You Pay whatever your Taxes are Regardless of how much the Government Spends

It depends on how soon I receive the money after the government does.

 

Inflation just means there is either more money chasing the same or relatively less amount of goods, or there is the same amount of money chasing less goods.

That's all inflation is. It involves not only quantity of money, but velocity of money. There are plenty of equations that are used to determine how much money is necessary for the economy to complete the amount of transactions necessary in order to reach the targeted growth level.

When the Govt spends $4.5 trillion and employs 22 million individuals... they are essentially giving the rest of us 22 million customers and $4.5 trillion to go get.

 

I don't understand what you mean by the "total public portion of the debt." I assume you mean the debt held by the public.

Let's get the terminology straight:

Public debt (or total public debt) = the total gross debt owed by the US Govt.

Intragovernment debt = Debt owed to a US government or quasi-Govt agency or fund, such as the SS trust fund or the Federal reserve.

Debt held by the Public: Debt owed to entities not associated with the US Govt.

Total Public Debt = IntraGovt Debt + Debt Held by the Public

So to rephrase your post: If the Debt Held by the Public had a larger decrease than the increase in intragovernmental debt, than we would have a decrease in the Total Public Debt.

That is correct.

We did, in the year 2000. I proved it to you. It's in the Treasury Department document I cited. Year end 1999 to year end 2000, the total public debt decreased $114 billion.

You acknowledge that the debt decreases when debt is redeemed.

Again, how is the debt decreased if not with tax dollars?

So what? It decreased in 2000.

Please address these questions:


What enables the government to redeem debt?

We have SS tax receipts now, for example, more than we had in 2000. But no one is redeeming debt at this time. What's the difference?

But we have the same lump of money now, more so than in 2000. Why aren't we redeeming debt now like we were in 2000?

 

You proved the "debt held by the public" decreased year end. But I proved that the gross national debt increased year end. So therefore, the debt held by the public could not have decreased less than the increase in intragovernmental debt.

So Clinton really didn't "pay down the debt"... he swapped the debt held by the public with intragovernmental debt. If taxes were used to pay down the debt held by the public than we would have had a decrease in gross national debt.

That is just simple mathematics.

 

You are mistaken.

Look at the Treasury Department Publication I cited. Here is the link again:

ftp://ftp.publicdebt.treas.gov/opd/opds122000.pdf

It shows a decrease in the the total public debt (what you call the gross national debt) of $114 billion from Dec 31, 1999 to Dc 31, 2000.

Total Public Debt Outstanding
Dec 31, 1999: 5,662,216
Dec 31, 2000: 5,776,091

That is not the Debt Held by the Public, but the Total Public Debt that decrease.

See above.

But this issue is a red herring to the real issue, and that is how the Govt budget works.

Please answer these questions. You wonder why I stop debating with you it's because I ask basic questions, and when they undermine your position and you cannot answer them, you just ignore them. You do this tactic repeatedly.

What enables the government to redeem debt?

We have SS tax receipts now, for example, more than we had in 2000. But the government is not redeeming debt at this time. What's the difference?

But we have the same lump of money now, more so than in 2000. Why aren't we redeeming debt now like we were in 2000?

If you are determined to be hung up on date issues, then answer this one: Why did the Govt redeem $300 billion dollars of Debt Held by the Public in 1997-2001, and not since, when the social security surplus was larger after 2001 (until the recession in 2009)?

 

I'm speaking about the consolidated fiscal year. We have already gone over why the debt can sometimes decrease. Simply because there is more redeemed than issued. But eventually they will issue more debt to cover the imbalance. At the end of the year, the numbers the Govt uses to describe the year end balances... there was not a decrease in gross debt, therefore it is mathematically impossible that your income taxes paid down the public portion of the national debt.

 

I understand that. I am speaking about the year ending Dec 31, 2000.

What causes there to be more redeemed than issued?

What enables the government to redeem more debt that it issues?

We have SS tax receipts now, for example, more than we had in 2000. In 2008 we had a bigger SS tax receipt surplus. But the government was not redeeming more debt than it issues at that time like it was in 2000. What's the difference?

But we have the same lump of money now, more so than in 2000. Why aren't we redeeming more debt now that we are issues like we were in 2000?

If you are determined to be hung up on date issues, then answer this one: Why did the Govt redeem $300 billion dollars of Debt Held by the Public in 1997-2001, and not since, when the social security surplus was larger after 2001 (until the recession in 2009)?

What imbalance, and why does that cause them to issue more debt?

Please review the Treasury department publication I cited which proves otherwise.

If you are determined to be hung up on date issues, then answer this: Why did the Govt redeem $300 billion dollars of Debt Held by the Public in 1997-2001, and not since, when the social security surplus was larger after 2001 (until the recession in 2009)?

 

The Fed only increased interest rates between July '04 and Sept '07, after which it decreased back to 2%. The seeds for the housing bubble were sown before that. Besides, how can we be sure that the increased funds rate during that time was high enough? How does the Fed know what the Funds Rate should be in order to maintain a permanently healthy housing market?

What caused the speculative bubble if it wasn't the Fed keeping interest rates too low, too long?

These shoddy lending practices by private institutions, why were they allowed to occur?

Also, government spending. If the Fed creates money to purchase treasury bonds on the open market, and the government spends that money into the economy, then that will also cause inflation if the money supply is expanding faster than GDP.



This one does: http://www.bls.gov/webapps/legacy/cesbtab1.htm

Seasonally adjusted, total private employed, from your source:



The stimulus bill was passed in Feb. '09. According to the graph, the total number of private sector jobs did not start increasing until Mar '10, and we still have not reached private sector job levels that we had before the stimulus was passed. How can we conclude that the stimulus succeeded in improving the private job market? How do we know that it was not the free market instead? And if the stimulus did in fact improve the private job market, how do we know that those jobs increases are going to be permanent and not the product of another bubble?

Correct, which is why it is a less meaningful indicator of unemployment compared to U-5.

Prices in terms of stable pricing mechanisms such as gold.

Interesting. I thought the PCE was used to calculate the real GDP from nominal, I didn't know there was a GDP Deflator.

http://www.politicalforum.com/political-opinions-beliefs/207555-creation-federal-reserve-system.html

Under a gold standard during deflationary periods, people would be saving their money more becuase the purchasing power of their money would be increasing. Demand for gold would be up while demand for other goods and services would be down. More gold would be mined/refined because of the demand. Theoretically, the amount of gold produced will be roughly equal to the amount of goods and services not being produced becuase of people saving their money. This inflow of gold into the system will offset the deflation and people will begin spending their money again as it loses value. The demand for gold will go down and the demand for other goods and services will go back up. So, the answer to your question is that people saving their money during times of deflation will have a negligible effect on GDP. This is of course assuming that you count gold production in GDP.

 

It is true that by 2004, there had already been a substantial increase in housing prices. But the bubble continued to appreciate rapidly in 2005 and 2006.

And again, as pointed out, the Fed's rates only have an indirect effect on long term rates. They do however have a more direct impact on short term rates -- the kinds that affect teasers and ARMs.

However high they were, they were increasing, which would make the cost of monthly payments increase as well, and put downward pressure on housing prices -- it not distorted by things like ARMs and teasers.

Gold fever. People, brokers, banks, and other institutions were making (*)(*)(*)(*)loads of money buying and selling and flipping.

We had a culture of deregulation. The party promoting that view -- and the view that the private sector can police itself, was in power. Also promoting an "ownership society." And an opposition party that was also happy to see people being able to buy housing.

Eventually. But the Fed's injection of money is only one element of the effective money supply, which includes the mutiplier of bank lending and velocity. These latter elements have been greatly reduced since the financial crisis, which is why we haven't seen high inflation even though the Fed has more than doubled the money base.


This one does: http://www.bls.gov/webapps/legacy/cesbtab1.htm

Those are adjusted figures; the actual, unadjusted figures show 5 million more jobs in the private sector since Jan 2009. Some of that is due to seasonal fluctuations.

One criticism of stimulus spending is that there is a lag time between the time the law is passed and when the money actually gets out into the economy creating jobs. Also, employment is historically a lagging indicator of the economy. So it is not surprising that you see significant change in employment for several months after a stimulus bill is passed. What you do see is the rate of job loss declining in the latter half of 2009 and turning around in 2010.

You cannot definitively prove anything in economics. So I cannot "prove" the stimulus affected the employment level, any more than you or anyone else could "prove" that it had no effect.

What you can do is look at historical evidence as well as collect incomplete data and create models to try to adjust for numerous variables and make estimates, which is what the independent organizations I posted did.

There is also a psychological aspect, as well. A recessionary cycle if fed on fear which is self reinforcing. Demand drops, companies cut back production, lay people off, that creates more fear, less spending, less demand. The Govt can help break that psychological spiral with a program like the Stimulus program to help restore confidence.

Of course, if you have a significant, well funded segment of society that is determined to negatively affect the economy for political purposes, you will see them constantly harping on anything negative, ignore or minimize anything positive, and try to reduce confidence by various means. That can undermine the success of a recovery.

I don't disagree. But U-3 has been a consistent measure over time and is therefore the valid reference point. It is misleading to claim the unemployment rate is x when you are referring to U-5 (or U-6 as many do) when everyone thinks and is familiar with the historically used U-3 rate to refer to the unemployment rate.

So why do folks in the conservative media frequently harp on the "true" unemployment rate and refer to the higher figure? See the confidence factor discussed above.

Things are not priced in gold. They are priced in dollars. Even gold is priced in dollar.

Furthermore, gold is not a stable pricing mechanism by a long shot. Gold value has fluctuated wildly over the past few decades, evidence by the last few years.

But PCE includes food and energy too. The core rate excludes it.

I don't have time to read it now, maybe later.

This doesn't make sense. The production of gold is miniscule compared to overall production of goods and services. How can it make up for the decreased production caused by the drop in demand?

 

What difference does it make? I already disproved your statement.

So you're saying that fiat currencies are intentionally designed to hyperinflate from the very beginning?

Actually, it has, for millennia. One ounce of gold in Roman times could buy you a nice toga. It's no coincidence that one ounce of gold today, exchanged for Federal Reserve Notes, can still buy you a nice suit. This is because the amount of gold in circulation is always dictated by the natural laws of supply and demand. And that's just one example. Your statement bears no resemblence to reality. It is based on opinion, not fact.

Yes. The Byzantine Empire flourished for 800 years as the center of world commerce because they used a gold standard. Look what happened when they started clipping their coins.

There's nothing magical about sound money. The only thing that's magical is the misguided belief that fiat currencies are sustainable.

Exactly what it says its worth. A coin that is marked "one ounce of gold" should have exactly one ounce of gold in it.

Why not? If I build a computer and sell it to you, I'm going to charge you for materials, labor, plus any additional profit I seek. How is mining gold any different? Or copper? Or iron? They're all going to be worth something of equal value, something which required the same amount of labor to get them into their finished form. That's how bartering works, except the gold is going to be what people choose to continuously get passed around as the medium of exchange, AKA money.

So the simple answer is that demand for gold has gone up and the demand for dollars has gone down (inflation). Why has demand for gold gone up? Why do investors want to "park their money"? It's just a stupid metal afterall.

How is it worthless if people are willing to pay someone almost $2000 to mine and refine one ounce of gold? Doesn't sound worthless to me. Sounds like you're in denial. Or maybe just delusional.

http://www.politicalforum.com/political-opinions-beliefs/207555-creation-federal-reserve-system.html

I bet you won't read it. The Fed is a cartel. I challenge you to debunk the facts presented in the OP's in that thread. If you can't, anything you say is simply an opinion that is not based on fact.

I know...that's my point, where did I say otherwise? Or are you just making stuff up again, putting words in my mouth? How about actually responding to the points I made please. Let's not resort to elementary school tactics.

Making stuff up again I see. Where did I ever assert that the presence of gold makes a country more educated and productive?

Oh really? So you're making $87 billion a year right now? What are you doing on these forums arguing with us peasants?

Meaningless slander. I'm not the one who is continuously contradicting myself.

You're guilty of the same mistake then, because you're incorrectly attributing America's success to fiat currency. First of all, we weren't a fiat currency until 40 years ago. Secondly, you cannot prove that it wasn't the free market bleeding through the abuses of the central bank and government to get us where we are. America will not be the great nation it once was when it's currency is reduced to its inherent value of zero.

 

So why do we trust the Fed with manipulating interest rates if it is incapable of accomplishing its stated objective of stabilizing the economy/housing prices? Interest rates were too low earlier in the decade, for years. It's clear that the bubble was a direct result of that policy, and the Fed couldn't contain it before it got out of hand.

How did this cause the prices of homes to rise unnaturally high?

These banks are able to use the Fed's base money supply to create money out of nothing to make loans, instead of using their own private capital to make the loans. This is completely legal for them, but if you and I were to do it, we would go to jail for counterfeitting. And, if these lending institutions were forced to use their own private capital like the rest of us, there would have been much less shoddy lending practices going on. Couple that with the knowledge that they will be bailed out (at least the ones deemed too big to fail), and you've got quite the moral hazard on your hands. That's why these lending practices were able to occur, because the lending institutions knew they could get away with it without consquences. But we cannot truely consider them to be private entities if they are above the law in these manners. If they had to abide by the laws of the free market, they would have perished.

So what's going to happen when bank lending/velocity of money starts to pick up?

Correct. That is the point I was trying to make when I said

I wasn't implying that it didn't affect it, I was implying that you can't definitively prove that it affected it. There is no evidence for it.

I agree it's misleading to not indicate that you are referring to an alternative form of unemployment when citing U-5. But I believe U-3 is a misleading figure that the government uses because it is able to trick people into believing that the unemployment rate is lower than it actually is, for political purposes. I think U-5 is the most honest indiciator of the unemployment rate, so I do not fault anybody for citing it, as long as they are being clear that they're not indicating the official unemployment rate U-3.

It doesn't matter. You could buy more gasoline with an ounce of gold now than you could have in the early 70s. The real price of oil has gone down.

It's not the value of gold that has fluctuated. It's the confidence in the Federal Reserve Note which fluctuates. The only way for the value of gold to really fluctuate is based off the amount of it in circulation relative to the amount of goods and services in the economy. There is nothing else which would have caused the demand for gold to fluctuate wildly.

I meant core PCE.

I strongly reccommend it. You will learn some pretty alarming things about the creation of the Fed, one of which being that it's a cartel operating against the public interest.

It's production relative to overall production of goods and services is irrelevent. What I'm saying is that the amount of money people are saving will be roughly equivalent to the amount of decrease in production of goods and services. The amount of circulating gold necessary to get people to stop saving and start spending again is exactly equal to how much gold is necessary to begin devaluing their savings. In other words, there will be a demand for gold all the way up until the very point that the amount of it in circulation starts devaluing savings. Therefore, we can safely say that the amount of decrease in production of goods and services will be roughly equal to the amount of increase in production of gold in the end. That's why GDP will be unaffected. Once it hits or passes that equilibrium point, demand for gold will start to go down as the demand for goods and services will go back up. People will begin spending their money on other goods and services instead of saving it again.

 

Where does the Fed have a stated stated objective of stabilizing the economy/housing prices?

There was not problem with inflation. Interest rates were not too low.

People kept buying and speculating in overpriced houses making the prices go even higher.

Banks do not use base money to make loans, they use deposits. Banks do not create money out of thin air. That's more internet mythology. Only the Fed can create money out of thin air. Banks lend deposits (less the reserve requirement).

Shoot if that's all there is to it let's open a bank and print a couple billion.

And a destroyed economy. The ability to lend deposits though occasionally abused particularly in an an environment of lax regulation, has for two centuries been an important engine in the growth of commerce.

I agree that we have, through too much deregulation, allowed a few banks to become to dominate, to unregulated, and too big to fail. We need to return to the regulatory climate that served us well for decades.

1) the Fed reduces the base money supply, or

2) inflation

I disagree with your statement, nor was that what I said. There is a lot of evidence that Stimulus improved private jobs significantly. The evidence however is not proof.

It could be just a massive coincidence that economy began turning around right as the Stimulus was passed started having and effect.

Evidence is not the same as proof. See above.

The government has been using U-3 for decades and it is the oldest most consistent measure, also used frequently in the media and by economists. While I agree that other measures are relevant and provide useful information, the important thing is being consistent over time. The fact that U-3 measures things different than you think is optimal is less important (IMO) than the relative measure it shows. You can compare the U-3 rate today with what was going on in 2003 and 1993 and 1983. You cannot compare the U-5 or 6 rate with the U-3 rate from those times to make any meaningful comparison because you are comparing apples and oranges.

Gold does not measure the real price of anything, except the value of that item viz-a-viz gold.

Gold has fluctuated wildly with rapid changes in supply and demand.

Do you think everything in the economy has lost 1/4 of its value in the past 5 years? Do you think everything in the economy more than doubled in value between 1980 and 1982?

Only relative to gold.

You've provided no evidence the BEA uses the core PCE or core anything as the GDP price deflator.

Oh, I've seen all kinds of silly things about the Fed here and in other forums. There are some really hokey things out there about the Fed in the internet, and lots of gullible people just believe anything they read in an internet website or watch on an internet video or heard some distinguished guy who isn't even an economist say. I've probably seen it all, but maybe you'll show me something new.

BTW, what was the source of the article you posted in the other thread?

Ok. If everyone started saving 50% of their income we'd have about 50% less spending corresponding with a 50% decrease in production.

I don't follow.

This doesn't make sense. There will always be a demand for gold/money though it varies based on lots of factors. The demand for gold/money increases the cost of gold/money. How does that devalue savings?

Gold production is not like dollars you can produce based on demand. There is a limited supply available, and it can take years to see a marked increase in production.

How does that make the demand for goods go up?

You mean spending their gold? Why?

 

Nope, I am not saying that

Lol, a toga is a sheet and you can buy 400 sheets with an ounce of gold these days. Unless they had Armani sheets back in the Roman times, you can buy 5-6 normal suits for an ounce of gold. Nice job trying to lie your way out of this.

Was it because they used a gold standard? Really? Just the mere act of having gold made them successful for 800 years?

Show me a country that uses "sound money".

I'm saying the labor to dig up gold does not give gold it's value as a currency... you are just using red-herrings now.

Who cares, demand for gold has gone up in dollars. People want gold because they think they'll be able to get more dollars. You guys really do not make any sense.

It's WORTHLESS AS A CURRENCY. I'm not talking about the supply and demand for gold. Just like a Mickey Mantle baseball card is worth thousands of dollars to someone, doesn't mean that it would be worth that much as a currency.

You don't use any facts, numbers, math, or logic. You simply say "sound money", or gold makes a country better off. Yet you can not point me to a country that has this so called "perfect" system, and America has not used this system for decades and we have nothing but become the largest economy in the history of mankind. You bring absolutely nothing to the table.

No, we have been a fiat currency system for much longer. It was a hybrid between gold standard and fiat. 1971 was just the official cutting of the chord... but we have been a hybrid of this system for almost a century.

Gold's has an inherent value of zero also. I don't get your point. You have this ridiculous uneducated view of economics. Gold does not make any country more productive or any better off. In fact it hurt economic growth which is exactly why every developed country in the world left it. You bring absolutely nothing to the table in terms of logic.

 

Iriemon, I don't care about two random dates that you pick. I'm talking about the year end consolidated fiscal balances. As in after all the discrepancies and information is gathered, what were the results. And the fact is the gross national debt increased every single year. This tells me, using basic elementary math, that the debt held by the public decreased less than the debt held by the Govt increased.

 

I understand that.

But I am speaking about the year ending Dec 31, 2000. December 31 is not a "random" date. It is the end of the year. But the critical point here is that the debt decreased $114 billion dollars over that 12 month period of time.

What causes there to be more debt redeemed than issued for the year ending Dec 31, 2000?

What enables the government to redeem more debt that it issues?

We have SS tax receipts now, for example, more than we had in 2000. In 2008 we had a bigger SS tax receipt surplus. But the government was not redeeming more debt than it issues at that time like it was in 2000. What's the difference?

But we have the same lump of money now, more so than in 2000. Why aren't we redeeming more debt now that we are issues like we were in 2000?

If you are determined to be hung up on date issues, then answer this one: Why did the Govt redeem $300 billion dollars of Debt Held by the Public in 1997-2001, and not since, when the social security surplus was larger after 2001 (until the recession in 2009)?

+++

This is at least the 4th time I've asked you these questions.


These are basic fundamental questions that go to the heart of your position on how the Govt budget and money system work.

The fact you continue to dodge and avoid responding to questions and the real issue when your position is being proved wrong is a regular tactic with you.

 

Because you keep asking the same stupid questions. I've already said that taxes can be used to pay down the national debt. I'm just saying now that they haven't been used... accounting-wise.

We have a larger pool now, but we have larger expenditures also, I don't get the point of that question what so ever.

All I'm saying is Clinton did not pay down the gross national debt. You can use discrepancies between two given dates, but when all is consolidated he did not. Plain and simple... the rest of your argument I have no clue what you are even trying to get at.

Everyday treasuries are retired and everyday treasuries are issued... can income taxes be used to pay off retired treasuries? Yea, they can, if they are in the treasuries account. But at the end of the year, accounting-wise, during the Clinton administration, he did not pay off more of the debt held by the public than the increase in debt held by the Govt. This tells me, that maybe they do not use income taxes to pay off redeeming Govt debt.

Most likely, because this reduces the equity of the private sector, which is not necessarily a good thing.

Paying off the debt is not a good thing for the private sector.

 

http://www.federalreserve.gov/pf/pdf/pf_2.pdf

Well, not stabilizing the economy per se. The document details the different methods by which the Federal Reserve attempts to maintain high employment, prices and interest rates. Those are the methods by which the Fed attempts to stabilize the economy.

I never said there was a problem with inflation. Too many people were buying houses that could not have afforded it otherwise.

What caused the houses to be overpriced in the first place?

The Fed's base money supply eventually turns into deposits once it is distributed throughout the economy. With a required reserve ratio of 0.1, that money base will eventually be multiplied by a factor of 1/(reserve ratio) = 10. That is the method by which banks create money out of thin air.

All there is to what? Banks do not print money. Only the treasury prints money.

The economy has been destroyed already. Try again.

Perhaps, but it also has contributed to the unstable business cycle. There's nothing wrong with banks lending deposits so long as they do not create money while they do it. That means that banks using dollars should not allow their depositers to withdraw their money while at the same time it is being loaned out.

I assume you're referring to the pre-Reagan years. These same banks were dominant long before then, particularly JP Morgan. Being deemed too big to fail is a form of economic regulation, not economic deregulation. True deregulation would have meant the banks that were meant to fail would have perished and not been bailed out by taxpayers by force of law (regulation).

Which one do you think is going to happen? The Fed has not historically proven itself capable of controlling inflation.

Showing data of private sector jobs is not evidence that the stimulus improved private sector jobs. It is merely a table that shows the levels of private sector jobs over the past 10 years.

Barely. The unemployment rate U-5 is just about as bad as it was when the stimulus was passed. The Housing market is still at depression levels. Economists like Paul Krugman have stated that we are basically in a Depression. The only thing that turned around was GDP, and that's because government spending was increased. That doesn't actually indicate private sector improvement.

True, but didn't (what is now) U-3 used to be the equivalent of (what is now) U-5?

Measuring the value of items using gold is a far more accurate indicator of price than measuring it using Federal Reserve Notes.

It's the Federal Reserve Note that is subject to wild speculation. The price of gold is an immediate indicator of the speculation investors have on the value of the dollar. The price of gold has doubled in the last 4 years, so you're telling me that the supply of gold in the world has halved since then?Since we don't use gold as money but as a commodity, it is subject to the whims of those speculations in the short term. However in the long run, gold as money provides a stable pricing structure. Today, one ounce of gold will buy you exactly what it would thousands of years ago.

I'm sorry I think you misunderstood me. I was under the impression that core PCE was the same thing as GDP deflator. I was incorrect.

My brother wrote it. Did you read it yet?

The reason people are saving is because the value of their savings is increasing just by sitting on it due to deflation. So, in order to get them to spend again, their money has to stop increasing in value and start decreasing in value. The only way for that to happen would be for more gold to come into circulation...

...Since the value of savings is going up, demand for gold will also be up. That means more gold will get mined. And it will keep getting mined as long as there is a demand for it...the higher demand, the more that will get mined. Once enough gold is circulating, people will see their money beginning to not gain value and maybe even start to devalue (depending on how much more gold is brought into circulation). Demand for gold will decrease, gold production will decrease, and people will begin spending their money again because their savings are not gaining value but beginning to lose value.

That's the point. It requires real labor to produce gold so it's value is inherently equivalent to the cost of labor to mine/refine it. Inflation and deflation are automatically kept in check, whereas under our current fiat system, the dollar has devalued 96% since the Fed was established because Federal Reserve Notes can be created out of thin air at the push of a button, with no labor attached to it.

Depends on how high the demand for gold is. If the demand is higher, then the free market would automatically increase production as fast as necessary to reap rewards.

When people are spending their money, demand for goods and services goes up.

Becuase under a gold standard, gold=money. Why wouldn't people spend money?

 

What deflationary sprials are you referring to?

Yeah and about 40% of that is government spending, which comes mostly from debt and inflation. It's invalid to equal inflation and debt to private sector production.

That doesn't mean it's not going to happen. The average life of a fiat currency is around 40 years. We've just passed that point. The dollar is much stronger than your average currency becuase of the free market and no thanks to the central bank. It's probably going to be able to sustain more abuse than any other fiat currency in history, but like all fiat currencies, it will eventually be reduced to its real value of zero.

So you're saying they were incorrect about "crying" about economic bubbles right before the economic bubble burst in 2008? You're saying they incorrectly predicted the debt crisis we have now? What rock are you living under?

I'm not fighting against any economy. On the contrary, I believe that the reason we are so robust is BECUASE of the free market. The only thing that is getting in the way of us being continuously prosperous is our inflation/debt/economic bubbles, which are all caused by bad money and bad economic policy.

What's your point? Mises and Hayek were critical of those same economists, so I don't see how that negates any of the work Hayek did.

Yes, it's fininte, but it has the ability to be created out of thin air, which it always is, until the point where it is effectively reduced to its real value of zero. Once fiat currency becomes worthless, then it's effective supply is infinite.

You're just talking out of your ass. What gives gold its value then? Why is gold always exchanged for goods and services that are exactly equal in value to the value of the labor that was involved in mining and refining that amount of gold?

There are no economies in the world using a gold standard.

Please explain how a gold standard would cause a massive depression.

 

The argument for increasing tax rates and adding new taxes is because government "needs money" ... it needs money because it spends more than it takes in. Government spending affects tax rates, it therefore affects how much you pay in taxes. Well... assuming you're in the 50% of American's who actually pay income tax.

 

So what makes you think they can continuously devalue forever without eventually being reduced to their inherent value of zero?

Yeah, that's because of technological improvement, which is a result of the free market. The point is that in ROMAN times, togas were the equivalent of what are modern day suits to us. It doesn't surprise me that you don't have the brain capacity to comprehend such an elementary point. Or are you just grasping for straws?


Was it because they used a gold standard? Really? Just the mere act of having gold made them successful for 800 years?[/quote]

Those are your words, not mine. For the tenth time, please don't put them in my mouth.

Having a gold standard ENABLED them to be successful for 800 years. It wasn't "the mere act of having it" that made them successful. Would you care to explain to me how this is factually incorrect? Or are you just going to defame me, use more strawman tactics, etc.?

There are none right now. Show me a fiat currency which has retained its purchasing power.

So digging up gold is worthless? What gives gold its value then?

That "who cares" attitude is the reason you don't understand the fundamentals of money. The fact is that you're incapable of answering the question because you don't udnerstand it. Why do people get more dollars for their gold? Why do people buy gold for almost $2000/ounce if it's just a "stupid metal"?

That's an invalid analogy. There are not enough Mickey Mantle baseball cards in existence to effectively serve as a currency. Mickey Mantel baseball cards cannot be broken down into smaller denominations. Mickey Mantle baseball cards are perishable. Your point is moot.

You're very good at dodging questions. Why do people buy gold for $2000/ounce if it's worthless as a currency?

I already informed you of the Byzantine Empire, and it was around much longer than America has been. That is one example. You still have yet to give me an example of a fiat currency which has retained its purchasing power.

That's called a fractional reserve system. It is not the same as fiat. It is not a hybrid between a gold standard and fiat. Shows how educated you are on this subject.

Then why are people paying almost $2000/ounce for it if it's "inherently worthless"?

I'm not the one who dodges questions, uses strawman tactics, puts words in other people's mouths, and claims to understand the Austrian theory when in fact knowing nothing.

Putting words in my mouth....again. Shocking.

Please explain in great detail how a gold standard would "hurt economic growth".

 

What you mean by devalue is just your ignorance in not understanding what inflation is and why it occurs. Controlled inflation only hurts people on fixed incomes and those that can not earn any more money. The dollar will reached it's inherent value of zero when no one wants it any more.

They are still sheets. And an ounce of gold in US Dollars can buy a very nice suit. No one knows what an ounce of gold would buy as a currency.

Really, so they were successful because the gold standard?

What you mean by retained it's purchasing power is once again your lack of education. I'm sorry you still think that 1913 dollars should still be worth the same 100 years later.

Supply and demand. No one wants gold because someone dug it up.

For an investment because they think someone else will buy it for more later. Do you not understand what investing is? No one is buying gold because of it's value as a currency.

Investing

So you think we are worse off than the Byzantine Empire because we have fiat money and we aren't using gold even though we are the largest producing country in the history of mankind? Hmmmm... your infatuation to that useless piece of metal is very creepy!!

False, in 1934 they cut off ownership of gold in the country and made it where citizens could not redeem their dollars for gold. 1971 they cut it off for the globe. We have been using this de-facto hybrid of a system for almost 100 years now.

Investing

 

It's sad all the people that are getting sucked into the gold scam. I feel like I'm watching passengers boarding the HMS Titanic, so confident that their ship cannot sink. When the financial experts are singing lamentations about the "gold bubble" I promise I won't laugh or ridicule. I'll weep for you instead.

 

The second the economy picks back up and people realize that owning a piece of useless metal is not as cool as owning something that provides utility... gold will drop like a rock. It amazes me how people do not realize that gold is no different than any other commodity driven by supply and demand.

 

We agree on something!

 

Price inflation occurs when monetary inflation occurs at a faster rate than the production of goods and services.

Inflation harms everybody who does not catch the windfall of the increased money supply before it has a chance to dilute the already existing dollars and cause prices to rise. That mostly includes poor people not receiving entitlements and the middle class.

What would cause people to not want it anymore?

It doesn't matter that they are "sheets" today due to technological improvements, back then they were considered the equivalent of suits. We know exactly what an ounce of gold will buy today - the same amount you can purchase for 1800 Federal Reserve Notes.

Becuase the gold standard enabled them to be continuously productive and prosperous. They didn't have business cycles like we do. They never experienced depressions due to fiat deflationary collapses.

How does that demonstrate a "lack of education"? You still haven't shown me any fiat currency which has sustained its purchasing power.

There would have been no reason for them not to, because under a gold standard, the money supply would expand at the same rate that the rest of the economy was expanding.

So please explain to me why 1913 dollars shouldn't be worth roughly the same as 2011 dollars.

http://www.federalreserve.gov/pf/pdf/pf_2.pdf

One of the goals of the Fed is to maintain stable prices, and the only way for that to happen is for them to control the effective money supply so that it's not expanding at a rate faster than the rate at which goods and services are produced. AKA maintaining the purchasing power of the currency.

Even the Fed disagrees with you. You're just talking out of your ass, it's embarassing.

Now we're getting somewhere. Yes, it's value is dictated by the law of supply and demand. Why is there a demand for gold?

So they're investing in something that's worthless? Why would they do that? Worthless items are not a sustainable investment:

http://en.wikipedia.org/wiki/Tulip_mania

They always lead to bubbles that pop when people realize that their investments are not grounded in reality. If gold was really worthless as you claim, that bubble would have popped long ago. Why then has it retained almost the exact same purchasing power for thousands of years? Do you not understand what investing is?

So let me ask you again: why is gold hundreds of times more valuable than tulips?

Technically you're correct because we have legal tender laws. The only reason people aren't buying gold because of its value as a currency is government force. That means your argument is invalid because we are talking about a free market system that doesn't have a govt/central bank forcing their subjects to use the central bank's fiat notes.

What's the difference between something having value and something having value which also has properties that make it suitable to be used as a medium of exchange? People are buying gold BECAUSE it has value. It also happens to have properties which make it the best known substance to be used as a currency. We do not use it as a currency simply because of legal tender laws. In the absence of legal tender laws, you can bet that people would be buying gold because of its value as a currency.[/quote]

Those are your words, not mine. Please stop putting words in my mouth. Do you have no better argument than strawman tactics?

We are better of than the Byzantine empire because we have the advantage of much more human knowledge, more respect for certain liberties and technological advancement. But the death of a currency always brings empires down, and you can bet that the American Empire is not going to last nearly as long as the Byzantine Empire did unless we move to sound money.

How is it useless if people are willing to pay almost $2000/ounce for it?

The dollar was still redeemable in silver until the late 60s.

See above.