[luke warm]

so do you think monetary policy is better handled by the fed? some do, i know, but some also think the economy would be better served by abolishing the fed

[Al_U_Card]

The Fed has had a "free rein" to run the economy and the financial sector (by design if not by control) since 1913. Greenspan, Rubin and Sommers were the latest "gang" to apply their brand of laisser-faire to the market with predictable result. Geithner was a junior in that crowd and has his hand on the pulse of the nation's purse (it becomes a sac when he squeezes....)

They know all about bubbles and regulation and M1 etc. and they are a private corporation, they do have shareholders (the dozen or so private global financial institutions that sit on the board) notwithstanding the couple of US government visitors.

Still hard not to understand how Dr. Paul's (and Jackson's and Lincoln's and Kennedy's) idea that printing money without interest must be better than having someone else do it at interest is not sensible.

Having the Fed or it's replacement as a part of the government (RESPONSIBLE to the people) for financial functioning of the economy seems to be a minimum requirement, at least.

[blackshoe]

Currency is, in effect, a government IOU — or at least, it used to be. Once upon a time, a dollar bill (or a twenty, fifty or hundred dollar bill) said basically "the US government promises to pay the bearer of this note X amount of gold (or silver) on demand". Bills no longer say that. They just say they're "Federal Reserve Notes". So back in the day, Bills were explicit IOUs, redeemable in precious metals. Now they're IOUs, redeemable in... what? Promises? More IOUs? How is that an improvement?

[hrothgar]

blackshoe, on Nov 25 2009, 08:42 PM, said:

So back in the day, Bills were explicit IOUs, redeemable in precious metals. Now they're IOUs, redeemable in... what? Promises? More IOUs? How is that an improvement?

Gold and silver prices fluctate dramatically.
Why would one want to peg one's money supply to some random metal?

There have been any number of incidences where economies were wreaked by external changes in the price of gold / silver (or in the ratio of gold to silver). The impact of New World gold reserves on the Spanish, Portugese, and Ottoman economies is particularly well documented.

It's also worth noting that the gold standard collapsed for a reason:
Governments and bankers reached the conclussion that it is fundamentally broken.

[blackshoe]

All very well, but that doesn't answer my question.

[Al_U_Card]

Apart from the value of your work, the one thing that we all need and that has more than an intrinsic value is.....land.

Buy a lot and then watch it increase in value as

you improve it
the surroundings improve
the demand for that particular location increases
etc.

Land based economies (there are a few of them) tend to thrive and they can print money to fill the need of media of exchange. The land-owners get taxed for the "real" value of their property and everyone works to accrue value (without the need for income taxes), which is eventually translated into land prices.


http://www.youtube.c...h?v=fZ0zLERW9B0

[phil_20686]

Al_U_Card, on Nov 25 2009, 12:07 PM, said:

Still hard not to understand how Dr. Paul's (and Jackson's and Lincoln's and Kennedy's) idea that printing money without interest must be better than having someone else do it at interest is not sensible.

Because someone has to pay the people who actually print the money. And regulating a currency is actually a great deal of effort. If the goverment takes back the Fed they will have to start paying for all the Feds employees. One would imagine that this represents pretty much exactly the cost of the interest.

[phil_20686]

Al_U_Card, on Nov 25 2009, 02:04 PM, said:

Apart from the value of your work, the one thing that we all need and that has more than an intrinsic value is.....land.

Buy a lot and then watch it increase in value as

you improve it
the surroundings improve
the demand for that particular location increases
etc.

Land based economies (there are a few of them) tend to thrive and they can print money to fill the need of media of exchange. The land-owners get taxed for the "real" value of their property and everyone works to accrue value (without the need for income taxes), which is eventually translated into land prices.


http://www.youtube.c...h?v=fZ0zLERW9B0

Land based economies are frought with practical difficulty. In particular how do you value land that doesnt change hands? This is particularly true in teh case of large estates, where the land price of nearby smaller dwellings will be far higher that the land price of the whole estate, due partly to the limited number of buyers, and partly to the fact that they are generally not suitable for development due to planning restrictions (at least in britian).

If there is a property boom in a given location the taxes will go up. If you are working the same job in teh same house and your tax bill doubles, you will be justifiably upset. Moreover if your price has high volatitlty, and is surveyd only once per 7 years or so, then you could end up stuck with a house with an unjustifiably high price, and this will depress its value so you could equally be unable to sell it. Basically, land based economies are highly impractical for a developed state.

[Al_U_Card]

phil_20686, on Nov 25 2009, 02:21 PM, said:

Al_U_Card, on Nov 25 2009, 12:07 PM, said:

Still hard not to understand how Dr. Paul's (and Jackson's and Lincoln's and Kennedy's) idea that printing money without interest must be better than having someone else do it at interest is not sensible.

Because someone has to pay the people who actually print the money. And regulating a currency is actually a great deal of effort. If the goverment takes back the Fed they will have to start paying for all the Feds employees. One would imagine that this represents pretty much exactly the cost of the interest.

RICHARD! Fact-check on aisle 0 please.

[phil_20686]

hrothgar, on Nov 25 2009, 12:53 PM, said:

blackshoe, on Nov 25 2009, 08:42 PM, said:

So back in the day, Bills were explicit IOUs, redeemable in precious metals. Now they're IOUs, redeemable in... what? Promises? More IOUs? How is that an improvement?

Gold and silver prices fluctate dramatically.
Why would one want to peg one's money supply to some random metal?

There have been any number of incidences where economies were wreaked by external changes in the price of gold / silver (or in the ratio of gold to silver). The impact of New World gold reserves on the Spanish, Portugese, and Ottoman economies is particularly well documented.

It's also worth noting that the gold standard collapsed for a reason:
Governments and bankers reached the conclussion that it is fundamentally broken.

Basically money is like any other tradeable commodity, and so its value fluctuates. We decide how much something is worth by deciding how much we are prepared to pay for it

[phil_20686]

Al_U_Card, on Nov 25 2009, 02:31 PM, said:

phil_20686, on Nov 25 2009, 02:21 PM, said:

Al_U_Card, on Nov 25 2009, 12:07 PM, said:

Still hard not to understand how Dr. Paul's (and Jackson's and Lincoln's and Kennedy's) idea that printing money without interest must be better than having someone else do it at interest is not sensible.

Because someone has to pay the people who actually print the money. And regulating a currency is actually a great deal of effort. If the goverment takes back the Fed they will have to start paying for all the Feds employees. One would imagine that this represents pretty much exactly the cost of the interest.

RICHARD! Fact-check on aisle 0 please.

wikipedia says that the fed generates revenue independently. Ie revceives no funding from the governemnt

[mike777]

luke warm, on Nov 25 2009, 06:00 AM, said:

mike777, on Nov 24 2009, 11:27 PM, said:

Let me try this:


If the government can spend money smarter than Free Capital Markets, then that sounds like a good thing?


If the government spends money on more productive innovation than Free capital markets is that a good thing?


If Free capital markets or people like you just save the money and do not invest it in productive stuff, that is a bad thing.

Another part of the argument may be that having a smaller gdp may be a good thing,not   bad thing. It may be a good thing to shave 1% per year compounded over 50 years from a country's growth.


This is not the total argument but a large degree of it.

well i'm not an economist, so in your opinion would more jobs be created by increasing taxes and gov't spending or by cutting corporate and small business taxes to zero?

I dont know if the government can create jobs or merely redistributes them.


I have read economists on both sides of this issue.


I am not and never have been a deficit hawk. I do understand many smart people are worried about the deficit. At this point my guess is that it is the lesser of two evils...


I am a big, create jobs guy. If we dont know how to create jobs, I am all for throwing everything against the wall and hoping something works.




I dont know if the government is smarter at allocating capital, I have read economists on both sides of this issue.


As for the Fed, imo, the basic thing the Fed should do is control the amount of money in circulation and do so as an independent agency.


I believe that the central government does a lousy job at creating innovation but it should fund basic research and create property laws that encourage innovation.


I believe jobs are created out of innovation private ind, taking risk. Of course jobs are also destroyed by innovation and by taking risk.


Of course Jimmy, I am the guy who posts about the coming Singularity in 2050 so...

[Winstonm]

Quote

They just say they're "Federal Reserve Notes". So back in the day, Bills were explicit IOUs, redeemable in precious metals. Now they're IOUs, redeemable in... what? Promises? More IOUs? How is that an improvement?

The Federal Reserve note is actually backed by debt. The act of monetization by the Fed is an action of purchasing treasury debt with created dollars.

This allows a currency to expand as necessary to meet demand. You can imagine a limited gold supply with a huge surge in demand such as an industrial revolution - there is simply not enough money in supply to fund the expansion and interest rates soar, further contracting expansion.

Gold-backed currency is not the end-all answer to monetary problems.

[Al_U_Card]

But if the government provided the same money, not as debt but as credit, this would provide an inflationary impetus but could be controlled by interest rates on loans to consumers and business.

But wait, the bankers would not make money on the interest differential between the treasury and the fed.....next they would want to stop speculation (gambling) on various metrics of the financial system and we can<t have that, it would empower too many regular people and impoverish the financial sector.

[hrothgar]

helene_t, on Nov 25 2009, 01:56 PM, said:

hrothgar, on Nov 25 2009, 12:54 AM, said:

I do think that algorithmic trading programs make the stock market more efficient by arbitraging out mistakes in prices.

Interesting. Doesn't that just mean that for a given trade volume, computer-assisted trading is more efficient than old-fashioned trading?

There was this Nobel price winner who suggested putting a tax on currency transactions in order to stabilize currency markets.

My impression was that this is a controversial issue. What the effect of transaction taxes will be on the stability of the markets remains to be seen.

Krugman has an article supporting this idea in this morning's times

http://www.nytimes.com/2009/11/27/opinion/...tml?ref=opinion