Jason's or the LP's stance on money creation

[RVonse]

The alt-right wants to fight a war over CRT, LGBT, and pizzeria basements. Not because their parents are scraping by on Social Security.

Its not the parents who will start the next civil war, its the young virgin males living in the parents basement not able to start a family who you should be worried about.

 

[RVonse]

The Fed has no role in wealth disparity.

My point is that they should. Their low interest and fiat money printing causes the rich to see immediate investment gains while the middle class pays more in inflation. It is an unfair and untenable position for society at large.

Technically inflation makes debt cheaper for all parties. Sure, prices rise, but my Mortgage didn't increase during the post-pandemic inflation.

The Cantillon effect refers to the uneven distribution of wealth resulting from changes in the money supply. As new money enters the economy, it typically benefits early receivers, such as banks and financial institutions, who gain an advantage by deploying it at pre-......

 

[Jimmy Higgins]

The alt-right wants to fight a war over CRT, LGBT, and pizzeria basements. Not because their parents are scraping by on Social Security.

Its not the parents who will start the next civil war, its the young virgin males living in the parents basement not able to start a family who you should be worried about.

Those weren't the people invading the Capitol building (who were middle to lower-upper class white collar folk).

 

[laughing dog]

What revolving door between the Fed chair and banks are you talking about? If my memory serves correctly, not one chair in the past 50 years has moved from the Fed chair into a bank.

The Federal Reserve's Too Cozy Relations With Banks

Working at the Fed shouldn't be an audition for a Wall Street job. Waiting periods and other reforms are needed.

www.hoover.org

From 1984 to 1990, Powell worked at Dillon, Read & Co., an investment bank, where he concentrated on financing, merchant banking, and mergers and acquisitions, rising to the position of vice president.

Powell went from being a banker to the Fed chair, not the reverse.

You won't ever find a fed chairman who was some kind of economics professor. They are all recruited from banking positions.

Both Janet Yellen and Ben Bernanke were economics professors prior to entering the Federal Reserve.

 

[Swammerdami]

.

Nitpick. The renderer leaves invisible a deleted quote from Swammi, but Swammi still gets an Alert.

The Fed has no role in wealth disparity.

My point is that they should. Their low interest and fiat money printing causes the rich to see immediate investment gains while the middle class pays more in inflation. It is an unfair and untenable position for society at large.

Technically inflation makes debt cheaper for all parties. Sure, prices rise, but my Mortgage didn't increase during the post-pandemic inflation.

The Cantillon effect refers to the uneven distribution of wealth resulting from changes in the money supply. As new money enters the economy, it typically benefits early receivers, such as banks and financial institutions, who gain an advantage by deploying it at pre-......

I'm glad to see we've finally got some interesting commentary. Thank you, RVonse !

I hope Infidels click Like on my History of money, up to 20th century thread. Tomorrow I should post again in that thread, a briefish essay on bank-created money. SPOILER ALERT: Before 1930 bank-created money was a promise to pay precious metal. After 1930 bank-created money was a promise to pay with bank-created money.

I must study further before commenting on RVonse's biflation.

But I can already make a general point.

Issues with biflation arise by definition ONLY from monetary policy. That problem disappears if instead stagnant economies are stimulated with fiscal policy.

It often seems these days that EVERYTHING reduces to the Red-vs-Blue political schism. But indeed that is the precise case here as well! The Blue-shirts would be happy with fiscal stimulus (cf. AOC's visions). The Red-shirts however are happy to insist on monetary policies which, as RVonse points out, can be tilted to favor a particular class, i.e. financiers. And indeed recent crises are often handled in a pro-banker way even when the Blue-shirts are nominally in charge. (Political margins are so scant.)

And let's do be fair. Red-shirts are also ecstatic with fiscal policies as long as the principal plank is tax-cuts for the rich.

Think of the opportunity, if stimulus wasted on corporate tax cuts and waging wars were instead devoted to progressive programs like science and family health!

We should hope for GOOD programs, not just "breaking windows." But even breaking windows is a better use of economic resources than is waging war.

- - - - - - - - -

But NONE of the responses, AFAICT have proposed an ALTERNATIVE to the FedRes system. Are we to guess that FRB opponents want a system very like FRB, but with Governors appointed from another political class? RVonse?

 

[Rhea]

What revolving door between the Fed chair and banks are you talking about? If my memory serves correctly, not one chair in the past 50 years has moved from the Fed chair into a bank.

The Federal Reserve's Too Cozy Relations With Banks

Working at the Fed shouldn't be an audition for a Wall Street job. Waiting periods and other reforms are needed.

www.hoover.org

From 1984 to 1990, Powell worked at Dillon, Read & Co., an investment bank, where he concentrated on financing, merchant banking, and mergers and acquisitions, rising to the position of vice president.

You won't ever find a fed chairman who was some kind of economics professor. They are all recruited from banking positions.

Aaah. You are having trouble with “revovling door” as an analogy. It means goes from one to the other and back. That’s not what we have here.

 

[jonatha]

But the panics were still better than the wealth disparity problem we see today.

Tell me you don't know anything about the Robber Baron age without telling me you don't know anything about the Robber Baron age...

 

[jonatha]

You won't ever find a fed chairman who was some kind of economics professor.

Except for the one before the current one (Janet Yellen), and the one before that (Ben Bernanke)...

 

[Jimmy Higgins]

You won't ever find a fed chairman who was some kind of economics professor.

Except for the one before the current one (Janet Yellen), and the one before that (Ben Bernanke)...

Of course, if you get an economist or a bookworm, they'll complain about them not having real world experience.

 

[bilby]

Technically inflation makes debt cheaper for all parties. Sure, prices rise, but my Mortgage didn't increase during the post-pandemic inflation.

The USA is highly unusual, in that long term fixed rate mortgages exist there.

Over here, the longest fixed rates available are typically five years (three is more typical), and loan terms are typically 25-30 years, so most mortgage holders are on variable rates, and those who are not are often going to be in the very near future.

As inflation causes central banks to raise interest rates, so this leads to higher mortgage interest rates. My home loan interest payments have more than doubled since 2022, and they are by far the largest element of the total increase in our personal cost of living since that time. Gas, groceries, and utility bills have all gone up, in some cases very significantly; But none of our other cost of living increases come close to the increase in mortgage interest.

This article has some more details on the structural differences between the US and Australian economies, and the consequent greater impact of interest rates on inflation and economic activity here, compared to over there.

 

[Loren Pechtel]

Panics in pre-Fed America in the late 1800's. Why the Federal banking
system was created in 1913.

.....
At the time, like today, New York City was the center of the financial system. Between 1863 and 1913, eight banking panics occurred in the money center of Manhattan. The panics in 1884, 1890, 1899, 1901, and 1908 were confined to New York and nearby cities and states. The panics in 1873, 1893, and 1907 spread throughout the nation. Regional panics also struck the midwestern states of Illinois, Minnesota, and Wisconsin in 1896; the mid-Atlantic states of Pennsylvania and Maryland in 1903; and Chicago in 1905.
.....

Banking Panics of the Gilded Age

Explore the Federal Reserve's history

www.federalreservehistory.org

I'm not saying bank panics were good. But the panics were still better than the wealth disparity problem we see today. Wealth disparity is a HUGE issue approaching disparity we saw during the late 20's. Such wealth disparity represents a serious societal problem fully capable of bringing down our country into civil war.

Furthermore, during all those panics the US was doing very well. The US was the most robust economy of the world from the late 1890's until 2005 or so.

Wealth disparity? You realize it was much greater then than now?

It's just that there were few in between.

 

[Loren Pechtel]

The Fed has no role in wealth disparity.

My point is that they should. Their low interest and fiat money printing causes the rich to see immediate investment gains while the middle class pays more in inflation. It is an unfair and untenable position for society at large.

Huh? What are you smoking?!

Inflation and interest move in the same direction, not opposite directions! The more inflation there is the more you will have to pay people to borrow their money because when you return it it won't be worth as much. You seem to want high interest, low inflation and a good economy. Sorry, but that combination isn't going to happen.

 

[Swammerdami]

.

The Fed has no role in wealth disparity.

My point is that they should. Their low interest and fiat money printing causes the rich to see immediate investment gains while the middle class pays more in inflation. It is an unfair and untenable position for society at large.

Huh? What are you smoking?!

Inflation and interest move in the same direction, not opposite directions! The more inflation there is the more you will have to pay people to borrow their money because when you return it it won't be worth as much. You seem to want high interest, low inflation and a good economy. Sorry, but that combination isn't going to happen.

Neither of you is completely wrong. But neither is completely right.

Obviously interest rates and inflation TEND to move in tandem, but the relationship is much more complicated than that. And Jason is right that present-day monetary policies tend to favor the investor class over the masses.

Inflation is usually measured via the Consumer Price Index. But very important to the investor class is Asset Prices and, rightly or wrongly, the FRB does NOT respond to asset price inflation. Below I attach a graph (https://www.longtermtrends.net/market-cap-to-gdp-the-buffett-indicator/) showing that the Wilshire 5000 index has more than tripled (relative to GDP) over the past 15 years and is now 179% of GDP.

(And BOTH of you are charged with leaving a deleted Swammi post inside the quote box! )

 

[Loren Pechtel]

The Fed has no role in wealth disparity.

My point is that they should. Their low interest and fiat money printing causes the rich to see immediate investment gains while the middle class pays more in inflation. It is an unfair and untenable position for society at large.

Huh? What are you smoking?!

Inflation and interest move in the same direction, not opposite directions! The more inflation there is the more you will have to pay people to borrow their money because when you return it it won't be worth as much. You seem to want high interest, low inflation and a good economy. Sorry, but that combination isn't going to happen.

Neither of you is completely wrong. But neither is completely right.

Obviously interest rates and inflation TEND to move in tandem, but the relationship is much more complicated than that. And Jason is right that present-day monetary policies tend to favor the investor class over the masses.

Yeah, they don't track perfectly, but in the long run that's going to happen.

Inflation is usually measured via the Consumer Price Index. But very important to the investor class is Asset Prices and, rightly or wrongly, the FRB does NOT respond to asset price inflation. Below I attach a graph (https://www.longtermtrends.net/market-cap-to-gdp-the-buffett-indicator/) showing that the Wilshire 5000 index has more than tripled (relative to GDP) over the past 15 years and is now 179% of GDP.

But what does the Fed have to do with that?

(And BOTH of you are charged with leaving a deleted Swammi post inside the quote box! )

View attachment 45443

The software makes it awkward to delete the empty quotes.

 

[ZiprHead]

I've noticed Jason has been quite absent from this thread even though he asked for it.

 

[Swammerdami]

.

The Fed has no role in wealth disparity.

My point is that they should. Their low interest and fiat money printing causes the rich to see immediate investment gains while the middle class pays more in inflation. It is an unfair and untenable position for society at large.

Huh? What are you smoking?!

Inflation and interest move in the same direction, not opposite directions! The more inflation there is the more you will have to pay people to borrow their money because when you return it it won't be worth as much. You seem to want high interest, low inflation and a good economy. Sorry, but that combination isn't going to happen.

Neither of you is completely wrong. But neither is completely right.

Obviously interest rates and inflation TEND to move in tandem, but the relationship is much more complicated than that. And Jason is right that present-day monetary policies tend to favor the investor class over the masses.

Yeah, they don't track perfectly, but in the long run that's going to happen.

Just as a few remarks:
(1) Long-term and short-term interest rates often move separately.
(2) Typically interest rates lag behind inflation. Anticipation of future inflation is often more relevant than actual inflation measured over the recent past.
(3) When rates ARE stable, the difference between nominal interest rate and inflation rate is an important parameter. That parameter generally correlates with economic success: prosperity causes the "real interest rate" to be HIGH, a slump will make it low, at least when a central bank is cutting rates to combat the slump.

Inflation is usually measured via the Consumer Price Index. But very important to the investor class is Asset Prices and, rightly or wrongly, the FRB does NOT respond to asset price inflation. Below I attach a graph (https://www.longtermtrends.net/market-cap-to-gdp-the-buffett-indicator/) showing that the Wilshire 5000 index has more than tripled (relative to GDP) over the past 15 years and is now 179% of GDP.

But what does the Fed have to do with that?

You're agreeing with me! "the FRB does NOT respond to asset price inflation." It COULD do, if Congress or a FR Governors' majority so decided. And some economists have occasionally suggested that doing so would be wise. In particular, the FRB sets the margin requirement (50% now for decades) for broker's call loans, and some have suggested that this margin be increased to combat stock-market "bubble."

I don't know if RVonse was suggesting this or not.

It MIGHT be an interesting topic to discuss, but let's hold off for a day or two. BECAUSE right now we seem to be "feeling our way in the dark," confused and using incompatible viewpoints, etc.

(And BOTH of you are charged with leaving a deleted Swammi post inside the quote box! )

The software makes it awkward to delete the empty quotes.

I also strongly dislike this board's software, but we may dislike it for different reasons.

Do you post from a telephone or from a computer? I almost NEVER even attempt to post from phone.

I put some effort into my posts. But the response to my complaints in the Software Complaints (or whatever it's called) thread lets me know I use the editing modes very differently from other posters.

 

[Swammerdami]

You're agreeing with me! "the FRB does NOT respond to asset price inflation." It COULD do, if Congress or a FR Governors' majority so decided. And some economists have occasionally suggested that doing so would be wise. In particular, the FRB sets the margin requirement (50% now for decades) for broker's call loans, and some have suggested that this margin be increased to combat stock-market "bubble."

It may be contrary to the Board's culture, but I often like to back up what I write with citations!

In 1996 at a meeting of the FRB's Open Market Committee we find

I recognize that there is a stock market bubble problem at this point. We do have the possibility of ... increasing margin requirements. I guarantee that if you want to get rid of the bubble, whatever it is, that will do it.

Alan Greenspan, it will be recalled, was Chairman of the FRB for almost two decades, and is often spoken of with great reverence!

Should the Fed have acted this way? RVonse may think so and he might be right. I was advocating actions like that before I ever read Greenspan's statement.

Let's discuss whether Greenspan SHOULD have increased the margin requirement in this thread but wait until NEXT WEEK. Right now, we're just trying to grope our way through BASIC facts and definitions.

Speaking of which, the companion thread (History of Money) is being hijacked by gibberish. I will personally be grateful if Infidels with a clue about the definition of "money" show up in that thread and help drown out the gibberish.

 

[Jimmy Higgins]

I've noticed Jason has been quite absent from this thread even though he asked for it.

That'd require him to actually express a position, of which we need to wait for the next blue moon.

 

[Jason Harvestdancer]

I've noticed Jason has been quite absent from this thread even though he asked for it.

Yes, I haven't logged on to the forum for several days. Maybe one day you'll figure out how to notice that. Every profile shows that stat.

That'd require him to actually express a position, of which we need to wait for the next blue moon.

Why does your eagerness to pretend I don't express my positions make you also pretend that I agree with your assessment? Never mind answering, the question answers itself.

Okay, @Swammerdami , you wanted to know what would be used for money if it were not a centrally controlled endeavor. To understand that you have to start at the beginning.

What is money? It is a store of value. You accept money because you believe you will be able to exchange it for desired goods and services. Just because something is presented as money doesn't mean it will be accepted as such. When the US invaded Iraq, the US tried to issue a new Iraqi currency, but the Iraqi people rejected it and the US government was forced to resume printing the pre-invasion currency.

What makes a good currency? There are several key requirements.
1. It has to be relatively scarce. Too little of it and it won't be divisible enough, too much of it and the relative worth would mean carrying large amounts just for simple transactions.
2. It has relatively few other applications. Sure, you could burn federal reserve notes to keep warm, but obviously that isn't the best option. Copper and iron are very widely used in industry for example.
3. It has to be durable. It is true that in specific sub-groups other commodities are used as currency, such as the famous example of cigarettes in jail, and cigarettes aren't all that durable, but in general you want something that will stick around and last a while. Also I witnessed kids doing post-Halloween candy trading and the bite-sized snickers eventually became the temporary currency that all other candy was measured against.
4. It has to be divisible. Since most of our currency exists inside computers, it is very easy to divide it even smaller if we wanted. Gemstones are not divisible without some loss.
5. It has to be fungible. One bit of it is like any other. A dollar is a dollar. A euro is a euro. A pound is a pound. If we both take a dollar out of our pockets and exchange them, neither of us is made any worse for it because a dollar is a dollar.

Those are key requirements of money being used as a store of value for exchange purposes.

 

[ZiprHead]

Yes, I haven't logged on to the forum for several days. Maybe one day you'll figure out how to notice that. Every profile shows that stat.

You are wrong. I'm on here several hours daily. Running the board requires it.