Bush appoints Bernake Chairmen of the Federal Reserve

[vulturesrow]

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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]

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]

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

[vulturesrow]

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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?

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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]

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

[tylerdurden]

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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]

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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]

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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]

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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.

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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.