A Mental Walkthrough on how the United States monetary system actually works!

I'm entitled to one of those. I am the 99%!

 

I'm simply describing the system. You guys are debating what the Government should or should not do within the system. We will always have inflation, and we will always have a fiat currency. Those are things economists have learned that will never be changed.

If you can't grasp the concept of inflation and you can't understand why fiat currency is more advantageous than gold or competing currencies than you guys are almost a century behind the learning curve.

 

But they're not different; they're all fiat currencies! You're trying to point out how ours is special - and the reason for the stupendous growth - when you're not comparing our economy to any which has retained a gold standard, or doesn't fall under IMF control.

I've already explained that they do matter, and I've already explained that we enjoyed explosive economic growth without the intrusive indentured infiltration of the FED.

All the FED did was provide a whip and a prod, and enjoyed a percentage of the increased productivity that took place from those capable of creating such productivity, while simultaneously driving those who were less - or not at all - capable into the dirt.

Non-sequitur. We were an immature baby economy, and we were not as technologically advanced as we are now. Attempting to equate hardships as a consequence of a more primitive society with the lack of a fiat currency system is disingenuous at best.

You continue to blithely ignore the point. I have never said that they would be any more gifted: what I said was that in a system where inflation didn't penalize their wealth, they wouldn't be LOSING worth and value.

As they are now.

Because it forces people to constantly work harder than they otherwise would have to work in order to attain a measure of wealth with which they would be self-sufficient! You are literally "working the horse to death"! You've created two opposing forces, which is the metaphorical equivalent of a WHIP: you've endorsed a system which DEMANDS that one's wealth be put to maximum use in order to assure that it does not depreciate while simultaneously taking increasing (unsustainable) percentages of it regardless!

And that doesn't sound sick to you? Even though such punitive action creates the very thing - hiding wealth - that you claim was the impetus for the justification of such a stupid system with which to begin?

And you don't see the problem?????

They are not my employees, now...are they? And according to the Constitution, those who administer our currency are supposed to be in our direct control.

There is nothing Capitalist about the FED. It has no competition, it is not in direct control of the Congress, and I cannot refuse its product.

You - again - are conflating standards of living with 'better off'. Having a fiat system instituted with the Pilgrims would not have resulted in iPods and Air Conditioning in 1800.

Those advances would have taken place regardless the form of monetary system.

Unsustainable. Do you see anything sustainable about the current fiscal path that this country is on? That Europe is on? This system creates an increasingly large and vociferous "have not" segment of society, and that segment eventually revolts.

I've heard you say that before. The problem is that your claim is moot, as the politicians in Washington - who are controlled by the exact same people who control our currency - say that our taxes must be raised in order to pay this debt back.

I agree: it doesn't have to be paid back. Fat lot of good knowing that does, if I end up in jail if I don't pay it back.

And any system that requires increasing percentages of earned income in taxes is unsustainable, as there is no number larger than 100%.

And the fact is that even 100% of the top 1% of income earners cannot put a dent in the debt that is being created.

Instead, it is an IOU on my children, so that this monstrous Plantation Owner can put the shackles on them as well.

They are one and the same. I firmly believe that you do not know how to answer the problem with a solution, but you at least can acknowledge the problem. You don't seem capable of connecting the dots back to what I identified as the cause: inflationary systems will always rob lower classes far more severely than upper classes.

Supporting a monetary system which created the circumstance which they errantly blame on "the rich".

Nothing I said disagrees with what you wrote. You want a Ferrari; that is demand. That money creates the means through which demand can be met does not detract from my point in the slightest. Like I said: demand is akin to 'covet' - and that's something which is found in human nature.

Like I said. Increased pressure on demand is what I said. Nothing you wrote counters that.

How is this a logical response to what I wrote?

What I did in the past provides the intellectual - and (as a result) tangible - assets with which I conduct business in the future. My past is my roadmap of equity building. What I object to is being forced to economically operate in a monetary system which robs a percentage of sweat of the participants in the economy.

Because that is exactly what the FED does.

Before, I was poor. What happened? You're utterly off-base, and I proved you wrong. I understand the deleterious effect of our current monetary system, and I understand how to manipulate it. I also understand that my intelligence, talents and work ethic keep me from being robbed of my assets at the same rate as those of lesser means.

In addition, I understand how returning to a set currency standard administrated by our own Government directly - without profit - would be far better for our economy, and solve many (if not most) of the problems that we have created for ourselves.

For starters, the destruction of the family is linked to this malfeasance. It used to be that one person in the family had to work in order to pay the bills. Your "maximize productivity" mantra has ruined that: we now have 2 income families, and a host of social/familial dysfunctions as a result.

You think your system is superior. It is not. "Maximizing productivity" is a catch phrase used by slave-owners. You should have focused on maximizing life, liberty and the pursuit of happiness.

Because your system sucks at securing those things.

Duh.

 

great point!

 

There is no need for your incessant descriptions. I understand perfectly well how it works. I learned about our monetary system from a former analyst at the Federal Reserve.

No, we're debating whether or not the government should monopolize the issuance of currency.

I'm of the opinion that monopolies are good for the elites and bad for the working classes, whereas you are of the opposite opinion.

This is not an argument in favor of a FIAT monetary system. It's just an empty assertion.

If you can't grasp why central planning does not work, then you are the one who is behind the learning curve.

 

This goes both ways. You don't have any country to compare the United States to that is first of all more robust, let alone on the gold standard. All you are doing is offering your subjective opinion that we would be better off now with the gold standard. Yet if you could actually prove it, you would win a noble prize and turn around the past century of economic evolution. If I were you I would write a book and make couple million dollars about how our system would be better off under the gold standard.

Our economy is way too robust for you to claim we had similar growth in the past. We are the most innovative, technologically advanced, financially savvy country in the history of mankind. And there has been no bigger growth period than since the Fed and our new economic system took shape. Explain to me how that is just a coincidence and how we would be better off had we not created a central bank and had we not abandoned the gold standard. I bet you $1 million that you can't.

Technological advancement and innovation are a result of productivity. Just like we advanced in building cars, we have advanced in economics. The fact that you think we understood more about economics 100 years ago is mind boggling.

That's the point of our system. If you don't want to lose value of your medium of exchange than do something with it.

Lol, American's work too hard? That's a new one to me.

A medium of exchange shouldn't retain or gain value. It's counterproductive

You might not understand it, but they monitor and handle our $14 trillion economy. They deserve every penny they get.

Utility is all that matters. The fact that we have iPods and air conditioning now makes us better off than 1800. Unless people in 1800 didn't want air conditioning and iPods. You are missing the whole point of economics.

Yea, Europe is screwed. They do not have any control over their own monetary policy. Which is exactly why all the countries will start leaving it for an American based system. More proof of how awesome our system is. They essentially have strapped themselves to a revenue constraining system whereas America is not. We are nothing like the Euro countries.

No one is saying to pay the debt back other than conservatives. The problem is reducing the deficit to prevent long term high inflation. Although now is not the time to do it, I don't think any taxes should be raised. In the future when productivity picks up I believe taxes should be raised on the top. This has nothing to do with class warfare. I love wealthy educated people and I don't care how much someone makes. This is purely economically derived.

I was talking about the national debt

Your children will never have to pay it back just like you never had to pay back the previous generations debt. You simply do not understand our economic system.

That's not true.

You said demand is human nature and has nothing to do with monetary policy. I told you that demand is demand on money, so you were in fact incorrect with your statement.

Read my post. The FED doesn't create money, the Government does. The FED is not the culprit you think it is. You simply do not understand what the Fed does and why.

Stick to whatever it is that made you money. Your knowledge of economics would make you poor again.

This goes in to a whole bag of socioeconomic issues. I'm sure woman aren't ready for America to turn in to Iran quite yet.

 

I guarantee you don't really understand how it works.

That is the debate you guys brought up from my description of the system. Money is simply a representation of productivity. If you have competing currencies than you will need to separate production. This is exactly why the Euro was created, because they wanted to create a single currency to represent a much larger base of production.

Competing currencies would not work the way you believe. Money should not be saved for investment purposes as in saving money because it will be worth more in the future. That would destroy economic growth. You should not want USD because you want to collect it. You should want it because you want to get something else with it that was built by employees in USD and paid for by companies who accept USD.

I can grasp it, it's called the United States of America. If you think that advocating something that has not been used in almost 80 years as being ahead of the curve than you are nuts. Welcome to the 21st century. Take the tin foil hat off, stop worrying about the Illuminati and just join the fun!

 

Essentially, I'm doing that now, by responding to you. I can see that you're unable to refute the notion that if inflation forces you to employ your assets in order to avoid having them depreciate, THE POOR AND MIDDLE CLASS WILL SUFFER THE MOST.

That alone DISQUALIFIES THE SYSTEM. Who cares how much productivity you can create if the system that creates the productivity harms such a huge portion of our society? What's the point of "maximizing productivity" for some, if it is as the expense of so many others???

It's exactly why those robber-barons (like Sachs; Rockefeller, etc) pushed so hard to institute it: they're the quintessential beneficiaries of such a system!

All true; all meaningless. We've had sustained economic growth in this country with - or without - your indentured fiat system. The difference now is that we have sustained debt, and a stratified class structure...

...along with a host of social ills brought about by the pursuit of "maximizing productivity".

I still take issue with that claim, btw: all I think this system does is congeal productivity at the TOP.

The same way that you cannot deny that our social ills are largely derived by the pursuit of "more stuff", and that inflation has ruined the family unit by creating the need for mothers to work. The same way that you have no way of knowing just what kind of economic growth (without the ills I identify) would have taken place without such a leach-like system.

No, they're not: they're a result of ingenuity and knowledge. Productivity is a non-sequitur in this equation.

If I injected crack into a plowhorse, you can be assured that my field would be plowed faster.

Was I "more productive" that day? Of course. Perhaps I could even do it for a while.

But at the end of the day, what have I sacrificed? You're so focused on what you think is the positive result of such forced influence (the manipulation of people and their assets) that you think it's a good thing.

It isn't. It's destructive.

Your economic system is nothing more than a theory. You have not demonstrated its sustainability, and the current state of our economy from a macro-economic standpoint is a priori evidence that your economic system isn't sustainable.

But - more importantly - it is a priori evidence that sustainability isn't even the goal. CONTROL is the goal.

How obtuse. 100 years of history has established that too many people don't, so your "tough: do the smart thing" falls on deaf ears, and is truly indicative what is the evil force behind our societal and fiscal ills.

You think I earned all that you saw by not working hard?

You haven't been paying attention. The work ethic of Americans was a large part of our lore. That is being eroded now due to the socio-economic troubles that your monetary system has instigated.

Your goals are all screwed up, and it's causing all sorts of socio-economic problems.

As I've pointed out; as you seem unable to deny.

I understand it fully. Perhaps you'll stop your backhanded swipes at my intellect, as you were forced to retract your claim of my financial condition.

There is nothing that the FED has earned. The FED's charter is a matter of historical record: manipulation, underhandedness and deceit. Its institution is illegitimate, and highly questionable - and that's maximizing my charitable nature to describe it as such.

I'm not missing a thing. You haven't demonstrated how a fiat currency is the reason why we have iPods and AC. I have asserted that it isn't: that the ingenuity of people and our inquisitive nature would have resulted in those things regardless the monetary system. You have repeatedly attempted to attribute our monetary system for our advancement as a culture, and I have flatly rejected that, as we clearly advanced rapidly as a culture prior to that point.

It's like Moore's Law, only applied societally. It has nothing to do with fiat currency.

That you seem able to separate the two is utterly insane to me. The US is following Europe's system; the differences are only a matter of degree.

Pap.

Obama says "rich must pay more to reduce our debt".

[ame="http://www.youtube.com/watch?v=hAIjoaDVbDY"]http://www.youtube.com/watch?v=hAIjoaDVbDY[/ame]

Don't even try to claim that Obama is a Conservative. I wil literally jump through my monitor and beat you over the head with your own keyboard.

 

But wait! How is that a problem?? Doesn't inflation prompt "maximum productivity"?? Wouldn't higher inflation increase productivity that much more?

Kinda doesn't matter your personal position on the wealthy if you're taking their money regardless.

So is Obama. And he's talking about me paying "my fair share".

I absolutely do. You absolutely do not understand the damage our monetary system has done to our economic system. You cannot see it; you refuse to see it. You're simply happy to view that crack-injected horse plowing that field at a pace you think represents "maximum productivity", without giving any thought whatsoever to whether it is actually healthy.

You admitted it earlier: it forces people to invest their money in order to avoid having it depreciate. If the poor and middle class cannot and do not do that, then they are - by definition - being harmed.

It is absolutely true.

No, I wasn't. Demand=covet; something found intrinsic to human nature. Money is simply the vehicle through which that demand is manifest in our current economic system. Demand would still remain in a barter system as the basis of it as well.

You're incorrect; I know how it works. The Government has chartered the FED to become a moneychanger: they are literally the Mafia of our economy.

Disagreeing with your claims of the efficacy of our current system is not displaying a lack of knowledge of the system. It is precisely because I understand our system that I do not keep my money in low-return vehicles (to the degree that I can avoid them).

That does not mean that it is good for society; it isn't. You continually attempt to attribute societal advance to our monetary system, and you have continually failed to support that assertion. The problem isn't with me; it's with your inability to defend a system which is clearly broken - and you even deny that it is.

This goes in to a whole bag of socioeconomic issues. I'm sure woman aren't ready for America to turn in to Iran quite yet.[/QUOTE]

 

Then the A I got from my macroeconomics professor must have been a big mistake.

Which has nothing to do with the deleterious impact that monopolies have on the working classes.

Separate production from what?

Yea, and the Euro is doing so well.

Pure speculation.

The data clearly disproves this simplistic nonsense.

When the US economy finally came out of the Great Depression, personal savings rates were at a historical high; conversely, when our economy went into the Great Recession, personal savings rates were at a historical low, and the tentative economic recovery we are experiencing has correlated with a rise in personal savings rates. Obviously, you haven't the first clue what you are talking about.

This is just your stupid opinion. It has no basis in established economic principles or real world data.

An asinine soundbite with no relevance to our discussion.

I'm advocating something that is used everyday and to great effect. They're called "markets", and they're demonstrably superior to economic central planning.

As soon as you stop kissing Ben Bernanke's worthless ass, I'll take my tin foil hat off.

 

maybe in your fictional socialist utopia. most Americans agree that something is severely wrong with our system at a fundmental level

 

I see you still haven't realized why money must be directly tied to labor in order for it to have any real value. the only reason anyone trades with fiat currency is because it is backed by government force, ie legal tender laws

 

Good grief. When will people begin to realize that money is a commodity that serves to facilitate trade?

 

Oh gosh, you again. You still think gold has more value than fiat currency because the labor it takes to dig it out of the ground?

Lol.

 

No, this is incorrect. Inflation forces you to employ your medium of exchange in order to avoid having it depreciate. Inflation actually helps your assets.

What "huge" portion is harmed?

Tin Foil hat logic

So we didn't have slavery and poverty during the first 140 years of our existence? All the suffering came about because of the Fed?

That is a fiscal problem, not a monetary one

That's subjective

It's not forced influence. You can keep your money stored in your mattress all you want.

The United States of America, China, Japan. Oh wow, the 3 largest economies in the world... I wonder what "theory" they use. Maybe you can point me to countries that use your theory. I'll be waiting. I think Uganda still uses gold to transact. Maybe we should be more like them.

Control is needed in sophisticated societies. We are not a 3rd world country.

Lol, it's all the monetary systems fault isn't it. Hahaha

I have never said our system is the reason why we have iPods. But it is the reason why even people on welfare have ipods and iphones and Apple is one of the largest companies in the world selling gadgets. That's a product of our monetary system. The ability to mass produce and reach a massive demand base. Under your system, Apple would not be able to make as many products as they do because 95% of the country wouldn't be able to afford them. That sounds fun! And if they can't make as many products, they wouldn't employ as many people. Welcome to econ 101.

 

$35 bought one ounce of gold in 1933, now I can buy over $1700 with one ounce of gold. Nice performance dollar.

 

And in 50-75 years an ounce of gold will cost $3000-4000. Welcome to econ 101.

 

Except poor people usually don't have any assets besides their meager savings and wages, which inflation destroys.

Your entire perverse ideology is nothing more than a war on the working classes. You've admitted as much throughout this entire thread, but you fail to understand the implications of your incoherent gibberish.

 

Yea, and inflation helps your assets, too.

 

Poor people have gotten screwed in every economic system in the history of the world. I don't get how you think, having no inflation helps out poor people. It actually leads to more poor people.

 

Now you're changing the subject.

You made a stupid claim, i.e., inflation helps one's assets.

I informed you that poor people do not usually have any assets besides their meager savings and wages, which inflation devalues.

So, please explain how inflation helps their assets. I'd be interested to hear your "logic"...

 

Anyone who can not increase their wages or assets will be hurt through inflation. But don't take that as cause to celebrate your point. Since you still don't have a reason why they would be better off in the long run with out any inflation.

 

So let's continue on with your country. You now created a Fed who pumped $500 million in reserves/currency in to the banking system. The private sector has $1 billion. Now the Fed is one of the most misunderstood entities in our entire system. People equate the money the Fed creates as "printing money". They think the Fed is responsible for creating all this money that causes massive inflation and such.

But the key point to understand is that the Fed creates currency and reserves. Currency is just a physical method for the private sector to exchange their Government deposits. Reserves are just an accounting identity for banks to leverage and exchange amongst each other. So now let's go through a mental example on how $1 billion is the only amount of money that will ever exist regardless of the Fed. Let's take a step back and say that the Fed never gave the banks $500 million.

The countries balance sheet looks like this

Banks
A | L
Treasuries $1b | Deposits $1b

Fed
A | L
$0 | $0

Country
A | L
$1b neg equity | $1b treasuries

Ok, so you have a country where people have $1 billion in deposits but no physical currency to use.

Now here is the interesting part about the Fed. Let's say the Fed purchases every single Treasury in existence, which in this case is $1 billion. Now what happens to the country? Most people think the Fed just added $1 billion to the country, but let's look at the facts. The Fed added $1 billion in currency/reserves to the country. The private sector still has $1 billion in deposits. So now the country looks like....

Banks
A | L
Reserves/Currency $1b | Deposits $1b

Fed
A | L
Treasuries $1b | Reserves/Currency $1b

Country
A | L
$1b neg equity | $1b treasuries

---------------------------------------------------

You notice how the countries balance sheet does not change regardless of what the Fed does. The country still owes $1 billion and the private sector still has $1 billion. The Fed did not create any "new" money. They simply created a form of money that can be used to exchange Government created deposits. That is all the Fed does in our system. They create reserves and issue currency. Congress dictates how much money we actually spend and create in the United States. Everything revolves around what Congress decides.

 

it helps the the poor stay poor, and keep voting for whores in washington who promise free crap.