Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble.
According to wikipedia, the idea originated with a fictional biography of Columbus, "The Life and Voyages of Christopher Columbus" written by Washington Irving in 1838.
In fact, not you don't know gravity. You know objects, and know that they attract each other, and know how this attraction is described in equations. The underlying assumptions of said equations, be them "attraction at distance", or "distortions in space-time", or "gravitons flowing at the speed of light", are all unobservable concepts. All hard sciences are constructed upon said unobservables, and this causes no problem, because we see their macroscopic effects working as expected.
If you disagree, I'd like you to show me an "atom". And no, I don't mean a screen showing an image that you believe is an atom because there's an appendage to the machine called an "electronic tunneling microscope". I mean an atom itself.
The "scientific value" of an equation that describes how machine A connects to machine B and produces effect C is the equation itself. Either it fits with observable reality, by which I mean concrete macroscopic things, or it doesn't. The "fantastic entities" embedded in it, be them "atoms" or "invisible angels" or "chi" or "quantum fields" or "strings" or "meridians", are of no importance or concern whatsoever, and I, as a scientific instrumentalist, don't give a damn about them.
Go read Popper. No scientific theory or scientific concept is true. They're "still unfalsified" or "already falsified". Nothing more, nothing less.
That no scientific concept is true is a red herring, because praxeology is not a scientific concept. As I was saying.
Popper said that the criterion between scientific theories and unscientific theories is what is falsifiable.
Angels causing gravity is not falsifiable. The theory of gravity is falsifiable. There are clearly things that matter could be observed doing that would falsify Newton's theory. The theory of gravity as spacetime curvature is falsifiable (also the fabric of spacetime is obviously woven by angels). The theory of atoms is falsifiable, and I believe parts of it have been falsified. Praxeology is not falsifiable.
Show me the experiment that could falsify praxeology and I'll change my mind. If it can explain any behavior then there isn't an experimental result that could falsify it. If it makes the same predictions as another theory that is falsifiable but adds extra stuff that isn't falsifiable, then I'll stick with the other theory.
If you can describe the sequence of events that concretely happens the moment a lower interest is declared by the government, and I mean who got this money when, until it finally ended up spread all over society in the hands of common people purchasing bread and butter with it, you'll have the answer. Try the exercise. Then read about Hayek's triangles. Let's see if your conclusions differ.
None of this changes the painfully obvious flaw in the logic. Especially if any amount of time before A causes B is allowed, then any A could cause any B, and therefore there isn't any observation that could falsify this idea.
It's not my burden to prove some alternate theory.
And it always resulted in the same thing, whenever a bank decided to issue more paper than it had gold in stock: inflation.
This is obviously false, the money supply expanded tremendously in the 1920's and there was practically no inflation (graph).
For that matter, gold itself isn't immune from this kind of manipulation, after all, governments can mix silver and thus multiply the available number of coins, as the Roman Empire used to do in its final days. I'd be all for purely fiat money, provided the amount of bills was fixed, and new ones printed only to replace old ones too damaged for circulation. That would result in the same benefits of a purely gold standard.
Yes. An increase in one year was counterbalanced by a decrease the next year, with the average staying remarkably stable, in a slow deflation distorted by just two peaks, around 1815 and 1865. The mean CPI for each decade in the 19th century:...
25% swings year over year is not stable, by any practical definition. We have never had annual inflation or deflation reaching anywhere near annual levels that occurred the 19th century. "Slowly increasing" consistently does not equal unstable.
If you want to say that prices were stable defined as average over centuries, and if that's the only thing you care about, then I really can't argue against that.
Praxeology (the Austrian method) is simple, generic, and its effects are testable as much as anything else in human sciences.
I think that gravity is caused by tiny, invisible angels exerting downward force on things. We can't test that, but we can test its effects. My theory is simple, generic, and its effects are testable.
Basic pseudoscience.
Not a theory I've ever heard before. What exactly were these "cheap loans"? . . . Too much liquidity? During the Great Depression? Bank failures mean the opposite of too much liquidity. (And again, I'm not sure what by "cheap loans" you mean exactly. Lowering interest rates?)
So if lowering interest rates causes this latent economic chaos 10 years later, how to we know that Roosevelt's lowering interest rates had no immediate effects and wasn't instead the cause of the recession of 1953? If it's plausible that any lowering of interest rates at any point prior causes recessions, how can you really know which lowering of interest rates caused which recessions?
Only lowered interest rates followed (any point later) by a recession counts. Lowered interest rate and no recession doesn't count; and this is rendered moot by allowing any time distance for recessions. Increased or unchanged interest rates doesn't seem to matter one way or the other. Only "hits" count; textbook pseudoscience.
A "gold standard" where the government can issue paper (such as "war bonds"), promising to give "in the future" gold to the person who received said paper, not having said gold in stock, has the "gold" and "standard" words surrounded by scare quotes. These studies you mention correctly hit something that didn't work, but this something was a "gold standard" in name only. A proper gold standard requires people to actually carry gold around, or at least to have very strict controls making absolutely sure that absolutely NO paper bill is issued that isn't backed by an actually existing, actually stored somewhere, thus 100% retrievable at any moment by everyone in possession of said bills without this causing national chaos, amount of physical gold, or silver, or whatever is used as backing. Mess with these very simple and basic rules and you'll have a messy result, no exception.
Governments have always been able to issue bonds, so I'm not sure when this kind of gold standard ever existed. Fractional reserve banking anywhere in the private sector would mean that the supply of money > the supply of gold specie, for that matter. Both of these things certainly existed in the 19th century.
Ah, a foreign government could demand gold specie for its exchange balances until 1971 in theory, but in practice the few times it was actually tried US government refused to pay.
I think you're seeing history inverted. I look at the 20th century, and I see cycles an interminable sequence of booms and busts mixed with inflationary and hyperinflationary phases. I look at the 19th century, and I see customer and other prices with almost perfect stability, so much that anyone could save money for bad times by simply storing it in their houses, rather than at some bank, as is required now.
You also talk about liquidity, but it was precisely the artificial liquidity created during Woodrow Wilson's government, by way of cheap loans at below market rates, that created the boom of bad investments that imploded in 1929.
Not a theory I've ever heard before. What exactly were these "cheap loans"?
This is an excellent demonstration of why Austrian economics or as you seem to obliquely refer to it as "classical liberal" is unscientific. The Austrians say that all business cycles must be caused by the government. So, find a business cycle, and find some action the government did at some time prior to that. That government action must have caused that recession!
Apparently something that happened 10 years prior is good enough.
It's just like Freudian psychology. Got a problem? Can you think of any trauma that occurred to you at any point in your childhood? You can?! That earlier trauma must have caused your problem now!
Austrians and Freudians made strikingly similar rejections of the scientific method. von Mises thought that human behavior 1) could/should not be explained by theories that could be falsified, observed or make predictions, and 2) instead could be deducted axiomatically though "natural laws". And these laws can only be expressed verbally, not mathematically. And, of course, only a Austrian economist could interpret the laws correctly.
Which all explains why today Austrian economics is taken about as seriously by economists as Freudian psychology is taken by psychologists.
And then it was the New Deal that, by providing even more cheap loans and thus creating more (useless) liquidity, that extended what would have been self-correcting recession, into a full blown, decade-long depression.
Too much liquidity? During the Great Depression? Bank failures mean the opposite of too much liquidity. (And again, I'm not sure what by "cheap loans" you mean exactly. Lowering interest rates?)
As for why the Great Depression lasted so long, it turns out that actual economists study these things:
A number of countries adopted the gold standard in the 1920s but left or were forced off gold relatively early, typically in 1931. Countries in this category included Great Britain, Japan, and several Scandinavian countries. Some countries, such as Italy and the United States, remained on the gold standard into 1932 or 1933. And a few diehards, notably the so-called gold bloc, led by France and including Poland, Belgium, and Switzerland, remained on gold into 1935 or 1936.
If declines in the money supply induced by adherence to the gold standard were a principal reason for economic depression, then countries leaving gold earlier should have been able to avoid the worst of the Depression and begin an earlier process of recovery. The evidence strongly supports this implication. For example, Great Britain and Scandinavia, which left the gold standard in 1931, recovered much earlier than France and Belgium, which stubbornly remained on gold. As Friedman and Schwartz noted in their book, countries such as China--which used a silver standard rather than a gold standard--avoided the Depression almost entirely. The finding that the time at which a country left the gold standard is the key determinant of the severity of its depression and the timing of its recovery has been shown to hold for literally dozens of countries, including developing countries. This intriguing result not only provides additional evidence for the importance of monetary factors in the Depression, it also explains why the timing of recovery from the Depression differed across countries.
Uh, yes it does. Borrowing money, then deciding that you get to pay less back, while deciding how much to charge the same person in taxes, IS printing money. It is the same method that is often suggested here when a government talks about an unpopular fine. The suggestion is, "Just raise taxes, and give a tax break to those do what you want". Yes, the way that the Feds print their money is behind a big shell game, but they are doing it all the same.
Taxpayers and bondholders are not identical sets of people. Even if it were, if someone buys a bond, then the government raises taxes... then fewer bonds will need to be sold due to higher tax revenues anyway.
If you think that deficit spending isn't predicated on the idea that when the time comes to pay it back, the money will have less value, and thus the debt isn't as expensive as it looks, you haven't been paying attention.
You don't understand how bond markets work. The sale price of bonds (and therefore interest rate) is determined by the free market. The government holds up a piece of paper and says "I will pay the person who returns this piece of paper to me in 6 months $5000. How much are you willing to pay for this piece of paper?" The piece of paper is then auctioned off, for, say, $4,960. If bond investors expect inflation, then the price will be, say $4,850. The market price takes inflation into account perfectly. It's almost as if liquidity markets actually know how inflation interacts with debt and take it into account.
Few young people realize that until the 1964-1968 time period it was possible to bring your dollars to the government and get precious metal on demand.
You haven't been able to do this since 1933.
Since that time, the government has found that it can simply make more money out of thin air and spend it on government programs to generate votes. As with any supply and demand equation, when they start running the printing presses to make more dollars, the dollars you have in you bank account become worth less. You're losing money value and the government is gaining money value, but your 'taxes' are low. One can see this in inflation charts which start to skyrocket in the 1970's, relative to decades previous.
The US does not use inflationary finance, nor does any other developed country. The US hasn't used inflationary finance since the civil war.
The US government does not pay for budget deficits by printing money. It simply doesn't. Deficits are paid for by the selling of bonds, i.e. debt, as seen in phrases like "the national debt".
As for inflation being very high in the 70's, what is that supposed to prove compared to any other period of high inflation? If government spending really was the cause of all inflation, wouldn't you expect inflation in the 70's to be much lower than in the 80's which had vastly higher budget deficits (cut taxes + higher spending), the exact opposite of what can actually be observed?
The Wall Street Journal recently ran a graph showing the value of the dollar vs. gold vs. oil. If we look at the start of the decade until now, if we were holding euros instead of dollars, gas would only be about $2.70 at the pump - that extra $1.30 can be viewed as lost power of the dollar. But, the euro is no panacea either - if you compare the price of gas to the price of gold, it's nearly flat. How about $1.20 gas? I actually saw $5 diesel in CT last weekend.
The recent increases in the price of oil is due to supply scarcity. There isn't enough oil being pumped out to meet world demand. Gold isn't going to create more oil. If you start paying for oil by using gold... you think maybe oil would start getting really expensive in terms of gold?
Not surprisingly, the government decided to stop keeping track of 'M3', or the money supply of the dollar recently. Private economists have continued the calculations and it's easy to see why the government doesn't want to talk about it.
M3 is not "the money supply of the dollar", because for one thing, the "money supply of the dollar" is a meaningless term. The Fed tracks m0, m1 and m2 (measures of the money supply) and other government agencies report the CPI (inflation rate). If the government financed itself by printing money, wouldn't it show up in all the M* measures? Especially M0, the sum of all of the printed currency? M3 is just a superset of M2 plus a few other relatively less important instruments, CDs + dollar denominated accounts outside the US + repurchase agreements. If the money supply really did == inflation, and the government caused this on purpose for spending and wanted to obscure it, then why would the government continue to report inflation statistics directly (CPI)? Or the other 3 money supply measures? Does the government's printing money go directly and exclusively to CDs, banks outside of the US or repurchase agreements?
Except Congressional travel is typically not paid for by taxpayers. Part of the reason why only wealthy candidates from wealthy parties enter Congress.
I've been looking for entry-level DBA work... I love database work, I enjoy it much more than programming and I've got some impressive experience under my belt, but literally 100% of the ads are for a "Senior DBA" with 5+ years experience, always on one specific platform.
Thousands and thousands of studies get published every week. That one didn't get picked up by the media doesn't prove anything, much less a general bias.
Libertarianism's answers are often simple, but their justification of these answers very often uses vague a priori logic. For example, libertarians say that we shouldn't regulate against monopoly, because monopolies are actually always caused by government intervention... somehow or other. Or, we should legalize competing currencies, as the US monetary system is going to collapse... any day now.
Tricyclic anti-depressants, a previous generation of medication before SSRIs, were largely abandoned because they had more side effects and were considered less effective. Sort of throws water on that theory.
(upward) price adjustment is the definition of inflation. Prices do not take time to adjust to inflation, price adjustment is inflation. They are identical by definition.
I also can't imagine how you could conclude that an increase in the money supply assuming that's what you mean here could "always" lead to increased prices since the 1920's were followed by massive reduction in price level.
Suffice to say I don't think you understand mainstream opinion to which you object.
Don't forget that the fed caused it in the first place, with the massive inflation that drove the stock bubble in the 1920's.
Who told you this? Simply false. Look at this graph and look between the the ticks for 1920 and 1930. Inflation was low or negative for most of the 1920's, up to and including 1929.
According to Keynsian theory, it's not possible to have high inflation and high unemployment at the same time. Ever hear of the "stagflation" of the 1970s?
You're talking about a theory by A. W. Phillips, published in 1958. Stagflation did disprove the original Phillips curve but today more complicated models based on it are used.
That said, there are various serious problems with Keynesian theory, and there aren't really any strict Keynesians anymore and macroeconomists are generally in post-Keynesian camps that take Keynes as a jumping-off point.
The Austrian school of economics, which Paul subscribes to, predicted this would happen prior to the crash.
A couple Austrian economists were quoted as saying there would be a "crash", but one thing they could not predict was the keynesian economic policy would prevent recessions from spiraling into depressions ever again, which used to happen regularly and has not happened even once since. Which is why economists abandoned the Austrian school many, many decades ago.
Ron Paul was saying there would be a recession or worse back during the first debates when everyone was talking about the strength of the Bush economy.
Again, this is easy to do. There will be a recession. Sooner or later. Apple will make better, smaller iPods. You will meet someone new this week.
And, I'll also bet that Ron Paul has predicted recessions lots of times, and only the few times that he turned out to be right count. If he can reliably predict recessions more than one quarter in advance and is willing to write his method out, he should send it to Stockholm so he can get a Nobel.
Once again, the Austrian school is ahead of the curve.
As I said, the Austrian school was abandoned by economists generations ago. The Austrian school in its heyday used to seriously debate Marxist economics, which shows you the state of the field at that time. It died out because Keynes could explain the relationship between the money supply and economic growth much better than they could. Today almost no economists still believe in the Austrian school outside of a couple suspiciously well-funded "think tanks".
It's not that hard to predict really.
Now this is getting good. It's not hard to predict recessions and depressions?
So, why haven't you written this up and collected your Nobel prize?
Or, better yet, since you know when to buy and sell stocks, are you fabulously wealthy?
The federal reserve made the great depression worse (but did not cause it as you seem to almost imply), but it made it worse by tightening the money supply after the depression hit rather than expanding it.
At that time the federal reserve hadn't begun managing the money supply according to keynesian principle, for the understandable reason that Keynes did not publish his theory until 1936.
After the government adopted keynesian economic policy not a single economic recession has spiraled into a depression, which used to happen regularly, and the same is true of every other government worldwide that has done the same.
Get the idea out of your head that the government is what causes inflation -- if the government doesn't do anything, the money supply changes on its own, typically expanding during economic growth and contracting during downturns. According to keynesian theory the government should work to make the money supply do the opposite of this, and whether or not this sounds good on paper all empirical evidence of the last 80 years has shown that it works, and there has been not a single economic depression since the great depression.
Ron Paul's most basic views on economics are flatly incorrect in ways that are trivially easy to verify.
Examples:
Ron Paul has claimed that going back to the gold standard will fix a large variety of economic woes. Two things he has said the gold standard will resolve I can think of now are inflation and he's said that it will "smooth" the boom-and-bust cycle of the economy. Yet obviously this country has already spent a lot of time under a gold standard, and it's very easy to verify that during this time inflation was about the same as it is now or slightly worse, and the boom-and-bust cycle was considerably worse. It's really easy to google for graphs of these things, it's not some obscure data.
He also thinks that when the government runs a budget deficit, the federal reserve creates the extra money, creating inflation and thus constituting a silent "tax" on everyone's savings. This idea is simply counterfactual. When the government spends more than it takes in, the treasury department sells bonds. A bond is basically an agreement that says in exchange for X dollars today I'll give you slightly more than X dollars at some set point in the future. If the government literally printed up money every time it ran a deficit, it wouldn't owe anything when it was all said in done. Think about it: under this scenario, there would be no national debt. Isn't there, in fact, like a 9 trillion dollar national debt? The national debt is actually the sum of all of the outstanding treasury bonds. It's really easy to verify this story and it's not some subtle point.
The percentage of economists that still believe in the Austrian school is only about one order of magnitude away from the percentage of climatologists that don't believe in anthropogenic climate change.
...when he pointed out that the price of a barrel of oil in gold is the same as it was in 1992. Everyone can understand that...
That's a coincidence.
The price of oil happened to be low in 1992, and the price of gold was recovering from its massive collapse in the early 80's. They both happen to be really high now. It's a coincidence. You could find such coincidences for any two commodities.
Someone just went back and found a particular point when the price of oil to gold happened to be the same as they were in 2007. You are mistaken to think that this entails that the price of oil to gold has been historically stable, which it isn't, an obvious falsehood that this bogus point had obviously been intended to imply.
Think of it this way: Is Ron Paul trying to say that the price of oil would not have been going up over the past few years if we were using gold-backed dollars rather than fiat dollars? In order for that to be true, wouldn't the change in the price of oil have to be explained by inflation in the fiat dollar? Now, the price of oil is around four times what it was in 1992. Has there been fourfold inflation in the US dollar since 1992?
No, there hasn't. None of this adds up. It's not just a little wrong in the details, it's utterly off-base from the start. The next time anyone tries to peddle any of this gold standard stuff to you, use your head and maybe even google.
George W. Bush was not the first president to fund stem cell research, though I've heard that claimed numerous times in certain quarters. It's painfully easy to look this stuff up.
Such was the state of affairs when, in 1998, using--by necessity--private funds, James Thomson of the University of Wisconsin successfully created the first human embryonic stem cell lines. Clinton's NIH knew the historic nature of that achievement. "This research has the potential to revolutionize the practice of medicine," Harold Varmus, director of the NIH, testified at a Senate hearing that year. New treatments for conditions like Parkinson's, heart disease, diabetes, and spinal cord injury now appeared possible. But the research needed years of federal support in order to flourish--and the Dickey-Wicker Amendment stood squarely in the way.
Or did it? In January of 1999, Harriet Rabb, the top lawyer at the Department of Health and Human Services, released a legal opinion that would set the course for Clinton Administration policy. Federal funds, obviously, could not be used to derive stem cell lines (because derivation involves embryo destruction). However, she concluded that because human embryonic stem cells "are not a human embryo within the statutory definition," the Dickey-Wicker Amendment does not apply to them. The NIH was therefore free to give federal funding to experiments involving the cells themselves (what Republican Senator Sam Brownback, of Kansas, called a bit of "legal sophistry.")
The NIH, with input from the National Bioethics Advisory Commission and others, went on to develop guidelines outlining the types of human embryonic stem cell research that would be eligible for federal funding. These Clinton Administration guidelines, published in August of 2000, forbid the use of federal funds to destroy human embryos to derive stem cells (because of the Dickey-Wicker Amendment), but permitted research with stem cells that other, privately funded scientists had already derived from spare embryos slated for destruction at fertility clinics.
President Clinton strongly endorsed the new guidelines, noting that human embryonic stem cell research promised "potentially staggering benefits." And with the guidelines in place, the NIH began accepting grant proposals from scientists. Thus, it was the Clinton Administration that first opened the door to federal funding.
Be careful calling people ignorant when you yourself are short a few clues to what you're talking about.
Lately people (aka: script kiddies) seem to be losing the distinction between what is a language, and what is a framework. I cannot remember the last time I downloaded a PHP script and it required PEAR. I absolutely despise PEAR, and all other frameworks that really don't seem to have a place.
You're losing the distinction between a framework and a library.
PEAR isn't a framework, it's a library management tool, like CPAN is for perl. It would make no sense to say I'm building a website 'using PEAR' as much as you could build a web site 'using CPAN', but you could say I'm building a web site in PHP and I used a couple packages that I found in PEAR.
Slashdot Mirror
Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble.
Shame that this explanation falls apart upon closer inspection.
According to wikipedia, the idea originated with a fictional biography of Columbus, "The Life and Voyages of Christopher Columbus" written by Washington Irving in 1838.
That no scientific concept is true is a red herring, because praxeology is not a scientific concept. As I was saying.
Popper said that the criterion between scientific theories and unscientific theories is what is falsifiable.
Angels causing gravity is not falsifiable. The theory of gravity is falsifiable. There are clearly things that matter could be observed doing that would falsify Newton's theory. The theory of gravity as spacetime curvature is falsifiable (also the fabric of spacetime is obviously woven by angels). The theory of atoms is falsifiable, and I believe parts of it have been falsified. Praxeology is not falsifiable.
Show me the experiment that could falsify praxeology and I'll change my mind. If it can explain any behavior then there isn't an experimental result that could falsify it. If it makes the same predictions as another theory that is falsifiable but adds extra stuff that isn't falsifiable, then I'll stick with the other theory.
None of this changes the painfully obvious flaw in the logic. Especially if any amount of time before A causes B is allowed, then any A could cause any B, and therefore there isn't any observation that could falsify this idea.
It's not my burden to prove some alternate theory.
This is obviously false, the money supply expanded tremendously in the 1920's and there was practically no inflation (graph).
The money supply is not identical to the am
Yes. An increase in one year was counterbalanced by a decrease the next year, with the average staying remarkably stable, in a slow deflation distorted by just two peaks, around 1815 and 1865. The mean CPI for each decade in the 19th century: ...
25% swings year over year is not stable, by any practical definition. We have never had annual inflation or deflation reaching anywhere near annual levels that occurred the 19th century. "Slowly increasing" consistently does not equal unstable.
If you want to say that prices were stable defined as average over centuries, and if that's the only thing you care about, then I really can't argue against that.
Praxeology (the Austrian method) is simple, generic, and its effects are testable as much as anything else in human sciences.
I think that gravity is caused by tiny, invisible angels exerting downward force on things. We can't test that, but we can test its effects. My theory is simple, generic, and its effects are testable.
Basic pseudoscience.
Yes. Artificially lowering interest rates below natural market equilibrium level.
So if lowering interest rates causes this latent economic chaos 10 years later, how to we know that Roosevelt's lowering interest rates had no immediate effects and wasn't instead the cause of the recession of 1953? If it's plausible that any lowering of interest rates at any point prior causes recessions, how can you really know which lowering of interest rates caused which recessions?
Only lowered interest rates followed (any point later) by a recession counts. Lowered interest rate and no recession doesn't count; and this is rendered moot by allowing any time distance for recessions. Increased or unchanged interest rates doesn't seem to matter one way or the other. Only "hits" count; textbook pseudoscience.
A "gold standard" where the government can issue paper (such as "war bonds"), promising to give "in the future" gold to the person who received said paper, not having said gold in stock, has the "gold" and "standard" words surrounded by scare quotes. These studies you mention correctly hit something that didn't work, but this something was a "gold standard" in name only. A proper gold standard requires people to actually carry gold around, or at least to have very strict controls making absolutely sure that absolutely NO paper bill is issued that isn't backed by an actually existing, actually stored somewhere, thus 100% retrievable at any moment by everyone in possession of said bills without this causing national chaos, amount of physical gold, or silver, or whatever is used as backing. Mess with these very simple and basic rules and you'll have a messy result, no exception.
Governments have always been able to issue bonds, so I'm not sure when this kind of gold standard ever existed. Fractional reserve banking anywhere in the private sector would mean that the supply of money > the supply of gold specie, for that matter. Both of these things certainly existed in the 19th century.
Ah, a foreign government could demand gold specie for its exchange balances until 1971 in theory, but in practice the few times it was actually tried US government refused to pay.
I think you're seeing history inverted. I look at the 20th century, and I see cycles an interminable sequence of booms and busts mixed with inflationary and hyperinflationary phases. I look at the 19th century, and I see customer and other prices with almost perfect stability, so much that anyone could save money for bad times by simply storing it in their houses, rather than at some bank, as is required now.
Perfect stability, eh?
You also talk about liquidity, but it was precisely the artificial liquidity created during Woodrow Wilson's government, by way of cheap loans at below market rates, that created the boom of bad investments that imploded in 1929.
Not a theory I've ever heard before. What exactly were these "cheap loans"?
This is an excellent demonstration of why Austrian economics or as you seem to obliquely refer to it as "classical liberal" is unscientific. The Austrians say that all business cycles must be caused by the government. So, find a business cycle, and find some action the government did at some time prior to that. That government action must have caused that recession!
Apparently something that happened 10 years prior is good enough.
It's just like Freudian psychology. Got a problem? Can you think of any trauma that occurred to you at any point in your childhood? You can?! That earlier trauma must have caused your problem now!
Austrians and Freudians made strikingly similar rejections of the scientific method. von Mises thought that human behavior 1) could/should not be explained by theories that could be falsified, observed or make predictions, and 2) instead could be deducted axiomatically though "natural laws". And these laws can only be expressed verbally, not mathematically. And, of course, only a Austrian economist could interpret the laws correctly.
Which all explains why today Austrian economics is taken about as seriously by economists as Freudian psychology is taken by psychologists.
And then it was the New Deal that, by providing even more cheap loans and thus creating more (useless) liquidity, that extended what would have been self-correcting recession, into a full blown, decade-long depression.
Too much liquidity? During the Great Depression? Bank failures mean the opposite of too much liquidity. (And again, I'm not sure what by "cheap loans" you mean exactly. Lowering interest rates?)
As for why the Great Depression lasted so long, it turns out that actual economists study these things:
Uh, yes it does. Borrowing money, then deciding that you get to pay less back, while deciding how much to charge the same person in taxes, IS printing money. It is the same method that is often suggested here when a government talks about an unpopular fine. The suggestion is, "Just raise taxes, and give a tax break to those do what you want". Yes, the way that the Feds print their money is behind a big shell game, but they are doing it all the same.
Taxpayers and bondholders are not identical sets of people. Even if it were, if someone buys a bond, then the government raises taxes... then fewer bonds will need to be sold due to higher tax revenues anyway.
If you think that deficit spending isn't predicated on the idea that when the time comes to pay it back, the money will have less value, and thus the debt isn't as expensive as it looks, you haven't been paying attention.
You don't understand how bond markets work. The sale price of bonds (and therefore interest rate) is determined by the free market. The government holds up a piece of paper and says "I will pay the person who returns this piece of paper to me in 6 months $5000. How much are you willing to pay for this piece of paper?" The piece of paper is then auctioned off, for, say, $4,960. If bond investors expect inflation, then the price will be, say $4,850. The market price takes inflation into account perfectly. It's almost as if liquidity markets actually know how inflation interacts with debt and take it into account.
Few young people realize that until the 1964-1968 time period it was possible to bring your dollars to the government and get precious metal on demand.
You haven't been able to do this since 1933.
Since that time, the government has found that it can simply make more money out of thin air and spend it on government programs to generate votes. As with any supply and demand equation, when they start running the printing presses to make more dollars, the dollars you have in you bank account become worth less. You're losing money value and the government is gaining money value, but your 'taxes' are low. One can see this in inflation charts which start to skyrocket in the 1970's, relative to decades previous.
The US does not use inflationary finance, nor does any other developed country. The US hasn't used inflationary finance since the civil war.
The US government does not pay for budget deficits by printing money. It simply doesn't. Deficits are paid for by the selling of bonds, i.e. debt, as seen in phrases like "the national debt".
As for inflation being very high in the 70's, what is that supposed to prove compared to any other period of high inflation? If government spending really was the cause of all inflation, wouldn't you expect inflation in the 70's to be much lower than in the 80's which had vastly higher budget deficits (cut taxes + higher spending), the exact opposite of what can actually be observed?
The Wall Street Journal recently ran a graph showing the value of the dollar vs. gold vs. oil. If we look at the start of the decade until now, if we were holding euros instead of dollars, gas would only be about $2.70 at the pump - that extra $1.30 can be viewed as lost power of the dollar. But, the euro is no panacea either - if you compare the price of gas to the price of gold, it's nearly flat. How about $1.20 gas? I actually saw $5 diesel in CT last weekend.
The recent increases in the price of oil is due to supply scarcity. There isn't enough oil being pumped out to meet world demand. Gold isn't going to create more oil. If you start paying for oil by using gold... you think maybe oil would start getting really expensive in terms of gold?
Not surprisingly, the government decided to stop keeping track of 'M3', or the money supply of the dollar recently. Private economists have continued the calculations and it's easy to see why the government doesn't want to talk about it.
M3 is not "the money supply of the dollar", because for one thing, the "money supply of the dollar" is a meaningless term. The Fed tracks m0, m1 and m2 (measures of the money supply) and other government agencies report the CPI (inflation rate). If the government financed itself by printing money, wouldn't it show up in all the M* measures? Especially M0, the sum of all of the printed currency? M3 is just a superset of M2 plus a few other relatively less important instruments, CDs + dollar denominated accounts outside the US + repurchase agreements. If the money supply really did == inflation, and the government caused this on purpose for spending and wanted to obscure it, then why would the government continue to report inflation statistics directly (CPI)? Or the other 3 money supply measures? Does the government's printing money go directly and exclusively to CDs, banks outside of the US or repurchase agreements?
Except Congressional travel is typically not paid for by taxpayers. Part of the reason why only wealthy candidates from wealthy parties enter Congress.
I've been looking for entry-level DBA work... I love database work, I enjoy it much more than programming and I've got some impressive experience under my belt, but literally 100% of the ads are for a "Senior DBA" with 5+ years experience, always on one specific platform.
Thousands and thousands of studies get published every week. That one didn't get picked up by the media doesn't prove anything, much less a general bias.
Libertarianism's answers are often simple, but their justification of these answers very often uses vague a priori logic. For example, libertarians say that we shouldn't regulate against monopoly, because monopolies are actually always caused by government intervention... somehow or other. Or, we should legalize competing currencies, as the US monetary system is going to collapse... any day now.
Tricyclic anti-depressants, a previous generation of medication before SSRIs, were largely abandoned because they had more side effects and were considered less effective. Sort of throws water on that theory.
(upward) price adjustment is the definition of inflation. Prices do not take time to adjust to inflation, price adjustment is inflation. They are identical by definition.
I also can't imagine how you could conclude that an increase in the money supply assuming that's what you mean here could "always" lead to increased prices since the 1920's were followed by massive reduction in price level.
Suffice to say I don't think you understand mainstream opinion to which you object.
Serves them right for forcing us to include the same long urls that point to files that never change in every single HTML file ever.
Don't forget that the fed caused it in the first place, with the massive inflation that drove the stock bubble in the 1920's.
Who told you this? Simply false. Look at this graph and look between the the ticks for 1920 and 1930. Inflation was low or negative for most of the 1920's, up to and including 1929.
According to Keynsian theory, it's not possible to have high inflation and high unemployment at the same time. Ever hear of the "stagflation" of the 1970s?
You're talking about a theory by A. W. Phillips, published in 1958. Stagflation did disprove the original Phillips curve but today more complicated models based on it are used.
That said, there are various serious problems with Keynesian theory, and there aren't really any strict Keynesians anymore and macroeconomists are generally in post-Keynesian camps that take Keynes as a jumping-off point.
The Austrian school of economics, which Paul subscribes to, predicted this would happen prior to the crash.
A couple Austrian economists were quoted as saying there would be a "crash", but one thing they could not predict was the keynesian economic policy would prevent recessions from spiraling into depressions ever again, which used to happen regularly and has not happened even once since. Which is why economists abandoned the Austrian school many, many decades ago.
Ron Paul was saying there would be a recession or worse back during the first debates when everyone was talking about the strength of the Bush economy.
Again, this is easy to do. There will be a recession. Sooner or later. Apple will make better, smaller iPods. You will meet someone new this week.
And, I'll also bet that Ron Paul has predicted recessions lots of times, and only the few times that he turned out to be right count. If he can reliably predict recessions more than one quarter in advance and is willing to write his method out, he should send it to Stockholm so he can get a Nobel.
Once again, the Austrian school is ahead of the curve.
As I said, the Austrian school was abandoned by economists generations ago. The Austrian school in its heyday used to seriously debate Marxist economics, which shows you the state of the field at that time. It died out because Keynes could explain the relationship between the money supply and economic growth much better than they could. Today almost no economists still believe in the Austrian school outside of a couple suspiciously well-funded "think tanks".
It's not that hard to predict really.
Now this is getting good. It's not hard to predict recessions and depressions?
So, why haven't you written this up and collected your Nobel prize?
Or, better yet, since you know when to buy and sell stocks, are you fabulously wealthy?
The federal reserve made the great depression worse (but did not cause it as you seem to almost imply), but it made it worse by tightening the money supply after the depression hit rather than expanding it.
At that time the federal reserve hadn't begun managing the money supply according to keynesian principle, for the understandable reason that Keynes did not publish his theory until 1936.
After the government adopted keynesian economic policy not a single economic recession has spiraled into a depression, which used to happen regularly, and the same is true of every other government worldwide that has done the same.
Get the idea out of your head that the government is what causes inflation -- if the government doesn't do anything, the money supply changes on its own, typically expanding during economic growth and contracting during downturns. According to keynesian theory the government should work to make the money supply do the opposite of this, and whether or not this sounds good on paper all empirical evidence of the last 80 years has shown that it works, and there has been not a single economic depression since the great depression.
OK, I'll bite.
Ron Paul's most basic views on economics are flatly incorrect in ways that are trivially easy to verify.
Examples:
Ron Paul has claimed that going back to the gold standard will fix a large variety of economic woes. Two things he has said the gold standard will resolve I can think of now are inflation and he's said that it will "smooth" the boom-and-bust cycle of the economy. Yet obviously this country has already spent a lot of time under a gold standard, and it's very easy to verify that during this time inflation was about the same as it is now or slightly worse, and the boom-and-bust cycle was considerably worse. It's really easy to google for graphs of these things, it's not some obscure data.
He also thinks that when the government runs a budget deficit, the federal reserve creates the extra money, creating inflation and thus constituting a silent "tax" on everyone's savings. This idea is simply counterfactual. When the government spends more than it takes in, the treasury department sells bonds. A bond is basically an agreement that says in exchange for X dollars today I'll give you slightly more than X dollars at some set point in the future. If the government literally printed up money every time it ran a deficit, it wouldn't owe anything when it was all said in done. Think about it: under this scenario, there would be no national debt. Isn't there, in fact, like a 9 trillion dollar national debt? The national debt is actually the sum of all of the outstanding treasury bonds. It's really easy to verify this story and it's not some subtle point.
The percentage of economists that still believe in the Austrian school is only about one order of magnitude away from the percentage of climatologists that don't believe in anthropogenic climate change.
...when he pointed out that the price of a barrel of oil in gold is the same as it was in 1992. Everyone can understand that...
That's a coincidence.
The price of oil happened to be low in 1992, and the price of gold was recovering from its massive collapse in the early 80's. They both happen to be really high now. It's a coincidence. You could find such coincidences for any two commodities.
Someone just went back and found a particular point when the price of oil to gold happened to be the same as they were in 2007. You are mistaken to think that this entails that the price of oil to gold has been historically stable, which it isn't, an obvious falsehood that this bogus point had obviously been intended to imply.
Think of it this way: Is Ron Paul trying to say that the price of oil would not have been going up over the past few years if we were using gold-backed dollars rather than fiat dollars? In order for that to be true, wouldn't the change in the price of oil have to be explained by inflation in the fiat dollar? Now, the price of oil is around four times what it was in 1992. Has there been fourfold inflation in the US dollar since 1992?
No, there hasn't. None of this adds up. It's not just a little wrong in the details, it's utterly off-base from the start. The next time anyone tries to peddle any of this gold standard stuff to you, use your head and maybe even google.
Be careful calling people ignorant when you yourself are short a few clues to what you're talking about.
Lately people (aka: script kiddies) seem to be losing the distinction between what is a language, and what is a framework. I cannot remember the last time I downloaded a PHP script and it required PEAR. I absolutely despise PEAR, and all other frameworks that really don't seem to have a place.
You're losing the distinction between a framework and a library.
PEAR isn't a framework, it's a library management tool, like CPAN is for perl. It would make no sense to say I'm building a website 'using PEAR' as much as you could build a web site 'using CPAN', but you could say I'm building a web site in PHP and I used a couple packages that I found in PEAR.
Except Canada, Sweden, Norway, Finland have much lower population density yet beat us handily in broadband penetration...