The Creation of the Federal Reserve System (Part 2)

No one ever learns about the terrible times during/after war in school.. convenient huh?

Sickens me to think people are willing to send their brave countrymen to die just so they can keep buying material objects...

Stable economies are a result of production.. you can not spend without producing first unless there is a central bank willing to create the money.. this inevitably debases the currency as we have seen over and over.

Im sure there is a psychological disorder that describes the condition in which if certain events (like currency collapse and governmental collapse) has not been personally experienced, the individual does not believe it is possible.. Any suggestions?

 

I use war as an example of Government spending being able to spur economic growth. I do not encourage going to war and I especially do not believe we go to war to keep buying material objects.

My point is that we are limiting ourselves because of our misguided views on economics. The Govt should be spending trillions of dollars more than they are now, rebuilding all the roads, making more highways, building bridges, trying to get NASA to reach limits we've never seen, building high speed rail systems, finding the cure for diseases, etc, etc.

 

Where are these trillions going to come from?

 

The same place all the other trillions came from. The Treasury crediting our accounts with little tiny bytes!

 

You must not understand economics if you think that is a viable solution in a global economy.

 

No, if the government was to spend trillions more, there would be a extreme removal of the dollar worldwide which would result in the collapse of the stable society. Firstly, the government would need to do either 3 things: A) Raise taxes drastically, B) Get the Federal Reserve to print those dollars, C) Borrow from China. None of these option are viable nor would they provide any type of long term growth for the economy, just provide stabilization until greater problems eventually as a result of such action.

A) More taxes = less money in the economy in certain areas that provide high employment options for people in the lower-middle classes. To leave money in the economy means that small businesses have more disposable income and are able to slowly and eventually expand, which includes hiring and more production.

B) The Federal reserve has already printed over 2 trillion dollars in aide to the US and foreign economies during the Obama administration. This is not a political matter. The fact is that printing the money does 2 things. A) Devalues the savings of countries world wide as well as the savings in our own personal savings. This is all tied to the US Government's debt levels. When the debt levels sky rocket, investors and loaners leave the US Debt market because the prospect of getting a stable return is diminished. As people leave the dollar, they buy into other currencies (although most are in the same situation as the US) or in gold/silver. B) Will eventually lead to the US Currency falling from the high level of World Reserve Currency, and Americans will lose Massive value in their savings as the price of EVERYTHING will increase.

C) The stimulus spent already has only stabilized the economy. We still run into the same crisis until the congress/federal reserve authorizes another stimulus. The government has tried to pick which banks, which businesses, which governmental institutions should survive because of various reasons. Some reasons revolve around the fear of riots, some reasons revolve around the notion that certain businesses can become profitable, some reasons revolve around the realities of the public-private partnership which has been created in Washington. In reality, the government officials have not proven that the lack of money being spent is the problem.

If anything, it shows that throwing money at something does not make up for the lack of political will to implement real change in policy and decision making. Throwing money at something does not change the laws of economics.

1. Businesses who are failing do so because they fail to do one simple thing. Fail to offer a desirable product at a competitive price.

2. Banks who are failing do so because they fail to do one simple thing. Fail to take their risky behavior seriously because the government can bail them out.

3. Government institutions fail because of one simple thing. Fail because the serves they provide are not valued by the public to which the increase in tax is unjustifiable.

It is too much government involvement, too much government spending thats the problem. They are perpetuating a system which allows failing businesses and organizations to stay afloat when it is possible for better businesses and organizations to be created and started in their place.

 

To add, the market should establish what people should be building, what people should be researching, and what people should be buying. Just because a product is created through government funding, does not mean the private market will engage in commerce. "If we build it, they will come" should be the government's official motto. Too bad it has failed and failed and failed. There is very little history on governmental economic intervention which had not prolonged the financial instability. This is why many are leaving the keynesian school and going toward adam smith because, too much keynesian fails to stand up to any practical common sense test. It works if you start with a strong financial position, but once your financing runs out, it fails. This is why keynesian economics has gained massive traction over the past 50 or so years because of our economic success within the private markets. Now that private markets are scarce, keynesian economics starts to bleed dry.

History has not led us into a more free market, it is less of a free market than ever before which is why many feel the only solution is government intervention. Government creates the problems, then government says it can save the day. All the while government get larger and becomes more powerful.

 

You have displayed that you don't even know how the system actually works and you are questioning my solution?

Our greatest commodity is our human capital... put people to work, if it requires paying them, then pay them. We are wasting a lot of time because of peoples economic ignorance.

 

How the system works according to you does not equal how the system actually works. Sorry to burst your bubble.

Rofl. People do not work for free and if you create money to pay them you create inflation. Do I need to explain to you how inflation works?

 

The Government doesn't build stuff for the free market. It isn't in the business game. They build stuff for the country. They build computers so that the military can have better calculations, they build the internet so that the military can communicate with each other. They do not build Windows, they do build Wal-Marts. The provide goods that the free market would not or should not be in control of.

Our problem is simply a lack of demand. Get money in to the hands of people who will spend it and they will spend it and people will produce goods. Simple as that.

 

I describe how the system actually works. It isn't a theory. When the Govt credits an account there isn't some theory surrounding how they do it. There is actual accounting and operational realities that go in to every transactions. Without understanding how those transactions affect each other your solutions are probably worthless.

More money chasing the same amount of goods. What if more money creates more goods? Explain that to me.

 

How do people remove the dollar? And no, the Govt doesn't need the Fed in order to spend money, and the Govt doesn't have to raise taxes, and the Govt doesn't have to borrow from China. All three of these assumptions you are making is 100% incorrect.

Lol, too much Govt spending is the problem? How is that a problem. Please tell me why the country would be much better off with out the Govt spending. I can't wait to hear this.

We produced a quarter of the world's output last year, our corporations made over $1.6 trillion in profit. Businesses are not a problem. Our lack of skilled labor and our over abundance of unskilled laborers that are losing their jobs to little Chinese kids is the problem. The supply side is perfectly fine in America, if someone wants something they can easily produce it and they would produce it the second someone has the means to get it.

 

Not necessarily. I could create a checking account and not put any money in it.

That's of course assuming that the people managing the money are selfless, incorruptable, know exactly what interest rates and the money should be (that would normally be continuously changing at infinitely small periods of time), and only have the best interests of the economy at heart. Of course all of this is far from true.

You said fiat currency came about for the same reason governments coin clipped. Governments coin clipped because it was a method of extracting wealth from the general public without having to raise taxes on them.
Let's try this again: so you admit that the reason governments use fiat currency is as a method to extract wealth from the general public without having to raise taxes on them?

I take it you've never heard of a silver certificate.
Embarassing!!!

So if it's so good for our standard of living, why doesn't the government just nationalize everything so we can have 100% employment and print fiat money to pay for all of it?

It wasn't useless because you needed it explained it to you, since you don't understand how the system works.

So you admit that you were wrong in saying, "They can not create deposits in our system. As in they can't give you or I money"?

Lots of places. Banks get their money from deposits and profits. Corporations get their money from profits. Foreign central banks can create money out of thin air and exchange them for dollars. Foreign governments tax, borrow, or create money out of thin air, and exchange them for dollars. Individuals get their money from personal income.

Probably not, but it could if it wanted to.

The govt is not the only part of the money creating equation. The private sector and the Fed also play a role.

I disagree that the Fed is capable of controlling inflation to keep it low.

False. The Fed has no money in it's reserves, it simply creates it out of thin air.

Not necessarily. If I was a corny corporation or a member bank selling govt securities to the Fed, they would ensure that I would make a handsome profit on that exchange.

Banks do not create money out of thin air.

This transaction creates no new money.

This transaction is when the money is created.

I disagree with your opinion.

Of course. Profits in the millions of dollars on every primary dealer transaction would be chump change compared to the government's budgets in the trillions of dollars. That doesn't mean it's not ripping off taxpayers and consumers.

The Fed has no "reserves", it simply creates money out of thin air to make all of its bailouts.

I disagree with your opinion.

It doesn't. Productivity, population increases, and technoligical increases lead to more goods.

 

Not necessarily. I could create a checking account and not put any money in it.

That's of course assuming that the people managing the money are selfless, incorruptable, know exactly what interest rates and the money should be (that would normally be continuously changing at infinitely small periods of time), and only have the best interests of the economy at heart. Of course all of this is far from true.

You said fiat currency came about for the same reason governments coin clipped. Governments coin clipped because it was a method of extracting wealth from the general public without having to raise taxes on them.
Let's try this again: so you admit that the reason governments use fiat currency is as a method to extract wealth from the general public without having to raise taxes on them?

I take it you've never heard of a silver certificate.
Embarassing!!!

So if it's so good for our standard of living, why doesn't the government just nationalize everything so we can have 100% employment and print fiat money to pay for all of it?

It wasn't useless because you needed it explained it to you, since you don't understand how the system works.

So you admit that you were wrong in saying, "They can not create deposits in our system. As in they can't give you or I money"?

Lots of places. Banks get their money from deposits and profits. Corporations get their money from profits. Foreign central banks can create money out of thin air and exchange them for dollars. Foreign governments tax, borrow, or create money out of thin air, and exchange them for dollars. Individuals get their money from personal income.

Probably not, but it could if it wanted to.

The govt is not the only part of the money creating equation. The private sector and the Fed also play a role.

I disagree that the Fed is capable of controlling inflation.

False. The Fed has no money in it's reserves, it simply creates it out of thin air.

Not necessarily. If I was a corny corporation or a member bank selling govt securities to the Fed, they would ensure that I would make a handsome profit on that exchange.

Banks do not create money out of thin air.

This transaction creates no new money.

This transaction is when the money is created.

I disagree with your opinion.

Of course. Profits in the millions of dollars on every primary dealer transaction would be chump change compared to the government's budgets in the trillions of dollars. That doesn't mean it's not ripping off taxpayers and consumers.

The Fed has no "reserves", it simply creates money out of thin air to make all of its bailouts.

I disagree with your opinion.

It doesn't. Productivity, population increases, and technoligical increases lead to more goods.

 

Lol, is an account WITH money that the Govt puts in to it considered money.

And you believe the private sector is selfless and incorruptible and the best interests of the economy at heart?? Lol, we are either slaves to the Govt or slaves to the resource owners. I much rather have a Govt that I have a say in rather than be subjected to resource owners who will squeeze every penny out of us until we are working for free just so they can give us food.

Because there wasn't enough money to satisfy the country's wants. You can say that's good or bad, but if you need to protect your country and you can't because you don't have enough of a stupid metal found in the ground, then you have a dumb Govt and you should learn to speak another language so you can speak to the prison guards of the country that takes us over.

I've never even seen one

I honestly think the Govt should institute a wage guarantee instead of a minimum wage, whereas anyone who wants to work can get a job. Then the private sector would have to compete for labor. BUT let's not get in to this subject since I'm sure this will make you go crazy. I do not believe the Govt should nationalize everything.

I understand exactly how the system works and I'm trying to explain it to you, but it does not seem to be getting through to you.

No, I'm saying they could... but they don't and they won't.

First off you are talking about how people make money. The question we are arguing about is where does this money come from that they are making? And Foreign Central Govts purchase treasuries with existing dollars, they do not purchase them by exchanging their currencies with the dollar. They purchase them with the trillions of dollars we ship overseas to buy their cheap products.

I never said it was. The Fed is very critical in the money creating process because they make the money the Govt gives us usable. And the private sector has no role in the money creation process other than their ability to go in to debt.

I never said it doesn't.

Not really that handsome. Just very small percentages on the spread.

Sure they do. You obviously do not understand our banking system. They do not use your deposits to loan me money.

Of course it does. The private sector has $1 billion more dollars in which they can now purchase the $1 billion in Govt debt that it represents from the secondary market. It also uses this $1 billion to pay taxes. We first must be given this made up money before we can "fund" the Govt with the made up money they gave us.

It's a form of money. But the other form of money which we call deposits in America already exist. You're too fixated on the fact they control the Federal Reserve Notes. That's just the physical currency we use, that is not the money we have.

It's not an opinion, it's a description.

What does paying taxes have to do with issuing debt?

It's bailouts are for the banking system. The banking system can't do anything with the reserves the Fed gives them other than trade them amongst each other. Let me ask you a question... if the Fed can bailout the banks like you are thinking, then why were the tax payers also asked to bailout the banks? If you can understand the difference between the two bailouts you will understand more about what I'm talking about.

False, basic econ 101. Supply and demand.

 

Depends on how you define "money".

Nope, but many corrupt actions taken by the private sector are illegal. These actions are not illegal for the government to do.

Individuals shouldn't be working for the greater good of the greater number, they should be working for the greater good of themselves.

What's the difference?

It's good to see that you're now being completely open about your desire to be a slave to a system that resource owners use as a tool to exploit you.

What do you mean there wasn't enough money? Of course there was. The amount of gold in circulation doesn't matter...because if there is "not enough gold", then the gold that the government is collecting is worth more relative to goods and services.
Clipping coins doesn't create any more money, it just devalues the already existing money. It has nothing to do with how much gold there is in circulation. Econ 101

Why does the government need to resort to dishonest tactics such as coin clipping instead of honest tactics such as raising taxes to pay for the country's "wants"?

Who cares?

Where is the money going to come from to pay for this?

The private sector already competes for labor.

Why not? According to your theory it should make GDP per capita go through the roof.

That's because your "explanations" are riddled with factual errors, logical fallacies, blatant contradictions, baseless opinions, and strawman arguments.

Blatant contradiction with what you originally said.

We could speculate all day about that.

Sometimes they do.

Not always.

False. The only reason the "money" the Fed makes is usable is becuase of federal legal tender laws. Nobody would use the Federal Reserve Note as a medium of exchange if it were not for federal legal tender laws.

False again. The primary dealers are part of the private sector.

So you admit that you were wrong in claiming "they didn't create money"?

Prove it.

It doesn't matter. At any given time, the banks cannot have an amount in outstanding loans that is any more than the initial amount of money that the Fed has created. It's mathematically impossible. No new money is created when the banks make loans.

This does not create any new money. It simply causes the government to go into more debt.

Why doesn't the govt just fund itself? What I mean is, why not cut out the middleman (us) and just have the govt print made up money for itself?

This statement makes zero sense. Most of the money the Fed creates is not physical, but is digital. All of our money is denominated in FRN's; it doesn't matter if they're physical FRN's or digtial FRN's.

Keep telling yourself that.

More taxes = less debt. Econ 101

An astute observation.

What does this have to do with the Fed? The taxpayers were forced by Congress into paying for the TARP bailouts. This has nothing to do with the Fed bailing out its member banks. The fact that you're bringing this up shows how little you understand.

There were far more than two bailouts.

Productivity increases and technoligical improvements = increase in supply. Econ 101
Population increases = increase in demand. Econ 101

 

Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context

Can you use your deposit to pay for goods and services?

We can eat when we are slaves to the Govt

OMG!! You are ridiculous. "It has nothing to do with how much gold there is in circulation". Of course it does, people just don't build tanks for free.

Because raising taxes reduces demand. You are acting as if production is fixed. As in if we need a military, the private sector has to give something else up. That is not how economics works. You can have a military and the private sector can still eat food and buy the crap they want.

Same place money comes from now

The Govt is the largest employer in the nation. They provide some stiff competition to the private sector.

Real GDP per capita is all I care about which takes inflation in to calculation. I'm not saying you can give everyone 1 million dollars and things would work out.

They are based on pure math and logic. The fact that you argue against these simple concepts of reality is what is hilarious.

There's no "speculation" about where money comes from. It isn't magic. There is a reality to how money gets created.

But they don't

Of course. But that doesn't make what I'm saying false.

False, they are banks. Can you magically create trillions of dollars in deposit accounts?

I have never said they didn't create money. I said they create a "form" of money to represent money that has ALREADY been created.

Lol!!!! No wonder you can't grasp what I'm talking about. You have absolutely no clue how the banking system even works. Read up... especially page 17.

http://www.rayservers.com/images/ModernMoneyMechanics.pdf

LOL!!! So the extra $1 billion the private sector has isn't "new" money? Come on man! You have to be able to grasp this... I'm basically drawing it out for you.

That's a great question. Why don't they fund themselves and just take seigniorage of the currency. For one our current system has the policies that existed in the gold standard, what the Govt did was adjust how the banking system, Treasury, and reserves work. Why do you think the Govt created Primary Dealer banks that are required to bid on every single treasury auctioned off by the Govt? The Primary Dealers are essentially the Govt's way of funding themselves. The bond market has turned in to a tool for the Fed to control the demand for money, not a tool to fund the Govt. The Govt can spend and create as much money as they want.

So the Fed has created $2.9 trillion in reserves/currency by purchasing $2.9 trillion in Govt debt. Where did we get $2.9 trillion to purchase Govt debt in the first place so that the Fed could purchase it from us to "create" money, lol.

Because they are two separate bailouts. I'm trying to see if you understand the difference.

Demand is not what people want it's what people actually buy... Econ 101

 

You seem like a smart enough guy, so I think you can understand this. I'm not making up crazy conspiracy theories. I have done more research on the Fed, Primary Dealers, and the Treasury that it's embarrassing. Everything I'm saying about the Fed/Primary Dealer/Treasury interactions is exactly how it works.

The Primary Dealers are mandated to participate in every single auction because of policy. Policy dictates that the Govt has to be "funded" in order for it to spend. So the Primary Dealers take the place of direct Govt spending. They are required to make a market and they are required to purchase the debt at rates that the market dictates.

All this can be explained through accounting. The bottom line is the Govt gives the private sector it's money before the Govt needs their money. They don't need us to buy their debt and they don't need us to pay taxes (the keyword is "need", you still have to pay your taxes).

The Federal Reserve specifically controls this Govt spending. They control it by pumping reserves in to the banking system by purchasing the debt that the Primary Dealers bought with money they made up from "thin air". This way when we go to the bank to get cash, they will have it. This way when we write checks, banks will be responsible for having enough reserves to back it. But banks never lend reserves. They do not give you and I reserves.

So yes, the Federal Reserve does have to create money, but they do not determine how much money the Govt has or how much the Govt can spend. They simply manage the amount the Govt spends so that the private sector can use it. The Fed does not give you or I money, only the Govt can give money to an individual who does not have any monetary asset to give in return.

Think of the bond market as a savings account. If you want to save your money invest in treasuries and when the bond comes due you can roll the bond over and keep your savings account or you can get your cash back. The bond market does not fund the Govt. The Govt funds itself by simply adding digits to our accounts.

The rest is just the Fed, the Treasury, and the Primary Dealers trying to finance this in a way that prevents inflation and provides enough liquidity for the recipients of the money (aka us). I'm not some lunatic conspiracy theorist, I actually study this stuff and have a pretty good grasp of how the transactions in America effect each others balance sheets. This can all be explained using accounting.

The bottom line is the Govt never has or doesn't have money. They simply debit and credit accounts. The rest of it is all how they want to control liquidity and the demand for money. The Fed simply controls demand for the money the Govt creates by affecting the borrowing cost of money.

 

I know this violates all the core beliefs of conservatives and libertarians, but it is the truth. The debt will always increase, the debt will always be paid, and the United States will never run out of money.

The private sector will never be responsible for "funding" the Govt.

 

It's utterly confusing the everyone but you.

 

Iriemon, you agreed with everything I said step by step until we got to the part that the private sector does not "fund" the Govt. Your claim is that eventually the private sector buys the debt. Who cares what they eventually do, they have the money before the debt ever is bought.

The fact that you still argue with me on the discrepancy is mind boggling!

 

Only as long as federal legal tender laws exist to enforce the Federal Reserve Note as legal tender. Otherwise, no, I probably wouldn't be able to do so.

We can eat when we're not slaves. We can eat without government. We can eat without resource owners. We can eat with government. We can eat with "resource owners". Your point is moot.

And what the hell is a "resource owner" anyway? I'm a resource owner...you're a resource owner. Everybody I know is a resource owner.

Who said they would? When there is less gold in circulation, it's worth more. That doesn't mean production in the economy slows down. That only happens with fiat currency.

So does inflation.

Just because production isn't fixed doesn't mean the private sector still doesn't have to give something up in order to pay for govt services.

So your plan is to put the poor on an automatic fixed wage that will be paid for by driving up the cost of living for the poor? LOL
So what about the poor people who are employed and/or make slightly too much money to qualify for your fixed wage program? They will have to pay for that through inflation....tough (*)(*)(*)(*) for them I guess.

"Stiff competition" is an understatement. It's impossible to compete with government. Government can outcompete any private business it wants to. The only options for private businesses are to get in bed with the government, or perish. That gives the government an effective monopoly over whatever sector it is "competing" in. I'm sorry, but I don't support monopolies.

OK. According to your theory it should make real GDP per capita go through the roof.

Just keep telling yourself that.

Who said anything about how the money was created?

Your say-so is not good enough for me.

I'm glad to see that you have admitted that fiat currency is worthless in the absence of government force.

Since when aren't banks part of the private sector?

There's a lot of things that I'm not legally allowed to do that other private entities can do.

Gibberish.

Your source does not disprove anything I've said.
Banks do not create any money that goes into circulation. They only multiply deposits.

You haven't drawn out anything. All you've specified was that a primary dealer purchased $1 billion worth of Treasury bonds with money out of his own pocket (money that already existed) and the government gave it to you and I to spend. No new money has been created. New money is only created when the FOMC buys the treasury bonds from the primary dealer.

It was rhetorical. The real answer is because it keeps a check on inflation, and income taxes prevent the people from thinking about how the Fed is screwing this country over through inflation.

We did not have a gold standard. We had a fractional reserve standard.

Because it ensures that the cartel is able to operate most effeciently.

No they can't. The FOMC is not required to purchase govt securities from the primary dealers. And even if it was, it would surely lead to hyperinflation if the government could create as much money as it wanted. That's why this mechanism, along with the income tax, exists. Senator Aldrich was a big proponent of the income tax system. It's no wonder the Income Tax laws and the Federal Reserve Act were passed so close together in time.

What difference does it make if the FRN's are digital or physical? If the Fed buys millions of dollars worth of bonds from me or anyone else on the open market, I would assume it is going to write the recipients a check that will credit their accounts with digital Federal Reserve Notes. I highly doubt anybody would demand billions of dollars in cash as payments for their securities.

http://en.wikipedia.org/wiki/Demand_(economics)
In economics, demand is the desire to own anything, the ability to pay for it, and the willingness to pay

Fail.

 

So yes, you can

Well history says otherwise, unless you are one of those true survival of the fittest nuts that could care less if people died from starvation. As long as the capitalists get to keep their money who cares who dies!!

It's only worth more because more people want it because there is less of it going around. Which gives complete control to money owners. Worse thing an economy can experience. But you are not fond of economics so I know you wouldn't care.

100% incorrect, this is still the ideology that production is fixed. If the Govt prints tons of dollars and pays for the military the private sector doesn't have to give up anything unless the country can't increase it's productive capacity. You are still in this crazy world that the Govt can't do anything productive. Once you get passed that weird belief than you can start thinking logically.

Lol, I would much rather continue working in the private sector than the Govt. I have no clue what you are talking about.

If productivity increases

Then research it yourself.

Yes, societies have to have some structure. Just walking around trading cows and chickens doesn't sound very productive.

Call it whatever you want to call it but banks have the ability to do things that private businesses and the nonbank public can't and they are apart of the central banking system controlled by the Fed.

Lol, so deposits aren't money in circulation?<<<Mod Edit: Personal Attack Removed>>>

No Primary Dealers did not purchase $1 billion in Treasury bonds with money out of his own pockets. They created it out of thin air. You need to seriously read that primer on how the banking system works.

Lol, all the Fed does is purchase from the primary dealers. And they just purchased over $1.7 trillion worth of debt from the Primary Dealers. <<<Mod Edit: Flamebait Removed>>>

Exactly, what difference does it make? You just said above that all the banks do is multiply deposits? So why is digital money at the Fed considered money but all the deposits the bank creates not considered money?

<<<Mod Edit: Flamebait Removed>>>

You said Population Increase = Demand Increase

I said Demand is what people buy. And you show me a description that is saying exactly what I was saying and then you say "fail". <<<Mod Edit: Personal Attack Removed>>> I said demand is what people buy because I was making a point that demand doesn't necessarily increase because the population increases.

<<<Mod Edit: Flamebait Removed>>>

 

What's your point exactly?

What history? More baseless claims.

Another true strawman argument from the master himself.

Faulty premise. One can be a capitalist simultaneously a wealthy socialist.

Money owners typically have control anyway. I disagree that people having money is "the worst thing an economy can experience".

Your random jab is noted.

Wrong.

It doesn't matter. The government printing money is still going to put an upward pressure on prices, regardless of what production is doing. If production speeds up enough that it doesn't cause inflation (like you said), that doesn't mean that the private sector still isn't paying for it. That speed up in production would have caused prices to go DOWN if the government hadn't printed the money.

Because it can't. Proven pages and pages ago.

I have no idea why:
http://www.usatoday.com/news/nation/2010-03-04-federal-pay_N.htm

It wouldn't. Every time the government spends money, it has to allocate it from the private sector in some way. That causes private consumption to go down in the end.

No thanks, I don't feel like wasting my time on wild goose chases.

That's why people started trading gold and silver and not worthless paper.

No. That's why they're called deposits, becuase they take money out of circulation.

Your random personal attack has been noted.

Primary dealers do not create money out of thin air. Only the Fed can create money out of thin air. You're just making stuff up.

Nothing you said here disproves what I said.

Because the money the Fed creates by purchasing bonds moves into circulation. The multiplied deposits by the banks never put any newly created money into circulation.

Correct. An increase in population will naturally yield an increase in general demand for goods and services. Econ 101.

And I was showing you why you were wrong. You said "demand is not what people want". Please explain how "the desire to own" is not "what people want".
Demand is not what people buy. Consumption is what people buy. Demand is what people want, can afford to and are willing to buy. Big difference. Econ 101

Your random personal attack has been noted.

 

"Can be" I rather not leave our poor peoples future up to chance

I didn't say "having" money, I said "saving" money. And yes it is the worst thing for an economy, that is if you want a high standard of living and economic growth. If you don't care about that, than yes your system of making money profitable to own would be awesome!

No it isn't. You do not even consider velocity in anything you talk about. More money DOES NOT equal inflation. The money supply as in the money used in transactions is Qty * Velocity. When velocity goes down which happens in recessions than you have much less money transacting and you get deflation. That is why the Govt and the Fed try to pump money in to the system so we can get the number of transaction necessary to reach our target growth.

This is math. Your theory doesn't use math. It just makes tons of assumptions that things will just work out.

Lies lies and more lies. It is most definitely not proven.

I make quite a bit of money but that does not matter in this conversation

Wrong, I have demonstrated this to you 100 times. The stubbornness you portray is getting incredibly annoying. The Govt DOES NOT NEED TO TAKE FROM THE PRIVATE SECTOR IN ORDER TO SPEND MONEY.

Really, you honestly think private consumption has gone down?? <<<Mod Edit: Flamebait Removed>>>

So you will stick with your current theory which is 100% wrong. What a great way to live life!

They didn't have paper

You make up the most ridiculous things I have ever heard. What is the difference between having $100 in your wallet and have $100 in a deposit account. ABSOLUTELY NOTHING!!!<<<Mod Edit: Personal Attack Removed>>>

100 thousand percent incorrect. The banking system makes up money out of thin air all the time. Primary Dealers make up money out of thin air all the time. Just because you don't believe the digits in your bank account don't count as money doesn't mean it's true. The money in my bank account is MY MONEY. Just like everyone else. <<<Mod Edit: Personal Attack Removed>>>

Nothing I say can disprove what you said because in your head you aren't open to learning. You have already made up your mind how the system works and there is absolutely nothing anyone in this world can do to change your mind. <<<Mod Edit: Flamebait Removed>>>

<<<Mod Edit: Personal Attack Removed>>> Of course the banks put new money in to circulation. Are you really saying that banks do not add money to the money supply?

No it won't. You just made that up. Under your theory where the money supply does not increase, a growing population would not create an increase in demand for goods and services. It would create an increase in demand for money, which would cause a decrease in demand for goods and services. The reason they increase the money supply is to compensate for an increase in demand so that people who want things can get them. <<<Mod Edit: Flamebait Removed>>>



This is getting embarrassing... you are literally just making things up on the fly.