At any point, if the US government issues bonds, and the uptake is less than required to keep rates low, rates rise. The interest rates will depend on US treasuries as long as creditors will lend to the US government AND people use the dollar as a reserve currency worldwide. When China and other foreign interests decide to stop funding US deficits at ridiculously low lending rates that give negative returns after inflation, and bond sales flop (as Germany's did), the whole thing collapses. As the US tries to roll over low-rate debt into higher-rate debt, the interest payments become higher, and we will be borrowing more than half of every dollar we spend. It will collapse. At that point, some other currency (Swiss Franc, Singapore Dollar, a possible Gold Renminbi) will become the de facto reserve currency, and all rates of return will be measured against something other than the dollar.
The difference between gold money (or competitive money) and fiat currency controlled by the government is that in a competitive or gold system, people can choose to use the money that works best for them. In a fiat/government controlled system (ours), the government chooses the money that works best for the banks, and can steal from the people through inflation.
If you think US Treasuries are a safe investment, think about what just happened last week in Germany. They couldn't sell enough bonds at a low enough interest rate to sell the full debt load they originally planned. And that's not Italy or Greece - it's Germany. It seems you understand that interest rates are set in the bond market, which is to your credit. But you maybe are hanging on to the idea that US debt is zero risk, which I think has generally been accepted as being an unsound belief.
That there is a stable supply (not fixed, it grows about 2% per annum) of gold is what makes it money, as opposed to Federal Reserve Notes, or Euros, or Zimbabwe Dollars, which can be printed at a high rate. Gold only encourages hoarding when chased out of the economy by paper currency (Gresham's law).
Yeah, technically that's true - they could keep the created money. It's a non-issue, though, because there is no way that interest rates won't rise, and when they do, the government's interest payments will require more money printing just to keep up. If the Fed prints money fast enough to monetize the issuance of new debt by the Treasury, the world will drop the dollar as a reserve currency and the dollar will fail. The only way to solve this is with massive spending cuts and some tax reform (mostly oriented towards higher total tax revenue). Ain't gonna happen.
If the Fed receives back payment on the debt it has purchased, it must mark down its assets and equity/liabilities equally. The issuance of new notes against the new debt results in reserves which can be expanded through the fractional reserve system. When that debt is paid off, the money supply decreases, because the base of the fractional reserve is being reduced, and this reduction has to have an effect on the outstanding money supply, which reduces in proportion to the monetary base at the ration of the money multiplier (ten to thirty times, give or take).
There is nothing in there to prevent any entity from borrowing more money than exists in the monetary base. To pay it off, the government would have to re-tax the same dollar in the deflated money supply N times until the debt was paid off.
The government doesn't control the value of the money directly. Once they print too much, the inflation in the money supply causes a general loss of confidence in the currency, and people move to something else, and the old currency becomes worth less (worthless).
Wrong, sir. Currency is just an IOU. Money stores value. Hence gold has outperformed the Dow by about 50% since Nixon went off the gold standard completely in the early 1970s.
I twisted my office mate's arm to take the Database course. He's a web designer with a print layout background, and has been trying to get into programming to expand career options (he's maxed out as a designer).
The class has been hugely challenging and rewarding for him - he's not had math above Algebra II before, and that was over 30 years ago, so it's hard, but he is starting to truly understand SQL instead of just guessing, and he's understanding the concepts of abstract types, formal grammars, and so on.
Really a tremendous improvement over the video lectures and static course materials offered from other online courses. The quizzes and interactive exercises are superb. I can't say enough about the class, and will be bashing his head in to take the intro to CS class.
Time we got used to making $30K for web development jobs, and time the anthropology, english & history majors.. end up flipping burgers.
What's wrong with that? As long as the government stops propping up the value of bank assets to save them at the expense of every other part of our economy, it wouldn't be a problem. A massive deleveraging event that unwinds over a decade would be just fine.
You don't need to actively regulate/break up banks of a certain size. You allow all banks to issue notes against gold, and remove central banking. The single-note-issuance aspect of the Federal Reserve, along with it being the bank to the banks, is what allows banks to grow large. This is explained in excruciating detail in Murray Rothbard's "The Mystery of Banking", and in summary in "The Case Against the Fed", both available at Mises.org.
In short, using gold as money, and allowing banks to issue their own notes (instead of requiring everyone to use Federal Reserve Notes), basically solves the "too big to fail" problem, because banks can't leverage deposits so much.
Since you brought up Glass-Steagall, I wonder if you think that stopping a holding company from owning both an investment and commercial bank goes far enough (that was the only provision repealed)? What about preventing the co-mingling of deposit and loan banking, or double-counting dollars owed more than once (fractional reserve banking)?
Until recently, I thought/. was relatively libertarian, certainly much more than most sites. It's only in the past few years that I've seen stereotypically liberal comments become common. I suspect that males born after 1990 match the bias you suggest, but they're still not a majority here.
Rand Paul seems to throw in a little bit of Palin-esque stupidity on purpose to minimize GOP fear of him, and to not ostracize the part of the electorate that is scared of the fact that his father is often talking to them like intelligent adults.
I was discussing the matter with a friend of mine (a very bright programmer) recently and he challenged my attitude that it is the responsibility of the citizenry to elevate itself to a cognitive level consistent with making wise choices in elections. When I charged him to tell me what his solution was, he said that the answer is to support well-meaning politicians who lie enough to get elected, but still do some good. I could not bring myself to ask him where he thought these well-meaning politicians would come from.
Nothing there in the responses about the TSA or the Federal Reserve/Banking Regulations. Like those topics don't exist. And so 99% of the uproar is over marijuana. Wow.
You're missing something critical. If there's less debt, there's less credit created by the Federal Reserve, because the Fed buys bonds in the repo market by writing checks on itself, monies from which go to the US treasury and into the economy. That's how the money supply expansion begins (it's multiplied by the fractional reserve banking system). The Fed has the asset of the bond on its books, and the equity of the newly created cash. Only the Fed can do this, since it has a legal right to counterfeit. Any other entity would have to offset an asset with a liability.
If the debt all got paid off, the dollars would return to the Fed, and they'd be out of the economy and banking system. This would create a deflationary trend, where just by holding dollars you'd increase purchasing power. Interest rates would start to be set by the market. Savings accounts and CDs would start to yield decent rates, as there would be less money available to lend, and those borrowers who could, would most likely be willing to pay more interest.
Without the Fed buying all that debt, the banks simply have to compete harder for savings account deposits. Fractional reserve banking would still mean that more dollars would be in the economy than with full reserve banking, but the extraordinary effect of debt monetization would not be there to kick it into hyperactivity.
So you wouldn't need to chase yield by investing in US bonds. Savings accounts/CDs would do just fine, as banks would lend in the market, instead of borrowing from the Fed at zero and parking the money in US bonds, and screwing retail customers. Because of the inflationary bias, people invest in something with the "zero risk rate of return" (until recently the US bond). In a non-inflationary environment, you can park your money in dollars (which would be as good as gold if the Fed truly didn't inflate) stuffed under your mattress and get some return due to deflation. You could choose what amount of your money to put at risk for higher returns, but you wouldn't have to do that if you didn't want.
Failing to understand that low-risk yield-chasing is a by-product of the effects of inflationary policy is something that 99.999% of the population will not understand. The author of the article clearly hasn't a clue about it, despite being somewhat literate economically.
Murray Rothbard has several excellent books on this topic. I'd recommend both "The Case Against the Fed" and "The Mystery of Banking" for detailed explanations of the processes I summarized (poorly) above. Of course none of this may be taught in any economics course, since academic economics is controlled by the banks, who are the chief beneficiaries of Fed policy and activity.
It shouldn't be a mystery. The Chertoff Group and a few other private agencies make huge money off forcing this shit on us. Do you think national security is any different from monetary policy when it comes to control by connected industry?
There's an ongoing public outcry, probably by about 3% of the population. It just so happens that doing real journalism that involved people getting a chance to have a rational dialogue doesn't get good ratings, so it's ignored.
Amen. I've talked to enough teachers to know that almost all of them (at least all I've talked to) oppose any teacher quality evaluation method, period, regardless of its merits. They oppose TALKING about evaluation methods. They are much more interested in job security through political ends, and are firmly entrenched in the teacher vs. administration mindset. That said, given the ineffectiveness of most administrators and the techniques they've applied so far, I can sympathize with the teachers. As you suggested, the way out of it is through unfettered competition. And I'm glad to see parents trying alternatives to the traditional public school "education factory" system.
Actually, there's a growing body of evidence in the field of epigenetics that shows that acquired traits can be inherited. Google leads to many, many interesting and legit papers.
Interesting. I think a lot of the trade balance positioning with currency devaluation, etc., could easily be done away with if people just allowed pricing to clear the markets. Long-term, that also has the benefit (for those in poor countries) of equalizing wealth levels globally. See how today China is starting to see the emergence of a middle class for the first time (it is small now, but poised to grow), even as many people are suffering under the types of work conditions that those in Europe and the US did around the time of the 1900s. So if we stop putting barriers up to the pricing system (of people setting a price for their goods that they can sell those goods for) and to currency exchange (to help facilitate the wealth exchange between overvalued and undervalued currencies) a lot of these problems would be short-term and insignificant. It is the economic policies that cause the disparities to remain instead of letting arbitrage take place and things to equilibrate.
Regarding piracy and such, remember that people often assume that just because the government acts against these types of criminals that there is no other solution. But yet look at the regular police - is it not the case that private entities (corporations and individuals) hire private security firms to protect their persons and property? Even when the government has a monopoly on law enforcement, there is still a market for security. So back to piracy...sell off or build the naval warships for insurance firms to buy; insurance premiums for freighters would naturally help pay for private shipping security financed through the insurers. Walter Block is a great advocate of such market-based solutions to these kinds of problems.
I don't know what you mean by "globalization". It is a term used many different ways. I do not think that trade is the problem, though - I think it is manipulation of the money by the powers of the banks and governments, for profit and politics. For normal men, we try to make money to build wealth and a better life. But when that savings is constantly devalued to meet some political end or to profit a bank, then we suffer.
Personally, I don't see the problem with free trade. Why should anyone not be able to trade just because we live in different countries? I should be able to buy coffee from a farmer in Brazil, or ham from Spain, or sell my wife's art to someone in New Zealand. If one country has a generous amount of some natural resource, why not sell it overseas? I have no problem with that. To restrict free trade is to restrict the division of labor and the benefits of specialization which have benfited all.
Slashdot Mirror
At any point, if the US government issues bonds, and the uptake is less than required to keep rates low, rates rise. The interest rates will depend on US treasuries as long as creditors will lend to the US government AND people use the dollar as a reserve currency worldwide. When China and other foreign interests decide to stop funding US deficits at ridiculously low lending rates that give negative returns after inflation, and bond sales flop (as Germany's did), the whole thing collapses. As the US tries to roll over low-rate debt into higher-rate debt, the interest payments become higher, and we will be borrowing more than half of every dollar we spend. It will collapse. At that point, some other currency (Swiss Franc, Singapore Dollar, a possible Gold Renminbi) will become the de facto reserve currency, and all rates of return will be measured against something other than the dollar.
The difference between gold money (or competitive money) and fiat currency controlled by the government is that in a competitive or gold system, people can choose to use the money that works best for them. In a fiat/government controlled system (ours), the government chooses the money that works best for the banks, and can steal from the people through inflation.
If you think US Treasuries are a safe investment, think about what just happened last week in Germany. They couldn't sell enough bonds at a low enough interest rate to sell the full debt load they originally planned. And that's not Italy or Greece - it's Germany. It seems you understand that interest rates are set in the bond market, which is to your credit. But you maybe are hanging on to the idea that US debt is zero risk, which I think has generally been accepted as being an unsound belief.
That there is a stable supply (not fixed, it grows about 2% per annum) of gold is what makes it money, as opposed to Federal Reserve Notes, or Euros, or Zimbabwe Dollars, which can be printed at a high rate. Gold only encourages hoarding when chased out of the economy by paper currency (Gresham's law).
Yeah, technically that's true - they could keep the created money. It's a non-issue, though, because there is no way that interest rates won't rise, and when they do, the government's interest payments will require more money printing just to keep up. If the Fed prints money fast enough to monetize the issuance of new debt by the Treasury, the world will drop the dollar as a reserve currency and the dollar will fail. The only way to solve this is with massive spending cuts and some tax reform (mostly oriented towards higher total tax revenue). Ain't gonna happen.
If the Fed receives back payment on the debt it has purchased, it must mark down its assets and equity/liabilities equally. The issuance of new notes against the new debt results in reserves which can be expanded through the fractional reserve system. When that debt is paid off, the money supply decreases, because the base of the fractional reserve is being reduced, and this reduction has to have an effect on the outstanding money supply, which reduces in proportion to the monetary base at the ration of the money multiplier (ten to thirty times, give or take).
There is nothing in there to prevent any entity from borrowing more money than exists in the monetary base. To pay it off, the government would have to re-tax the same dollar in the deflated money supply N times until the debt was paid off.
The government doesn't control the value of the money directly. Once they print too much, the inflation in the money supply causes a general loss of confidence in the currency, and people move to something else, and the old currency becomes worth less (worthless).
Wrong, sir. Currency is just an IOU. Money stores value. Hence gold has outperformed the Dow by about 50% since Nixon went off the gold standard completely in the early 1970s.
I twisted my office mate's arm to take the Database course. He's a web designer with a print layout background, and has been trying to get into programming to expand career options (he's maxed out as a designer).
The class has been hugely challenging and rewarding for him - he's not had math above Algebra II before, and that was over 30 years ago, so it's hard, but he is starting to truly understand SQL instead of just guessing, and he's understanding the concepts of abstract types, formal grammars, and so on.
Really a tremendous improvement over the video lectures and static course materials offered from other online courses. The quizzes and interactive exercises are superb. I can't say enough about the class, and will be bashing his head in to take the intro to CS class.
Time we got used to making $30K for web development jobs, and time the anthropology, english & history majors.. end up flipping burgers.
What's wrong with that? As long as the government stops propping up the value of bank assets to save them at the expense of every other part of our economy, it wouldn't be a problem. A massive deleveraging event that unwinds over a decade would be just fine.
You don't need to actively regulate/break up banks of a certain size. You allow all banks to issue notes against gold, and remove central banking. The single-note-issuance aspect of the Federal Reserve, along with it being the bank to the banks, is what allows banks to grow large. This is explained in excruciating detail in Murray Rothbard's "The Mystery of Banking", and in summary in "The Case Against the Fed", both available at Mises.org.
In short, using gold as money, and allowing banks to issue their own notes (instead of requiring everyone to use Federal Reserve Notes), basically solves the "too big to fail" problem, because banks can't leverage deposits so much.
Since you brought up Glass-Steagall, I wonder if you think that stopping a holding company from owning both an investment and commercial bank goes far enough (that was the only provision repealed)? What about preventing the co-mingling of deposit and loan banking, or double-counting dollars owed more than once (fractional reserve banking)?
Until recently, I thought /. was relatively libertarian, certainly much more than most sites. It's only in the past few years that I've seen stereotypically liberal comments become common. I suspect that males born after 1990 match the bias you suggest, but they're still not a majority here.
Rand Paul seems to throw in a little bit of Palin-esque stupidity on purpose to minimize GOP fear of him, and to not ostracize the part of the electorate that is scared of the fact that his father is often talking to them like intelligent adults.
I was discussing the matter with a friend of mine (a very bright programmer) recently and he challenged my attitude that it is the responsibility of the citizenry to elevate itself to a cognitive level consistent with making wise choices in elections. When I charged him to tell me what his solution was, he said that the answer is to support well-meaning politicians who lie enough to get elected, but still do some good. I could not bring myself to ask him where he thought these well-meaning politicians would come from.
Nothing there in the responses about the TSA or the Federal Reserve/Banking Regulations. Like those topics don't exist. And so 99% of the uproar is over marijuana. Wow.
You're missing something critical. If there's less debt, there's less credit created by the Federal Reserve, because the Fed buys bonds in the repo market by writing checks on itself, monies from which go to the US treasury and into the economy. That's how the money supply expansion begins (it's multiplied by the fractional reserve banking system). The Fed has the asset of the bond on its books, and the equity of the newly created cash. Only the Fed can do this, since it has a legal right to counterfeit. Any other entity would have to offset an asset with a liability.
If the debt all got paid off, the dollars would return to the Fed, and they'd be out of the economy and banking system. This would create a deflationary trend, where just by holding dollars you'd increase purchasing power. Interest rates would start to be set by the market. Savings accounts and CDs would start to yield decent rates, as there would be less money available to lend, and those borrowers who could, would most likely be willing to pay more interest.
Without the Fed buying all that debt, the banks simply have to compete harder for savings account deposits. Fractional reserve banking would still mean that more dollars would be in the economy than with full reserve banking, but the extraordinary effect of debt monetization would not be there to kick it into hyperactivity.
So you wouldn't need to chase yield by investing in US bonds. Savings accounts/CDs would do just fine, as banks would lend in the market, instead of borrowing from the Fed at zero and parking the money in US bonds, and screwing retail customers. Because of the inflationary bias, people invest in something with the "zero risk rate of return" (until recently the US bond). In a non-inflationary environment, you can park your money in dollars (which would be as good as gold if the Fed truly didn't inflate) stuffed under your mattress and get some return due to deflation. You could choose what amount of your money to put at risk for higher returns, but you wouldn't have to do that if you didn't want.
Failing to understand that low-risk yield-chasing is a by-product of the effects of inflationary policy is something that 99.999% of the population will not understand. The author of the article clearly hasn't a clue about it, despite being somewhat literate economically.
Murray Rothbard has several excellent books on this topic. I'd recommend both "The Case Against the Fed" and "The Mystery of Banking" for detailed explanations of the processes I summarized (poorly) above. Of course none of this may be taught in any economics course, since academic economics is controlled by the banks, who are the chief beneficiaries of Fed policy and activity.
It shouldn't be a mystery. The Chertoff Group and a few other private agencies make huge money off forcing this shit on us. Do you think national security is any different from monetary policy when it comes to control by connected industry?
There's an ongoing public outcry, probably by about 3% of the population. It just so happens that doing real journalism that involved people getting a chance to have a rational dialogue doesn't get good ratings, so it's ignored.
Amen. I've talked to enough teachers to know that almost all of them (at least all I've talked to) oppose any teacher quality evaluation method, period, regardless of its merits. They oppose TALKING about evaluation methods. They are much more interested in job security through political ends, and are firmly entrenched in the teacher vs. administration mindset. That said, given the ineffectiveness of most administrators and the techniques they've applied so far, I can sympathize with the teachers. As you suggested, the way out of it is through unfettered competition. And I'm glad to see parents trying alternatives to the traditional public school "education factory" system.
Actually, there's a growing body of evidence in the field of epigenetics that shows that acquired traits can be inherited. Google leads to many, many interesting and legit papers.
Done. Posted on my FB page, and it sparked an interesting conversation with my wife. Thanks.
The only bad science is the science that is held above questioning. That's called faith.
Is that yours? Can I quote that freely (with attribution)? Please!??
Interesting. I think a lot of the trade balance positioning with currency devaluation, etc., could easily be done away with if people just allowed pricing to clear the markets. Long-term, that also has the benefit (for those in poor countries) of equalizing wealth levels globally. See how today China is starting to see the emergence of a middle class for the first time (it is small now, but poised to grow), even as many people are suffering under the types of work conditions that those in Europe and the US did around the time of the 1900s. So if we stop putting barriers up to the pricing system (of people setting a price for their goods that they can sell those goods for) and to currency exchange (to help facilitate the wealth exchange between overvalued and undervalued currencies) a lot of these problems would be short-term and insignificant. It is the economic policies that cause the disparities to remain instead of letting arbitrage take place and things to equilibrate.
Regarding piracy and such, remember that people often assume that just because the government acts against these types of criminals that there is no other solution. But yet look at the regular police - is it not the case that private entities (corporations and individuals) hire private security firms to protect their persons and property? Even when the government has a monopoly on law enforcement, there is still a market for security. So back to piracy...sell off or build the naval warships for insurance firms to buy; insurance premiums for freighters would naturally help pay for private shipping security financed through the insurers. Walter Block is a great advocate of such market-based solutions to these kinds of problems.
I don't know what you mean by "globalization". It is a term used many different ways. I do not think that trade is the problem, though - I think it is manipulation of the money by the powers of the banks and governments, for profit and politics. For normal men, we try to make money to build wealth and a better life. But when that savings is constantly devalued to meet some political end or to profit a bank, then we suffer.
Personally, I don't see the problem with free trade. Why should anyone not be able to trade just because we live in different countries? I should be able to buy coffee from a farmer in Brazil, or ham from Spain, or sell my wife's art to someone in New Zealand. If one country has a generous amount of some natural resource, why not sell it overseas? I have no problem with that. To restrict free trade is to restrict the division of labor and the benefits of specialization which have benfited all.
Baloney. Written with the insight of someone who's not completely taken in by the nationalist BS.