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Forum Post: Does Money Really MATTER ?

Posted 7 years ago on Oct. 27, 2011, 8:49 p.m. EST by Rico (3027)
This content is user submitted and not an official statement

I am consistently surprised at people complaining that we bailed-out the banks in one post then complain that it's all "funny money" in the next, so I decided to explain a few things about money.

Money is just a token used to facilitate commerce. Imagine I have some excess milk and would like some wheat. WITHOUT these nifty tokens, I have to find someone who BOTH has excess wheat and WANTS milk. WITH these nifty tokens, I need only "sell" my milk to ANYONE who wants some then "buy" some wheat from ANYBODY who has some. Money has no intrinsic value outside the goods and services being traded. It is simply a convenient abstraction.

Some advocate our money would be more "real" if it were gold. Gold, however, is only one of millions of things people want to trade, and it's far from the most valuable in practical terms. If we select ANY product as the "standard" product, someone can accumulate piles of it and strangle commerce, even though few even CARE about that particular product. This DID happen several times in many different coutries over history.

How many of these "tokens" do we need to have in circulation? Precisely as many as are needed to support the volume of commerce. At the WWII Bretton Woods conference, the USA overrode the advice of the economists and established the dollar as the world's reserve currency. This put us in the position of having to print sufficient dollars to support the volume of world-wide commerce (against our own self interest... Google "Triffin Dilemma"). That's a LOT of dollars !

Who is hurt the most when we print dollars? Those holding wealth and debt. Though it takes some time to establish equilibrium, inflation generally causes both prices and wages to increase. Thus, those of us living "paycheck-to-paycheck" see little change on average. In contrast, those holding piles of dollars or debt obligations see the value of those holdings fall because they collected those dollars or made those loans using dollars that were worth more then than they are now. This is why most populist movements through history have demanded a "loose" or inflationary monetary policy.

Inflation is also a good way to get people to spend those piles of money they're sitting on; if they hold on to them too long, their pile becomes worthless, so their value is maximized by spending them as soon as possible. Printing money is also absolutely necessary when there are insufficient tokens in the system to support commerce.

Inflation is also the traditional method by which countries fix trade imbalances. When we reduce the value of the dollar relative to foreign currencies, we make their products look expensive in our market and our products look cheaper in theirs. This is one of the main reasons why America's trade deficits have been falling lately.

The Federal Reserve is doing precisely what is needed. They are trying to devalue the piles of cash held by the wealthy and the huge debts held by our creditors while simultaneously trying to correct the trade deficit problem.

The "average Joe" should be very happy about all this !

Finally, for the Ron Lawl supporters, I must mention the Consititution gives Congress the power to "... coin money, regulate the Value thereof ..." What EXACTLY do people think that clause 'regulate the value thereof" MEANS? For the same crowd, I will point out that the policy making body of the Federal Reserve, the Governing Board, is comprised of persons appointed by the President subject to review by Congress under Title 12 paragraph 3 of Federal Law. The Federal Reserve SYSTEM includes private banks who pay fees to the US Government in exchange for the services it provides, but POLICY is set according to US Government officials.

BRING IT ON all you Pauler's but bring some FACTS with you!

EDIT: Note http://www.frbsf.org/currency/independence/initial/s85.html shows that paper money with no mention of gold or silver was the money of the land in 1776.

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142 Comments


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[-] 2 points by 666isMONEY (348) 7 years ago

I'm no fan of gold & silver or fiat money but your "EDIT" may be in error, Constitution made gold & silver legal tender: http://en.wikipedia.org/wiki/Legal_tender#United_States

Famous ppl who believed in eliminating money: http://666ismoney.com/MoneyQuotes.html

[-] 2 points by Rico (3027) 7 years ago

My "EDIT" provides a link to an image of a bill introduced under the Articles of Confederation and simply points out that the bill makes no mention of being redeemable in gold or silver. It serves to illustrate that the founders were well aware of and using paper money without expectation of redepmtion in gold or silver. Surely, being so aware of paper money, they would have explicitly demanded the currency of the United States be based on metals if they felt that was appropriate. Had the currency of the time been gold/silver, then perhaps we could take their silence as an oversight, but since paper was the currency, their silence speaks loudly.

Article 1, Section 10, Clause 10 discusses Contracts. In this section, the many states are forbidden from "opting out" of the Federal "coin money and regulate the value thereof" clause except if they wish to accept gold or silver as valid payment. It does not REQUIRE they accept only gold or silver, and it does not EMPOWER them to coin money. To do so would be to negate the Federal right to "coing money and regulate the value thereof."

I don't care how many famous people think we can do without money. The fact is, these little tokens make our lives easier. There have been some communities in California, for example, that initially operated by direct barter and exchange in goods and services. It took almost no time at all, however, before they started issuing "points" so people would have more flexibility in exchanging their goods and services. These "points" are "money."

[-] 1 points by FrogWithWings (1367) 7 years ago

Bullshit! The Constitution for the United States of America wasn't even written in 1776, much less adopted by all states willing to sign the bankruptcy pact.

I wouldn't even begin to consider you worth the time to discuss why the bankruptcy pact designated gold, as the the second one, and why FDR signed on agreeing all interest payments of the third reorganization were to be made in gold.

Ha hahahahaha! I saved it all so go ahead and edit to get the turds and eggs off our face!

[-] 1 points by Rico (3027) 7 years ago

You are one rude person. Rather than "Constitution" I should have said "under the Articles of Confederation" as the linked image clearly denotes. You are clearly more interested in "winning" a debate than engaging in civil and respectful discourse.

[-] 1 points by FrogWithWings (1367) 7 years ago

You're right, it was rude and what precipitated it was how rudely and arrogantly you baited several others in another thread which contained a link to this one. You present to many others in the same exact manner of which you rightfully point out my reply to you presents.

I too am an engineer and a scientist ,although, that doesn't make my shit stink any less.

Aside from all this, I find many of your opinions and perspectives interesting, yet at the same time, shocking that such a studied person seems patently unaware of the root causes of our current day maladies.

My apologies, just the same.

[-] 1 points by Rico (3027) 7 years ago

Well, let's chalk it up to "we all have bad moments." I try not to be rude, but sometimes I get frustrated, and the inner animal overwhelms mind.

Being an engineer/scientist means nothing in most discussions except where engineering and science are required to understand the topic at hand. This thread is certainly not one of those. On the other hand, I am a Systems Engineer, and my job requires I hold a very large set of variables conditions in my head at once so I can see how they interact and craft well balanced solutions. This particular ability to see interactions among many variables probably is valuable in this discussion, but opinions remain opinions in any case.

If I may, I'd like to edit your last line to say "I find it ... shocking that such a studied person seems patently unaware of the root causes of our current day maladies, as I see them." ;o)

[-] 1 points by FrogWithWings (1367) 7 years ago

Fair enough and all is swell, but, FDR did sell what was left of the world to sell, that A Lincoln's ghastly actions did not consume.

You have a great rest of your week.

[-] 1 points by 666isMONEY (348) 7 years ago

With abundance, barter, hoarding and money is obsolete. Other than that, I don't disagree with what U wrote or your other post about Libertarians & Ron Paul.

Pelatiah Webster says of this paper and the continental currency: "We have suffered more from this cause than from any other cause or calamity. It has killed more men, pervaded and corrupted the choicest interests of our country and done more injustice than even the arms and artifices of our enemies." — John Knox, United States Notes, "Paper Money A Cause of the Revolution," 1899

George Read thought the words [allowing the Federal government to "emit bills of credit" i.e., print paper money], if not struck out [of the Consitiution] would be as alarming as the mark of the Beast in Revelation. — James Madison, Debates, 1787

[-] 2 points by Rico (3027) 7 years ago

Sure, some disagreed. Do we need to go into the contrasts between Madison and Jefferson, both great men, to explore the idea that some disagree with one another? What matters is the compromise they came to and embodied in the Constitution.

For every quote by someone who despises paper money and inflation, we can find another quote from a person of equal standing who disagrees. The fact remains that every major nation in the world has formed a national bank along the lines of the Federal Reserve. While some would call this evidence of an evil conspiracy, I see it as acceptance that the ability to "regulate the value thereof" is a useful idea.

Remember the Hunt Brother's attempt to corner the market in silver? They would have succeeded if we hadn't changed the rules on them. We cannot have a monetary system that depends on a single commodity if for no other reason than because someone can corner the market on that commodity and strangle commerce.

[-] 1 points by FreedomIsFree (340) 7 years ago

I think you have the right instincts with regards to silver and gold. But one thing that I will say is that gold is already a standard against which all fiat currencies are measured. The main reason for this is that gold has always been, and has continued to be a stable long-term store of value.

This, however only covers one part of the role of money, and it leaves out the other two, usually called medium of exchange (which if you think about it, is really derived from the store of value property), and the unit of account, or a way of finding the relative value of different products and services and the like.

While gold performs the store of value well, as a circulating medium and as a unit of account, dollars are much more useful.

The problem is that when we use the dollar as a long-term store of value (via Treasuries) it becomes worth less and less as time goes by, even though those investments' yields tend to grow. This means that the unit of account becomes less useful the longer the time-scale one uses, and ends up pitting those who are trying to save against those with debt. The perhaps unspoken aspect of this is that if, for example, we wiped out a significant amount of debt, say by forgiving student loans, this wipes out the savers whose pension funds are likely heavily invested in debt-backed securites.

[-] 1 points by Rico (3027) 7 years ago

Good comment. I think we agree. Money has a temporal value. When we inflate, we decrease the time period of which it holds value... bad for savers, good for folks in debt. If I had to characterize America, I'd say we're debtors !

[-] 1 points by 99time (92) 7 years ago

The Constitution does not require commodity backed money.

From Article I, section 2:

The Congress shall have Power ... To coin Money, regulate the Value thereof, and of foreign Coin, and for the Standard of Weights and Measures.

From Article I, section 10:

No State shall ... coin Money ... [or] make any Thing but gold and silver Coins a Tender of Payment of Debts ..."

Contrast these two. The national government has the broad power to "coin Money," whereas, states are not allowed to create money that is not backed by gold or silver. There is no such "gold or silver" restriction on the national government. Where one is expressly prohibited and the other is not, such prohibition cannot be assumed, but rather implied not to be.

[-] 2 points by occupyguy (33) 7 years ago

Your post is very hard to rebut because there are so many mistakes. Your are bundling inflation, interest, trade exchange between countries, and money velocity into one vague and ridiculous theory. You should Google some of the buzzwords I just mentioned to get a better grip on your post. The most outrageous thing you said was:

"Inflation is also a good way to get people to spend those piles of money they're sitting on; if they hold on to them too long, their pile becomes worthless, so their value is maximized by spending them as soon as possible. Printing money is also absolutely necessary when there are insufficient tokens in the system to support commerce."

This isn't true. Inflation by definition is a rising general level of prices which hurts people that allocate the majority of their income to consumption.

Furthermore, the Fed isn't helping anybody by keeping interest rates near zero at the discount window except the banks.

[-] 2 points by snodog (4) 7 years ago

Excellent job I agree with everything you said, and that's saying something because I hardly ever agree with anyone regarding economics. There is a lot of disinformation out there and propaganda. Economics has become corrupted and there are few good sources left.

For anyone willing to learn- Warren Moslers "Center of the Universe" is a good source to learn about how our economic system really works.

[-] 1 points by Rico (3027) 7 years ago

And here's an interesting overview by the banker to the world's Central Banks, the Bank of International Settlements : http://www.bis.org/publ/arpdf/ar2011e.htm

Their most recent report for the quarter is available at http://www.bis.org/publ/qtrpdf/r_qt1109.htm

[-] 1 points by bigbangbilly (594) 7 years ago

Lets just say we are stuck the idea of it.

[-] 1 points by BlueRose (1437) 7 years ago

The Paulistas want Biblical power, not government. Which means anyone other than a white male fundamentalist wacko gets screwed. As someone explained to me, They think govt is Satan, but gold was around before government, so they accept gold.

Which leads to this stuff:

Mormons Become Victims in $50 Million Scam to Sell Gold Bullion http://www.bloomberg.com/apps/news?pid=newsarchive&sid=an7Pm3hkmauw

"...Paul is unique among the GOP contenders, or for that matter among politicians in general, in making monetary policy his signature issue. So it’s worth noting that he is among those who have been wrong about everything in this slump." http://krugman.blogs.nytimes.com/2011/12/14/speaking-of-people-whose-models-have-failed/

[-] 1 points by richardkentgates (3269) 7 years ago

inflation makes assets worth more and money worth less. poor people have little to no assets and rich people store their money in the form of assets. your assessment is completely backward from reality and is based on a very poor understanding of money management for the upper income levels.

[-] 1 points by JesseHeffran (3903) 7 years ago

You are right, but the insecurities and angst this causes, I hope, will entice Congress to raise taxes on the one percent and raise the minimum wage. This, I believe, will entice industry to raise their wages to keep pace with the minimum wage. The fed is quasi independent, but their actions will make Congress do their job. As for devaluation of money, even with out raising minimum wage, If we are to believe that the companies look out for their own, they should raise the wages on their own. Only people who are really hurt, are those who get taken advantage of by temp services. And I assume companies look out for their workers no matter how many dollars are chasing so many goods. Your point about the people who are invested in commodities and assets are more immune is correct. But even that can be fixed IF Congress gets off their butts and does their job. I believe his point was more to negate the Idea that having one commodity as the decider of money's value is a good idea. no?

[-] 1 points by richardkentgates (3269) 7 years ago

we are on the same page then. with one caveat. it is my opinion that for minimum wage to perform the intended function, it must be tied to inflation and evaluated quarterly like any other long term investment. the uber-wealth that is suffocating capitalism thrives on vacuuming up capital from the gap between inflation and real-wage. if that gap is not allowed to grow, the markets will become stable.

[-] 1 points by JesseHeffran (3903) 7 years ago

Very good that is probably something you should write about.

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[-] 1 points by JesseHeffran (3903) 7 years ago

you are not as smart as your handle would imply. But 'cause I feel nice, I will explain it to you. Say you own a business and you want to shuffle the board to increase production. Now, your profit margin needs to be a dollar a unit. You have over head of seven dollars so your cost per unit is eight dollars. Now, say you realize that the worker is better at making you profit than your upper management, which each year has you raising your prices to keep pace with his lavish life style. So if one dollar goes to the worker, two dollars goes to middle management, one goes for over head and taxes, and three goes to the CEO, you, as probably an investor on the Board of directors, make a dollar. Now, as an innovative go getter, as your name implies, You decide to take seventy five cents from the CEO, and give fifty cents to the middle management and a quarter to the workers. What would your total overhead be? Well, I'll tell you. It would be seven dollars. And I have never even owned my own business, I am just an uppity bookworm. Or you could just keep paying the worker slave wages and bitch because he/she don't take the job seriously. go figure... Also there are other out of the box remedies for relieving unemployment numbers. The intelligencia just seems to be stuck on stupid. Maybe create a thirty hour work week, make the employer pay over time after thirty hours.

[-] 1 points by Mooks (1985) 7 years ago

That may work for a large corporation but a lot of small business owners are all of those positions in one. I own a dental practice and I am a worker, the middle management, upper management, CEO, CFO and whatever other titles there are. So whatever raise my employees get comes right out of my pocket. I pay my employees more than minimum wage, some significantly more, but if I was forced via a law to raise the wages of my assistants, I would seriously consider getting rid of one of them. I already know which one it would be.

Minimum wages dis-proportionally hurt those in society who are uneducated and lack any kind of real skills. If you have no real skills, which is an unfortunate problem for many in this country, how can you efficiently do even a minimum wage job? You can't, which is why so many of these people are unemployed.

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[-] 1 points by Rico (3027) 7 years ago

This topic is called 'monetization of debt' and it is a very old and well understood phenomenon. Unfortunately, most google hits tie monetization of debt to the US debt rather than debts other than that issued by the government, but it works the same way in all cases. I'll walk through it...

We are deeply in debt at the personal, local, state, federal, and international level. The debt held by our creditors are held as assets on their books. The value of these assets is defined by the value of the goods and services they can be exchanged for in open commerce at the time the debt was issued.

The average Joe lives largely pay-check to pay-check, so he is generally isolated from the number of tokens in circulation; as we issue more, both the prices of goods and services and wages climb. Because he doesn't hold tokens, the average Joe only suffers a small bit during the lag between increasing prices and the corresponding increase in wages. He suffers not at all when the rate of increase in tokens (inflation) is stable as he generally gets pay raises targeted at the inflation rate.

While the average Joe is largely insulated from increasing the number of tokens (inflation), his creditors are not because they are getting paid back with tokens that buy fewer goods and services than the tokens they lent Joe. Note this is one reason why creditors love adjustable rate mortgages and debt instruments; they insulate the creditor from debt monetization.

The story gets even better when we consider the effect of inflation on international trade. By printing more tokens, we reduce the value of each in relation to those of another country. As a result, their imports consume a larger portion of Joe's wages and our exports look cheaper to the other country's Joes. Thus, the trade balance shifts in our favor.

Just last night I read an article on Yahoo news talking about the Chinese complaint that the value of the US debt they're holding has fallen 33% . I can't speak for you, but my real wages haven't fallen 33% ! Yea inflation !

[-] 1 points by richardkentgates (3269) 7 years ago

"I can't speak for you, but my real wages haven't fallen 33%"

yes it has. the growing gap between the rise in inflation and the rise of your wages mean that you spend a higher percentage of your wages for the same goods. to the common man, he gets the same dollar amount so to him it is the same amount.

[-] 1 points by Rico (3027) 7 years ago

Nope.

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[-] 1 points by JesseHeffran (3903) 7 years ago

I'm stealing your post and disseminating it to the world. buhaaa! I've been trying to make this point to no avail. Only problem I have with the token analogy is that old money never has to work when they have horded the tokens. For this reason I believe the estate tax needs to be the highest tax on the books. The Founders, once again, had it right.

[-] 2 points by Rico (3027) 7 years ago

Token hording is why we don't want 'hard currency' especially today when we're so deeply in debt at the personal, local, state, national, and international levels and what tokens we have are in the hands of our creditors (mostly China, Japan, and the 1%). I read a great article last night on Yahoo news describing how pissed the Chinese are that the debt they're holding has been reduced in value by 33%. I don't know about you , buy my income hasn't fallen by 33% ! Booya ! Yea inflation !

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[-] 1 points by Rico (3027) 7 years ago

Personally, my wages have gone up roughly 3% above inflation for my entire career, but I see your point. Interestingly, there are some that remain worried about a deflationary threat ( see http://money.cnn.com/2011/09/26/news/economy/deflation/index.htm ).

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[-] 1 points by imhotep3223 (81) 7 years ago

Great points.

[-] 1 points by hchc (3297) from Tampa, FL 7 years ago

Anyone can hate. We need solutions. Im guessing you think everything is fine? Or not? Or do you have anthing to contribute at all?

[-] 1 points by Rico (3027) 7 years ago

The mere fact that I do not buy into the AynRand/RonPaul disdain for the Federal Reserve does not mean I don't support or contribute here. See my posts at:

http://occupywallst.org/forum/one-percenter-ready-to-join-if/

http://occupywallst.org/forum/we-the-people-in-order-to-a-proposal/

http://occupywallst.org/forum/the-power-of-the-people/

http://occupywallst.org/forum/the-rise-of-the-machines/

You might also enjoy my 3 part response to an NYU journalism student at http://occupywallst.org/forum/one-percenter-ready-to-join-if/#comment-295977

I have been here contributing daily since October 10. You can see more of my posts by searching for my handle at http://ows.superunion.org/results/?q=Rico . I challenge you to find hatred expressed in any of my posts.

[-] 1 points by hchc (3297) from Tampa, FL 7 years ago

So, what is it? Whats the solution?

[-] 1 points by Rico (3027) 7 years ago

LOL ! Well, personally, I think we need do only 2 things in the near term.

1) Restore our Democracy by getting the money out of politics so we can use our uncorrupted Democracy to settle our other differences and effect balanced change as our Founders intended. See http://www.themultitude.org/forum/viewtopic.php?f=47&t=733

2) Get the American consumer to consider all social costs rather than sticker cost alone when making purchasing decisions. See http://www.themultitude.org/forum/viewtopic.php?f=47&t=734

Assuming we can get successfully make the first two changes, our longer term future will be reasonably assured if we can simply get our citizens to engage and think. We have far too many citizens who Occupy Couches letting the talking heads on television and the Internet do their thinking for them while happily consuming whatever cheap product someone puts in front of them. Democracy and Capitalism demands engagement and effort, and far too few of us put that effort into our actions.

In the end, it makes no difference if we restore the political power of the people if they won't put the effort into making it work by well reasoned votes cast at the ballot box. Likewise, our businesses will continue to be socially irresponsible if we are not willing to put the effort into casting our dollar votes at the check-out register.

In a Capitalist Democracy, we get both the government and companies we deserve.

[-] 1 points by hchc (3297) from Tampa, FL 7 years ago

Very true man. I always love the "get the government we deserve" line. Im sitting here trying to figure out which would be harder to achieve, 1 or 2, and Im thinking 1 will be easier than getting the people to wake the hell up.

[-] 2 points by Rico (3027) 7 years ago

Yep. If you've read Plato's Republic, you'll know that folks were concerned whether the public was up to the task of Democracy back in 300 BC. The issues have only become larger, and it remains unclear whether we can live up to the faith our Founding Fathers had in Man's ability to self-govern.

[-] 1 points by whisper (212) 7 years ago

I quoted from an article by Alan Greenspan called 'Gold and Economic Freedom', in another thread regarding the nature of money, I can't find that thread and I don't want to type it all out again but here is a link to the article itself: http://www.321gold.com/fed/greenspan/1966.html

Everything you said is fine up until you answered the question 'how many of these tokens do we need?' The answer is as many as AND NO MORE THAN required to represent goods which exist and have not been consumed. The other qualification is that those tokens MUST be exchangeable for the goods they represent AND the person who issues/creates/distributes these tokens MUST be able to produce that which is represented by the tokens.

Inflation is the result of printing more tokens than there are goods represented by those tokens. This allows those who print the tokens to offer more tokens for a good which, in turn, raises the price of that good. Those who's token accumulation is tied to their productive ability now have to produce more in order to afford what used to cost less. If they cannot produce more without increasing their effort, this drives the cost of their goods up. The only people not hurt by this are those who print tokens without backing them by goods held in reserve. THIS is what the federal reserve does. The Fed is in practice, though not legally, backed by the government's taxing power. The tokens that the Fed produces represent what will be taxed from US in the future, not actual goods. If you took a dollar bill to the Fed and asked to exchange it for the goods it represents, they would laugh at you. They don't HAVE any goods. They require US to produce the goods to back the currency that they produce. Given that the government cannot get away with taxing 100% of people's products and effort, there will ALWAYS be more currency than goods represented by that currency in such a system. THIS is the cause of inflation, and this is the (ir)rationale behind 'deficit spending'.

[-] 1 points by Rico (3027) 7 years ago

An interesting aspect in all this is that our inflation rate (as measured by the CPI or what can be bought with a token) remains pretty low, in fact some worry that we'll slip back into deflation. This is in spite of the Fed printing tokens like mad. So where are all those tokens going? Overseas.

In our status as the world's reserve currency, we have to print tokens in proportion to the worlds dollar-denominated GDP rather than ours alone. Kinda sucks, but we signed up for it at Bretton Woods and we only thought of the Triffin Dilemma later. While the world is slowly moving off the dollar toward Special Drawing Rights (SDRs, essentially the 'Bancor' the economists recommended at Bretton Woods), we will remain the reserve currency for at lest another decade or two (or three, or four ;o)

With all the financial turmoil in the world, everyone runs to the dollar and, if we didn't print them, the value of the dollar would soar and hurt our exports. In addition, I recently became aware that people overseas actually borrow in dollars and thus bypass the monetary policy of the own central bank ! We're essentially providing stimulus to the Europeans by printing dollars !

I found this last tidbit of information in the quarterly and annual reports of the Bank of International Settlements (BIS), the central banker of the central banks. These are the same people that negotiate the Basel agreements between world banks. The latest round of agreements called Basil III call for increased reserves, reduced leverage, etc of the world's central banks to forestall a recurrence of the 2008 problem. Interesting eh? I didn't know there was a central banker's bank ! You can see the materials through my post at http://occupywallst.org/forum/amateur-economists-read-this/ .

The much maligned policy of the Fed in paying banks to hold higher reserves likely (opinion) results from a desire to ensure our banks have sufficient liquidity to weather the EuroZone problems. Bernanke is a student of the Great Depression and surely knows that our troubles were going to bounce off the rest of the world and come back again. Ironically, he's leveraging his own balance sheet by paying the banks 3% ... the alternative would be to have to later intervene at 100%. Some of these reserve boosting moves may also be related to Basel III, but I suspect it's more the EuroZone problem.

It's all fascinating stuff, but I'm certainly not the world's expert !

[-] 1 points by FreedomIsFree (340) 7 years ago

There's some reasons why CPI seems to be so low. Best explanation of it I've found: http://www.shadowstats.com/article/consumer_price_index

[-] 1 points by Rico (3027) 7 years ago

Yep. Folks play a lot of games with CPI, that's for sure. I have no idea, however, regarding how to correct it. It's a very complex calculation with equally complex assumptions. Do you know how to correct it ?

[-] 1 points by FreedomIsFree (340) 7 years ago

Let John Williams sign off on the calculations?

Actually, paying more attention to money supply, or simply tying COLA to money supply would make more sense. Might be somewhat of an over-compensation, but would be more fair to those whose very income is tied to cost of living fluctuations have a fairer shake, and might also moderate loose monetary policy to some degree.

[-] 1 points by Febs (824) from Plymouth Meeting, PA 7 years ago

I've read the discussion here and people do a good job of rebutting your position. You conflate to many different things as related, are called on it, and then ignore it.

The Federal Reserve isn't devaluing piles of cash of the rich (primarily because no one except Scrooge McDuck actually has piles of cash) but is acting as a money pump via inflation to the rich bankers who make up the Fed by using inflation as the mechanism.

[-] 1 points by Rico (3027) 7 years ago

I'm not aware of ignoring anyone. I'll go back and reread the discussion to see if I missed one. I post here while also working on some complex work stuff, and every now and then I see a post so long that I can't respond right away. Unfortunately, once one clicks on the notification, it doesn't come back, and I miss posts when I come back. I'll go check when I get some time.

Inflation is the "standard" way of devaluing the debts held by creditors, and America has a lot of debt at the personal, local, state, federal, and international level. Do you disagree we are in debt and that inflation tends to devalue that debt ?

[-] 1 points by Febs (824) from Plymouth Meeting, PA 7 years ago

No I don't disagree with that at all and inflation would surely cause our debts to be worth less. However I find that the unintended consequences of high inflation to be far far less desirable than other methods we have to deal with our debt. In fact repaying debt by monetizing it is the same as defaulting on it - its the purchasing power that is important not the number of denominations of the currency.

Off to lunch - colleagues want to hit Olive Garden and I could use a soup and salad.

[-] 1 points by Febs (824) from Plymouth Meeting, PA 7 years ago

Brought here by your link from our precious discussion.

I will be glad to discuss the negative impacts of a planned inflation which far outweigh the perceived benefits to a small group of individuals.

First we have to talk about inflation in a system where inflation is the natural reaction to an increase demand for liquidity.

[-] 1 points by Rico (3027) 7 years ago

I don't have time to rehash all this with every single person. Read the discussions here, and, if you have a new perspective to offer, we can discuss it.

[-] 1 points by TheRoot (305) from New York, NY 7 years ago

Rico: You ask the Q,what do we thing it means " to coin money, regulate the value thereof". It's pretty simple. It's a clause in the Constitution that means to fix the specie content, the gold or silver content, of money. What do you think that it means?

[-] 1 points by Rico (3027) 7 years ago

First, where does it say gold or silver ? Second, be careful in confusing value and denonimation Third, the currency of 1776 was paper http://www.frbsf.org/currency/independence/initial/s85.html Finally, gold/silver was a hot topic at the time, so why DIDN'T the framers EXPLICITLY say "gold/silver" in the Consititution?

[-] 1 points by TheRoot (305) from New York, NY 7 years ago

Aren't you being a little hard on yourself? After the long dialogue between you and Republicae the other day, I thought that you'd consider the merits of his arguments based on the facts he had presented to you and concede.

[-] 1 points by Rico (3027) 7 years ago

I haven't conceded anything, but you just did. Bye.

[-] 1 points by TheRoot (305) from New York, NY 7 years ago

Dr. Parks talks about it. http://vimeo.com/4835053

[-] 1 points by EndTheFedNow (692) 7 years ago

The Fed has exclusive control over the money supply. Our money supply was privatized with the creation of the Fed. The Fed creates Federal Reserve Notes and credit out of thin air and they "loan" in to the government and into circulation. Every bill in your wallet and every digit in your bank account is DEBT, loaned from the Federal Reserve. On the debt that they issue as currency, they make interest. Remember, they have no reserves, no money of their own; they merely order the "money" created and then make their profit on the interest. The entire national debt is owed to the Federal Reserve Bank, and the balance (over 14 TRILLION) accumulates interest (their profit) every second. Neither the Fed nor the IRS, their collection arm, are government agencies. Contrary to the disinfo in the OP, the Fed is owned by member banks and their shareholders, and other shareholders not part of the member banks. All shareholders are private. The Fed is a privately owned, for profit corporation, created in 1913, to loot the American people. Prior to their creation, our money was owned by the people and issued interest free, and not for the profit of a private cartel of international financiers. Privatizing our money was harmful as privatizing all water would be. We need to reclaim the people's money and abolish the private cartel that is raping us. The creation of the Fed was unconstitutional. Our founders warned about our money supply falling into private hands (because this financial cartel has operated for centuries) and the constitution mandates that our money supply belong to the people.

The Central Bank is an institution of the most deadly hostility existing against the principles and form of our Constitution. . . . I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the Government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs. If the American people ever allow the banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied.

– Thomas Jefferson

[-] 1 points by Rico (3027) 7 years ago

Your arguments are SPECIOUS and VACUOUS. You offer NOTHING but unsubstantiated OPINIONS that are CONTRADICTED by the FACTS.

Thomas Jefferson DIED in 1826. The Federal Reserve was CREATED in 1913. Many people with ILLUSTRIOUS names APPROVED of the idea and CONGRESS authorized it's creation.

Citing someone else's OPINION, no matter how ILLUSTRIOUS, is not a "reference," it's just a supporting opinion, and no number of men who agree can make TRUTH from FALSEHOOD. Try using FACTS if you want to convince me or anyone ELSE that you know of what you speak.

By the way, the Federal Reserve was created through AGENCY LAW under which the various branches of the Government VEST their powers in a separate entity. Congress FIRST vested the Treasury Department with a portion of its power to "..coin money, regulate the value thereof..." and both the Treasury and Congress subsequently VESTED power to the Federal Reserve.

The ability of the various branches to VEST their authority in an independent agency has been TESTED many times, and AGENCY LAW stands. If you want to get UPSET about an Agency, consider the IRS... it MAKES law (vested by the Legislative Branch), ENFORCES law (vested by the Executive Branch), and ADJUDICATES law (vested by the Judicial Branch). Now THERE's an AGENCY !

[-] 1 points by EndTheFedNow (692) 7 years ago

There is no authority granted, in the constitution, for congress to vest anyone with any power to do what the constitution mandates congress do. Of course they do, but it's that violating of the constitution that got us where we are. Through administrative dictate, every alphabet uses SWAT teams against Americans, too, and it's legal but it is not lawful. What you are arguing in favor of is criminal government gone wild, and a big fuck you to the contract, which is the constitution (not some administrative law bullshit). All of our rights have been eroded or outright taken away because of criminal government. It has happened because, just as the founders warned, the people allowed it. We don't have the rights guaranteed by the fourth amendment anymore and that's all happened in my lifetime. I don't care if it's congress, the executive, the courts, agencies, or fucking aliens from outer space who are usurping our unalienable rights. Our rights belong to us and if they are stolen and violated, it is up to us to fight to reclaim and secure them. Now, if you want to argue in favor of your own enslavement, which you are, it's your choice.

So, you find Thomas Jefferson to be outdated, it appears. Perhaps you'd like to throw out the Magna Carta while you're at it. I mean, shit that's 13th century and certainly an impediment to a such a smart and modern man as you. I guess that falls in your category of "falsehoods" by the mere fact that there are criminals in power who don't recognize the rights of others. There are no fundamental truths in your world, only the "truth" of the dictator, which changes with the stroke of a key or a proclamation. That makes you part of the problem.

[-] 1 points by Rico (3027) 7 years ago

I'm not a big fan of AGENCY LAW either, especially regarding the IRS, but it's been fought time and time again in the Supreme Court and it still stands.

You make a HUGE leap when you jump from a discussion of the Federal Reserve to discussion of the erosion of individual liberties then circle back to say my efforts to EDUCATE people regarding the Federal Reserve means I'm against individual liberties. My post was intended to do nothing more but introduce some facts.

Thomas Jefferson was a GREAT man, one of MANY that emerged from the Age of Reason "that sought to mobilize the power of reason in order to reform society and advance knowledge" [WikiPedia]. REASON ! He would likely be the FIRST to say some of what he said said needed revision. Accepting EVERYTHING said by a man of the 18th century speaking about an ever dynamic and growing society simply DEFIES reason. ALL of the Founders made specific comments about different issues relevant to their time, but they were very CAREFUL to leave such DETAIL out of the Constitution which is written to allow for CHANGE.

I, for one, which we could spark a REBIRTH of the Age of Reason in this Country, and I try to FOSTER that rebirth by engaging in civil discourse based on FACTS. I have observed that I am one of the FEW people who do so. MOST simply spout their opinions, point to OTHERS who SHARE their opinion, show no SIGN of UNDERSTANDING the issues about which they hold those opinions, and simply revert to NAME-CALLING when their opinion is CHALLENGED by someone offering a different perspective back with FACTS.

It's more than a little SAD who we have become, and I'm POSITIVE our Founding Fathers would be very disappointed in us; they had HIGH hopes that we would employ REASON in CIVIL and RESPECTFUL discourse to solve our problems. We have let them down.

[-] 1 points by LIVE4CHANGE (37) 7 years ago

yeah its funny you mention that we should back our money with gold/silver because last time someone (aka JFK signed the executive order 11110, he was assassinated.) hmmmmm...he signed to put out $4 billion U.S. notes because thats how much silver we had in our economy....

lets try to pass an order like that again....

[-] 1 points by Republicae (81) 7 years ago

Actually the executive order 11110 did nothing of the sort, read it again. That is a popular, but misleading myth. All it did was delegate to the Secretary of the Treasury the president's authority to issue silver certificates under the Thomas Amendment of the Agricultural Adjustment Act.

[-] 1 points by Rico (3027) 7 years ago

You do understand the difference between correlation and causation, right ?

[-] 1 points by occupyguy (33) 7 years ago

Hey, I don't have an exact answer for you but here's some fun facts regarding the amount of money in circulation:

Our buddy, The Federal Reserve, keeps an eye on the Benjamins with a microscope. They even have their own catchy little lingo that they use to conspire with other folks in their club. Here's a brief breakdown:

M0: Is total of all physical currency, plus accounts at the central bank which can be exchanged for physical currency.

M1: Is the M0 as well as the amount in demand accounts ("checking" or "current" accounts).

M2: Is the M1 as well as most savings accounts, money market accounts, and certificate of deposit accounts (CDs) of under $100,000.

M3: Is the M2 as well as all other CDs, deposits of eurodollars and repurchase agreements.

In March 2006, the US Federal Reserve ceased publishing M3 data, saying, "[the] M3 does not appear to convey any additional information about economic activity that is not already embodied in M2 and has not played a role in the monetary policy process for many years", adding that the costs of collecting the data required for the index outweighed its benefits.

http://www.federalreserve.gov/releases/h6/discm3.htm

Since 2006 they have been printing M3, the total amount of money in our economy, faster than they can count it and we all know that they are still auditing the M3 data and Bernanke has the spreadsheet hidden in the locked drawer of his desk:)

Wa Wa Waaaaaaaaaa

[-] 1 points by Rico (3027) 7 years ago

So? Why do you CARE so much about how many little tokens are created?

See my post at http://occupywallst.org/forum/what-is-money/

[-] 1 points by Republicae (81) 7 years ago

Because the amount of "tokens" created have a direct affect on the ability of people to make purchases, under a fiat monetary substitute system the more bills issued the less their purchase value....it's called inflation or monetary depreciation. Since 1913, the fact that the purchase value of a "dollar", which once held at 100 Cents is now down to approximate 3 Cents does, in fact, make a huge difference in the ability of people, in particular working people and those on fixed incomes, to make ends meet. The more "little tokens" the less the purchase value of each of those units. The more they print the less they buy, the less they buy the harder it is for common people to make it...haven't you noticed the prices in the grocery store lately. Two years ago, one of my favorite blocks of Irish cheese when for $2.87, today that same block of cheese is over $6.00. Wait until milk is $8.00 a gallon, then perhaps you might rethink why the increase in the fiat money supply is very, very important. Or perhaps you will wait until a hyper-inflationary depression takes hold to change your thoughts on the subject.

[-] 1 points by Rico (3027) 7 years ago

You're ascribing value to the tokens where there is none. The REAL value in an economy is measured by the goods-and-services exchanged, NOT by the quantity of tokens. Further economic PROGRESS is measured by standard of living, NOT by the value of our tokens.

Forget the tokens. Consider instead the life span, working conditions, housing conditions, infant mortality, quality and quantity of goods and services available, and the disposable income available to buy those goods. Do you REALLY think the average American Joe is WORSE OFF today than he was in 1913 ? Heck, we have so much food even our poor are obese, our houses are FILLED with luxury items that are not needed for simple survival, MOST of us are employed making/doing things that are non-essential, and we've created hugely successful companies (Apple et al) who making NOTHING that anybody needs to survive.

[-] 1 points by Republicae (81) 7 years ago

Ah, but there is an exchange value to monetary units, even where those units are fiat units. The mechanism of exchange in this economy is not goods and services, but the money used in that indirect exchange mechanism. As such, if the purchase value of a unit of money loses the value of exchange by certain percentages then it costs more to purchase the same goods and services that were less expensive prior to inflation.

Progress might be measured by the standard of living, but the means of exchange is measured in the amount of goods and services a monetary unit will buy. As Adam Smith rightly explained: “Though the wages of the workman are commonly paid to him in money, his real revenue, like that of all other men, consists, not in money, but in the money’s worth” In other words, in what that money will buy. Thus, it is not the amount of money that is as important as it is the quality of that money in terms of the exchange power of each monetary unit.

The standard of living of a society is a direct result of the mechanism of exchange and through that exchange the mechanisms of the market in providing both goods and services to those who demand those goods and services, without the mechanism of exchange, or with one that is being constantly depreciated through inflation, the standard of living will decrease over time.

[-] 1 points by Rico (3027) 7 years ago

I remain unconvinced ! Sorry ;o)

[-] 1 points by Republicae (81) 7 years ago

Oh, that's okay, I need not convince you, time will do that, time and a reality that will force a great many people to open their eyes to a situation that none will be able to avoid.

[-] 1 points by Jbear (60) from Greenfield, MA 7 years ago

One thing you didn't mention is that for the past 50 years prices have been rising, but wages have not risen nearly enough to match that.

[-] 1 points by Rico (3027) 7 years ago

It depends on what prices you're referring to, does it not? Most of us paid MUCH more for our car than our parents did, for example, but our cars are MUCH better than they were then. Just compare the car the average Joe drives today to a 1950 Bel-Air ... our cars get better mileage (offsetting increased fuel costs), make less pollution, work for 200,000 miles, need much less routine maintenance, are much safer in a crash, have MP3, GPS, etc.

In fact, as I look around my home, I see I have everything my parents had back when the "dollar was worth something." They had a 12" black-and white TV with three broadcast networks while I have a 50" HD LCD panel with 100 satellite channels. They had a dishwasher, refrigerator, and stove as do I. They couldn't record TV or afford to hop on a plane to take a trip. I can. In addition, my life i full of products they couldn't even imagine... computers, Internet, cell-phones, MP3 players, etc.

I think my dollar is buying a LOT more today then theirs did. The only thing it DOESN'T buy as much of is gold, but I'm not terribly interested in gold.

[-] 1 points by Jbear (60) from Greenfield, MA 7 years ago

Food prices and gas prices have both skyrocketed without any wage changes. And honestly, cars lasted a lot longer and were better quality in the 80s than the 90s, I can't say anything for the past decade, cause I've never owned a car in that year range. My 88 pickup truck got better gas mileage (30 mpg) than many cars did 3 or 4 years ago.

The price rises that I was speaking to, were those of necessities, not luxuries. Clothes, food, transport.

And for the things that have had a rise in cost that is consistent with the rise in quality, it doesn't help people who are making minimum wage, that these things are better quality. They still can't afford it, because minimum wage is too low in proportion.

[-] 1 points by Rico (3027) 7 years ago

You need to think a bit deeper about some of these costs.

Oil is a non renewable resource and we've seen a phenomenal increase in demand as the economies of China, India, South America, and the rest of the world have expanded. In addition, we have had to deal with the OPEC cartel. As prices have gone up, new exploration and extraction technologies have become cost effective, and we're getting better at extracting what remains of the world's hydrocarbon reserves (I understand America/Canada, for example, are now over 70% self-sufficient). The IMPACT of hydrocarbon costs on the American consumer have been mitigated to a large extent by continued progress in efficiency. The average new car now gets 30 MPG versus 12 MPG in the '60s, and the change is even more dramatic if we include the newer electric, hybrid, and clean diesel cars. In summary, the cost of oil is driven by many factors beyond simple inflation, and the actual cost of gasoline per driven mile seen by the consumer has not increased as much as people assume when they look at the cost per gallon alone (which is still FAR less than the cost of a Starbucks latte per gallon ;o)

As for food, how can we simultaneously declare that the nation is obese while also saying the cost of food has risen so high people can't afford it? It makes no sense. Even our POOR are walking around with a girth once reserved for the rich (did you know that being fat used to be considered an indicator of wealth?).

As for cars, you really should consider taking another look. Both my Acura and my Honda Civic Hybrid now have over 200,000 miles on them, and I have had zero problems other than routine wear (brakes, belts, etc). I am a long time car nut and used to build muscle cars (I still DO hold on to my tricked out Gen 3 RX-7 o;), and I remember well how often I used to have to do clutch/transmission work, change oil, change plugs, etc on my cars. These new cars are simply amazing in terms of reliability and maintenance. They're a bargain !

As for general American prosperity, see my post at http://occupywallst.org/forum/inconvenient-truths-america/ . 65% of the American public lives in owner-occupied residences and 21% own their homes outright. The portion of household income devoted to housing costs is quite low (especially after the Great American Debt Payoff of 2008-2011), and we retain appreciable disposable income. The large amount of disposable income in America is readily evident from the rise of Apple and other such firms; nothing they make is a necessity.

Minimum wage is a bit off-topic for this thread, and I have not conducted enough research to formulate a rational opinion (yet). I'll remain silent until I know more.

[-] 1 points by henoktg (66) 7 years ago

Rico ... WHO OWN THE FED? If it was me I will form my corporation “THE FED” to generate profit, how will i do that? The US dollar is debt money. It’s backed by the productive power of the US public.
How do you explain private investors who own the fed to print money backed by the public production power and earn interest on it as taxation from the public? I’m sure you do know the core problem.

[-] 1 points by Rico (3027) 7 years ago

I quote from the Encyclopedia of Business and Finance, 2nd ed. which you can read at http://www.encyclopedia.com/topic/Federal_Reserve_System.aspx#2-1G2:1552100128-full

'Designed by Congress and subject to congressional authority, the Fed is a politically independent and financially self-sufficient federal agency ... The Fed's primary policy-making group is the seven-member Board of Governors. Appointed by the president and confirmed by the Senate, members serve for one fourteen-year term only. A member who is appointed to fill an unexpired term may be appointed for an additional full term. From among the seven members, the Board's chairman and vice chairman are also appointed and confirmed by the president and the Senate for four-year terms."

If you like, you can also read Title 12 paragraph 3 of the Federal Code that created the Fed at http://www.law.cornell.edu/uscode/12/usc_sup_01_12_10_3.html . It says the same thing in legalese.

Though the member banks of the Federal Reserve System ARE private, the Governing Board sets POLICY. We The People control the Federal Reserve. This relationship where a regulating agency works closely with the industry being regulated is replicated in the FCC, the FDA, etc. In ALL cases, We the People set policy, and the regulated companies have just as much influence over policy as we decide their input merits.

As for this whole panic over printing money, people need to remember money is just a token we use to facilitate commerce, and it has no intrinsic value. The VALUE in an economy is defined by the goods and services exchanged in commerce, NOT the number of tokens. People who obsess over these tokens, whether the rich who hoard them or the poor who vest them with too much meaning, suffer from a delusion. See my post at http://occupywallst.org/forum/what-is-money/

Note that if we did NOT maintain an elastic supply of tokens, we would be in DEEP trouble right now because the rich and China hold so MANY of our tokens that there wouldn't be enough left to facilitate commerce. Fortunately, we can just print more tokens to ensure there are enough to meet our needs.

[-] 1 points by henoktg (66) 7 years ago

Never try to delude the public, the public is part of everything?

[-] 1 points by henoktg (66) 7 years ago

Explain this....

THEY PRINT IT - WE BORROW IT AND PAY THEM INTEREST We shall start with the need for money. The Federal Government, having spent more than it has taken from its citizens in taxes, needs, for the sake of illustration, $1,000,000,000. Since it does not have the money, and Congress has given away its authority to "create" it, the Government must go the "creators" for the $1 billion. But, the Federal Reserve, a private corporation, doesn't just give its money away! The Bankers are willing to deliver $1,000,000,000 in money or credit to the Federal Government in exchange for the Government's agreement to pay it back - with interest! So Congress authorizes the Treasury Department to print $1,000,000,000 in U.S. Bonds, which are then delivered to the Federal Reserve Bankers.

The Federal Reserve then pays the cost of printing the $1,000,000,000 (about $1,000) and makes the exchange. The Government then uses the money to pay its obligations. What are the results of this fantastic transaction? Well, $1 billion in Government bills are paid all right, but the Government has now indebted the people to the Bankers for $1 billion on which the people must pay interest! Tens of thousands of such transactions have taken place since 1913 so that by the 1980's, the U.S. Government is indebted. to the Bankers for over $1,000,000,000,000 (trillion) on which the people pay over $100 billion a year in interest alone with no hope of ever paying off the principal. Supposedly our children and following generations will pay forever and forever!

[-] 1 points by Rico (3027) 7 years ago

You're still focused on the tokens. ANYONE obsessed with these tokens, whether the rich who try to amass them or others who vest them with significance beyond their due, suffers from the same delusions. The tokens have ZERO intrinsic value.

The wealth of a nation is measured in the goods-and-services it provides, and the prosperity of a nation is measured in the standard of living enjoyed by it's citizens. Neither has ANYTHING to due with the value of our tokens much LESS that value of gold.

People like to say the Federal Reserve has caused great harm, yet any rational comparison of both the wealth of our nation and the standard of living enjoyed by our citizens has improved dramatically since the Fed was founded in 1913. We cannot say this is CAUSAL, but we CAN say our wealth and standard of living have improved in SPITE of whatever evil you think they do.

[-] 1 points by trob888 (25) 7 years ago

Ok so when prices go up and wages go up, how does this benefit someone who doesn't have a job? The answer is, it doesn't, it cripples them.

[-] 1 points by Rico (3027) 7 years ago

Absolutely. Those on welfare, social security, etc have TYPICALLY gotten "cost of living increases" but we seem to be dropping those across the board. In my opinion, this is a rather heartless way to "save money" at the expense of those who can least afford it. The fact is, inflation is largely the result of Government Policy, and we shouldn't be making those who are already suffering the most suffer even more.

[-] 1 points by snodog (4) 7 years ago

When there is more inflation people spend their money. 70% of our economy is consumer spending so if people are buying more cars, houses, and tv's companies will have to hire people to make those products thereby lowering unemployment.

[-] 1 points by Rico (3027) 7 years ago

Yep... and to be even MORE concise, the MAJORITY of American workers are NOT employed making things people actually NEED for survival, and our economy is largely driven by DISCRETIONARY spending. See my rather lengthy comment at http://occupywallst.org/forum/what-is-money/#comment-226298 .

[-] 1 points by Republicae (81) 7 years ago

Unfortunately, an economy that depends totally upon debt will ultimately become distorted and crash, economies that are based upon actual savings however, tend to be much more sustainable.Since this government and the FED must constantly inflate in order to maintain the illusion of economic growth, eventually the economic potency of the monetary unit is weakened. Today, for instance, it takes over $22,000.00 to buy what $1,000.00 bought in 1913...why, because of the massive degree of monetary inflation that has taken place under the FED, that depreciates the real or purchase value of the monetary unit to the point that it eventually no longer functions as a medium of exchange and people begin to rapidly lose confidence in the system...we are getting to that point.

[-] 1 points by Rico (3027) 7 years ago

Sigh.

Please compare the car, televisions, refrigerator, dishwasher, smart phones, computers, internet, air travel, life expectancy, medical care, and all other REAL measures of life between 1913 and today. Even our poorest look well-to-do by the standards of the average Joe back in 1913.

There is literally only ONE thing I can't buy as much of today as before, and that's Gold. I care about the price of gold about once every 10 years when I buy my wife a non-essential trinket. The rest of the time I find I've got so much food I'm fat just like the wealth of old, I don't worry about polio or flu epidemics, and I've got all these gadgets that folks couldn't even imagine back then!

[-] 1 points by Republicae (81) 7 years ago

Double Sigh.....you obviously don’t get it or the implications of what I am saying. The real wages, the real income, the real purchase power of the currency has been depreciated purposefully, essentially making most working people little more than serfs, working for pennies per hour when they think they are making several dollars an hour. So, most people make their few “dollars” per hour, but either must resort to living on credit to live a life that is half-way decent or living on government assistance, with about half of the population depends on and the government likes it that way....the politicians tend to have a captive voting block that way.

Most of what most people have been buying for the last twenty years or so has been not due to the fact that they can afford cars, televisions, refrigerators, dishwashers, etc., but that they have, been able to live on an artificially created economy based solely upon credit. Of course, as we know, the wonderful world of credit is only as good as and will last as long as the artificially maintained fiat economy can be maintained and manipulated by the government’s lapdog central banking system.

Gold, or the fiat price of gold, is reflecting several things, one being the depreciated value of the fiat monetary regime, it also reflects fear and uncertainty. The U.S. Dollar was once 1/20th of an ounce of gold, today as it reflects the debased currency, the U.S. Federal Reserve Note is 1/1738th of an ounce. If you don’t understand the importance of that then by all means continue on with a life governed by circumstance, wondering what the hell is happening as the costs of living gets higher and higher and higher. It is happening before your eyes, are you prepared for the consequences of such events? From your comments, it sounds doubtful.

[-] 1 points by Rico (3027) 7 years ago

Triple Sigh ;o)

I am unmoved from my position that the average Joe of today is much better off than the average Joe of 1913. His life-span is longer, he works fewer hours, he's got more food (and is fatter), and has more disposable income to spend on trinkets. How ELSE do you explain the meteoric rise of Apple (et al) who sells nothing but luxury goods people can live without ?

Please just run a tally comparing the quality of life of 1913 to 2011. Ignore the distracting discussion about these tokens we call "money." Look at his living and working conditions combined with the number of trinkets he owns.

[-] 1 points by Republicae (81) 7 years ago

We are not talking about being better off, we are talking about the fact that money, the mechanism of the economy is being depreciated to the point that it becomes harder and harder for a working man or woman to makes ends meet. The majority of disposable income in this country, at least for the last two decades, has been due to the easy extension of credit, not to disposable income. Read the statistics on personal debt, that makes the case pretty clear. The problem is that the fiat paper tokens are based on a system that cannot be sustained any more than the easy credit lifestyle of consumerism this country has become addicted to, thanks in large part to the monetary policies of the Federal Reserve.

We are, at least it should be obvious, talking about two entirely different things. The fact that we have enjoyed a fantastic standard of living in this country is not due to the accumulation of productive capital, but to the type of monetary policy that makes credit/debt accumulation easy. That however, as the Panic of 2008 proved, is not the most efficient method of raising the standard of living.

[-] 1 points by Rico (3027) 7 years ago

Yet the standard of living of the average American Joe HAS improved to an ASTONISHING degree since the creation of the Federal Reserve in 1913. While this may not be causal, it certainly argues against the OPPOSITE position that the Federal Reserve has caused great harm.

[-] 1 points by Republicae (81) 7 years ago

Ah, but is that indeed true? Look at the various crashes and recessions that have taken place after the formation of the FED, they far outweigh any that took place under a gold monetary system and indeed, the losses to the general public have been massive, from the Great Depression onward. In the Panic of 2008, for instance, Trillions of dollars worth of equity was wiped out, retirement plans wiped out. The FED, thanks to Bernanke, finally admitted that it was the monetary policies of the FED that caused the Great Depression. The FED, at that time had only been in existence for a little less than 20 years, yet it created a situation that caused the most destructive economic event in the history of this country to that point. The fact is that the FED and its policies are behind every single economic dislocation that has occurred in this country since that time.

Additionally, the fact that there has been a steady erosion of the buying power of the currency is enough to argue against the supposed benefits of the FED. Now, if you want to see the results of societies that have raised their standard of living on easy credit and easy money....view the PIIGS of Europe, those countries and their people enjoyed an ever increasing standard of living, that is until the backbone of that standard was swept from under them. Those countries represent a reality that you obviously choose not to concern yourself with however, the reality is that this country is also build on a system of easy credit and money, fiat money. A system that is rapidly heading for the crapper, when it does what do you think the standard of living will be like in this country? It will certainly not be what we would consider acceptable, much less substantial. The numbers are already showing a decline in the standard of living for the American People, it will continue to erode as more and more debt is used to bolster an economy build solely upon debt creation as a political means of placating the public. Indeed, it is very difficult to access the damage done over the years, from economic distortions, mal-investments, mis-allocation of resources, the lack of a signaling process in businesses, not to mention the distortions in profits, credit markets, the stock market, pension plans, etc.

You can serve as an apologist for the FED, but the truth of the matter is that unless you are one of the ones who gets to the FED’s trough first, you pay a price with each increase of the money supply that that price is very, very costly in a myriad of ways. If you count inflation in the orthodox manner, in the way they use to calculate inflation, then the rate of inflation, non-culumative, is running at 11%. That is substantial in an economy that is not producing growth, even if the economy were producing, that rate of inflation is enough to cause disruptions. Disruptions in the capital and labor triumvirate, for wages are not increaseing at such a high rate, meaning that more and more people will have to use what they have on subsistence rather than anything else, as we have seen over the last couple of years.

It should also be obvious, that pumping vast amounts of fiat money does not produce economic growth, if it did then we should be up to our chins in economic growth due to that infusion of Trillions of Dollars in recent years, yet the potency of those fiat dollars is declining so rapidly that there is little resulting effects from the currency infusions themselves. At one time such methods of fiat trickery worked, but that began to change around the year 2000, when the so-called return on government investment into the economy started its slide. The fact is that money itself is unproductive, particularly when that money is fiat money which retains little of its original purchase value. Money, at least all those Trillions of Dollars spent by this government has been ultimately used on numerous non-productive projects and programs, in a feeble attempt to “jump-start” the economy, when that is not what the economy needs, it needs real savings, real production and a money that is not constantly depreciated through FED policy and government intervention.

There is, obvoiusly, far more involved with an increase in the standard of living, the access to a higher standard of living has indeed been broadened by the easy credit and money policies of the FED however, that cannot discount the major role that innovation plays, that the market mechanisms that work despite those distortive monetary polices create, the ability of the market to be resistent despite all the road-blocks placed before it by the policies of the FED.

Besides, I dare say, with a great deal of confidence, that your thoughts and ideas about FED policy will go through a huge transformation within the next 24 to 48 months, based on the evidence I’ve seen about the underlying economic conditions of this country.

[-] 1 points by Rico (3027) 7 years ago

Oh come on! You MUST admit the standard of living today is MUCH better than it was in 1913 ! How can you argue that point?

On finer matters, it's clear we're going to have to agree to disagree (a perfectly reasonable conclusion to any rationale discourse about such complex matters).

Let's see how the world is doing 24-48 months from now as you suggest.

I bet we're in better shape. In fact, I have an UNSUBSTANTIATED suspicion that we might be doing MUCH better the day after the 2012 election... I suspect business leaders are simply pissed at Obama for his "I have my boot on the throat of the corporations" statement and actions, and they are intentionally holding back to try and get him out. IF Obama is defeated (and given the slate of Republican choices, that's none too sure), I suspect they may jump in with two feet. Again, this is a wholly unsubstantiated suspicion. Only time will tell.

[-] 1 points by Republicae (81) 7 years ago

I have never said that it isn't better now, can't you read? That was never the point that I was making, that was your point.

The Republicans will do nothing more nor can they do anything more than Obama. The problem currently is the massive amount of uncertainty in the markets, that is causing corporations to hold back, but that uncertainty is not simply going to go away due to the election, there are fundamental issues within the economic foundation of this country that are simply not being addressed. Indeed, there are fundamental issues that haven't been addressed even since the Panic of 2008, the fact is that the same problems that caused the Panic still exist, nothing was fixed only mollified through heaping massive amounts of bailouts and stimulus fiat money toward the problems. They heaped more debt on to solve a huge debt problem, there is essentially a massive overhang, not only of debt, but also of fiat money floating around outside the U.S., it will not take much for those fiat notes to flood back into this country as more and more countries come to understand that this government is not only not serious about the issues it has with debt, but that it is essentially helpless to accomplish anything dealing with those issues.

Oh, time has already told, back in 2006, on the site Capitol Hill Blue, you can find my writings where, long before there was an issue with Fannie/Freddie I hit the mark on what we were facing, not only there but the entire sub-prime market. Additionally, also in 2006, I hit the mark again on the problems with the EURO. I mean, look it up under the name Republicae...it's all documented. So, based on my understandings of those issues, I forecast those events and prepared myself for them. So too, based on my understandings of the major issues rolling under the surface of this economic system I also forecast certain events and I'm preparing for them.

I'm not trying to be cocky, but I'm just saying that so far, I've been correct in my assessments....I could be wrong this time, but for some reason I doubt if my methodology will fail me this time either.

[-] 1 points by Republicae (81) 7 years ago

Well Rico...I’ve been at this for a long, long time, I first retired at the age of 34, sold two business I started and sailed all around South America for a year...then got bored, so, I began accumulating various securities liceneses, Series 7, Series 3, as well as some more esoteric disciplines. I have since traded mainly commodities futures, made my first big hit in Coffee during the 80s.

However, I have seen several things happening in this country, a progression of economic policy decisions that have made a definite impression upon me that things are following a downward path. I have, since the 70s began to make preparations for a period of upheavel, that time is here, at least in my estimation. I began to buy gold as soon as it was legalized again in 1975 and have accumulated it and silver since that time.

My writings tend to be radical but you can find them at http://1776solution.blogspot.com

[-] 1 points by Rico (3027) 7 years ago

Well, let me just say that THIS time, I hope you're wrong ! Heck, I just made over $100K in the markets and am only a year or so away from a nice bohemian lifestyle of writing, blogging, drinking, and general carousing in retirement !

I respect your willingness to engage in rational discussion, and I'm off to read your other stuff. Who knows, you might even change my position, but no promises ! ;o)

[-] 1 points by harry2 (113) 7 years ago

A) Its bacteria infected paper. B) It is a artificial power tool C) It is a medium to define value of goods

D) we should not need it

Check out the venus project = alternative living.

[-] 1 points by Rico (3027) 7 years ago

A) Agreed ;o)

B) Agree, but I turn it around to say people GRANT it too much power

C) Reverse it. The value of a TOKEN is defined by the goods for which it can be exchanged.

D) Disagree. We'll always be exchanging things, and these tokens are useful.

We just need to understand that money is nothing but a token and stop investing it with so much power and meaning. The real VALUE in the economy are the goods and services produced. Money is just a token we use for convenience so we can trade goods and services between us more readily.

Your Venus project is a case in point. People can and DO get by simply trading goods and services directly. Some communities have even built their own "point" system and trade points. They have created "money."

Money is just a useful tool. People who obsess over it suffer from delusions, whether they be the wealthy who seek it in endless quantity or the people here who vest it with so much meaning !

[-] 1 points by harry2 (113) 7 years ago

Maybe a educational value system, while being in a lifetime learning process, is a solution. Options to temporarily to opt out for physical work contribution? And temporary security work contribution.

Goods are just a natural result of the education leading to inventions and better understanding.

Money? just don't use the word use it as points of a lifetime and eliminate banks,
A lifetime support in points! Technology can provide a fully administrative automation with relative low manpower.

Workforce now is mostly self entertainment or better said over administrated anyway .

[-] 1 points by EndTheFedNow (692) 7 years ago

OP you have just spewed so much disinfo it's appalling. Fortunately there are other threads on this board telling the truth so it's not necessary to take your post apart and correct it.

[-] 1 points by Rico (3027) 7 years ago

In other words, "I have a very strong opinion about something I don't understand but I'm POSITIVE you are wrong because all my friends agree with ME." Do ANY of you do actual research or do you all just repeat opinions you hear from others? THIS is what's wrong with "Direct Democracy;" it depends on an INFORMED public but folks would rather cling to the opinions of their local club than engage in civil discourse with people having opposing views. Go back to the warm comfort of your little opinion club !

[-] 1 points by EndTheFedNow (692) 7 years ago

Look, you didn't make a post, you wrote an essay. It's too long to refute point by point.

You said:

"Money is just a token used to facilitate commerce. Imagine I have some excess milk and would like some wheat. WITHOUT these nifty tokens, I have to find someone who BOTH has excess wheat and WANTS milk. WITH these nifty tokens, I need only "sell" my milk to ANYONE who wants some then "buy" some wheat from ANYBODY who has some. Money has no intrinsic value outside the goods and services being traded. It is simply a convenient abstraction."

That is completely inaccurate. Gold and silver have been valued as a medium of exchange for thousands of years because they DO have intrinsic value. Believe me, if I'm selling wheat and you have casino chips and the other has gold or silver, he's getting the wheat.

[-] 1 points by Rico (3027) 7 years ago

An essay? Hardly, it was a few paragraphs. Some topics are inherently complex, and any reasoned discussion of them requires more than 200 characters. This frustrates the Twitter/Facebook/Sound-Bite lovers, but it's unavoidable if we are to engage in reasoned discussion of complex topics.

Imagine we were on the gold standard right here and now. The rich and the Chinese have ALL of it. What are the 99% engaged in routine day-to-day commerce having nothing whatsoever to do with gold supposed to use ?

More questions... what happens to an economy when huge new deposits of gold or silver are found as in the California and Alaskan gold rushes and the Comstock Lode silver strike ? How does all this "extra value" get injected into an economy? Are you aware of the intense political debate surrounding this very question that occurred at the time ? The rich wanted the gold/silver deposited in Fort Knox while the average American, many of whom were farmers suffering under debt, wanted the money put into circulation to create inflation.

Yet more questions... Are you familiar with the Dutch Tulip Panic, the French Louisiana Land bubble, Spain's South American land bubble, the Panic of 1873, etc? ALL of these occurred under the gold/silver standard.

People are romanticizing gold/silver with little understanding of history or economics. It's not all it's cracked up to be, and there's darned good REASONS why we left that system behind us.

[-] 1 points by TalkingHead (101) 7 years ago

Excellent summery. A quick question, when the fed devalues the dollar by creating new dollars, how do the new dollars get into the economy?

[-] 2 points by Rico (3027) 7 years ago

I was going to add a statement to my post to the effect "the METHOD by which the number of tokens in circulation is modified is somewhat arcane and irrelevant to the general discussion." That's literally the truth. If you want to know more about HOW the Fed actually does this....

The response from Republicae below is pretty accurate insofar as it describes fractional lending in general. I would elaborate by pointing out what may be obvious... the percentage of each dollar the bank is required to hold as reserves defines a money multiplier. Assuming the bank is required to hold 20% in reserve, has unlimited demand for loans, and is able to make loans as small as 5 cents, one dollar on deposit turns into about $5 in the general money supply (M1). It's important to note, however, that those assumptions are critical... if there is no demand for loans, the multiplication doesn't occur.

I would also point out that this multiplication process works in reverse as well (division)... If so many depositors walk in on the same day and demand their dollar back, the banks reserves will be exhausted and will have no choice but to either shutter its windows or start placing calls on outstanding loans. This is a "bank run" caused by insufficient "liquidity".

The plot thickens. If we were to let the banks operate with ZERO reserves the money supply will approach infinity (again assuming they have unlimited demand for loans). As we raise the reserve requirement towards 100% , the money supply shrinks. As it turns out, we DO have a set reserve requirement that we impose on banks, but we let them BORROW their reserves from the Federal Funds Window. The rate we the People of the US charge at this window returns revenue to the taxpayer but more importantly, it provides a "lever" by the Governing Board can control the expansion of contraction of the money supply. If the Fed sets the rate higher than what the banks think they can get for the money they hold, they will be conservative in hoolding back their reserves. If the Fed sets the rate much lower than what the banks think they can get, they will go ahead and loan out all the money they have and simply BORROW their reserves. Thus, the "fixed" reserve rate becomes flexible via the Federal Funds window and the Fed is able to expand and contract the money supply.

Remember those assumptions? They matter. At present we have a situation where there is little demand for loans, so it doesn't matter how much the Fed tries to expand liquidity; it makes no difference if nobody ready, willing, or qualified to borrow. Thus, the Fed and the Treasury turn to some other tools.

Another tool used by the Federal Reserve and the Treasury is to print money by letting the Federal Reserve buy Treasuries issued on behalf of the Treasury Department. The money to BUY those Treasuries literally appears from nowhere via an accounting trick... it holds the Treasuries on it's books as assets against which it can print money. This money then goes into circulation and the M! supply expands. This is "Quantitative Easing," and we're not the ONLY ones doing it.

In joining the Eurozone, countries like Greece gave up their sovereign currency and cannot print money to effect a "slow default" as is usually done when a country gets into their situation. While a "slow default" is STILL a default, it is gradual and doesn't shock the system like a hard default under which they essentially declare bankrupcy. Remember, all that debt they can't pay ended up in the fractional reserve system, and pulling it back out of the system forces a collapse in liquidity.

Unfortunately, the fiscally conservative Germans don't want to let the ECB print the money like the more liberal French suggest as that would devalue the currency, so now they can't print their way out of the problem. Bottom line... many countries gave up their sovereign currency to join the common MONETARY system but never formed a common FISCAL union much less a means to deal with debtor nations.

Of all the Eurozone members, I believe Britain was the ONLY one to keep their sovereign currency, and they have a "Quantitative Easing" program just like us.

[-] 1 points by TalkingHead (101) 7 years ago

Thank you for your very comprehensive response. Now, if like you say expansion of the money supply happens through the process of fractional-reserve bank loans, what happens to the economy when fewer loans are made and the new money supply created is insufficient for the amount of commerce needed to keep the unemployment rate from getting too high? Is that what causes recessions, when banks make fewer loans and the money going out of the banks (in new loans) is less than the money going in (in loan repayments), in effect sucking money out of the economy?

[-] 1 points by Rico (3027) 7 years ago

You have to be careful in the causal relations. Banks will lend money insofar as there is demand for loans, and the demand for loans is driven by demand for goods and services in the economy. Availability of credit is not the only, nor is it the largest, factor influencing consumer demand; a fact implicit given our recent inability to move the economy via monetary policy alone.

Modern economies are driven by consumer demand for non-necessities, or discretionary spending. Ask yourself how many people you know that are employed in the creation of goods and services the average person simply cannot survive without. Where a farmer once worked all day to feed his own family, for example, today's farms are so efficient, only a small number of people feed the world ! The fact that the economy is so driven by non-essentials is evident in the wide swing in spending we see when folks get scared. They're still buying the necessities (lest they perish), but they stop spending on non-essentials (tangent: ponder for a moment the power of the media over a modern economy).

The demand for non-essentials, let's call them "trinkets," is driven by desire and affordability.

Desire is largely personal, but it IS affected by the number of trinkets people already have; I myself can never even THINK of what I want for Christmas... I already have it all (tangent: consider how new and improved trinkets drive demand to replace existing trinkets while environmental concerns inhibits demand via reluctance to discard working but "old" gadgets ). Note desire defines WHAT we buy, and we also have a lot of people who are buying "security" by NOT spending ( tangent: what is the impact of the Baby Boomer generation FINALLY realizing it's time to start retiring debt while saving/investing for retirement ?).

Affordability of any given trinket is defined by the consumer's subjective sense of his present and future economic position combined with subjective decisions regarding the relative value of different trinkets they desire. A periodic poll of families conducted by the Federal Reserve revealed some very interesting changes; ALL families, regardless of income, reported a 200% increase in their sense of how much savings/debt they should carry for security reasons, and ALL reported a reluctance to spend based purely on the state of the economy. This is reflected in the unprecedented drop in household debt and increase in household savings rate we've seen since the 2008 crash. A bit of good news, by the way, was reported in the Q3 report from the Commerce Department; sales of new cars spiked, and this suggests Americans are starting to feel like they're back in a position to spend (cars are the second largest purchase most people make, right behind homes).

In summary, we have only a little control over consumer demand via monetary policy. We can create inflation which puts some pressure on people to spend their "stash" before its value falls, reduces the cost of household debt, and shifts trade in favor of domestic products to create jobs, but we can't MAKE people spend.

[-] 1 points by TalkingHead (101) 7 years ago

I’m not an economist or financial professional but this whole system of creating new money only when loans are made seems not the optimum way for new wealth to enter the economy. Wouldn’t it be better if all new money created equaled the total dollar amount of new food harvested, raw materials mined, oil pumped etc. in our country. If we eliminated the fractional-reserve method of money creation and substituted it with raw-wealth backed money we could use it to fund our government, greatly reducing the need for taxes. It would also be more stable rather than the loan-demand created periods of boom and bust that we go through now. Loans would be made at 100% reserves, which would allow interest rates to raise enough to make it worth it to save your money. If you think this is pie-in-the-sky by all means let me know.

[-] 1 points by Rico (3027) 7 years ago

No, FAR from being "pie in the sky," you're CLEARLY starting to "get it" (at least as well as an average Joe non-expert like myself can explain), and asking a VERY good question ! The only thing I would change in your question is to expand "food harvested, raw materials mined, oil pumped, etc." with "goods and services produced" or the Gross Domestic Product (tangent: those nifty microprocessors in your computer cost nearly as much as gold, but they are made mostly of common sand and are primarily VALUED ADDED products).

I, for one, DISLIKE the whole idea of the Federal Reserve or (anyone else) trying to "manipulate" me to do what they think is right... It just FEELS wrong. If the USA stood alone in the world, and people did NOT accumulate debt or wealth, I would argue they should print dollars in direct proportion to growth in the Gross Domestic Product and no more. Unfortunately, we do NOT stand alone in the world, and people DO amass wealth and debt, AND there's always the Triffin Dilemma (Google it) so we end up needing a way to MANAGE the number of tokens in circulation.

As you suggest, however, I suspect the WAY we manage the tokens may not be optimal.

What if instead of printing dollars that are injected into the system via loans and Congressional borrowing, we simply printed dollars and gave them to each and every citizen ? How would we DO that? Through the Tax system.

The Fed pumps all THEIR money through the banks and politicians do it through their benefactors and constituencies. The Fed's approach benefits the banks, and the Congressional approach benefits Congressman. All this creates a centralized MESS. For example, I do a LOT of work with Government contracts, and the recent stimulus efforts failed in PART because the Government simply doesn't have enough sub-contract administrators to get all that money into circulation; there are RULES about Government contracts, and they sucked up EVERY contract administrator in the country by STILL couldn't get the money out there.

Perhaps there's an EASIER way.

If the Government wants to INCREASE the money supply then cut taxes and issue REBATE checks (at ANY time during the year). The consumer will spend how he sees fit, but it WILL happen quickly, and the money will go where the MARKET decides. If the Government want to DECREASE the money supply, then raise taxes (any time during the year), and the cuts will be apportioned where the MARKET decides. Of course, we can't go OVERBOARD on all this, but it seems a lot more RATIONAL than letting the Government borrow money to try and stimulate the economy !

Take my ideas with a grain of salt as I am CERTAINLY no expert. The main PROBLEM with my suggestion may be that it permits too much POLITICAL control over the whole process AND exposes the whole manipulation to the public, and it may not WORK for these very reasons; manipulation exposed is manipulation thwarted, and there may be good REASON why the Wizard of Oz should remain behind his curtain ! At a MINIMUM, however, stimulus from CONGRESS should be via DIRECT distribution to the public, NOT through their chosen BENEFACTORS ! Of THAT part, I'm SURE !

[-] 1 points by TalkingHead (101) 7 years ago

As far as distributing new wealth-money (as opposed to debt-money we currently create), I agree that the temptation for politicians to use it for cronyism would be great, perhaps it would be better used for national health insurance, retirement insurance, things of that nature that are shared by all the people in the country. After all, shouldn’t the growing money supply (matching the growth of raw wealth harvested by this country) be the property of the people? I’m not saying that the businessmen and women who build the companies that harvest the wealth should not be able to make their profits, if anything their profits will be increased because the economy won’t go through the fits and starts that it currently goes through by lack of a constantly expanding money supply unrestricted by the haphazard and market-confidence reliant system of debt-based money we have now.

[-] 1 points by Rico (3027) 7 years ago

The FIRST rule of marketing and sales is to stop SELLING once you've convinced the customer ! I've ALREADY agreed that there might be a better way !

I caution YOU, the same way I caution MYSELF, however, that this is VERY complex stuff, and we should ALL be careful in MESSING with stuff we don't FULLY understand ! I;m an engineer, and I can't even BEGIN to tell you how many "great ideas" folks tell me about that are UTTER NONSENSE. I HAVE to assume the SAME thing happens with ECONOMISTS.

A really SAD aspect of American Society is that we don't trust ANYONE in authority. We're somewhat ARROGANT and think WE know more than THEY do. This is simply not true. First, MOST folks in Government are GOOD PEOPLE just like you and I, and many of them know a LOT more about these topics than the average citizen will EVER know. A certain amount of TRUST in our fellow man is appropriate and NECESSARY if we are to have the best INFORMED people making the decisions.

In management, what I am advocating here is called "EMPOWERMENT."

[-] 1 points by TalkingHead (101) 7 years ago

I agree with you about government, I think government is composed of mostly good people being influenced to do things that are not always in the best interests of their constituents. We need to start asking for politicians to sign a pledge to support a constitutional amendment to get money out of politics. With the big money influence and corruption we have today there is almost zero chance of getting the big changes we need to have done.

[-] 1 points by Rico (3027) 7 years ago

ABSOLUTELY.

I want ONE thing from this movement... I WANT MY GOVERNMENT BACK !

As long as we INSIST on arguing over our petty differences, liberal vs. conservative, we split into FACTIONS with NO POWER... JUST the way the STATUS QUO wants.

Once we have TAKEN BACK OUR GOVERNMENT, we can use the UNCORRUPTED Democratic process to work through our MINOR differences.

For background, see my post at http://occupywallst.org/forum/one-percenter-ready-to-join-if/

For a proposal I think ALL of America can support, see my proposal at http://occupywallst.org/forum/we-the-people-in-order-to-a-proposal/

[-] 1 points by TalkingHead (101) 7 years ago

Read your posts, great stuff. Totally agree that unions, corporations and large donations must ALL be banned from influencing elections and policy. Politicians would have no choice but to work for us for a change.

Sometimes I think the reason why there is the Liberal vs. Conservative battle in the first place is to distract people while our wealth gets siphoned off by the plutocracy. It’s kind of like going to a football game and having your car stripped in the parking lot.

[-] 1 points by Rico (3027) 7 years ago

EXACTLY !

[-] 1 points by Republicae (81) 7 years ago

Suppose a teenager, Bill, is rummaging in the attic and finds $1,000 in physical currency in an old chest. Bill is ecstatic and runs to the local bank, where he opens a checking account and deposits the green pieces of paper.

Under a 100-percent-reserve banking system, this would be the end of the story. In the act of making the deposit, Bill's currency holdings would fall by $1,000, while his checkbook balance would rise by $1,000. Putting the money in the bank wouldn't affect the total amount of money in the economy.

However, in our current system, Bill's bank would see a new profit opportunity. After the bank put the $1,000 of paper currency into its vault, its reserves would be that much higher, while its outstanding deposit liabilities would have risen by $1,000 as well (in the form of Bill's new checking account). But since banks in the United States are subject only to a reserve requirement of (approximately) 10 percent, the bank would have new excess reserves of $900. If it found a suitable borrower, the bank would have the legal ability to grant a new loan for this amount.

Suppose the bank found such a borrower, Sally, and charged her 5-percent interest for a 12-month loan. Assuming she paid off the loan in a timely manner, here is what the bank's balance sheet would look like at various stages in the process:

I. Bank's Balance Sheet after Billy's Deposit Assets Liabilities + Shareholder's Equity $1,000 in vault cash $1,000 (Billy's checking account balance)

II. Bank's Balance Sheet after Loan Granted to Sally Assets Liabilities + Shareholder's Equity $1,000 in vault cash $900 loan to Sally at 5% for 12 months $1,000 (Billy's checking account balance) $900 (Sally's new checking account)

III. Bank's Balance Sheet after Sally Spends Her Loan on Business Supplies Assets Liabilities + Shareholder's Equity $100 in vault cash $900 loan to Sally at 5% for 12 months $1,000 (Billy's checking account balance) $0 (Sally's checking account balance)

IV. Bank's Balance Sheet after Sally Sells Her Products for $1,000 Cash and Deposits the Proceeds in Her Account Assets Liabilities + Shareholder's Equity $1,100 in vault cash $900 loan to Sally at 5% for 12 months $1,000 (Billy's checking account balance) $1,000 (Sally's checking account balance)

V. Bank's Balance Sheet After Sally Pays Off Her Loan Plus Interest Assets Liabilities + Shareholder's Equity $1,100 in vault cash $1,000 (Billy's checking account balance) $55 (Sally's checking account balance) $45 in bank shareholder equity

Read it here: http://mises.org/daily/4499

[-] 2 points by SmartAlx (59) 7 years ago

This isn't accurate. It's what the financial system WANTS you to believe but it's not true. The $1000 Bill has deposited into the bank doesn't allow the institution to lend $900. It allows the bank to lend $9000. They keep the $1000 in reserve and are able create brand new money out of thin air at the reserve ratio limit, which is often 9:1, not 10%.

Watch the movies "Money as Debt" and "Money as Debt II" on YouTube. Both very entertaining and informative.

[Removed]

[-] 1 points by TalkingHead (101) 7 years ago

Thank you for the explanation. While fractional reserve lending creates new money out of thin air in the form of bank loans, wouldn't that money disappear when it is paid off? I'm still not sure how that expands the money supply.

[-] 1 points by SmartAlx (59) 7 years ago

The movies "Money as Debt" and "Money as Debt II" explain the whole process in a very easy to understand (and fun) way.

[-] 1 points by Republicae (81) 7 years ago

Yes, in a way it does, but since that money was used to pay say contractors, plumbers, roofers, suppliers it actually went into the economy through all those avenues. While on paper the loan is retired, but in reality that money has filtered through the economy at various levels.

[-] 1 points by Satyr000 (86) 7 years ago

That does explain why the housing market bubble made such an impact. Simply due to the fact that a lot of smaller companies work as a team to build a house and produce materials. If one company was responsible for doing every thing from cutting timber, making door knobs to framing the house there would be less jobs available and the cost of the house would be much higher. Like wise the construction industry does stimulate the economy in the area where they are working. Simply due to the fact that the construction workers tend to spend more money in the area they are working in. If they are going to stop by a gas station to buy gas they are more likely going to do so from a gas station close to where they are working.

[-] 1 points by Republicae (81) 7 years ago

Concerning the clause "regulate the value thereof", you can find the answer to that in the Coinage Act of 1792. There is a complete difference between regulating value derived from the weight of a coin and regulating or manipulating the purchase value of a currency through either inflation or the manipulation of interest rates, which is, or should be determined by the market and not a central bank whose primary purpose is to inflate the money supply so governments can run amok, avoid responsibility and create a patronage system as we suffer from now under Corporatism.

All fiat money or money substitutes are double liabilities on both sides of any ledger, they are essentially nothing more than promises to pay, but pay with what since there is no asset value behind fiat currency? Gold and silver, on the other hand are double assets on both sides of any ledger, they require no faith, no official government seal nor do they require legal tender laws to force people to use them as money. Gold and silver restrict the ability of governments to operate outside the law, they restrict the warmongers from the power to wage war beyond defensive causes, they restrict the creation of a patronage system where governments promote Corporatism.

[-] 1 points by Rico (3027) 7 years ago

All just tokens dude. Tokens.

If you define Gold or Silver as your token, you end up having to regulate how much of it is in circulation and how much of it is sitting idle in Fort Knox. The USA had great debates on these topics after the California and Alaskan gold rushes as well as the Comstock Lode silver find. The bankers wanted all the "new gold/silver" to be vaulted at Fort Knox, but the public, many of who were suffering precisely BECAUSE the wealth held all the gold/silver wanted that money pressed into circulation. What EXACTLY do you think used to HAPPEN when folks found huge new troves of silver and gold ? HOW do you think they put it into circulation?

We can't, and nobody should WANT, to go back to the 1700's. They were NOT good times. Go back and read about the Dutch Tulip Panic, Spain's South American Land bubble, and France's Louisiana Land bubble. These all happened under the GOLD system, and the we're darned hard to fix.

[-] 1 points by Republicae (81) 7 years ago

Actually, you are confusing several different things, especially when you are speaking about the various manias, such as the Tulip Mania. The Land Bubbles were also brought about by unscrupulous speculators and scam artist, and were not due to gold being used as money.

Now, concerning what you called the French Louisiana Land Bubble, is properly known as the Mississippi Land Bubble and instead of gold being the culprit as you assume, it was brought about by the schemes of John Law, who promoted a fiat paper money system that not only facilitated the formation and collapse of the scheme, but almost brought down the government of France in the process. John Law was an advocate of basically nothing more than the proto-type of the keynesian fiat monetary system. Law proposed that a nation needed sufficient money to supply the nation and expand the economy, he proposed a fiat monetary system that would be elastic and flexible. With the ability to increase the money supply the proposal, as it is today, that there would be an increase in trade, production and employment. Law theorized that money should be a government creation and in control of government, with no intrinsic value and it would function only as a medium of exchange...sounds familiar, or it should. Law’s theories, flawed and dangerous as they were, are almost exactly what we are subjected to today.

There is however, based on your assumptions, a vast difference between a token money, which is essentially divorced from a concrete good and real money, which is, in itself, a recognized asset. In fact, unlike a paper token that is essentially useless except as an instrument of exchange or what is essentially nothing more than a claim on society and the expectations of future production by that society. Gold, on the other hand is a commodity, a recognized asset, useful and it has no claim on society or on future demands of production. Unlike paper money tokens, gold and silver are real property. Fiat paper tokens are the “property” of the issuer, the government, not the People. With the elimination of such property rights of money, the government assumes a great deal authority and control over the population. Fiat paper money can be, in the hands of government, a powerful tool for social controls.

The fact that you assume that in some bizarro-world that gold would take us back to the 1700s defies logic and, in fact, monetary mechanics.

[-] 2 points by Rico (3027) 7 years ago

Touche! The Mississippi bubble (sorry for the prior misnomer) was a bad example to use because it supports arguments for and against gold. France had no gold due to war (an example of why we shouldn't let commerce be strangled by lack of any single commodity), so John Law printed money with disastrous results (proving, at a minimum, that you can't be the ONLY economy using the goods-and-services model when your neighbors are all still on gold). The bubble, however, was fueled by the same thing that fuels ALL bubbles; lot's a people abandon reason and buy assets under the assumption they will forever increase in value. The Tulip Panic was a better example.

Another good example showing panics do in fact happen under gold would be the Panic of 1825. This panic is widely viewed as the first "modern" panic caused by purely economic factors rather then discrete events such as war. A very good summary of this panic by an economist can be read at http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.186.1832&rep=rep1&type=pdf .

A thought experiment: Assume were were on gold this very day. The rich 1% and the Chinese have it ALL. What are the 99% of people engaged in routine day-to-day commerce having nothing whatsoever to do with gold supposed to use ?

[-] 1 points by Republicae (81) 7 years ago

Now, the point of the thought experiment: First, the manner and means of real monetary exchange and the balance of trade that is associated with actual specie does not function in the same way as a fiat monetary regime. While there are definite similarities, those are primarily only superficial in nature since fiat currency is primarily only a medium of exchange and can function only as a double-liability, meaning that there is no asset value to the paper tokens they only represent a promise to pay. The Chinese, of course, are, as they must be, deeply invested in the quid-pro-quo of these fiat paper money substitutes since we borrow from them heavily, as well as other countries, in particular Great Britain and Japan, both combined own more U.S. Treasury debt than do the Chinese. That however, is beside the point.

First, under a gold monetary system, it would neither be in the interest of the rich 1% nor the Chinese to hoard gold. It would bascially improverish them all if they attempted to do so. Also, the manner and means of monetary exchange under a gold-based monetary system requires the free-flow of specie in order to maintain economic vitality and indeed the balance of trade therefore, I can say with certainty that neither the rich 1% nor the Chinese would seek to restrain gold money from the economic markets, to do so would be suicidal.

By the way, I wish I could find the article written in the Canadian Financials back in 2008, but in that article the Canadian economists were speculating what would happen it the United States ever went back on the gold standard, their conclusion was that in order to maintain any degree of competitiveness with the United States that Canada would have to immediately return to the gold standard as well because of the economic power that a gold monetary system would give to the United States. If you happen across that article by all means forward the info to me.

[-] 1 points by Republicae (81) 7 years ago

Actually, the Panic was in 1819 and extended to 1921, of which I did one of my dissertations on during college, so I am familiar with the period and the economics surrounding the Panic. One of the main sources for my research was, in fact, the newspapers of the period, which provided some of the more intricate details of the Panic. The fact is that the War of 1812 created some major dislocations within the early economy, additionally, the monetary system as young, most banks were confined to the larger cities. Most of the banks and corporations of the day were subject to high speculation and indeed they placed a heavy influence on the entire banking system, not to mention the First Bank of the United States, corrupt from its inception also played a role in pressuring State legislatures for special priviledges, not much has changed in that respect.

One of the main issues, was trade, prior to the War of 1812, there was a massive increase in both imports and exports in this country, unfortunately with the War came an incredible decline in both the imports and exports, by 1814 the toll was severe on the whole economy. Perhaps one of the main causes of the Panic of 1819 however, can be found, once again, in the protencity of War to cause a country to indebt itself heavily. The difference then as opposed to today however, is that the government borrowed from the various banks within the States, which were primarily note issuing banks instead of specie. In fact, many State banks were issuing notes as low as denominations of 6 Cents. Due to the fact that after the War, the First Bank of the United States took a back seat and no longer sought to control other State banks, those State banks began to issue without regard to the actual specie on hand. That, of course, is a problem.

It is important to remember too that there was no uniform bank notes in circulation during that period and banks were free to issue such notes without much regard to the possible consequences to the economy of the country. Outstanding bank notes began to overshoot the amount of specie in several areas of the country, and in several States there became a drain on specie due to the continued issuance of bank notes. By 1814, New England suspended all specie payments outside of the New England States, but the governments of those States allowed those banks to continue operating as normal. Thus, there was a dual problem arising, the rich New England States suspending specie payment, banks operating as normal issuing more and more bank notes as though there was real money to back them. So, the War of 1812, the first real war after the country became independent, stretched and distorted many of the economic factors that would have not existed otherwise. There was a natrual price inflation during the war, due to many factors, including blockades.

But by 1817, the year that the New York Stock Exchange formally opened its doors, the need and desire for foreign goods was once again powerful in the American public. Thus, instead of maintaining a far more sound path of monetary policy, many of the States embarked, once again on credit expansion through the banks and, as usual, the issuance of bank notes beyond the reserves of specie. It was viewed, again, as a faster means to prosperity, as it always is. Both British and other foreign exporters were very willing to extend short term credit to American importers, and did so on a truely massive scale top the point that the balance of trade between the young country and her trading partners was severely distorted.

[-] 1 points by Republicae (81) 7 years ago

In one area, in particular, the flood of foreign imports caused some major econnomic disruptions, that was the American textile industry, it was doing well during the War due to the restrictions on foreign goods entering the country, in fact it had grown substantially during those war years to meet domestic demand however, with the end of the War and normalization of relations between the United States and Great Britain, there was what could easily be described as a grown depression in the textile industry and those ancillary industries that supported it.

I mean I could go on and one, but suffice to say that the Panic of 1819 didn’t have to do with gold, but the abuse of the issuance of bank notes. Those banks which had issued massive amounts of bank notes could not possibly return to specie convertibility without causing a massive credit contraction, which would create even more problems, thus came the institution of the Second Bank of the United States in an attempt to right the problems created through the issuance of non-specie bank notes, essentially non-backed fiat tokens or money substitutes. There was a problem however, the Second Bank of the United States was, by Congressional Charter, required to redeem its notes in specie when it began its operations in January of 1817. The problem came when the State banks agreed to also resume specie payments the that February, but to do so under a bank discount, that caused some dislocation in the monetary system. But the real problems again arose because the Second Bank of the United States, like the first and the State banks was not restricted from the issuance and expansion of credit beyond specie reserves. The Second Bank was a purely profit making enterprise and with all the credit expansion it soon could not fulfill its promises, in fact, like most of the State banks, it readily accepted its second and later installment payements in the form of what we might call IOUs instead of actual payment in specie.

I’m sure you, if you have not guess already, know where this is heading judging from what was taking place in the economy and the country’s banking systems. With the expansion, the massive expansion of credit and bank notes came a massive boom period prior to and in the beginning of 1819. The Bank of the United States, rather than serving as a restrictive force on State banks, instead, basked in the joy of bank note expansion itself. Soon, political influence peddling, pressured the Second Bank of the United States to accept and use various types of State banking notes, even the Treasury began to accept State bank notes as part of its revenue and even as payment on the sale of public lands. Bank credit expanded at an ever higher rate, The problem came when the Second Bank and the U.S. Treasury accumulated so many notes without ever presenting them for redemption in specie, thus there was a massive amount of bank notes on deposit without actually being redeemed.

As problems became exascerbated, confidence in the banks began to errode, being pressed for specie payment, a premium was now being asked for payment in specie, but the discount on bank notes made it more and more difficult for banks to maintain specie payments for long or to even retain specie in their vault reserves since people begain to redeem their notes for specie, even at the Bank of the United States there was demanded a premium on specie repayment. This, of course, reflected the growing lack of confidence in the bank and its ability to maintain the payment in specie. Eventually, not only was gold specie redeemed at a premium, but also even silver, most of which was in the form of Spanish milled dollars. By March of 1818, the premium on silver was 4%, by later that year it had risen to over 6%.

Now, it is important to remember, that the debt on the Louisiana Purchase was due for scheduled payment in late 1818 and early spring of 1819 and those payments were to come from the Second Bank of the United States and the U.S. Treasury and they were required, by Treaty, to make those payments in specie, but what had the Bank and the Treasury been doing for years? Yep, they had been receiving bank notes without redeeming them.

Do you see a pattern, that pattern did not involved gold or silver, but the management of credit and non-backed specie bank notes, similar, in fact, to many of the problems we face today. Now, faced with some very difficult choices due to the over-expansion of both credit and bank notes, the Second Bank of the United States had to immediately halt all credit expansion and began to contract, in a major way, existing credit. That was in the summer of 1818, by early 1819 the Bank precipitated what is known as the Panic of 1918.

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[-] 1 points by JesseHeffran (3903) 7 years ago

Who in the 21 century sits on money, lol, I mean come on man, you either invest in assets or you spend like a drunken sailor. but i guess you are referring to that minority who plaid by the rules of Casino Capitalism. I guess they were not as smart as they thought the were. To keep it real, I say this but i guess if they feel wronged they can join the protests and get the return on their invested saving out of the ass of those who brought the whole house of cards down on US.

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[-] 1 points by Rico (3027) 7 years ago

Silliness. The US literally had all the money (gold) and the only functioning economy after WW II. The rest of the world had about as much input to the decision as they had at Malta. The UN is is New York City. The IMF and World Bank are in Washington DC.

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[-] 1 points by Rico (3027) 7 years ago

Oh, I think I see your point now, and I partially agree.

The initial decisions were made by formal agreement at Bretton Woods. Quoting from http://en.wikipedia.org/wiki/Bretton_Woods_system :

"Preparing to rebuild the international economic system as World War II was still raging, 730 delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, United States, for the United Nations Monetary and Financial Conference. The delegates deliberated upon and signed the Bretton Woods Agreements during the first three weeks of July 1944. Setting up a system of rules, institutions, and procedures to regulate the international monetary system, the planners at Bretton Woods established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), which today is part of the World Bank Group. These organizations became operational in 1945 after a sufficient number of countries had ratified the agreement. The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate by tying its currency to the U.S. dollar and the ability of the IMF to bridge temporary imbalances of payments."

As the world's economies emerged from the destruction of WW II, there has been a transition toward market forces as you note. The report at http://www.stanlib.com/EconomicFocus/Documents/Global/WorldReservesJuly2011.pdf shows that emerging economies in particular are moving from the dollar.

I think the correct statement would be "The dollar was declared the reserve currency at Bretton Woods, but market forces now play a significant role in which currencies are held in reserve, and the dollar is not assured of continued dominance."

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[-] 0 points by hahaha (-41) 7 years ago

That was a lot of blahblahblah to explain what we intuitively know by age 2.

[-] 1 points by Rico (3027) 7 years ago

See, now that was a constructive comment that improves the rational and respectful discourse.

[-] 1 points by Rico (3027) 7 years ago

Exactly. The VALUE in an economy is in the goods and services it produces, NOT in the number of tokens floating around. We could ELECT to barter directly with one another, but it won't take long before we realize a "point" system using tokens is more flexible, and we'll recreate money. Money is actually a very handy tool, but people shouldn't be so obsessed with collecting it, worried about people having too much of it, or despair over printing it when we need more to facilitate the commerce it is intended to support.

[-] 0 points by MagPie22 (144) 7 years ago

Money tokens are on the way out. Soon you will not see paper tokens and coin tokens but only digits in a computer representing your tokens. It can be shut down instantly and you have no control over your tokens.

Talent gives you tokens and with those tokens you can buy. Fine. But in todays world tokens and talent does no longer match so an idiot who can press a keyboard can now make 100.000.000 USD in 5 minutes whereas a hard working good artist and craft-man can make only 10 USD in the same time.

A danish bank just lost 5 billion USD in an investment in Ireland and now has to fire 2000 people over the next 2 years. Talent?