Discussion in 'Economy' started by Kevin_Kennedy, Dec 23, 2008.
Banking Demystified by Doug French
Okay, now I know this guy get's HALF of the problem. He's a goldbug.
To fault the FED is unquestionably correct. Our Fed is out of control, on that he and I quite agree.
But o imagine that the solution to our economic woes is to back all money with gold is a tragic mistake that many people (usually people who have gold, I might add) make.
HOW, I ask do they imagine that will help?
By preventing out government from printing too much money?
What would prevent out government from electing to revalue money whenever it needed to have more money in the system?
Oh, I see... these gold bugs think that we would ALSO BY LAW pin the dollar's value to a specifc amount of gold, right?
Let's assume they could actually control the treasury and government and do that.
Then what happens?
A continuous DEFLATIONARY cycle. As more goods and services are created, adding to the world's aggregate wealth, the value of those goods and services HAS TO decline in prices in order for them to be EQUAL to the amount of gold in the world.
There is no escaping that fact IF we play the gold standard game.
Is continuous DEFLATION preferable to the problems we are facing right now?
I rather doubt it.
We are already bearly coping with the DEFLATION caused by the paper losses we are experiencing with the decline in real estate values and now the mostly PAPER losses to the perceieved wealth that came with the crash of the stock market.
How will further DEFLATING the money supply fix that problem?
A slow steady deflation in prices due to increased productivity and a stable currency would be a godsend. Oh no, house prices becoming...affordable? What will we ever do?
Editec, ask yourself these questions:
* Since Nixon took us off gold in 1971, has the average wage increased or decresed?
* American industry has been moving overseas since 1971, is this a coincidence?
* Did new credit created (measured by M3 or M2 or MZM) go up sharply after 1971?
* When prices go up, are wages the first or last price to go up?
* Do the rich benefit from inflation?
The answer is obvious. To be fair, you don't really need gold; you need a monetary unit that slowly expands at a molasses pace, say 1% per year. Put money under the control of a laptop computer on autopilot, as Milton Friedman said. To bad no one ever took his advice.
We seen substantial deflation in energy prices and no one is complaining. Not only that, food prices, especially those highly dependent on shipping costs have gone down substantially. That's been a GOOD thing. Housing prices falling to levels they should have never departed from, however, seems to be regarded as a "bad" thing. Nothing could be further from the truth. If you used you hyper-inflated home value to consume things, tough, time to pay the fiddler for your stupidity, but homes costing what they SHOULD cost is a GOOD thing for the country.
Like so much BS, there was nothing substantive about banking but rather the bogeyman of all wingnut conservative libertarians. You would think after S&L or Enron etc. a brain cell would click on, but no, the blinders only see in one direction.
Added thought, did we not have the great depression, a similar occurrence to today, when gold was king?
Yes, but the Federal Reserve existed. Was it not already admitted by many that the Fed caused the Great Depression?
Fractional Reserve Lending is the problem. Gold standard or not.
Increased. I'll show you charts if you want.
Yes, but it has all across the industrialized world and has nothing to do with the gold standard.
Yes, especially this decade.
Few people benefit from inflation. However, the rich are best prepared to deal with it.
Friedman was correct, but he meant over a cycle. The growth rate in the money supply should rise by the real rate of growth in the economy. Anything higher produces inflation, either consumer price inflation or asset price inflation.
So all that purchasing on margin had nothing to do with it, then?
On that point you and I are on the same page.
Let me turn the page and see if you can follow my line of reasoning, shall I, Paul?
BANKING is the problem.
The fact that you or I cannot borrow money directly from the FED is the problem.
The fact that your or I do not get FIRST USE of new money is the ongoing classist crime which feeds this problem.
The FED, as structured is an enormous swindle because private banks get first shot at the new money.
Banking as currently structured is endentured slavery using economic doubletalk to justify it.
I am a better credit risk than Citibank.
You probably are, too.
Of course it did. How that somehow mitigates the Fed's overall role, I'm not sure. Is it not the Fed who enables it all to begin with, by controlling our credit?
Yes, we can definitely agree on some of that. I don't condone the Fed at all, however. I don't want to borrow a single dollar from them. Our problem is not that the Fed doesn't lend to us little people. The problem is that it EXISTS.
Without a central bank dictating credit, those little banks would be much more beneficial to us, as we as the market established our own rates of interest.
If through supply and demand, we decided that for a time, credit would be expensive, and some banks went under because of it, too bad so sad. That's the market.
There is not a single bank on EARTH that is somehow NECESSARY to our nation's survival, much less prosperity.
Do you even realize the power we could have over these banks if we actually used common sense, and a little intelligence as a society in regards to our own individual monetary policies? These banks are only as powerful and manipulative as we LET them be through our own apathy and lack of education.
Separate names with a comma.