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

Why is everyone attacking you? Your description of the monetary system is exactly what I and most other people were taught in Intro to Macroeconomics as an undergrad.

I guess anyone who disagrees with the cult of Paul is just a poor, brainwashed soul who hates the free market.

 

Why do you bring Ron Paul in to this? Certainly the monetary system exists on its own apart from Ron Paul, right?

 

My macro class, which as just 6 years ago still used the Alan Greenspan logic. We were still taught that money comes from the Fed and that the Government has to borrow money.

It turns out that those textbooks are not entirely accurate in describing our new economic system. The Government doesn't have to "borrow" money because the money doesn't exist. That was more of the point of the thread as that the Government has to be in debt in order for the private sector to have money.

If the Govt paid off the debt, it would require the private sector to give back all the money.

I think college textbooks need to be updated and represent a more MMT approach to the economy rather than the old school gold standard logic.

 

Which would mean your original assertion was a deceptive generalization that only applies to the ultra wealthy.

They'd be better off because they'd be able to buy more goods and services with their wages and savings than would otherwise be the case.

 

Oh, but I thought it helped their assets.

 

You don't need to be ultra wealthy to own assets or invest your money. I'm not ultra wealthy, but I'm wealthy enough to know that I shouldn't keep all my money in a checking account just rotting away.

Why? How do you know they would have the same jobs if there wasn't inflation. The point of inflation is velocity. If you cut inflation and make holding on money profitable, then there is less money going around. Less money means less income, means less jobs.

There is a reason why we target a certain rate of inflation every year. It's not because they want to steal from people, it's because they want people to use their money.

 

What gives fiat currency its value? What gives gold its value?

 

Supply and demand... nothing to do with labor

 

Of course not, but the poorer you are, the less you benefit.

The biggest asset of the middle and upper-middle classes are usually their homes, and because of inflation in the housing industry, virtually half of Americans homeowners are now underwater on their mortgages.

How did that help their assets?

Because their wages and savings would retain their purchasing power, obviously.

Then perhaps you can explain why personal savings rates were at an all-time high when our economy finally came out of the Great Depression, or why personal savings rates were at an all-time low when we went into the Great Recession, or why our tentative recovery has correlated with a recovery in personal savings rates.

Cute.

 

No, it is not incorrect. What percentage of Americans own stock?

You answer that question, and you'll discover that the 50% that so many are caterwauling about are the exact same people that do not benefit from the inflation that you laud.

And retirees? Those who cannot afford to risk placing their assets into investment vehicles with higher reward - but higher risk as well?

They are precisely the ones who are hurt the most by your FED Ponzi scheme.

It is the epitome of obtuse to simply say that "inflation helps your assets" without taking into consideration that {a} you'd have to first have assets, and {b} you'd have to deploy them intelligently, and expose them to risk of loss.

Both {a} and {b} are rife with opportunity for "money-changers" to gobble up your assets; this is precisely the dynamic made reality through an inflationary fiat currency system.

It's obnoxious to have to continually re-type it: the poor; the retired; the less fiscally intelligent - even simply those of modest means, who may not fit the exact description of poor, but also do not have disposable income with which to invest.

Is that over half of our population? Less than half of our population owns the vehicles essential to combat the inflation that you crow is critical to prompting and creating growth.

How can you operate under the presumption that forcing inflation is good for the whole of society, when only a fragment of it is positioned to take advantage of the playing field that such a system creates??

There's nothing conspiratorial about it. It is plain what damage the FED does. You think it's all good, because it forces increased productivity. You've remained blithely unwilling to even consider the opposite end of the spectrum:

THE FED IS WHAT HAS EXAGGERATED CLASS STRATIFICATION. INFLATION IS PRECISELY THE WEAPON THAT HAS BEEN USED AGAINST THOSE WHO DO NOT HAVE EITHER THE ASSETS TO TAKE ADVANTAGE OF INFLATIONARY INVESTING, OR THE INTELLECTUAL WHEREWITHALL TO PREVENT THEMSELVES FROM BEING BLED.

You've now obtusely done it again. Slavery and poverty both took place in a primitive culture. Our economy was new and growing. Our cultural awareness was developing.

None of that has a dåmned thing to do with the evil of FED instituted fiat currency.

You've said that 4 times now, and it continues to mean nothing whatever. It is a deflection, as monetary problems cause fiscal problems, as I've exhaustively demonstrated.

So? Prior to the FED, we sustained the nuclear family by the ability to only have to employ one member - usually the head - of a household. Two income earners became necessity precisely because of the inflationary pressures brought to bear on those without wealth accruing assets...just as I've said repeatedly.

And you've brought nothing to the table to refute that.

You yourself said that you're forced to spend/invest your money, as failure to do so results in your assets ROTTING. How obtuse do you plan on getting here? I'm about at my limit.

China, actually, has done things quite a lot different than the US and Japan. The US and Japan, I'll remind you, have been in a sustained economic slump. The Chinese Yuan is owned by the government of China. They do not cater to a for-profit bank.

A claim is not a fact. You're arguing in support of a command economy: control from a Central Bank. Merely restating your belief is not an argument in support of that belief. Evidence that your vaunted Control sucks is found in our current economic and fiscal condition.

I've already explained how - to which you've offered nothing in response but a 'haha'. That is not a good counter-argument.

You sure as hell did. You claimed that our advances are due to our monetary system. I've patiently explained that advances happen because of human ingenuity. All your vaunted fiat monetary system has done is ensured that a select few at the top take their cut of all the ingenuity of the people trapped within the system - a fact that you have not denied, but - instead - claimed that they were "worth every penny".

I flatly reject that.

This is absolutely fabricated nonsense. When we had the Gold Standard, people afforded all sorts of available luxuries at the time. How can you establish that such a reality would not have continued to this day???

It's obvious that you've been taught that as early as econ 101. It's clearly engrained in you; you're a nice little subservient soldier.

You're wrong, and you're in support of a system which has been enslaving our populace for close to 100 years.

 

Neoclassical is just an alternative term to describe "New Classical" economics, which, if you know your alternative economic theories, emerged in the late 1970 early 1980's. It's actually one of the newest alternative economic schools. New Keynesian is the other 21st century economic school. You seem to be a New Keynesian.

 

But it beats the crap out of the dollar's purchasing power. Too bad for all those folks who spend their dollars on food and energy, and don't get to convert them to assets.

 

Poor people benefit less regardless of what system you use.

One time event that happened after 100 years of home appreciation. Great way to take an event and discredit 100 years of evidence to the contrary. The housing collapse had many factors aside from "inflation".

But you still can't prove what their wages and savings would be. You are assuming that they would have the job and make the current wage they are now. That is not how economics works. If less people spent money, then the macro-economy would earn less of an income. That is basic mathematics. The velocity of money... something you need to learn.

Source?

 

I'm a Modern Monetary Theorist

 

Yea, too bad. But if it weren't for inflation, they wouldn't have any jobs. Gotta take the good with the bad.

 

it's truly sad that so many people don't understand money.

 

Agreed.....

 

Agreed. It's really so simple when you consider it carefully. Money is simply a commodity that derives its value from its ability to facilitate trade.

 

You are making the assumption that they were able to do this before. This is ludicrous. Old people just died back in the 1800s and poor people lived as impoverished as ever. You are assuming that life as we know it now would be the same if we had your monetary system. Yet you can't explain why life would be any better. You use today's data and apply it to your theory. The problem is, you don't know what today's data would be if we were using your theory all along.

If you don't have the means to own assets now, you would not have the means to own assets then. There have been poor people in every generation and there has never been a time where poor people had as much as they do now.

Source?

What's mind boggling to me is you thinking that life was so great before the Fed.

 

Yes, that is a simple explanation. But then what is it that you can trade for and why?

 

I trade my production for the production of others because specialization of labor increases production possibilities frontier.

 

What's truly mind-boggling is your desire to ascribe our prosperity and progress to the Federal Reserve and not the underlying principle of economic liberty.

 

I'm not attributing our success to the Fed. I'm saying the Fed and our ability to handle monetary policy had contributed greatly to our rapid economic prosperity. I just do not understand what you use as the basis for a productive economy. For me, it's productivity.

 

Yes, but why does anyone want your production?

 

Its not relevant why people want what they want. What is important is that they do want it.