75% blame Bush's policies for deteriorating economy

No, are you trying to put words in my mouth?

I'm making a simple point: the government can't just ask the Fed for money if it needs it.

 

Because according to Grim and other recently reincarnated neoliberals, those who have wealth don't deserve it. They have too much. They can "afford it".

Yeah.. That $17k write off just cost that same home owner Grim was talking about his job.

Yeah, us employers can afford it all. Keep in mind. When you punish a business you punish those that the business employs. You punish those that the business buys other goods and services from, and ultimately you punish those you were trying to help.

See also, trickle down theory.

 

Not at all. These are your words.

Now, if you claim that the money supply does not increase based upon debt, then how does it increase and when?

Semantic game. We'll do the familiar dance where I have to ask you questions until you paint yourself into a corner, then you leave P&R for 2 weeks or a month without owning up to the discussion.

Please, carry on with your answer.

 

Ok, let me first make sure that I'm understanding your stance: the function of open market operations is to fund the government.

EDIT: Let me be a little bit more specific: whenever the government engages in deficit spending, money is created by the Federal Reserve.

Is this correct?

 

Much simpler. Please explain how the money supply is increased.

 

#1 how am I a 'recently reincarnated neoliberal?
#2 When did I say those with wealth do not deserve it? Please show me this.
#3 When did I say they have too much?

Yeah because it would be so much better to dry up all the funds that home owners have so the business has no customers, yep that would be swell. It would be so much better that huge masses of home owners lose their houses.

Who said they can? A business however makes money off of their business, while those pesky home owners are just trying to live, how dare them. Without the homeowners most businesses would have no customers, yep lets dry up their funds.

I myself am a business owner and have been more of my adult life on a percentage than you I am willing to bet I however can see common sense of which method will kill the economy over which method makes it better for my own pocket book.

So are you one of those business owners who would not write the expense off on your taxes?

Lets not forget a business can simply increase their product prices 5% 'or whatever amount' to recover the funds, a home owner is pretty much screwed.

 

If Mia increases his hosting or dial-up prices by 5% he would be out of business in a week. He doesn't realize that if people have no buy power businesses like his will seize to exist. He lives in a dreamland if he believes that the well being of a business takes priority over that of a consumer or wealth and stability of their customers. I think he's got the priorities backwards.

 

The money supply in an economy can increase in three different ways:

1) Fractional Reserve Banking
2) Inflow of foreign currencies
3) Outright Purchases of debt securities by a monetary authority

Open market operations are conducted regardless of the budgetary conditions of the federal government. In other words, money creation is independent of fiscal policy. If no government securities are available, corporate securities are used according to the SOMA portfolio (although there was some controversy about doing this during the FOMC meeting a few years back).


Don't you always argue that the Fed prints money out of thin air then sells it to the government at interest? If that's the case, what does the government gain from selling securities to the Fed as opposed to the public anyway? It should make no difference to them since they would still have to pay the same amount of interest. How the hell is "printing money out of thin air" convenient to the government if it's going to cost them the same?

 

What a total pantload of crap.

1. Counterfeit. We all know about this. It's known as the printing of money.

2. Not relevant.

3. Not relevant.

That's an interesting way of dodging the fact that deficit spending, and the continuous production of government securities supercharges the money creation process when it is put through FRB.

No. I don't always argue that.

The reality is, yes the FED can create money without government debt, however government debt can not continue unchecked without a FED, and a constant demand for securities. It is a symbiotic relationship, as both are parasitic to true wealth and the citizenry.

I think most people on this forum are aware that the FED is a private organization, it manipulates the money supply and cartelizes the banking industry. It enables government deficit spending, and it debases our currency as it transfers wealth away from the people and to the banks. The genii is out of the bottle.

 

The government has to fund itself without the Fed. Unfortunately for you, that's what the law says. Do you know who funds the government (i.e. buy the Treasury Securities in the primary market)? Banks do. In fact, I'm feeling generous today, so I'll give you a list of the major buyers:

BNP Paribas Securities
Banc of America Securities
Barclays Capital
Bear, Stearns & Co.
Cantor Fitzgerald & Co.
Citigroup Global Markets
Countrywide Securities Corporation
Credit Suisse Securities
Daiwa Securities America
Deutsche Bank Securities
Dresdner Kleinwort Securities
Goldman, Sachs & Co.
Greenwich Capital Markets
HSBC Securities
J. P. Morgan Securities
Lehman Brothers
Merrill Lynch Government Securities
Mizuho Securities USA
Morgan Stanley & Co.
UBS Securities

 

Back to semantics.

The government needs the FED to create a market for the securities it produces. That is why banks buy government securities. To use as reserves and to create FRB leverage.

Try again?

 

So it's back to the conspiracy that the purpose of open market operations is to fund the government. Tell me this then: if buying government securities were against the banks' interest, why do they do it? There are thousands of banks that aren't dealers of the Fed, but they still buy billions worth of government securities.

 

I normally tend not to blame or give credit to administations for economic conditions. The administrations themselves tend to take credit for every little thing that occurs that is good, and probably blame prior administrations for anything that is bad. They over politicize economic conditions.

On the other hand some of the following is probably contributing to tough economic conditions currently that are attributable to the Bush administration.

1. Huge levels of federal debt that have exploded during this administration.
2. The Bush administration wiped out regulation and oversight on the industries that are responsible for the mortgage debt crisis. In fact it might have encouraged the bad debt crisis in its push for greater home ownership.

In terms of the money supply arguments I find them overly political and stemming from a small group with a totally theoretical perspective in which there are no examples of nations operating on the principals of libertarian thinking.

Moreover the world is somewhat awash in currency. Money supply has been growing everywhere. Take a look at the graphs of money supply growth here.

Even if the US money supply is growing relatively "faster" than other currencies around the world, the net difference is dramatically smaller than overall difference.

Why is the US dollar supply so weak? Nobody has absolute answers but it could be a factor of a lot of items; 1. terrible and worsening balance of trade...probably a big one. 2. Huge federal debt and aggregate debt within the nation. 3. Relative growth of the money supply against other money supplies. 4. Huge reliance on imported oil --way over that of any other nation removing relatively more US dollars out of the economy to net exporters. Lots of other reasons.


While I don't like to over or under blame an administration for current economic conditions there is little doubt from history that voters across the board take that into consideration when voting in elections. Pols know it and they push that aspect of their political stances.

In 1992 the mantra of the Clinton campaign was "its the economy stupid" as they tried to stay on topic attacking the senior Bush administration for the recession of that period. Having worked specifically in the industry (commercial real estate) that had the most impact on that recession during the run-up to the recession and specifically watched the unbelievable explosion of piss-poor loans made in the early 1980's (on a micro basis), I have little doubt that the recession that had hit before and after the 1992 election was the result of policies set at the end of the 1970's and especially during the early 1980's. The bad impact during that election was the result of a burst bubble that had begun long before the elder Bush ever became President. In fact the beginning signs of that burst bubble were occurring in the mid 1980's as Savings and Loans started to go belly up at increasing rates.

 

What conspiracy? I don't like that people start calling opposing opinions or perspectives "conspiracy" to discredit them. There is no conspiracy here. This is how government works.

Who said it was not in their interest? It is totally within their interest! Understand, prior to the FED, banks would inflate separately, and this would cause insolvency and shortages. So the FED acts as an inflationary cap or leader as the banks are all cartelized now. They inflate in unison, making it harder for them to fail, and it helps perpetuate this ridiculous notion that inflation is "normal" or "inevitable" by making it a perpetual, mass phenomenon.

You really should read Rothbard's "The Case Against the FED". I own the hardcopy, but I bet there is a free version at the Mises Institute.

Yeah, here it is. Enjoy.

Sure. Some of them use US government securities as reserves, the others use them to trade with primary dealers. The cartel has tiers.

It's foolish to propose that there is always a market for endless government debt. There isn't. By cartelizing all of the banks under the FED, and then creating the reserve requirement, using FRB and through open market operations, those securities suddenly gain more than investment value. In a sense, the FED makes them the legal tender of reserves, much like FRNs are worthless, save for legal tender laws defining their value.

Do you really think, given the long term projections for the US economy and government solvency, anyone wants to hold government securities as investment grade assets? HA!

Read Rothbard, he was a genius when it came to historical analysis. I like his work on money and history much more than his prose about philosophy. Unlike most Austrian oriented books, I think you will find The Case Against The Fed has enough tables and math in it to keep you interested.

 

I've corrected you on this once already. It is Austrian thinking. There is no "libertarian" school of economics. The closest may be the monetarists, the Chicago School and the Vienna School. Generally, my arguments are based around the Austrian (Vienna) school which has produced a Nobel Prize Winner for it's work on markets, and has successfully predicted most of the major economic and political events of the 20th century.

To say it is theoretical is a falsehood you keep repeating.

How you can talk about currency value, and ignore monetary policy is absolutely ridiculous Earl.

Why not just post "Don't take me seriously!"


~

 

Long-term projections made by cynical conspiracists?
There is no such thing as a "market for endless government debt" because the economy would inevitably collapse before ever reaching that point.
Are you naive enough to think that abolishing the Fed, making fractional reserve banking illegal, and/or bringing the gold standard back is going to stop the government from being fiscally irresponsible? The system is fine; the fundamental issue is so obvious: we're not electing the right people.

 

It is that simple believe or not. As long as we have a broken system we are going to have crooked politicians that take advantage of it. They spend like there is no tomorrow cause they just keep borrowing more, and the Fed keeps printing more mate.

 

Why do you keep trying to introduce conspiracy theory? Is your counter-argument so absent or weak?

I was obviously speaking figuratively. Congratulations. Obvious semantic man strikes again.

Did I write that in this discussion?

Why won't you read the book and address the issue of all of our banks being organized into regional, then national then global cartels? That we have institutionalized inflation, which is abnormal when the market trends towards price stability as long as the aggregate is not being manipulated. And when the aggregate is raised, who is getting this money first, buying goods and services before pricing has hit a new stable level by decreasing supply with the new funny money?

To answer the last part of your question, I think the market should determine what money is. I think we need to end legal tender laws. That is all we need to do. I don't care if we use gold, silver or Oreos for money. The market will find the best stores of value based upon the concerns of security, portability, durability and divisibility etc.

The system is not fine. Our money is counterfeit and represents no real wealth except for the fiat of legal tender law. I could name the rest but it's all doom and gloom so why bother. If you don't see that it's more than one or 100 new politicians can fix...

 

Arguing with people that believe in conspiracies can get very tiring.

You're right. Assuming that the debt made is through the fiat currency. If it is not, it's not.

You an Ron Paul puppet this as evil and bad and some of the worst things ever happening, yet the greatest expansion of prosperity ever recorded in the history of the Earth has been built in an economy with intellectual property rights and a fiat currency, based on fractional reserve banking.

Bada bing bada boom.

 

You're the one who makes consequentialist arguments. I'm not.

Fractional reserve banking/currency debasement enables a transfer of wealth from the poor and middle class to the wealthy. Historically, it has brought an end to all great countries and empires that practiced it, from the Romans to the Soviets.

Without FRB, there would be fewer if not zero wars. The people simply would not finance it in taxes. FRB enables our politicians to create FALSE prosperity by borrowing against the earnings of future generations. That is not only immoral, it is unsustainable, as evidenced by the US' looming entitlement crisis over the next 30 years, where our entire military and social structure is going to be at risk of collapse due to bankruptcy.

It's easy for you, a simple minded blogger with limited experience or knowledge, to flit and flicker from thread to thread making status quo arguments for tyranny and wealth destruction, but the big kids are talking right now, so maybe you should try to sit your Ritalin addled self down and attempt to read and learn something about the mechanics of the financial system from people who have a clue what is going on.

You might learn something if you can pay attention long enough.