How The Monetary System Works - And Why It Seriously Needs to Be Replaced

You offer illusion. freebies for votes, & more of the same. This does not support the workers, nor preserve the fruits of their labors. You will fleece them to finance your social engineering programs, while the rich continue to fleece us by inflation & fiscal policy. You are complicit with the propagandists, promising illusion while fastening our chains.

Perhaps this system has worked for you. Maybe you got rich working the banking system, or gambling on wall street. but it it structurally corrupt, & MOST people will not live a life of ease & luxury.

 

Apologies, you are right that it is exponential. Regardless, if there is a growing population, then to match that growth, our productivity must rise. And we have plenty of resources, capital, and labor to accomplish 3% growth for the foreseeable future.

 

The reason it's the least of your concerns is because people like you aren't thinking of what happens to this in the long term and how it's unviable. In the short term yes, utilizing productive capacity would help the economy. But this wouldn't happen in the first place if money wasn't debt. You're complaining about economic problems caused by the every fact that the system is set up this way.

 

Ah, but there's the rub, the population of the West is relatively stable whereas it is the developing world that is expanding. This model works better for a developing, rather than developed, nation.

 

I wonder what Edison's background in macroeconomics was. He doesn't seem to understand the difference between the Govt borrowing money, which is not inflationary, and creating money, which is.

- - - Updated - - -

Of course. Because higher wages and lower FICA taxes wouldn't help workers.

I'm the one trying to change the system to increase income for the workers, you're the one trying to protect the 1%.

 

Fascinating. I of course never said anything to the contrary.

Has the Fed purchased $2 trillion in US debt over the past 30 years? Yes.



Just as I said.

I'd get more credibility from a hamster.

 

I'll just leave it at that. Creating money is inflationary, but creating and using new money for productive use within an economy is not. You're not wrong, you just ignore the part of the answer that strays from your current thinking that's locked within the system we have and ignores what we could do even better.

 

Deleted: not my discussion

 

To keep debts from catching up. The only reason the system works in the first place is time lag. If growth slows to a significant degree, people don't want to take on more debt because they can't afford to pay it back. This exacerbates the problem - as people stop taking on debt and simply save money, the money start literally disappearing, as less debt = less money, and all the problems associated with having less money come with that.

 

Exactly, and I proved it is so in my post.

Sure it has. The Fed says nothing to the contrary. I find you less credible than a hamster.

That says nothing about injecting money in the money supply. I've said nothing to the contrary. What the Fed is doing is buying treasuries (and MBS) to "print" money.

Once again you've demonstrated your ignorance.

I'd get more credibility from a hamster than you.

 

We had "sustainable economic growth" long before the progressive monetary system even came into existence.



Sustainable economic growth and development arises, not from FIAT money and central planning, but from a combination of free markets and the rule of law. Under those conditions, wealth creation occurs organically. People will naturally and voluntarily coordinate and organize into highly complex socioeconomic networks that make things like affordable personal computers and vehicles a possibility for the "average" consumer.

That kind of precision and clarity inspires a lot of confidence...

 

I'm not sure what you're talking about. Money in the form of deposits may be disappearing because banks lending has dropped way down. If what you are talking about is US debt, we have already made great progress in getting it under control:

Year - Debt:GDP - Perc. point chng
2008 68.1% 5.9
2009 82.6% 14.5
2010 90.7% 8.1
2011 95.2% 4.6
2012 98.9% 3.7
2013 100.5% 1.6

We have gone from the debt increasing a whopping 14 percentage points of GDP to last year where it only grew 1.6 percentage points of GDP -- in other words, we are closing in on the point were the debt is stable compared to GDP. Hopeful that will continue and then start improving.

 

Because government monopolies on anything, money included, are aggressively anti-capitalist, obviously.

 

For some things, including money, that's a darn good thing.

 

Many things.

1. Our monetary system is a centrally planned government monopoly. The history of such planning is replete with poverty and oppression.
2. The arbitrary manipulation of interest rates by the central planners facilitates and often incentivizes the creation of asset bubbles like the housing bubble or the stock bubble of the great depression. Artificially low interest rates are the fuel of reckless speculation and malinvestment.
3. Inflation continually eats away at the purchasing power of the consumer. Prices rise while wages for poorer Americans stagnant. This is outright theft.
4. It creates moral hazard by insulating banks from excessive risk and unsustainable business practices.
5. It doesn't actually help the economy.
6. It discourages savings and encourages borrowing.

There is more but you get the picture.

A market-based system. Here are more technical and historical approaches to the subject if you're so inclined:

http://mises.org/books/denationalisation.pdf
http://books.google.com/books?id=Va...ce=gbs_ge_summary_r&cad=0#v=onepage&q&f=false

Monopolies take away choice and crush diversity. They keep good products from ever coming to the market, and they give the monopolist almost unlimited power over the consumer. Such systems are anti-competitive, unfair, and inefficient.

 

Nonsense. We've had the century of the greatest per capita growth in history with it.

Unregulated credit and investment leads to bubbles whether the interest rates are manipulated by central planners or not.

Inflation can be hedged with investment, which is economically beneficial compared to hoarding cash.

Wages for poorer Americans have been stagnant compared to prices because "trickle down" policies aimed at enriching the rich at the expense of the middle class have resulted in the 1% doubling its take of the nation's income (from 10% to 20%) and wealth (from 20% to 40%) in 30 years.

Break up banks that are too big to fail. That is the only hazard.

To the contrary, a small level of inflation ensures there is capital available for expansion, and encourages investment instead of hording.

To the contrary, it encourages investment over hoarding. It does facilitate borrowing by making money more available, increasing salaries over time, and decreasing the relative size of debt repayments like mortgages and car loans.

I get the picture perfectly. Now you do too.

Those look interesting but are too long a read to evaluate now. But no one has explained a "market based system" to me that makes any sense.

http://mises.org/books/denationalisation.pdf
http://books.google.com/books?id=Va...ce=gbs_ge_summary_r&cad=0#v=onepage&q&f=false

Exactly why in some areas we would want the Govt to control them instead of a company.

 

This doesn't even make any sense. You asked why should capitalists be against the monetary system and I told you it's because centrally planned government monopolies are anti-capitalist by definition. You respond with this perplexing assertion about the data showing the opposite. It's not a matter of "data", it's a simple matter of it being inconsistent with the fundamental principles of capitalist economic theory.

People can decide for themselves which one of us is credible.

 

You didn't address it at all, you dodged it and failed to apologize.

This was your quote... Of that $16 trillion, the Fed has "monetarized" maybe $2 trillion which has been injected in the money supply.

$2 trillion has not been injected in to the money supply. And this is not my opinion, the Federal Reserve tells you this themselves. I find them a little more credible than your opinion. No offense.

The Fed Says...

Is the Federal Reserve printing money in order to buy Treasury securities?

No.

http://www.federalreserve.gov/faqs/money_12853.htm


Apologizing is the only way you can get out of this mess you have created for yourself. More embarrassing than conservatives.

 

We have, loooooooooooong ago.

 

GDP per capita is just a ratio of the economy to the population. It doesn't tell you how fast or slow the economy is growing or decaying, nor does it tell you how the economic output is actually distributed across the population. If you measure the growth rate of the individual variables instead of their ratios, you see that the economy and the population both grew faster in the pre-fed era than in the post-fed era, so there is no reason to believe that the fed is responsible for the growth or that there's even been an improvement in growth. Professor Selgin of the University of Georgia details the fed's own historical inability to meet its own stated goals in this video...

[video=youtube;hQXeUckvrPM]http://www.youtube.com/watch?v=hQXeUckvrPM[/video]

Just because the government is not involved in something does not mean it's "unregulated". Markets are self-regulating. That's how they're able to sustain and even grow themselves. Sometimes, yes, there will be a bubble in the market created purely by market forces, but those same market forces will also serve to correct the error and return the system to a sustainable trajectory.

And heart disease can be mitigated with aspirin therapy, but I'd rather be healthy instead.

There's little to no risk to hoarding cash. With investment, you could lose the entire principal overnight. Of course, each individual has their own subjective tolerance and preference for risk and return, which is why I favor a market-based system where choice and competition determine outcomes instead of the arbitrary whims of central planners.

That's exactly what I'm talking about. QE has been nothing but a multi-trillion dollar handout to globalist bankers. What's it done for the economy? Virtually nothing, says the former fed official who oversaw the bond-buying program at the Federal Reserve: Andrew Huszar: Confessions of a Quantitative Easer

I can only say: I'm sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed's first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I've come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time.​

Nobody is too big to fail. That is a myth cooked up by corporate banking lobbyists. And the only reason they got so big in the first place is because the federal reserve erects multiple barriers to entry around the financial industry and the banking system. The bankers want the federal reserve system and the dollar monopoly to persist because it gives them a competitive advantage over marginal firms.

How does making them smaller address the underlying reasons they failed in the first place? What difference would it make if you cut Citigroup in half only to have both halves fail because they're both insulated from risk by the central bank?

So you can't have "capital available for expansion" without "small" levels of inflation?

Investments? Like in swanky California real estate or toxic mortgage securities? Why do you keep using the term "hoarding" when the proper economic term is "saving"? And why should one be categorically encouraged over the other? Isn't the decision to spend, invest, or save based upon each individual's unique circumstances and not some broad generalization about "encouraging investing"?

It increases salaries because it increases all prices levels by definition, but as I noted earlier, the poorer workers wages are the last to respond, meaning they are always trying to catch up with inflation.

It's hard to understand because we've lived under a FIAT monetary system our entire lives, but it's fundamentally no different than how any other consumer good or service works in a market system. Private companies develop products and then offer them at a competitive price to consumers.

Throughout history, central governments have proven themselves to be oppressive and even downright malevolent when they assume too much power. This lesson should not be forgotten.

 

I didn't say anything about who was responsible. I stated the fact that per capita GDP growth since the Fed was far stronger to rebut your claim that "Our monetary system is a centrally planned government monopoly. The history of such planning is replete with poverty and oppression." Simply not true. Per capital GDP has grown much stronger since the Fed.

It does it better than without it.

Markets are not self regulating. If there was there would have been no housing bubble.

Do you have a point.

Disagree. Hoarding take money out of the economy where it contributes nothing of use.

Disagree. QE has prevent what would otherwise have been damaging deflation. Many say it has helped push the stock market to new record highs, making people feel more financially secure.

I'm not arguing QE is a cure-all, or even the best form of stimulus, but with the Republican Tea Party induced austerity on the fiscal side, its about the only thing goin.

The failure of the major banks would likely have resulted in economic catastrophe. Banks shouldn't be so large so as to be such a dominant force in the economy.

Any individual bank has less overall effect on the economy.

When money is hoarded it is not available for expansion.

Saving and hoarding are not equivalent. Saving is reserving a portion of your income. Savings can be invested. Hoarding is savings that are not invested but kept in dollar form.

It is a fallacy to attribute the relative decline in real wages' purchasing power to inflation.

Investors act in a herd mentality. The over-speculate when times are good and over react when times get bad. We don't need our money supply regulated like the stock market. We need the opposite, cutting back when times are good and expanding when times are bad.

So have businesses and corporations. You need both. This lesson should not be forgotten.

 

People still need to be able to be well-off enough to begin borrowing on a large scale again, that's how things grew before this mess. They are not, evidently, due to the new realities of the employment situation.

 

It will probably be a while before we see borrowing on the scale we saw during the housing bubble. But that's a good thing.

 

Lmao, we had a different economic system that required people digging useless rocks out of the ground. Just because there isn't a "central planner" creating the money, doesn't mean money wasn't being found and added to the money supply. There is no difference between someone finding a lump of gold in the gold standard versus the government creating money in a fiat standard.

 

We have more millionaires and billionaires than the next 9 countries combined. Capitalists are doing just fine in this monetary system, lol. The data is overwhelmingly against you when you try to argue against the past century of our monetary system. The fact you try is hilarious though.