Central Banking is Socialism

[MisterBeale]

It's a rather timely op-ed, I think. Particularly since so much of the recent discussion involving the market problems is so misguided.


Anyway...

Last week, the Federal Reserve responded to Wall Street’s coronavirus panic with an “emergency” interest rate cut. This emergency cut failed to revive the stock market, leading to predictions that the Fed will again cut rates later this month. More rate cuts would drive interest rates to near, or even below, zero. Lowering interest rates punishes people for saving, thus encouraging consumers and businesses to spend every penny they make. This may give the economy a short-term boost. But, it inhibits long-term economic growth by depleting the savings necessary for investments in businesses and jobs. The result of this policy will be more pressure on the Fed to indefinitely maintain low interest rates and on the Congress and president to create another explosion of government “stimulus” spending.

The essence of socialist economics is government allocation of resources either by seizing direct control of the “means of production” or by setting prices business can charge. Federal Reserve manipulation of interest rates is an attempt to set the price of money. Federal Reserve attempts to set interest rates distort the signals sent by the rates to investors and business. This results in a Fed-created boom, which is inevitably followed by a Fed-created bust.

Boston Federal Reserve President Eric Rosengren has suggested that Congress allow the Federal Reserve to add assets of private companies to the Fed’s already large balance sheet. Allowing the central bank to buy assets of, and thus assume a partial ownership interest in, private companies would give the Federal Reserve even greater influence over the economy.

Economic elites benefit when the Federal Reserve pumps new money into the economy because they have access to the money created before there are widespread price increases. Artificially low interest rates also facilitate the growth of the welfare-warfare state. The Federal Reserve’s inflationary policies harm the average American by eroding the dollar’s purchasing power. This forces consumers to rely on credit cards and other forms of debt to maintain their standard of living...

Continued - Central Banking is Socialism

We sure have plenty of money for the banks and the war machine but government helping the poor and middle class...FUCK YOU COMMIE.

CRAZY!!!

 

[EdwardBaiamonte]

It's a rather timely op-ed, I think. Particularly since so much of the recent discussion involving the market problems is so misguided.


Anyway...

Last week, the Federal Reserve responded to Wall Street’s coronavirus panic with an “emergency” interest rate cut. This emergency cut failed to revive the stock market, leading to predictions that the Fed will again cut rates later this month. More rate cuts would drive interest rates to near, or even below, zero. Lowering interest rates punishes people for saving, thus encouraging consumers and businesses to spend every penny they make. This may give the economy a short-term boost. But, it inhibits long-term economic growth by depleting the savings necessary for investments in businesses and jobs. The result of this policy will be more pressure on the Fed to indefinitely maintain low interest rates and on the Congress and president to create another explosion of government “stimulus” spending.

The essence of socialist economics is government allocation of resources either by seizing direct control of the “means of production” or by setting prices business can charge. Federal Reserve manipulation of interest rates is an attempt to set the price of money. Federal Reserve attempts to set interest rates distort the signals sent by the rates to investors and business. This results in a Fed-created boom, which is inevitably followed by a Fed-created bust.

Boston Federal Reserve President Eric Rosengren has suggested that Congress allow the Federal Reserve to add assets of private companies to the Fed’s already large balance sheet. Allowing the central bank to buy assets of, and thus assume a partial ownership interest in, private companies would give the Federal Reserve even greater influence over the economy.

Economic elites benefit when the Federal Reserve pumps new money into the economy because they have access to the money created before there are widespread price increases. Artificially low interest rates also facilitate the growth of the welfare-warfare state. The Federal Reserve’s inflationary policies harm the average American by eroding the dollar’s purchasing power. This forces consumers to rely on credit cards and other forms of debt to maintain their standard of living...

Continued - Central Banking is Socialism

We sure have plenty of money for the banks and the war machine but government helping the poor and middle class...FUCK YOU COMMIE.

CRAZY!!!

Crazy??? We have 132 federal and state programs to help the poor each one of which was so very badly needed according to the libs. And guess what is still needed? That’s right, even more programs for the poor Because it turns out welfare doesn’t work rather it makes things worse which is exactly why 120 million starved to death in the USSR and Red China.This is a lesson that a tiny child would have learned but it is beyond the grasp of adult liberals.

 

[EdwardBaiamonte]

ya, so the cost of gas is up from 1913 and so is your income. And??????????????

 

[Fort Fun Indiana]

The majority of government spending is on "helping the poor and middle class".

Which is a sure sign that we need better policy.

 

[Tom Paine 1949]

As long as there is a national currency and national armies and balance of trade issue there will necessarily be a national banking system. Historically, in earlier periods, we saw under Andrew Jackson an end to the the Bank of the U.S., whose origins went back to Hamilton and Washington. The anger at the U.S. bank was anger at British and East Coast financial elites, and also went back to Jefferson, who however learned while he was President that one was necessary (Louisiana Purchase and all that). Jackson's populist destruction of the U.S. Bank led to a corrupt and unstable private and state banking system which itself led to runs on banks in the Panic of 1837. Even before the Panic, currency/bank notes issued by different state or private banks were discounted depending on their assumed reliability, which also made exchange and internal trade unreliable. A modern Central Bank system can be public or a combination of public and private like the Fed, but each has problems associated with it.

 

[EdwardBaiamonte]

As long as there is a national currency and national armies and balance of trade issue there will necessarily be a national banking system. Historically, in earlier periods, we saw under Andrew Jackson an end to the the Bank of the U.S., whose origins went back to Hamilton and Washington. The anger at the U.S. bank was anger at British and East Coast financial elites, and also went back to Jefferson, who however learned while he was President that one was necessary (Louisiana Purchase and all that). Jackson's populist destruction of the U.S. Bank led to a corrupt and unstable private and state banking system which itself led to runs on banks in the Panic of 1837. Even before the Panic, currency/bank notes issued by different state or private banks were discounted depending on their assumed reliability, which also made exchange and internal trade unreliable. A modern Central Bank system can be public or a combination of public and private like the Fed, but each has problems associated with it.

There are no problems with either system if the management objective is to encourage capitalism to the greatest extent possible given liberal problems caused by other parts of the government or by chance events like the Corona Virus.

 

[Tom Paine 1949]

In my opinion, there are problems with both systems -- "if the management objective is to encourage capitalism to the greatest extent possible."

The "greatest extent possible" is not in the best interests of humanity. The "greatest extent possible" is, under modern conditions, a capitalist oligarchy controlling society, government, both major parties in the U.S., and of course the Fed.

I am not opposed to "free markets" or "entrepreneurial capitalism" or small or even giant international corporate enterprises. They all play important roles. But the reality of modern international corporations and Wall Street finance is that wealth concentrates at the top, and only an enlightened and powerful democratic movement can correct this. Call it "a political revolution" or radical social democratic reform, or whatever.

To end capitalist corruption, the capture of our political institutions by big money interests, requires more than demagogy a la Trump. He is also a prisoner of the system, a creature from the darkest recesses of the Swamp. The reason capitalists themselves generally like a semi-private and independent Fed, rather than a direct national bank, is to prevent politicians from abusing the system. Nobody wants Trump's picture on our currency or the national mint to be run by the "Trump Treasury." But the Fed and Wall Street finance are already a highly developed and highly corrupt system strengthening oligarchy. Our politicians in both parties have proven impotent and unwilling to do anything about this. Only Elizabeth Warren and Bernie Sanders have raised policy proposals aimed at changing this American reality.

 

[Andylusion]

If destroyed will you give me yours given that destroyed things are usually worthless???

Heh heh. No. I don't even know you. And, really, you're starting to get annoying.

You said our currency has been destroyed by the Fed. Do you get annoyed when you learn you were wrong???

DO YOU?



How much value has the US dollar lost since 1913?

1913 is when the Federal Reserve, which is actually a privately-owned central bank, took over the US banking system. As you can see, it's been pretty much downhill since the Fed took over. In fact, the dollar has lost over 96% of its value. That means today's dollar would be worth less than 4 cents back in 1913.

~S~

This is true. However, this ignores some simple facts. Namely that even during the gold standard, there was in fact inflation.

There are a number of resources that validate this data.

The Gold Standard and the Myth of Price Stability

This should do.

While over the longer term, there is some indication that inflation remained lower during the gold standard, that's only the average inflation over periods of time.

In the short run, the markets and the currency, where very unstable, with wide fluctuations.

Now the point is, inflation is going to happen, whether we have a commodity backed currency or not.

Additionally, one of the problems that led to us moving off the gold standard, was the fact that we had already printed more dollars, than there was gold.

People seem to have this rather strange concept that if we have a gold standard, that this means the government will only print enough dollar bills, to fit how much commodity they have.

But this is assumes that politicians are going to abide by the rules of monetary policy. But if politicians were going to follow the rules of monetary policy, then why not follow the rules of the existing system?

In other words, if we can't trust them to follow good policy as it exists today, then why would we assume having new policies like a gold standard, would magically make the politicians follow those polices?

And lastly, having a gold standard, places us in a position for other countries to destroy our economy externally.

Gold Standard - Econlib

Most other countries on the gold standard—notably France and Belgium—did not follow the rules of the game. They never allowed interest rates to rise enough to decrease the domestic price level. Also, many countries frequently broke the rules by “sterilization”—shielding the domestic money supply from external disequilibrium by buying or selling domestic securities. If, for example, France’s central bank wished to prevent an inflow of gold from increasing the nation’s money supply, it would sell securities for gold, thus reducing the amount of gold circulating.
​

Now at first, you may not grasp the implication of this historical fact from post World War 1.

Under the gold standard, countries would exchange with each other. That exchange would result in gold being shifted around.

So France buys something from the US, and the US can use those bills to either buy something from France, or exchange it for gold.

The US buys something from France, and the French can use those bills to buy something from the US, or exchange it for gold.

Now as each country gets gold from the other countries, they would usually then issue more bills or currency, for the value of the gold they received.

There was just one problem. Countries like France, were choosing to not issue bills for the gold they got. So gold was flowing into France, but because there was no currency issued for that gold, the gold was not flowing out of France.
Countries like the US, were finding over time that their stock of gold was dwindling.

One difference is that France was not intending to destroy the economy of countries around them. They simply wanted to get a pile of gold to shore of up their government after WW1.

Now imagine the same situation today. China has trillions of dollars worth of T-bills. If we introduced a gold-backed currency, China could very easily sell off those T-Bills, and use the currency to exchange for gold.

In a matter of a months, they could easily drain all the gold out of our government, and leave our economy in ruins.

Status Report of U.S. Government Gold Reserve - Current Report

If this is accurate, we only have $388 Billion in gold. The US government has $23 Trillion in debt. That gold would be gone in a matter of hours even, if we instituted a gold based system.

 

[Andylusion]

The majority of government spending is on "helping the poor and middle class".

Which is a sure sign that we need better policy.

Which I would agree. The problem is, most of the people I hear offering what we should, only demand more of the same bad policies that got us where we are.

 

[EdwardBaiamonte]

In other words, if we can't trust them to follow good policy as it exists today, then why would we assume having new policies like a gold standard, would magically make the politicians follow those polices?

I agree with you generally but there might be 100 different gold standards that we could adopt.The libertarians around here don't realize it. But I think that libertarians here are unknowingly parroting the sentiments of those who support the purest gold standard of all which would leave the govt out altogether. Private banks would print money in relationship to the gold they had creating competition between banks based on how sound their paper money actually was and what interest they paid based on the number and quality of the loans they made. The total quantity growth of money would mostly be tied to new discoveries of gold needed to maintain constant prices as GDP rose.

 

[EdwardBaiamonte]

. The "greatest extent possible" is, under modern conditions, a capitalist oligarchy controlling society, government, both major parties in the U.S., and of course the Fed.

Pure insanity and ignorance since what you describe is not capitalism. Do you understand?

 

[EdwardBaiamonte]

. But the reality of modern international corporations and Wall Street finance is that wealth concentrates at the top, and only an enlightened and powerful democratic movement can correct this. Call it "a political revolution" or radical social democratic reform, or whatever.

More insanity and pure liberal ignorance of course. Its a free country. If people don't like Gates Jobs Brin Bezos Musk etc getting so rich they are free to stop buying their great products! You want to buy their products and then have govt steal the money back for you. Suppose they tried to get their stuff back without returning your money??

Moreover, wealth does not concentrate at the top. Much of the world's poor live at $1000/year while our poor live on $70,000 a year when you count all the welfare freebies.

 

[EdwardBaiamonte]

Only Elizabeth Warren and Bernie Sanders have raised policy proposals aimed at changing this American reality.

Socialism just killed 150 million innocent souls. Is that the policy proposal you like???

 

[EdwardBaiamonte]

To end capitalist corruption, the capture of our political institutions by big money interests,.

what??? what institution?????? What money interests???????? Afraid to tell us???

 

[EdwardBaiamonte]

Which I would agree. The problem is, most of the people I hear offering what we should, only demand more of the same bad policies that got us where we are.

Very true!! Liberals and socialists have gotten their way for 100 years and because their liberal state has failed they want more of it rather than less of it. This is how Stalin and Mao killed 150 million and never blamed themselves.

 

[EdwardBaiamonte]

To end capitalist corruption,

Capitalism is pure and by its nature not corrupt, but rather based on free and voluntary economic interactions which preclude corruption. It is liberal government that is obviously corrupt:

"There are two distinct classes of men - those who pay taxes and those who receive and live upon taxes."
Thomas Paine

"We still find the greedy hand of government thrusting itself into every corner and crevice of industry, and grasping at the spoil of the multitude. Invention is continually exercised to furnish new pretenses for revenue and taxation. It watches prosperity as its prey and permits none to escape without a tribute." Thomas Paine

 

[Tom Paine 1949]

Edward Baiamonte wrote:
Capitalism is pure and by its nature not corrupt, but rather based on free and voluntary economic interactions which preclude corruption. It is liberal government that is obviously corrupt: "There are two distinct classes of men - those who pay taxes and those who receive and live upon taxes." --Thomas Paine

This thread is about Central Banking and not taxation. You are off topic. I'm not interested in debating your meandering arguments on many different questions. I can see you are an ideologue ("Capitalism is pure") and not interested in a serious discussion with me.

Just a word on Thomas Paine, who you quote out of context apparently because I have chosen him for my avatar. Paine was not only a revolutionary who at the time of writing "The Rights of Man" and your quote was (in 1792) in Revolutionary France, and accused of treason in England, but he was also polemicizing against the famous Conservative Edmund Burke, and in your quote directly addressed the mercantilist and aristocratic taxation policies of late 18th century England. Paine was probably the first well-known advocate of using public taxes to create an elementary welfare state and money grant to every citizen. He was not at all against taxes per se, as this quote from the same text indicates:

"But how will ... the clamour that has been raised against it [the "Rights of Man"] be surprized to find, that ... it abounds with principles of government that are uncontrovertible—with arguments which every reader will feel, are unanswerable—with plans for the increase of commerce and manufactures—for the extinction of war—for the education of the children of the poor—for the comfortable support of the aged and decayed persons of both sexes ... in short, for the promotion of every thing that can benefit the moral, civil, and political condition of Man.

"Why, then, some calm observer will ask, why is the work prosecuted, if these be the goodly matters it contains? I will tell thee, friend; it contains also a plan for the reduction of Taxes, for lessening the immense expences of Government, for abolishing sinecure Places and Pensions; and it proposes applying the redundant taxes, that shall be saved by these reforms, to the purposes mentioned in the former paragraph, instead of applying them to the support of idle and profligate [aristocratic] Placemen and Pensioners."

 

[EdwardBaiamonte]

This thread is about Central Banking and not taxation."

so what should we do with central banking??? Afraid to say?

 

[Tom Paine 1949]

As I said earlier, Edward, I am sorry but I am not interested in discussing these questions with you. Your response to my earlier carefully worded and thought out comment -- that it was "pure insanity and ignorance" -- and your other comments as well show me such a discussion could not possibly be productive. Even your question implies this is a simple issue, which it most definitely is not.

 

[Fort Fun Indiana]

The problem is, most of the people I hear offering what we should, only demand more of the same bad policies that got us where we are.

Hmm, no, can't agree with that. In fact, I think you just made that up because it sounded nice to you.