the things that lead to those false "boom" periods.
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i dont know enough about this to comment, but i do know that the australian federal reserve is managed quite well, and i dont see why the US would be any different.
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Well I don't know much about you Aussies, but I'm sure your system is better than ours. I admire the British system actually. Their fed has a single mandate...to control inflation. In the US however our fed has a dual mandate. It is supposed to control inflation AND promote economic growth. The second part is where we get into a real mess... It is under constant pressure from politicians to keep the economy booming...to keep pumping new money into the system so the economy can grow grow grow. This sort of thing IS NOT HEALTHY! Every market needs to correct and weed out the excesses once in a while...but our federal reserve is required BY LAW to keep the economy growing...to do whatever it takes..bail out struggling companies, devalue the currency as much as possible to keep people spending rather than saving, etc.
| quote: | you wont find corporate banks offering lower rates than the fed, but they are more than free to have them higher if they wish. indeed, virtually all of australia's banks have a higher interest rate than the one set by the reserve bank.
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Yes all banks charge more than they pay to make a profit of course..but the amount they charged is based on the amount the fed charges them. They are competing for customers, and since they only have one source of credit (the fed), they all tend to charge close to what the fed charges them.
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again i want to ask how inflation is kept under control without a central bank? |
I told you I don't have an ideal solution, but here is one idea (you're not gonna like it;)): http://www.fee.org/publications/the...le.asp?aid=1605
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fact: corporate banks are predators and they will be shafting people for money with or without the fed. there will always be those that do not understand the consequences of their actions, especially when complicated economics are concerned.
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Yes some corporate banks can have shady practices..but these banks are going to be competing in a marketplace with dozens of other banks. Those who earn a reputation for dishonest business practices won't be around very long. It is in the interest of every business to satisfy as many people as possible...to make consumers HAPPY. This is the true beauty of the free market. Making people happy is the only way to succeed in the long run. No company will survive long if it continually aims to "shaft" people.
| quote: | | and why do you think the fed made it impossible for the banks to act and raise their own rates in the face of economic danger? |
The fed didn't make it impossible, and the banks DID raise rates eventually, but it was too late. The damage from easy money policies had already been done. I mentioned earlier these banks created millions of dollars out of thin air (only possible under the fractional reserve system). People used margin to buy huge amounts of stock with this newly created money and drove prices up. Once banks realized there was a problem and started raising rates on the loans, the market had already taken a downturn and people couldn't pay up..which led to a cascade of margin calls and the crash of 29'. The banks were partly responsible (for making foolish loans), but those loans were only made possible because the money they created was backed by nothing.
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haha, that's simply not true. you seem to possess a rather idyllic impression of capitalism, capitalists and the invisible hand. capitalism is a system of stratification that rewards and encourages self interest. there will always be problems like this occuring in a free market, or supposedly in your case- a 'freer' market. its called market failure. |
Yes, some people will fail in the free market. We are human and everyone makes mistakes, so it is inevitable. The problem comes when an organization like the fed tries to PREVENT market failures...They try to prevent poorly managed companies from failing, or to prevent individuals from suffering the consequences of poor decisions. This may be "compassionate" but it is not healthy at all. In a market correction, the damage is very painful but it is also short and sweet. It doesn't get smoothed over, prolonged or delayed...the way our crisis is being handled by the fed.
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they are hardly secret meetings. they get together, discuss the economic health of the country/world, sometimes decide to alter interest rates. what else do i, john citizen, need to know? they are subject to oversight by congress, if you dont trust congress to keep an eye on things then that's a whole other problem.
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Come on buddy, you know John Q Public doesn't have a clue what the federal reserve does. They still think those little paper rectangles in their pocket are backed by gold. They remain woefully ignorant of the inflation tax they are paying every year. As much as I hate to call for a new government program, I think learning about the federal reserve and how their money is created and valued should be mandatory for every high school student. Once people realize paper currency has no intrinsic value and is subject to the whims of politicians, they will start seeking alternatives.
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could you explain to me how the fed is 'bailing out' companies? i am unaware that they're giving away free money ;) ugh, the point being that the person's paycheck every month/year etc is also increasing. indeed, part of inflation is generated by higher wages.
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Google "Bear Stearns" for a start. ;) And yes, paychecks are also increasing but for the past 10 years they have been growing at less than the official rate of inflation. Last I heard, median family incomes in America were up around 2.5% annually for the past 10 years while inflation has been running 3-4%. So even if you believe the official government inflation stats, people are losing ground. Inflation is a big invisible tax on everyone, which makes it the worst kind of tax in my book. |
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| pkcRAISTLIN |
| quote: | Originally posted by robstar
Not in Zimbabwe, |
what i meant was that the activities of a mad dictator and the inevitable fallout isn't the same thing as examining the western democracies and their currencies and/or central banks.
| quote: | Originally posted by robstar
I was skimming tru your response I saw this
Maybe there's two different schools on this or you made a mistake?
I always thought higher wages was the result of inflation, not the other way around. |
it works both ways. inflation can bring demands from workers for wage increases to at least keep pace with CPI, but paying workers more and giving them larger disposable income can then lead to further inflation. there's a delicate balance.
edit: and thanks for the long reply capitalist. i am far too offa to make sense of it now, but i promise i will get to it, cheers. |
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| atbell |
| quote: | Originally posted by Capitalizt
You don't like the gold standard. We get it. And we know you aren't a U.S. citizen, so you don't care much about the dollar..but the fact is Ron Paul's comments are DEAD ON BALLS ACCURATE in regards to entitlement spending, the welfare state, and dollar devaluation. We have been printing dollars like mad the past few decades and exporting our inflation to the rest of the world. We've been able to do that because we had the "reserve currency" of the world. Today however their are stronger alternatives and the US is not the only powerhouse. Other countries are becoming reluctant to hold our rapidly declining dollars, so they are dumping them on the open market which is exacerbating the problem of inflation. Our federal reserve which is supposed to be controlling inflation is instead sitting on it's ass doing absolutely NOTHING to protect the purchasing power of the dollar. They are doing quite the opposite in fact...leaving interest rates at record lows and pumping billions of newly created paper into the system every week.
You may call this being "flexible", but I call it a massive corporate bailout. The fed is protecting irresponsible corporations that made bad loans and bad decisions. Rather than letting the free market work so these failed companies can be bought out and reorganized, the feds interve. They inflate the money supply and provide cheap credit to prop up failed enterprises. Ron Paul is right about this; Low rates and easy money benefit VERY FEW (those who get to use it first), and ends up hurting the many...those of us who must live with the higher prices. Workers and retirees are punished severely by inflation. And Americans aren't the only ones...Remember that oil is priced in dollars, and because the dollar has crashed, prices have soared on the world market. You can blame capitalism all you want. The fact is that capitalism has NOT BEEN ALLOWED to work in these areas. There is no free market when it comes to interest rates, energy, healthcare, etc. The government has an iron hand over these sectors of the economy, and that is the root of most of our problems today. |
+2
Pretty much right on from my stand point. Thanks for saving me time.
I also admire Ron but he isn't a sound economic thinker.
The fact that he just calls for chaos and disaster is a down point. He's got to spell it out more to gain credibility. A run on the dollar is what he's talking about. It has happened to countries before, in the Asian and Latin financial crises late last century, and it could well happen to the US$.
Then there is the termoil of conflict arising out of economic depression. How easy will it be for a populous person to point to China as the root of all evil? China sold our dollars, China stole our jobs, China hates the environment, China opresses people, China occupies Tibet, China ... China China. A conveneient scape goat for a population who has lived beyond thier means for decades is a way that wars start, big ones. |
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| atbell |
"Just as wars have been the only form of large-scale loan expenditure which statesmen have thought justifiable, so gold-mining is the only pretext for digging holes in the ground which has recommended itself to bankers as sound finance;" -J. M. Keynes, The General Theory of Employment, Interest, and Money.
What's gold worth?
It has very few uses that aren't ornamental.
With or without gold backing money is the same thing, it only has worth because people have faith that it will retain worth. If the faith disapears so does the value of the currency, be it cigaretts in a POW camp, tulips in 16th Century Holland, gold in Rome, or paper money in the US. |
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| jerZ07002 |
| quote: | Originally posted by Capitalizt
It was fiat money...money created and lent by banks on a whim, just as the fed creates it today. |
that's not fiat money, that's called the multiplier effect. fiat money only deals with printed currency and the faith consumers have in the government's backing of the currency.
| quote: | Originally posted by Capitalizt
There actually can be artificially low rates. You were correct earlier in pointing out that inflation is going to exist regardless of a central bank or not...but in a free market, the rate of interest will always find a natural equilibrium with the rate of inflation...providing a positive (if small) return for savers. When the fed is involved in setting rates, we've had periods (today included) where the real interest rate charged by banks is NEGATIVE...which means below the rate of inflation. So if you have money earning 3% with inflation running at 4%, you are losing purchasing power in that account. Through a policy of low rates, the fed is discouraging saving and encouraging risk taking, spending, and speculation...the things that lead to those false "boom" periods. |
that's not artificially low rates; rather, it's poor investment choices by consumers. If consumers didn't park their money in low interest bank accounts the banks would be forced to increase rates regardless of overnight or federal funds rates targeted by the fed.
| quote: | Originally posted by Capitalizt
Yes all banks charge more than they pay to make a profit of course..but the amount they charged is based on the amount the fed charges them. They are competing for customers, and since they only have one source of credit (the fed), they all tend to charge close to what the fed charges them. |
fundamentally incorrect. first, banks have many sources of credit: commercial papers, deposits (which is their main source), bonds, loans between banks, and the last resort is the fed. The amount banks charge is only marginally based on what the fed charges (because the fed is the lender of last resort). The target federal funds rate is actually not the rate charged by the fed for money lent by the fed, instead, it is the rate banks charge each other on short term loans. To set their rates banks use as a base their average cost of capital. Then they add the spread to make a profit.
| quote: | Originally posted by Capitalizt
The fed didn't make it impossible, and the banks DID raise rates eventually, but it was too late. The damage from easy money policies had already been done. I mentioned earlier these banks created millions of dollars out of thin air (only possible under the fractional reserve system). People used margin to buy huge amounts of stock with this newly created money and drove prices up. Once banks realized there was a problem and started raising rates on the loans, the market had already taken a downturn and people couldn't pay up..which led to a cascade of margin calls and the crash of 29'. The banks were partly responsible (for making foolish loans), but those loans were only made possible because the money they created was backed by nothing. |
if there was no federal reserve system banks could do the same thing. the only thing preventing banks from creating extra money supply is the reserve system's reserve requirement. without a reserve requirement, banks could lend 100% of the money they have on deposit. - which would be far more dangerous than our current situation.
| quote: | Originally posted by Capitalizt
Come on buddy, you know John Q Public doesn't have a clue what the federal reserve does. They still think those little paper rectangles in their pocket are backed by gold. They remain woefully ignorant of the inflation tax they are paying every year. As much as I hate to call for a new government program, I think learning about the federal reserve and how their money is created and valued should be mandatory for every high school student. Once people realize paper currency has no intrinsic value and is subject to the whims of politicians, they will start seeking alternatives. |
and what effects the price of gold? short supply and the whims of consumer desire - gold has almost no industrial value.
| quote: | Originally posted by Capitalizt
Google "Bear Stearns" for a start. ;) And yes, paychecks are also increasing but for the past 10 years they have been growing at less than the official rate of inflation. Last I heard, median family incomes in America were up around 2.5% annually for the past 10 years while inflation has been running 3-4%. So even if you believe the official government inflation stats, people are losing ground. Inflation is a big invisible tax on everyone, which makes it the worst kind of tax in my book. |
inflation is actually more in the 2-3% range for the past 10 years. |
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| mndeg |
China is actually more advanced than us in terms of finding an alternative to the gasoline powered car.
http://www.wired.com/wired/archive/...hina&topic_set=
I think a lot of Americans have the idea that China is some kind of ghetto 3rd world country where the police will shoot you on the spot if you did something to piss them off. There are already many cities that are much bigger than New York. |
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| jerZ07002 |
| quote: | Originally posted by mndeg
China is actually more advanced than us in terms of finding an alternative to the gasoline powered car.
http://www.wired.com/wired/archive/...hina&topic_set=
I think a lot of Americans have the idea that China is some kind of ghetto 3rd world country where the police will shoot you on the spot if you did something to piss them off. There are already many cities that are much bigger than New York. |
did you actually read the article? i would hardly say that china is more advanced. what china has is the lack of impediments (i.e., oil infrastructure) in creating an alternative energy infrastructure. All the major US and Japanese auto companies have already produced hydrogen cars. the huge impediment is the private oil sector. without the infrastructure to supply hydrogen and other alt energies (which is being resisted by the big oil companies) the technology will be very slow to produce cheaply. To reduce the costs of production, the technology actually needs to be purchased so the researchers can refine the process with the income earned from sales. The distribution of these vehicles does not occur because we don't have the infrastructure, and that infrastructure is being blocked by big oil. It is really up to the states to make it happen. the federal government doesn't really have the power to put the necessary infrastructure in place. |
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| robstar |
| quote: | Originally posted by jerZ07002
the federal government doesn't really have the power to put the necessary infrastructure in place. |
They certainly have the power to kill it/slow it down tho. :(
Citing Need for Assessments, U.S. Freezes Solar Energy Projects
| quote: | | Faced with a surge in the number of proposed solar power plants, the federal government has placed a moratorium on new solar projects on public land until it studies their environmental impact, which is expected to take about two years. |
Slooooooooooow... |
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| jerZ07002 |
fortunately the US government doesn't own all the land in the country. that's unfortunate though. the US government is surely failing miserably on this front. |
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| pkcRAISTLIN |
| quote: | Originally posted by atbell
The fact that he just calls for chaos and disaster is a down point. He's got to spell it out more to gain credibility. A run on the dollar is what he's talking about. It has happened to countries before, in the Asian and Latin financial crises late last century, and it could well happen to the US$. |
that's the other thing i don't get from ron paul.
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Commitment to the gold standard left countries vulnerable to "runs" on their currencies--Mexico in January of 1995 writ very, very large. Such a run, and even the fear that there might be a future run, boosted unemployment and amplified business cycles during the gold standard era. |
http://www.j-bradford-delong.net/Po...ldstandard.html |
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| Hedron |
| quote: | | could you tell me how fiat money contributed to the 'bust', the Great Depression? |
Well, picture the economy as a giant pizza pie. The slices are dollars. The pie is x trillion slices. (I really don't know how many dollars actually exist.) The Fed stuff x trillion dollars into the statically sized economy yet your salary remains the same amount. This is how inflation happens, as your salary becomes a smaller slice (while remaining the same numerical value) of the economy the prices appear to rise(as prices inflate with the size of the economy). In order to offset the inflation the economy has to grow in size. This why all the TV talking heads are so obsessed with growing the economy as if it's God himself.
I don't believe talking about the gold standard is really correct. Using gold to buy other commodities is the barter system. Conjuring money out of thin air is usurious to say the least. I think most people who don't like the fed don't really articulate the real reason they like it. That being that with a commodity based system, you have to actually produce useful things. In other words, you have to WORK!
When you have a situation where people are jumping onto the money train that is the federal reserve and therefor just sitting on money that's literally extorting money from others, via usury, and they themselves(bankers) not producing anything, sooner or later your economy is going to go bust.
I think I explained it well enough. If you need more insight I suggest you take it from the source:
"Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again." -Bernanke
http://www.federalreserve.gov/BOARD...108/default.htm |
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| pkcRAISTLIN |
| quote: | Originally posted by Hedron
Well, picture the economy as a giant pizza pie. The slices are dollars. The pie is x trillion slices. (I really don't know how many dollars actually exist.) The Fed stuff x trillion dollars into the statically sized economy yet your salary remains the same amount. This is how inflation happens, as your salary becomes a smaller slice (while remaining the same numerical value) of the economy the prices appear to rise(as prices inflate with the size of the economy). In order to offset the inflation the economy has to grow in size. This why all the TV talking heads are so obsessed with growing the economy as if it's God himself.
I don't believe talking about the gold standard is really correct. Using gold to buy other commodities is the barter system. Conjuring money out of thin air is usurious to say the least. I think most people who don't like the fed don't really articulate the real reason they like it. That being that with a commodity based system, you have to actually produce useful things. In other words, you have to WORK!
When you have a situation where people are jumping onto the money train that is the federal reserve and therefor just sitting on money that's literally extorting money from others, via usury, and they themselves(bankers) not producing anything, sooner or later your economy is going to go bust.
I think I explained it well enough. If you need more insight I suggest you take it from the source:
"Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again." -Bernanke
http://www.federalreserve.gov/BOARD...108/default.htm |
and how did they manage to achieve this under the gold standard? |
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