Why are conservatives obsessed with the federal reserve?

[SimpleDon]

Econ 101 says that money has no utility. That is no one holds on to money for the money's sake. Econ 101 is again wrong about this.

If ECON 101 taught that it would be wrong. But ECON 101 does not teach that. ECON 101 taught by my colleagues and everyone I know teaches that money has 3 functions: as a unit of account, as a store of value and for transactions. Clearly the 2nd function is a reason to hold money.

Econ 101 teaches us that money has no utility in and of itself, that it only has the three functions you listed. That there is no reason for economic agents to keep money, that agents are always looking for goods and services to consume or opportunities to invest. It is the basis of the strong supply bias to Econ 101, the rational for Say's law.

In fact, Econ 101 ignores money saying that money is neutral in its impact on the economy. They also teach the same thing about debt, that it has no impact on the economy, that it is that debt is neutral. That for every debt as a liability there is a debt as an asset.

The reason that you have so much trouble with this is because you know that money does have utility, that it does have use in and of itself, that people hold on to money as a hedge against uncertainty. Yes, Econ 101 is wrong.

 

[SimpleDon]

Like Jurhyn I am wondering if you aren't confusing value with utility. Yes, those things that you listed are useful.

Maybe this will help. Your lathe might cost say $10K. Its value is $10K. Easy to see, I hope.

But what is it worth to my metal shop? Is it worth $10K to me? This is the question of utility. Like so many of this questions it depends. We have to introduce the idea of marginal utility.

If I don't have a lathe and am cutting groves in shafts with a milling machine, trust me this is possible but takes a long time, then it is worth $10K to me.

But if I already have six lathes and only three operators, then the $10K lathe is very nearly useless to me. It has no added or marginal utility to me. It won't increase my productivity.

Even if I believe that it will increase my productivity by $5K the vendor won't sell it to me for that amount, hoping that it is worth more than $10K to someone else.

But the value of the lathe is still $10K to that someone else. Even if the marginal utility is $25K to him.

Do you see that the increase in the productivity is the value in use to you (which is determined by the market and perhaps the additional satisfaction/utility you get) while the vendor's minimum price is the value in exchange?

Yes, and you have the difference between value, in exchange, and utility, the increase in productivity.

And hopefully you now understand why economics had to have different terms to highlight the differences.

 

[T.G.G. Moogly]

To answer the OP, IMO, there are two reasons:
1) many conservatives are simply economically ignorant, and
2) some conservatives view the fed as interfering with financial markets.

And

3) The Fed doesn't agree with the Republican borrow-and-spend approach.

4) The Fed stops them from manipulating the economy for political reasons.

It's simpler than that as Sarpedon has already made clear. They just want to control the fed for their own purposes. Their displeasure isn't ideological. It's practical.

 

[untermensche]

Why are conservatives obsessed with the federal reserve?

They are nothing but cheerleaders for the 1%.

The Fed many times does things the 1% doesn't like.

There is no more explanation necessary.

 

[arkirk]

If ECON 101 taught that it would be wrong. But ECON 101 does not teach that. ECON 101 taught by my colleagues and everyone I know teaches that money has 3 functions: as a unit of account, as a store of value and for transactions. Clearly the 2nd function is a reason to hold money.

Econ 101 teaches us that money has no utility in and of itself, that it only has the three functions you listed. That there is no reason for economic agents to keep money, that agents are always looking for goods and services to consume or opportunities to invest. It is the basis of the strong supply bias to Econ 101, the rational for Say's law.

In fact, Econ 101 ignores money saying that money is neutral in its impact on the economy. They also teach the same thing about debt, that it has no impact on the economy, that it is that debt is neutral. That for every debt as a liability there is a debt as an asset.

The reason that you have so much trouble with this is because you know that money does have utility, that it does have use in and of itself, that people hold on to money as a hedge against uncertainty. Yes, Econ 101 is wrong.

"if they can!"

 

[laughing dog]

If ECON 101 taught that it would be wrong. But ECON 101 does not teach that. ECON 101 taught by my colleagues and everyone I know teaches that money has 3 functions: as a unit of account, as a store of value and for transactions. Clearly the 2nd function is a reason to hold money.

Econ 101 teaches us that money has no utility in and of itself, that it only has the three functions you listed. That there is no reason for economic agents to keep money, that agents are always looking for goods and services to consume or opportunities to invest. It is the basis of the strong supply bias to Econ 101, the rational for Say's law.

ECON 101 teaches (at least all the ECON 101s I have seen) teaches that money is held for transactions purposes and for saving purposes. Money makes all sorts of transactions easier whether it involves purchasing goods or services or assets. In fact the demand for money is typically broken into the transactions motive, the precautionary motive and the speculative motive.

In fact, Econ 101 ignores money saying that money is neutral in its impact on the economy.

Not in the ECON 101s I know. The availability of money affects interest rates which affects spending.

They also teach the same thing about debt, that it has no impact on the economy, that it is that debt is neutral. That for every debt as a liability there is a debt as an asset.

Every debt is an asset to the lender and a liability to the borrower, but that does not make it neutral on the economy. I don't know of any ECON 101 that teaches debt is neutral on the economy.

The reason that you have so much trouble with this is because you know that money does have utility, that it does have use in and of itself, that people hold on to money as a hedge against uncertainty. Yes, Econ 101 is wrong.

The reason that I am having trouble is that your characterization of ECON 101 radically conflicts with my long experience with ECON 101 as a student,instructor and colleague.

 

[SimpleDon]

Econ 101 teaches us that money has no utility in and of itself, that it only has the three functions you listed. That there is no reason for economic agents to keep money, that agents are always looking for goods and services to consume or opportunities to invest. It is the basis of the strong supply bias to Econ 101, the rational for Say's law.

ECON 101 teaches (at least all the ECON 101s I have seen) teaches that money is held for transactions purposes and for saving purposes. Money makes all sorts of transactions easier whether it involves purchasing goods or services or assets. In fact the demand for money is typically broken into the transactions motive, the precautionary motive and the speculative motive.

In fact, Econ 101 ignores money saying that money is neutral in its impact on the economy.

Not in the ECON 101s I know. The availability of money affects interest rates which affects spending.

They also teach the same thing about debt, that it has no impact on the economy, that it is that debt is neutral. That for every debt as a liability there is a debt as an asset.

Every debt is an asset to the lender and a liability to the borrower, but that does not make it neutral on the economy. I don't know of any ECON 101 that teaches debt is neutral on the economy.

The reason that you have so much trouble with this is because you know that money does have utility, that it does have use in and of itself, that people hold on to money as a hedge against uncertainty. Yes, Econ 101 is wrong.

The reason that I am having trouble is that your characterization of ECON 101 radically conflicts with my long experience with ECON 101 as a student,instructor and colleague.

So the economics that you were taught said that money has utility but you have no idea that there is a difference between value and utility. In other words your economics taught you that money has utility but they didn't teach you what utility is? And you didn't think to ask? Or did you miss some classes?

 

[SimpleDon]

Why are conservatives obsessed with the federal reserve?

They are nothing but cheerleaders for the 1%.

The Fed many times does things the 1% doesn't like.

There is no more explanation necessary.

I can't say that. The Fed is a bastion of the orthodoxy in economics, currently what is called neoclassical synthesis economics. This is a very supply side, pro-capital, pro-wealth economics. This economics believes that the economy starts with investment and that demand is incidental, that demand is only a byproduct of supply, and therefore of investment.

You can make a very good case in fact that the reason that neoclassical economics is the accepted orthodoxy is because it is so pro-wealth. The wealthy were rocked back on their heels by John Maynard Keynes and his book, The General Theory of Employment, Interest and Money. And not only because Keynes said that it was important for the government to take an active role in the management of the economy including, if required, changes in fiscal policies like taxation in order to minimize unemployment. Or that the fiscal policies of a country largely determined the distribution of incomes in a nation, not the inherent superiority of the upper class.

No, what Keynes said that really got the wealthy against him was demand was at least as important as supply in the economy of 1936 and that, shutter, that demand was becoming more important than supply. Therefore wages are more important than investment, because wages are the main component of demand in the economy.

And what came after Keynes was even worse. That profits weren't really the wages earned by capital, that profits were the snowball effects of capital that have to be taxed or all of the wealth in a country will end up with the wealthy. That supply and capital in the modern industrial economy is nothing more than money and that a sovereign country with its own currency can produce as much money as it needs. That capital is no longer a scarce resource, like it was in an agrarian economy where capital was land which is of course, limited. That labor is the most important resource in the modern economy. And that the most important thing about improving labor and therefore a nation's economy is improving human capital, the education and the training of labor, not traditional investment.

The wealthy, the investor class didn't much like this. Along came neoclassical economics with the promise that only certain select parts of Keynesianism would be added to the traditionally supply bias of neoclassical economics, the so-called neoclassical synthesis.

Neoclassical economics had fallen out of favor even before the stock market crash of 1929 and the Great Depression that followed. The Great Depression was just the last of a long line of economic phenomenon that neoclassical economics couldn't explain. It was slowly becoming irrelevant and the Institutional and Historical schools were coming to the forefront even before Keynes. Both readily adopted Keynes' ideas into their schools.

Neoclassical economics saw their way back in because of the sponsorship of the wealthy. It is the wealthy who fund professorships and chairs as well as the research in the prestigious Universities. It wasn't long after the Second World War was over that you couldn't get a professorship or be published in the best journals unless you were a neoclassical. In twenty years or so the wealthy installed this very wealth friendly economics in nearly every university in the country.

Neoclassical economics itself slowly became even more friendly to wealth. The economists who toed the line became wealthy themselves. (I am of the opinion that one of the reasons that it seems so logical to some of the wealthy to advance the notion that 99% of all of the climatologists in the world are lying about the threat of AWG is because the wealthy were so successful at corrupting 90% of the economists in the United States.)

To please the wealthy we had Milton Friedman and his monetarism that said that we didn't need to use fiscal policy changes to manage the economy, that monetary policies would be enough. Ten years later and we have Mundell and Laffer's supply side economics, the full circle back to the supply side, investment lead economy along with the rather absurd idea that the economy doesn't need the government at all, with all of its regulations.

No, the Fed is pretty subservient to the needs of the wealthy, especially to those in banking and finance.

 

[laughing dog]

So the economics that you were taught said that money has utility

Yes

but you have no idea that there is a difference between value and utility.

No. I cannot imagine how anyone would think the two are the same. It appears you are under the false impression that if someone uses the terms "value in use" and "value in exchange" that he or she does not understand utility or marginal utility. I prefer to avoid unnecessary jargon in discussing economics to avoid confusion. In this instance, I see I was wrong.

In other words your economics taught you that money has utility but they didn't teach you what utility is?

Oh no. I was taught quite a bit. For example, I did notice that in your example, you were confused the value of the marginal product of the additional lathe with the marginal utility of the additional expected revenue from the use of the lathe, but it didn't really matter to the general point you established.

And you didn't think to ask? Or did you miss some classes?

No to both.

 

[untermensche]

You can make a very good case in fact that the reason that neoclassical economics is the accepted orthodoxy is because it is so pro-wealth.

You give it too much respectability.

It is exactly what GH Bush called it. Voodoo economics.

 

[Axulus]

If ECON 101 taught that it would be wrong. But ECON 101 does not teach that. ECON 101 taught by my colleagues and everyone I know teaches that money has 3 functions: as a unit of account, as a store of value and for transactions. Clearly the 2nd function is a reason to hold money.

Econ 101 teaches us that money has no utility in and of itself, that it only has the three functions you listed. That there is no reason for economic agents to keep money, that agents are always looking for goods and services to consume or opportunities to invest. It is the basis of the strong supply bias to Econ 101, the rational for Say's law.

In fact, Econ 101 ignores money saying that money is neutral in its impact on the economy. They also teach the same thing about debt, that it has no impact on the economy, that it is that debt is neutral. That for every debt as a liability there is a debt as an asset.

The reason that you have so much trouble with this is because you know that money does have utility, that it does have use in and of itself, that people hold on to money as a hedge against uncertainty. Yes, Econ 101 is wrong.

Where are you getting this from? There is an area of study in economics to analyze the demand for money, which covers the reasons why people wish to hold onto money, why the demand for money changes, and what the broader impacts there are to the economy as the demand for money changes.

I know of no accepted economics sources that claim that money and debt are neutral in their impact on the economy.