Bush appoints Bernake Chairmen of the Federal Reserve [Archive]

FishHooks

10-24-2005, 07:01 PM

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Why did you think Greenspan's predecessor sucked?

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He had too many dramatic corrections to the fed fund rate. Examples. Early 70's extreme low intrest rates which helped fuel the hyperinflation in the late 70's. Then to counter the hyperinflation they raised the fed fund way too high and then helped fuel the recession of 1982. In a nutshell thats why

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This does seem to be a good choice, although I wont be happy until we get a Chairman that advocate a return to the gold standard. /images/graemlins/smile.gif

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I hope your not serious, our the graph of our economy would turn into a picture of the rocky mountains, with extreme fluctuations up and down.

adios

10-24-2005, 07:37 PM

Paul Volker was Greenspan's predecessor and he was the pioneer Fed chairman more or less of the "New Keynesian" school of thought regarding monetary policy which targeted growth in the money supply to make a long story short. Volker vowed to "break the back" of runaway inflation which he more or less did which ushered in the period of disinflation which we've had for the last 25 years or so.

vulturesrow

10-24-2005, 07:44 PM

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He had too many dramatic corrections to the fed fund rate. Examples. Early 70's extreme low intrest rates which helped fuel the hyperinflation in the late 70's. Then to counter the hyperinflation they raised the fed fund way too high and then helped fuel the recession of 1982. In a nutshell thats why

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First off, Volcker didnt become Chairman of the Federal Reserve until 1979, so he had little to do with the stagflation of the 70s. His "excessive" correction to the monetary market is widely regarded by most economists as having been a necessary and proper step. Seriously, very few people in the know will denigrate Volcker. Please dont take this to mean that I consider myself to be "in the know", but rather that I have seen very little criticism of him.

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I hope your not serious, our the graph of our economy would turn into a picture of the rocky mountains, with extreme fluctuations up and down.

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Im quite serious. It doesnt need to be gold per se, but some sort of fixed standard would be nice. The new Fed Chairman supports an inflation target for monetary policy, which is a semi-acceptable substitute. By the way, back in his rebellious youth, Greenspan advocated for a return to the gold standard. You can find his missive online, just google it.

FishHooks

10-24-2005, 08:40 PM

The fed's main goal is to control inflation by means of monitary policy, so to say the new chairman would do that is nothing new.

Also my bad about some of my misinformation earlier... but raising rates to around 14% was way too durastic. Especially since evey economist knows the economy has a lag, which mean thats it takes a while for things to take an affect.

FishHooks

10-24-2005, 08:47 PM

[ QUOTE ]
Paul Volker was Greenspan's predecessor and he was the pioneer Fed chairman more or less of the "New Keynesian" school of thought regarding monetary policy which targeted growth in the money supply to make a long story short. Volker vowed to "break the back" of runaway inflation which he more or less did which ushered in the period of disinflation which we've had for the last 25 years or so.

[/ QUOTE ] I'm not familiar with "New Keynesian" economics, if fact never heard that term used. But i definatly dont agree with the principle of John Keynes, and how gov't spending should be the thing to fuel economic growth.

We haven't had disinflation for 25 years, if that was the case we would be in a state of deflation. The target inflation rate changes constantly as well.

10-24-2005, 09:46 PM

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Why did you think Greenspan's predecessor sucked?

This does seem to be a good choice, although I wont be happy until the Federal Reserve is abolished /images/graemlins/smile.gif

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I fenerally hate FYP's, but whateve.r

lehighguy

10-24-2005, 09:48 PM

No relation to government spending.

Anyway, the 1982 recession was instigated on purpose to break the back of inflation. The tag team with Reagen's tax cuts helped soften the blow. We have seen lowering rates and inflation for 23 years as a result. This has been one of the main catalysts for the almost unhindered economic growth of the last two decades.

Volcker was immensely successful at achieving his goals.

10-24-2005, 09:51 PM

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By the way, back in his rebellious youth, Greenspan advocated for a return to the gold standard. You can find his missive online, just google it.

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Here it is. (http://www.321gold.com/fed/greenspan/1966.html) Anyone interested in monetary police should definitely read this.

tylerdurden

10-24-2005, 10:02 PM

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This does seem to be a good choice, although I wont be happy until we get a Chairman that advocate a return to the gold standard. /images/graemlins/smile.gif

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Agreed. Or even better, a total free market in money.

tylerdurden

10-24-2005, 10:06 PM

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The fed's main goal is to control inflation by means of monitary policy, so to say the new chairman would do that is nothing new.

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This is like saying "our goal is to control highway crashes by using government 18-wheelers to nudge old ladies (or other potentially bad drivers) off the road."

Eliminating inflation is easy. Stop fractional-reserve central banking and move to a 100% gold currency.

FishHooks

10-24-2005, 10:22 PM

That doesn't eliminate or even control inflation at all....there would be huge fluctuations in prices. Actually the Fed's main goal is to control inflation, weather you think so or not.

vulturesrow

10-24-2005, 11:12 PM

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The fed's main goal is to control inflation by means of monitary policy, so to say the new chairman would do that is nothing new.

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No offense meant, but you seem to be a little over your head here. Monetary policy can be effected in many different forms, a price rule being one particular way.

FishHooks

10-24-2005, 11:43 PM

Monitary policy is a broad term, of course there are many things you can do with/and can affect monitary policy. Do you even know how the fed works/normally controlls the interest rate?

vulturesrow

10-24-2005, 11:45 PM

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Monitary policy is a broad term, of course there are many things you can do with/and can affect monitary policy. Do you even know how the fed works/normally controlls the interest rate?

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Well I have a vague idea being that I got my degree in economics. Do you even know how to spell monetary?

FishHooks

10-24-2005, 11:51 PM

It wasn't a yes or no question, explain your statement...

vulturesrow

10-24-2005, 11:59 PM

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Do you even know how the fed works/normally controlls the interest rate?

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It wasn't a yes or no question, explain your statement...

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Huh? Seems like a yes or no question to me. In case you didnt understand my answer, here it is one more time: Yes, I know how the "fed works normally/controlls [sic] interest rates". Is that clearer?

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explain your statement...

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What statement? Have you been drinking tonight?

FishHooks

10-25-2005, 12:20 AM

Your answer was "Well I have a vague idea being that I got my degree in economics." Now I'm asking you to explain your thought on how the fed works, stop trying to aviod the question.

vulturesrow

10-25-2005, 12:24 AM

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Your answer was "Well I have a vague idea being that I got my degree in economics." Now I'm asking you to explain your thought on how the fed works, stop trying to aviod the question.

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That was called sarcasm. AGain, the answer to your question is "Yes". Would you like to move on or are you just going to get stuck in this stupidity loop? I have no idea what you want me to explain.

FishHooks

10-25-2005, 12:27 AM

Fine why dont I rephrase my question in which a responce will dictate if you do or dont know what your talking about. How does the Fed work in regards to interest rates, give some examples. Fair enough or are you now going to say ....i dont have to answer that. For someone with a degree in economics I'm sure you would be willing to answer a simple question.

vulturesrow

10-25-2005, 12:36 AM

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Fine why dont I rephrase my question in which a responce will dictate if you do or dont know what your talking about. How does the Fed work in regards to interest rates, give some examples. Fair enough or are you now going to say ....i dont have to answer that. For someone with a degree in economics I'm sure you would be willing to answer a simple question.

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Your question is nonsensical and I am certainly not obligated to anwer a question like "How does the Fed work" , esp since it proves nothing about what I know or dont know, given that I could google the answer in about 10 seconds. Why dont you just admit you had no idea what I was talking about when I said Bernake favors an inflation targeting approach to monetary policy?

FishHooks

10-25-2005, 12:44 AM

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Why dont you just admit you had no idea what I was talking about when I said Bernake favors an inflation targeting approach to monetary policy?

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This is the goal of the Fed, like i said before this is nothing new. Inflation is the Fed's main concern/goal. However apparently you can't even explain what the fed does, where did you get your economics degree at...northeastern southwestner southern illions or some random college.

vulturesrow

10-25-2005, 01:03 AM

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Why dont you just admit you had no idea what I was talking about when I said Bernake favors an inflation targeting approach to monetary policy?

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This is the goal of the Fed, like i said before this is nothing new. Inflation is the Fed's main concern/goal. However apparently you can't even explain what the fed does, where did you get your economics degree at...northeastern southwestner southern illions or some random college.

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Im pretty sure you have been drinking. Perhaps you honestly misunderstood me. Yes, price stability is a goal of the Fed, along with a few others. Bernake is an advocate of targeting a certain rate of inflation and using that goal as a framework for its open market operations. I realize that your Econ 101 class didnt go into much detail on this so I dont blame you. Bernanke wrote an entire book on this this topic titled Inflation Targeting : Lessons from the International Experience (http://www.amazon.com/exec/obidos/tg/detail/-/0691086893/qid=1130216354/sr=1-3/ref=sr_1_3/104-7937734-5764728?v=glance&s=books) on this very topic. But I guess Bernanke doesnt understand the purpose or operation of the Fed either.

FishHooks

10-25-2005, 01:45 AM

Maybe i should start a tally of how many questions you are avoiding, this is a reminder of why I dont post in this forum much anymore.

AngryCola

10-25-2005, 06:35 AM

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Maybe i should start a tally of how many questions you are avoiding

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I think this is a great idea.

Make sure to include a description of each avoided question.

tylerdurden

10-25-2005, 08:40 AM

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That doesn't eliminate or even control inflation at all....there would be huge fluctuations in prices. Actually the Fed's main goal is to control inflation, weather you think so or not.

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Are we talking about inflation or price fluctuations? They are not the same thing.

The Fed "controls the money supply" - this is a politically correct term for "counterfeiting". By adding money to the economy, they devalue the existing currency. The government (who gets to spend the money first) gains at the expense of everyone else, who's money value drops. THAT is inflation. Now that the dollar isn't even fractionally backed by gold, there is no limit to the Fed's ability to inflate.

vulturesrow

10-25-2005, 09:21 AM

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Maybe i should start a tally of how many questions you are avoiding,

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Please do. It should a real and meaningful influence on what I decide to post.

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this is a reminder of why I dont post in this forum much anymore.

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Why, because you dont like being called out when you are wrong?

I am going to make this is as simple as I can, because I think you just misunderstood what I was talking about in regard to Bernanke, perhaps I wasnt clear enough. There are different targets you can use with regards to monetary policy. You can use monetary aggregrates (basically the monetarist view popularized by Milton Friedman, which is essentially what Volcker did) or you can maintain a ratio of dollars to some commodity, e.g., gold, as just a couple examples. . Bernanke favors using the movement of some price index as the target of monetary policy, that is to keep inflation at some predetermined level. This is a policy that many central banks adhere to, the US does not. Under Greenspan, we had a de facto price rule, but it wasnt quite the same as the things Bernanke is advocating. I cant really make this any simpler. If you are still confused, there is plenty of info on the Web on Bernanke, including several short pieces he has written. Google "A Crash Course for Central Bankers".

FishHooks

10-25-2005, 10:21 AM

First of all for sake of this argument I was assuming wages are sticky, since that is just another variable we would have to discuss in the equation, so I was implying that price fluctuations are inflation, but in more complex terms they are obviously not. The fed not only contributes to inflation, but also contributes to deflation so it balances out, but it is true the target rate is something like a 3% inflation, however this changes over time.

Now when you say the fed controls the money supply your almost implying that it just throws money into the market which isn't necessarly the case, it does this in the form of lending it to banks, who in turn loan the money to other people. They can also buy up the money supply just as easly too to stop inflation.

"The government who gets to spend the money first" this is a bad statement, the government doesn't just spend its budget january 1st to avoid inflation...they spend their money thoughout the year...

Why would you want the money backed by gold or any other commodity? this would create huge price fluctuations as seen in the 19th century, most of these fluctuations are in the short run, and wages do tend to be sticky. If prices go down, companies wont pay their people less, however if prices rise then are companies supposed to pay people more, knowing full well that they wont be able to lower the wages if prices go down. Reason being, unions, unhappiness and the cost of turnover with job training make this statement mainly correct.

FishHooks

10-25-2005, 10:23 AM

Who said I was confused, I get what your saying and have been...my questions are still unanswered.

vulturesrow

10-25-2005, 10:28 AM

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Who said I was confused, I get what your saying and have been...my questions are still unanswered.

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You have written nothing that demonstrates that you understand my point. And as for these questions, I thought you were going to tally them up for us?

10-25-2005, 01:59 PM

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Who said I was confused, I get what your saying and have been...my questions are still unanswered.

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Dude, what are you talking about? VR hasn't said anything that's incorrect, and your "questions" seem, at this point, to be incoherent. Please start over and tell us what your questions and/or points are rather than engaging in this petty sniping.

FishHooks

10-25-2005, 02:03 PM

Why dont you just reread the posts, and stop engaging in your "sniping".

tylerdurden

10-25-2005, 03:48 PM

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The fed not only contributes to inflation, but also contributes to deflation so it balances out, but it is true the target rate is something like a 3% inflation, however this changes over time.

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If the target rate is not 0, it doesn't "balance out."

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Now when you say the fed controls the money supply your almost implying that it just throws money into the market which isn't necessarly the case, it does this in the form of lending it to banks, who in turn loan the money to other people.

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This is wealth redistribution. Those who spend the money first gain at the expense of those who get the money later, since as the "new" (i.e. counterfeit) money circulates, the power of an individual unit of money drops.

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"The government who gets to spend the money first" this is a bad statement, the government doesn't just spend its budget january 1st to avoid inflation...they spend their money thoughout the year...

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I think this point went over your head. When new money is counterfeited, the counterfeiter gains the most. Let's say that a communnity is using a free market currency, and each unit of currency has 1.00 power. Now a counterfeiter fabricates a ton of new money. When he first spends those new counterfeit units, each one will have 1.00 power. As the new counterfeit units enter circulation, the power of each unit (both real and counterfeit) will drop, eventually reaching 1.00-X. If you have a stash of money, even if you don't participate in any transactions with counterfeit money, your stash drops in value. Wealth has been transferred from holders of real money to the counterfeiters. The first people to do business with the counterfeiters also receive some benefit (assuming they re-spend the counterfeit money quickly, before the dilution effects reach equilibrium), though not as much as the original counterfeiters.

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Why would you want the money backed by gold or any other commodity?

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I'm actually advocating a free market in money. In an unhindered market, a standard currency will emerge. It's most likely that the emerging winner will be gold (given past history). Hard currency limits (but does not eliminate) the ability of government (or other criminals) to counterfeit.

When you use the term "backed by gold" I want to be even more clear - currency must be backed *100%*. Fractional backing is no different than outright counterfeiting.

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this would create huge price fluctuations as seen in the 19th century,

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Why? How does a free market currency *cause* price fluctuations?

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most of these fluctuations are in the short run, and wages do tend to be sticky. If prices go down, companies wont pay their people less, however if prices rise then are companies supposed to pay people more, knowing full well that they wont be able to lower the wages if prices go down.

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What's tying the value of a particular product to the value of labor? You're saying if milk gets cheaper my labor becomes less valuable?

Historically, in a pure gold standard scenario, prices drop over time. Wages remain roughly constant. This is a result of an increase in the standard of living.

tylerdurden

10-25-2005, 03:54 PM

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Dude, what are you talking about? VR hasn't said anything that's incorrect, and your "questions" seem, at this point, to be incoherent. Please start over and tell us what your questions and/or points are rather than engaging in this petty sniping.

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I have to agree with both Elliot Richardsn and VR. Nobody understands what the [censored] you're saying except you.

Il_Mostro

10-25-2005, 04:09 PM

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I have to agree with both Elliot Richardsn and VR. Nobody understands what the [censored] you're saying except you.

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It's always nice to find yourself agreeing with someone whom you usually disagree with.

And in this thread I find myself agreeing with you, pvn. Maybe not on the free-market money-thingy, but I'm not all sure.

sam h

10-25-2005, 04:14 PM

[ QUOTE ]
I'm actually advocating a free market in money. In an unhindered market, a standard currency will emerge. It's most likely that the emerging winner will be gold (given past history). Hard currency limits (but does not eliminate) the ability of government (or other criminals) to counterfeit.

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Please give me some historical examples from the capitalist era where the conditions you describe produced a standard currency (not sanctioned and upheld by government) that served effectively as the medium of exchange for a national economy.

Then please explain to me how such a currency would be integrated into the contemporary financial system.

lehighguy

10-25-2005, 06:26 PM

The fixed income analysts I've talked to think he is a solid choice. Markets are ok wiht him too.

vulturesrow

10-25-2005, 06:50 PM

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The fixed income analysts I've talked to think he is a solid choice. Markets are ok wiht him too.

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Markets like him, wide acceptance by most economists, very solid background in monetary policy..all in all a pretty good choice

tylerdurden

10-25-2005, 10:05 PM

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Please give me some historical examples from the capitalist era where the conditions you describe produced a standard currency (not sanctioned and upheld by government) that served effectively as the medium of exchange for a national economy.

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13th-Century northern Italy is full of examples. Some city-states (Genoa, e.g.) even had so little intervention that multiple metals circulated simultaneously (bimetallism is often described as "unstable" but that's only the case when government tries to enforce a fixed ratio of value between different metals).

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Then please explain to me how such a currency would be integrated into the contemporary financial system.

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I'm not sure how to answer the question. The "contemporary financial system" would adapt. That much is certain. I'm not particularly interested in predicting the particulars.

tylerdurden

10-26-2005, 12:17 AM

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The fed not only contributes to inflation, but also contributes to deflation so it balances out, but it is true the target rate is something like a 3% inflation, however this changes over time.

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If the target rate is not 0, it doesn't "balance out."

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I'm going to amend this even a bit further. Even if the net effect DID cancel out *in the aggregate* to zero, the policy would still be unjustifiable.

Deflation doesn't simply "roll back" damages done by inflation - the end state is not the same as the beginning state.

Is it OK to shoot one man in the head and then father a child, since the net effect on population is "balanced out"?

sam h

10-26-2005, 11:34 AM

[ QUOTE ]
13th-Century northern Italy is full of examples. Some city-states (Genoa, e.g.) even had so little intervention that multiple metals circulated simultaneously (bimetallism is often described as "unstable" but that's only the case when government tries to enforce a fixed ratio of value between different metals).

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So the only examples you can muster predate the rise of both "real" capitalist economies and nation states? That is what I imagined.

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The "contemporary financial system" would adapt. That much is certain.

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Yes, it would adapt. By collapsing.

FishHooks

10-26-2005, 11:37 AM

finally someone who is on my side, I just didn't want to argue with him anymore, his mind is pretty set on being 100% free-market no government involvement at all.

tylerdurden

10-26-2005, 01:20 PM

[ QUOTE ]
[ QUOTE ]
13th-Century northern Italy is full of examples. Some city-states (Genoa, e.g.) even had so little intervention that multiple metals circulated simultaneously (bimetallism is often described as "unstable" but that's only the case when government tries to enforce a fixed ratio of value between different metals).

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So the only examples you can muster predate the rise of both "real" capitalist economies and nation states? That is what I imagined.

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I'm not sure what your point is. Are you making an argument along the lines of "it's not the status quo, therefore it's unworkable"?

Further, I'm confused by your use of the term "real" in describing modern capitalist economies, since what we have now (and have had) are government-influenced economies, not true capitalist economies.

Are you arguing that a true free market in money is incompatible with an elaborate system of nation-states? If so, I have no problem with that, since I advocate the dissolution of nation-states.

sam h

10-26-2005, 01:42 PM

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I'm not sure what your point is. Are you making an argument along the lines of "it's not the status quo, therefore it's unworkable"?

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No. My argument is that there is no historical evidence that what you are proposing is viable for advanced capitalist economies. It only exists in abstract dreams and rought models scratched on paper.

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Further, I'm confused by your use of the term "real" in describing modern capitalist economies, since what we have now (and have had) are government-influenced economies, not true capitalist economies.

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None of the pertinent major thinkers defined capitalism as a system of economic organization lacking government intervention.

When I speak of "real" capitalism, I refer to the more or less complete commodification of land, labor, and capital that occurred with the full breakdown of the feudal order (not until fairly late in some european countries).

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Are you arguing that a true free market in money is incompatible with an elaborate system of nation-states? If so, I have no problem with that, since I advocate the dissolution of nation-states.

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It is incompatible with the nation state, as well as with the viability of market economies on larger than a local level.

If you want to advocate the dissolution of nation-states, that is your prerogative. If you think there is any chance of it happening in the advanced parts of the world, then you are deeply misguided. Why not move to Somalia or certain parts of Central Asia and experience these things first hand?

tylerdurden

10-26-2005, 02:40 PM

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My argument is that there is no historical evidence that what you are proposing is viable for advanced capitalist economies. It only exists in abstract dreams and rought models scratched on paper.

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In other words, "don't try anything new." If that's your only objection, it's incredibly weak.

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None of the pertinent major thinkers defined capitalism as a system of economic organization lacking government intervention.

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So what? By itself, this is effectively a continuation of the "don't try anything new" argument.

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When I speak of "real" capitalism, I refer to the more or less complete commodification of land, labor, and capital that occurred with the full breakdown of the feudal order (not until fairly late in some european countries).

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Or still continuing, depending on how you look at it. "Full commodification" cannot occur as long as governments continue to interfere in markets. Your "real" capitalism has not yet been achieved.

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Why not move to Somalia or certain parts of Central Asia and experience these things first hand?

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The "go move to Somalia" argument is bogus, and I've shown why it is about 400x in this forum.

AngryCola

10-26-2005, 03:48 PM

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finally someone who is on my side, I just didn't want to argue with him anymore

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If you had an actual argument, nobody here knew what it was.

Personally, I'm still waiting for your tally.

sam h

10-26-2005, 03:51 PM

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In other words, "don't try anything new." If that's your only objection, it's incredibly weak.

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Don't twist my words. Arguments about social phenomena should be grounded in empirical evidence, most of which is going to be historical. I submit that you have very little to support your position. Don't try to squirm out of defending your position empirically with some abstract glance towards possibilism.

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So what? By itself, this is effectively a continuation of the "don't try anything new" argument.

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You missed the point. Beforehand you stated that we had not had "true capitalist economies" because all economies were marked by government intervention. I was merely pointing out that this has never been part of the accepted definition of capitalism. If you want to get serious about arguing about these things, you have to be using concepts in a clear way. Usually this means adhering to some semblance of the definitions that have been in common currency among social thinkers for generations. If you want to redefine "capitalism" in your own way, go ahead, but its rather counter-productive.

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Or still continuing, depending on how you look at it. "Full commodification" cannot occur as long as governments continue to interfere in markets. Your "real" capitalism has not yet been achieved.

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Read the post again. I said "more or less" fully commodified.

But let's not get side-tracked. I still want to see your empirical evidence and full argument for the contemporary viability of a system of exchange beyond the level of local economies that is not government sponsored or supported. Please don't dodge the question any longer.

FishHooks

10-26-2005, 05:24 PM

I have better things to do than create a tally, actually saying I was going to do that is what we call an exegeration, we use this to stress a particular point, but feel free to look at my responces and count the question marks, and see if any of them were answered, not hard too do.

Also if no one knew what my argument was, why is there someone who is on my side.

AngryCola

10-26-2005, 05:25 PM

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I have better things to do than create a tally

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I find this difficult to believe.

Just admit the reason you can't answer the question about the supposed questions is because they don't exist. I don't want to hear one more thing about this guy supposedly dodging your questions when you can't even post them.

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actually saying I was going to do that is what we call an exegeration

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A what?

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if no one knew what my argument was, why is there someone who is on my side.

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I'm pretty sure he was just taking issue with what someone else said. But if you want to join his side, that's fine.

tylerdurden

10-27-2005, 12:47 AM

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Arguments about social phenomena should be grounded in empirical evidence, most of which is going to be historical.

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OK, so where's the evidence that a free market in money will fail in a modern global economy?

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Beforehand you stated that we had not had "true capitalist economies" because all economies were marked by government intervention. I was merely pointing out that this has never been part of the accepted definition of capitalism. If you want to get serious about arguing about these things, you have to be using concepts in a clear way. Usually this means adhering to some semblance of the definitions that have been in common currency among social thinkers for generations. If you want to redefine "capitalism" in your own way, go ahead, but its rather counter-productive.

[/ QUOTE ]

Where is this definition that includes government intervention?

Wikipedia: "In common usage capitalism refers to an economic system in which all or most of the "means of production" are privately owned and operated and where investment and the production, distribution and prices of commodities (goods and services) are determined mainly in a free market, rather than by the state."

Houghton Mifflin: "An economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market."

Neither of these "contemporary" definitions indicate a needed component of state intervention.

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I still want to see your empirical evidence and full argument for the contemporary viability of a system of exchange beyond the level of local economies that is not government sponsored or supported. Please don't dodge the question any longer.

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So your position is that since a true free market in money has never been alowed to operate unhindered in the contemporary global economy, it's automatically a laughable idea?

I'm not dodging any question, you're just moving the goal posts. You wanted an example of a free market currency in action, I provided one, then you want more. The fact is that gold has been used as an currency for international trade for centuries, long before any government figured out how to pull shenanigans to steal from people without their knowing it.

sam h

10-27-2005, 11:18 AM

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OK, so where's the evidence that a free market in money will fail in a modern global economy?

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1) A free market for money has never succeeded beyond the local level.
2) The contemporary world is constituted by national economies.

How many times do I have to ask you to give me evidence for your position? You're the one making the large claims. I just want you to back them up. But every time I ask, your response somehow manages to avoid empirics.

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Where is this definition that includes government intervention?

Wikipedia: "In common usage capitalism refers to an economic system in which all or most of the "means of production" are privately owned and operated and where investment and the production, distribution and prices of commodities (goods and services) are determined mainly in a free market, rather than by the state."

Houghton Mifflin: "An economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market."

Neither of these "contemporary" definitions indicate a needed component of state intervention.

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You originally said that we didn't have capitalist economies because they were influenced by government. I pointed out that this was not part of the definition. If I gave the impression, that I thought having government intervention was part of the definition, then I wrote carelessly. The point is that government intervention is not a definitional dimension, and thus your original argument about contemporary economies not being capitalist is flawed.

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So your position is that since a true free market in money has never been alowed to operate unhindered in the contemporary global economy, it's automatically a laughable idea?

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No, its my position that since a free market for money has never succeeded beyond the local level in the last 700 years, and since the current global financial system is so much more complex than even thirty years ago, that your idea is laughable. Sorry but I don't think anybody who studies or works in the fields of political economy, macroeconomics, or finance would disagree.

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I'm not dodging any question, you're just moving the goal posts. You wanted an example of a free market currency in action, I provided one, then you want more. The fact is that gold has been used as an currency for international trade for centuries, long before any government figured out how to pull shenanigans to steal from people without their knowing it.

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You provided one and I asked if you could provide others that extended beyond the local level and existed during the capitalist era. You have consistently dodged that question since.

If you want to know why government-sponsored money is necessary for the efficiency of complex economies, I suggest you start reading about institutional economics and the theory of transaction costs.

tylerdurden

10-27-2005, 11:42 AM

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1) A free market for money has never succeeded beyond the local level.

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That's obviously wrong. Gold exclusively was used for international trade until very recently, even when governments forced fiat currencies to be used internally.

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2) The contemporary world is constituted by national economies.

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So?

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You originally said that we didn't have capitalist economies because they were influenced by government. I pointed out that this was not part of the definition. If I gave the impression, that I thought having government intervention was part of the definition, then I wrote carelessly. The point is that government intervention is not a definitional dimension, and thus your original argument about contemporary economies not being capitalist is flawed.

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OK, if the concept of government intervention is not integral to the definition of capitalism, why is my statement that true capitalism *excludes* government intervention false? You're making a logical leap that you can't justify.
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No, its my position that since a free market for money has never succeeded beyond the local level in the last 700 years,

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False.

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and since the current global financial system is so much more complex than even thirty years ago, that your idea is laughable.

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Why is the complicated nature of it incompatible with a free market? It's complicated *because* a free market is being prevented.

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Sorry but I don't think anybody who studies or works in the fields of political economy, macroeconomics, or finance would disagree.

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Would disagree with what? That financial markets are complicated? I don't dispute that.

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If you want to know why government-sponsored money is necessary for the efficiency of complex economies, I suggest you start reading about institutional economics and the theory of transaction costs.

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Wait, you're seriously going to argue that government-directed currencies can create more efficient markets than free-market money? Government-directed currencies make it easier for established powers (namely, government itself) maintain their power. That's why governments employ them.

If government directed currencies were unambiguously "better" (i.e. more efficient) than free market currencies, there would be no need to impose them - the markets would demand them voluntarily. Things like paper money, fractional reserve banking, and the federal reserve wouldn't have to be shoved down the throats of the people by force.

FishHooks

10-27-2005, 12:10 PM

It might be hard to believe mr. 5000 posts, but some people dont have time to spend every second of their day on this forum.

sam h

10-27-2005, 09:47 PM

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Why is the complicated nature of it incompatible with a free market? It's complicated *because* a free market is being prevented….Would disagree with what? That financial markets are complicated? I don't dispute that… Wait, you're seriously going to argue that government-directed currencies can create more efficient markets than free-market money? Government-directed currencies make it easier for established powers (namely, government itself) maintain their power. That's why governments employ them.

If government directed currencies were unambiguously "better" (i.e. more efficient) than free market currencies, there would be no need to impose them - the markets would demand them voluntarily. Things like paper money, fractional reserve banking, and the federal reserve wouldn't have to be shoved down the throats of the people by force.

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Let me stop screwing around and be straight with you PVN. Your ideas are basically bush league. Beyond the comfortable confines of internet message boards filled with dilettantes who believe they have the world figured out, there are legions of smart people who have devoted their lives to thinking about these issues. To my knowledge, they’ve almost unanimously decided against your position. Does that surprise you? Almost every economist accepts at this point that government institutions such as national currencies, as well as others such as property rights, have historically reduced transaction costs and paved the way for more efficient and faster growing economies and that these institutions are essential components of contemporary economies.

My sense is that you don't know enough about the discipline of economics to even realize this. The fact that you think markets will reach the optimal solution here by themselves anyway also shows that you don't understand in a larger sense what “the market” means to most economists, in terms of its functioning, capabilities and limitations. Basically, you don’t seem to understand the idea of a collective action problem, the idea of a non-cooperative game, or the general idea of a suboptimal equilibrium. The social world is a lot more complicated than you think. At some point everybody must make a decision about whether it is more important to them to be right or to be righteous. Choosing the former has its rewards, but it generally entails abandoning the inherent satisfaction many people derive from extremist positions, not matter what type of extremism, since they are generally not viable once you actually dig into the empirical world.

Sorry to be harsh. Just calling it as I see it. This will be my last post in the thread.

tylerdurden

10-28-2005, 11:17 AM

(ad hominem deleted)

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Almost every economist accepts at this point that government institutions such as national currencies, as well as others such as property rights,

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If by "national currencies" you mean "fiat currencies" then you can't have both national currencies and property rights. The entire idea of national currencie is based upon the explicit violation of property rights.

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have historically reduced transaction costs and paved the way for more efficient and faster growing economies and that these institutions are essential components of contemporary economies.

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More efficient... for the politically-connected. And faster growing... when they aren't receeding.

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My sense is that you don't know enough about the discipline of economics to even realize this. The fact that you think markets will reach the optimal solution here by themselves anyway also shows that you don't understand in a larger sense what “the market” means to most economists, in terms of its functioning, capabilities and limitations. Basically, you don’t seem to understand the idea of a collective action problem, the idea of a non-cooperative game, or the general idea of a suboptimal equilibrium. The social world is a lot more complicated than you think.

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There's a lot of self-righteous bluster here but no actual argument. "It won't work because things are more complicated than I think you think they are" is not very convincing.

Regardless of what "most economists" think "the market" is, the fact is that unhindered markets DO reach optimal solutions, and there's no evidence that money is magically exempt from the forces that make this so. Conjure all the "non-cooperative game" and "sub-optimal equilibrium" boogeymen you want - all you're left with is a sophisticated argument for oppression.

You asked for a "contemporary viability of a system of exchange beyond the level of local economies that is not government sponsored or supported." Gold was that system until WWI. Governments may have had their individual names for currency, but if a Dollar, a Franc, and a Pound are all defined as a given weight of gold, they are all the same for practical purposes. Gold was the international standard for trade, and no one government established that - the market forced governments to accept it.

Once governments overinflated during WWI, they had to choose between bankruptcy and abandonment of the gold standard. The results of this have been "stability" for the governments established at the time but unprecedented financial turmoil. Financial ponzi schemes such as the "gold-exchange standard", its spiritual successor, the Bretton Woods agreement, and the disasterous Smithsonian agreement did nothing but create ever-more elaborate methods of wreaking havoc.

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At some point everybody must make a decision about whether it is more important to them to be right or to be righteous. Choosing the former has its rewards, but it generally entails abandoning the inherent satisfaction many people derive from extremist positions, not matter what type of extremism, since they are generally not viable once you actually dig into the empirical world.

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How is freedom more "extremist" than coercion?

adios

10-28-2005, 12:49 PM

More or less it's widely accepted that government needs to intercede in the market(s) to keep the "playing field level." The emergence of monopolistic trusts in the late 19th century led to the enactment of anti trust legislation. In your opinion is there a need for such legislation and if so has it gone too far. Obviously if you feel there's no need for such legislation then it's already gone way to far /images/graemlins/smile.gif.

tylerdurden

10-28-2005, 11:30 PM

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More or less it's widely accepted that government needs to intercede in the market(s) to keep the "playing field level." The emergence of monopolistic trusts in the late 19th century led to the enactment of anti trust legislation. In your opinion is there a need for such legislation and if so has it gone too far. Obviously if you feel there's no need for such legislation then it's already gone way to far /images/graemlins/smile.gif.

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Since monopolies only occur when government licenses them, there is no need for anti-monopoly legislation, as long as the government stops creating them.

Antitrust legislation has never, ever, ever been used against a company that "became" a monopoly on its own. They have been used as a club to bludgeon companies that competed successfully and ran a lot of competitors out of business - but a lack of competitors does not mean that competition is being hindered.