tsai3904
11-07-2011, 05:36 PM
Peter Schiff will be debating a couple Keynesian economists on Tuesday, November 8 at UCLA.
More information here: http://happenings.ucla.edu/all/event/52646
Admission is free on a first-come first-served basis. It says you must RSVP by November 4 but there is still room available.
One of the panelists is UCLA Econ Professor Roger Farmer. Look at what he had to say in 2010:
http://www.today.ucla.edu/portal/ut/10-questions-economist-roger-farmer-155965.aspx
How can we prevent these kinds of crashes in the future?
In the build-up to this crisis, I agreed with the people who said that the market was overvalued and should be dampened in some way. But I don’t agree with the method that they had for doing it, which was to raise the short-term interest rate.
The Fed should control fluctuations in the stock market by buying and selling blocks of shares; the best way would be to trade an index fund like the Russell 5000. They should do this independently of their control of the overnight interest rate by paying for stock purchases with newly created Federal Reserve debt. That provides a mechanism to insulate changes in the money supply from changes in share purchases.
Suppose the market index is trading at $100. In a depressed economy, $100 may be too low. So the Federal Reserve Open Market committee would announce, for example, that “four days from today we’re going to actively intervene in the market to raise the index to $120.” They’d be signaling an intention to go out and buy stocks to drive up the price to that point.
Buyers would think, “I could buy these shares today at $100; but four days from now they will sell for $120.” The announcement by itself would cause private buyers to bid the value up to $120 immediately in pursuit of profit. And that’s without any active trades on the part of the Fed. The idea is to stabilize swings in the market as a whole by trading an index fund without intervening on a micro level to set the price of individual companies.
But isn’t that a managed economy?
Yes. But, we’ve never lived in a totally laissez-faire economy — and certainly not since the inception of the Fed in 1913. Since 1913, we’ve been actively intervening to maintain one price – the short-term interest. What I’m proposing isn’t that different from what already is going on now. It’s a simple extension of quantitative easing. I’m advocating that we actively intervene to maintain two prices, not one. An overnight interest rate and the price of a stock market index.
More information here: http://happenings.ucla.edu/all/event/52646
Admission is free on a first-come first-served basis. It says you must RSVP by November 4 but there is still room available.
One of the panelists is UCLA Econ Professor Roger Farmer. Look at what he had to say in 2010:
http://www.today.ucla.edu/portal/ut/10-questions-economist-roger-farmer-155965.aspx
How can we prevent these kinds of crashes in the future?
In the build-up to this crisis, I agreed with the people who said that the market was overvalued and should be dampened in some way. But I don’t agree with the method that they had for doing it, which was to raise the short-term interest rate.
The Fed should control fluctuations in the stock market by buying and selling blocks of shares; the best way would be to trade an index fund like the Russell 5000. They should do this independently of their control of the overnight interest rate by paying for stock purchases with newly created Federal Reserve debt. That provides a mechanism to insulate changes in the money supply from changes in share purchases.
Suppose the market index is trading at $100. In a depressed economy, $100 may be too low. So the Federal Reserve Open Market committee would announce, for example, that “four days from today we’re going to actively intervene in the market to raise the index to $120.” They’d be signaling an intention to go out and buy stocks to drive up the price to that point.
Buyers would think, “I could buy these shares today at $100; but four days from now they will sell for $120.” The announcement by itself would cause private buyers to bid the value up to $120 immediately in pursuit of profit. And that’s without any active trades on the part of the Fed. The idea is to stabilize swings in the market as a whole by trading an index fund without intervening on a micro level to set the price of individual companies.
But isn’t that a managed economy?
Yes. But, we’ve never lived in a totally laissez-faire economy — and certainly not since the inception of the Fed in 1913. Since 1913, we’ve been actively intervening to maintain one price – the short-term interest. What I’m proposing isn’t that different from what already is going on now. It’s a simple extension of quantitative easing. I’m advocating that we actively intervene to maintain two prices, not one. An overnight interest rate and the price of a stock market index.