a question

[antagon]

[
You have summarized basic deflation and why it is difficult to impossible to correct with QE.

But that supports my original distrust of the ways in which currency value is allegedly set. Because it demonstrates that powerful market forces can undermine efforts to deflate currencies, which calls into question the ability of the fed to undermine the value of the dollar no matter how much money they distribute via QE.

Can you suggest a real formulaic approach in which the fed could introduce money into the economy and achieve direct destruction of dollar value within the limitations of our present system?

nope. you're right, getting the money supply to a target, or rates, or relative buck valuations is difficult and expensive. the more artificial (or stimulative), the more out of synch these each will be, i'd guess. full-floating currency markets can absorb a lot of pressure without budging. it is like tug of war with a rubber-band rope.

And what about deficit spending? Deficit spending is another way to inject money directly into circulation, targeted quite specifically.

that's merely monetary liquidation. fiscally, the issuer could decide to subsidize corn-chip makers with billions in purchasing power. the chipmakers will inflate the price of corn in turn by upsetting the ratio of willing cash to dearer and dearer corn. this is a crude example in a narrow market, but it shows how deficit spending introduces liquidity without the central bank's involvement, and in a way which might still effect inflation -- certainly on the street.

this is where i'm at with policy. i think there's a need or benefit in having the fed's monetary policy, too, especially since so much of that money comes back as treasuries purchases by reserve banks, particularly in asia, but fiscal policy makes the economy hum and can have more direct effect with clear deadlines.

antagonian protectionism entails broad subsidy of $2-3 dollars/hour on hourly wages up to a cap, for example. this will empower job market demand, and in turn labor market demand, which would allow policy-level austerity to entitlements and a transition of the largess to productivity support rather than subsistence... but that's fiscal recourse. the fed's on their own with that other shit. i dont have any better idea than you do, there.

 

[Toro]

You're becoming a Keynesian Paulie!

 

[Paulie]

You're becoming a Keynesian Paulie!

haha. Nah.

I'm just playing devil's advocate.

In reality I'm more concerned about the potential future inflation than I am about the current deflation.

 

[loosecannon]

Great! elaboration later

 

[william the wie]

One caveat. Mandelbrot and Talib have been arguing forever that:

That the distribution and probabilities models used in economics may have a 99% correlation with reality but that the 1% non-correlation will blow up your account quite nicely and in less than 4 years if you get piggy.

I don't see this issue being addressed.

 

[loosecannon]

one caveat. Mandelbrot and talib have been arguing forever that:

That the distribution and probabilities models used in economics may have a 99% correlation with reality but that the 1% non-correlation will blow up your account quite nicely and in less than 4 years if you get piggy.

I don't see this issue being addressed.

gmta!

 

[loosecannon]

antagonian protectionism entails broad subsidy of $2-3 dollars/hour on hourly wages up to a cap, for example. this will empower job market demand, and in turn labor market demand, which would allow policy-level austerity to entitlements and a transition of the largess to productivity support rather than subsistence... but that's fiscal recourse.

This is a genuinely brilliant idea. It really would have staved off unemployment and moreso the downscaling of American businesses. Furthermore we are probably already paying 2-3$ for each unemployed worker in the form of unemployment bennies and food stamps.

We could have cancelled the stimulus and otherwise spent the exact same money keeping near full employment and keeping RE defaults relatively low.

We would have saved $787 billion plus realized greater revenue, and the states would be far better off.

But we had to save the banks! That's really all that matters!

 

[loosecannon]

I don't know of cuurencies ever being valued based on reserves. Reserves instead can be used to influence supply and demand.

This can't be true Toro

The overwhelming number of examples in history feature currencies being backed by gold(A), and therefore worth more than currencies backed by silver(B) or currencies backed by the US Dollar (C).

In all of those cases those currencies did indeed derive their value from their reserves. Money always does unless it is unreserved fiat, self reserved fiat or debt based fiat.

 

[loosecannon]

The Fed could lend directly to individuals maybe?

GMTA

Obviously that would have to be regulated accordingly, though.

Lender of last resort to consumers.

I'm an opponent of the Fed anyway, so this is hard for me to try and ponder. But I'd have to think hard about the caveats on direct Fed lending to consumers.

We aren't gonna kill the Fed, no matter how much we want to. And we were more likely to do it 30 months ago than today. The recession has convinced almost everybody in the USA that the Fed, by saving the banks and ignoring the real economy, saved us from econ Armageddon.

So what else can we do? It might be a lot easier to nationalize the fed and scrub most of our debt in the process.

In fact almost half of all of our economic challenges are rooted in the FED, so turn the Fed into our bitch!

 

[loosecannon]

that's merely monetary liquidation. fiscally, the issuer could decide to subsidize corn-chip makers with billions in purchasing power. the chipmakers will inflate the price of corn in turn by upsetting the ratio of willing cash to dearer and dearer corn. this is a crude example in a narrow market, but it shows how deficit spending introduces liquidity without the central bank's involvement, and in a way which might still effect inflation -- certainly on the street.

actually it does involve the central bank by creating debt. That is a giant downside. But it does target money directly into circulation at the state and street level. But so far it has been shitty inefficient compared to your idea about subsidizing wages at 2-3$ hour.

But how can you only subsidize new jobs when what you most want is to avoid layoffs? And how can you prevent people from gaming the system to reduce existing labor costs? What if WalMart wanted to save $2-3/employee hour too? You don't think they could manage a firing-rehiring scheme that lept any hoops erected to select out fraud?

 

[william the wie]

I don't know of cuurencies ever being valued based on reserves. Reserves instead can be used to influence supply and demand.

This can't be true Toro

The overwhelming number of examples in history feature currencies being backed by gold(A), and therefore worth more than currencies backed by silver(B) or currencies backed by the US Dollar (C).

In all of those cases those currencies did indeed derive their value from their reserves. Money always does unless it is unreserved fiat, self reserved fiat or debt based fiat.

That doesn't make Toro wrong about today's currency markets in the short run. All sorts of financial forms of hamburger helper have been with us forever. Traditionally people have trusted pm coins and jewelry but banknotes and bank drafts have always been treated as possible funny money.

For that matter pm coin debasement has been fairly common too. Henry I or II castrated and chopped off the right hand of all British exchequer gold smiths for passing funny money in their lending operations. Elizabeth I's treasurer was Thomas Gresham of Gresham's law fame, had to recall the various debased issues in order to get good coins into circulation. So I have to agree with Toro even though I think hard money and no central bank is the best system and he doesn't.

 

[loosecannon]

I don't know of cuurencies ever being valued based on reserves. Reserves instead can be used to influence supply and demand.

This can't be true Toro

The overwhelming number of examples in history feature currencies being backed by gold(A), and therefore worth more than currencies backed by silver(B) or currencies backed by the US Dollar (C).

In all of those cases those currencies did indeed derive their value from their reserves. Money always does unless it is unreserved fiat, self reserved fiat or debt based fiat.

That doesn't make Toro wrong about today's currency markets in the short run. All sorts of financial forms of hamburger helper have been with us forever. Traditionally people have trusted pm coins and jewelry but banknotes and bank drafts have always been treated as possible funny money.

For that matter pm coin debasement has been fairly common too. Henry I or II castrated and chopped off the right hand of all British exchequer gold smiths for passing funny money in their lending operations. Elizabeth I's treasurer was Thomas Gresham of Gresham's law fame, had to recall the various debased issues in order to get good coins into circulation. So I have to agree with Toro even though I think hard money and no central bank is the best system and he doesn't.

OK, but none of that is what Toro said.

He said:

I don't know of cuurencies ever being valued based on reserves. Reserves instead can be used to influence supply and demand.

Then he edited that to include that reserves were maybe one of many factors influencing value.

I am not trying to rag on Toro. I am looking for better explanations of how currency values are established. Because there are many examples today that seem wildly contradictory.

 

[loosecannon]

On a side note, why is the Fed buying 10 year bonds if they intend to debase the dollar?

It seems as if what they are really trying to do is help the Federal government roll over it's debt into longer term instruments.

 

[RadiomanATL]

An answer:

42.

 

[loosecannon]

I was hoping the answer was F(n+2)-F(n+1)-F(n)=0\

 

[william the wie]

Changing the maturity profile of the national debt changes the stability of the dollar.

 

[loosecannon]

Changing the maturity profile of the national debt changes the stability of the dollar.

But it strengthens the dollar instead of debasing it.

 

[william the wie]

Changing the maturity profile of the national debt changes the stability of the dollar.

But it strengthens the dollar instead of debasing it.

The Fed has panicked?

 

[antagon]

antagonian protectionism entails broad subsidy of $2-3 dollars/hour on hourly wages up to a cap, for example. this will empower job market demand, and in turn labor market demand, which would allow policy-level austerity to entitlements and a transition of the largess to productivity support rather than subsistence... but that's fiscal recourse.

This is a genuinely brilliant idea. It really would have staved off unemployment and moreso the downscaling of American businesses. Furthermore we are probably already paying 2-3$ for each unemployed worker in the form of unemployment bennies and food stamps.

We could have cancelled the stimulus and otherwise spent the exact same money keeping near full employment and keeping RE defaults relatively low.

We would have saved $787 billion plus realized greater revenue, and the states would be far better off.

But we had to save the banks! That's really all that matters!

i would have left the banks up to the fed entirely. for the most part, the fed's intercession did more to assist banking than did any part of the TARP. it was bigger for starters.

the antagon system is a complete package and i'd propose it as a policy rather than a stimulus. financing would come by way of the increase in job market demand by cutting back on entitlements with a cap there. i'd charge $ for citizenship and visas for those looking to participate in the hot job market (~$5k), then capture the demand by tying the subsidy to legally employed workers. i'd limit the subsidy to hourly workers coercing a better ratio of management to productive employees, while likely stimulating hiring of non-hourly employees, notwithstanding. i would freeze the prevailing wage and minimum wage for over a decade to suppress inflation in labor costs with the aim of pushing the demand into growth rather than into higher labor rates. i would redress union laws to make them more likely to compete with one another for (shorter) contracts, and with the job market at large. their legal protections would have to be corroded pursuant to the theme of getting more people to work rather than creating a worker elite.

this is the best solution i can think of. it walks away from capitalism's dependency on many progressive entitlements, particularly for able-bodied 16-65s, but not without recognizing their value in specific cases, and while maintaining a mechanism to recycle cash through the sweet spot in the economy.

 

[antagon]

that's merely monetary liquidation. fiscally, the issuer could decide to subsidize corn-chip makers with billions in purchasing power. the chipmakers will inflate the price of corn in turn by upsetting the ratio of willing cash to dearer and dearer corn. this is a crude example in a narrow market, but it shows how deficit spending introduces liquidity without the central bank's involvement, and in a way which might still effect inflation -- certainly on the street.

actually it does involve the central bank by creating debt. That is a giant downside. But it does target money directly into circulation at the state and street level. But so far it has been shitty inefficient compared to your idea about subsidizing wages at 2-3$ hour.

But how can you only subsidize new jobs when what you most want is to avoid layoffs? And how can you prevent people from gaming the system to reduce existing labor costs? What if WalMart wanted to save $2-3/employee hour too? You don't think they could manage a firing-rehiring scheme that lept any hoops erected to select out fraud?

not just for new jobs, nor merely a stimulus.

if because of the immense cost, i had to narrow the eligibility, it would be sector or industry specific, rather than new jobs only. in such a scenario, i'd likely leave retail to their own devices and target manufacture. if wally wants to get in, they can move some of their xiang zhu action to st. louis. this is why the policy ought to promise some permanence via which companies can consider changing their business plans.

edit: how is it necessary for the fed to be directly involved? doesn't the treasury create treasuries, and cant they/dont they auction them themselves?