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Joe3113
01-02-2008, 10:47 AM
I'm trying to stick up for Dr Paul in some other forums and I'm being attacked by some economist guy....HELP! How should I respond?

I wrote....

Yes but collapse is inevitable when you continually inflate the currency. As you create more fiat currency you are pulling wealth away from the dollars that already exist. That is stealing.

Response...

The expansion of the money supply is entirely necessary to support economic growth. Are you proposing that the money supply remain fixed so that as productivity and the economy expands, prices decline due to the lack of money, ultimately leading to a crash? As it is, the US money supply, M3, has only expanded by 10% of GDP since President Nixon ended the Gold exchange system in 1972. The anti-monetary system brigade would have us believe that the US money supply is growing at an exponential rate. In any event, only about 13% (currency and demand deposits) of the US money supply is exposed to inflation. The rest is interest bearing, and in line with the Fisher effect, compensation for the erosion of purchasing power from inflation is received. So your hypothesis that the current monetary system is designed to steal money from the masses is largely illusionary.

I wrote....

The people who get to use the money first before it filters into the system, like big business, military-industrial complex etc, get the most benefit.

Response...

I'm quite sure you can't even explain exactly what you mean by this statement.

j0ew00ds
01-02-2008, 10:50 AM
...
As it is, the US money supply, M3, has only expanded by 10% of GDP since President Nixon ended the Gold exchange system in 1972...
Does that mean i'm reading this chart incorrectly?
http://en.wikipedia.org/wiki/M3_%28economics%29#United_States

jillian
01-02-2008, 10:51 AM
So in essence he is right?

omg. i'm totally kidding. I just couldn't resist. :D

Someone will surely be able to help you out.

jake
01-02-2008, 10:53 AM
look on ronpaullibrary for arguments

Joe3113
01-02-2008, 10:53 AM
Does that mean i'm reading this chart incorrectly?
http://en.wikipedia.org/wiki/M3_%28economics%29#United_States

No Idea. I need someone to give me a good IN YOUR FACE response. This guy is a real smart ass.

j0ew00ds
01-02-2008, 10:53 AM
Does that mean i'm reading this chart incorrectly?
http://en.wikipedia.org/wiki/M3_%28economics%29#United_States

answered my own question: he's talking about compared to GDP. But since that's measured in dollars (right?) we're comparing something to one of its dependents...

Anyway, i'm no help with this stuff. i've only just yesterday added econ books to my Amazon list. :cool:

Chester Copperpot
01-02-2008, 10:53 AM
I'm trying to stick up for Dr Paul in some other forums and I'm being attacked by some economist guy....HELP! How should I respond?

I wrote....

Yes but collapse is inevitable when you continually inflate the currency. As you create more fiat currency you are pulling wealth away from the dollars that already exist. That is stealing.

Response...

The expansion of the money supply is entirely necessary to support economic growth. Are you proposing that the money supply remain fixed so that as productivity and the economy expands, prices decline due to the lack of money, ultimately leading to a crash? As it is, the US money supply, M3, has only expanded by 10% of GDP since President Nixon ended the Gold exchange system in 1972. The anti-monetary system brigade would have us believe that the US money supply is growing at an exponential rate. In any event, only about 13% (currency and demand deposits) of the US money supply is exposed to inflation. The rest is interest bearing, and in line with the Fisher effect, compensation for the erosion of purchasing power from inflation is received. So your hypothesis that the current monetary system is designed to steal money from the masses is largely illusionary.

I wrote....

The people who get to use the money first before it filters into the system, like big business, military-industrial complex etc, get the most benefit.

Response...

I'm quite sure you can't even explain exactly what you mean by this statement.


that guy is a Keynesian which means he is the opposite of an Austrian economist... He thinks deficits are needed to help the economy and that inflation is needed, etc.. It is hard to convince people so dug in to their beliefs... he will encounter cognitive dissonance.

if he think money supply has only grown 10% since 1971 then he is completely nuts/

Ethek
01-02-2008, 10:54 AM
Ask hem where he came up with his information about the 13% of us money being vulnerable to inflation. As far as I know inflation affects the price of everything. It robs money from peoples pockets and injects artificial value into the banking system where lenders get to use it first. The economy looks like its doing well. Its a farce.

I don't know where hes pulling numbers from but I'm fairly sure competing with his bias is a loosing fight.

Joe3113
01-02-2008, 10:54 AM
look on ronpaullibrary for arguments

I'd love to read through that whole thing.....unfortunately time doesn't permit me at the moment......thats why I posted here.......I'm sure someone can help

Chester Copperpot
01-02-2008, 10:55 AM
No Idea. I need someone to give me a good IN YOUR FACE response. This guy is a real smart ass.

heh.. i bet he doesnt even know the difference between GDP and GNP... the GDP numbers hide alot of eroding in our industrial base.. closing of american companies, outsourcing, foreign ownership of america.

austin4paul
01-02-2008, 10:55 AM
I'm trying to stick up for Dr Paul in some other forums and I'm being attacked by some economist guy....HELP! How should I respond?

I wrote....

Yes but collapse is inevitable when you continually inflate the currency. As you create more fiat currency you are pulling wealth away from the dollars that already exist. That is stealing.

Response...

The expansion of the money supply is entirely necessary to support economic growth. Are you proposing that the money supply remain fixed so that as productivity and the economy expands, prices decline due to the lack of money, ultimately leading to a crash? As it is, the US money supply, M3, has only expanded by 10% of GDP since President Nixon ended the Gold exchange system in 1972. The anti-monetary system brigade would have us believe that the US money supply is growing at an exponential rate. In any event, only about 13% (currency and demand deposits) of the US money supply is exposed to inflation. The rest is interest bearing, and in line with the Fisher effect, compensation for the erosion of purchasing power from inflation is received. So your hypothesis that the current monetary system is designed to steal money from the masses is largely illusionary.

I wrote....

The people who get to use the money first before it filters into the system, like big business, military-industrial complex etc, get the most benefit.

Response...

I'm quite sure you can't even explain exactly what you mean by this statement.

What an idiot. The Fed is issuing credit, not printing dollars. Just post this link and print this quote:

"M1 is merely physical currency, plus demand accounts. What you really need to see is M3, which includes eurodollars and repurchase agreements (hey, what do you know! The Fed no longer reports M3. What an astounding coincidence!"

http://seekingalpha.com/article/58199-money-supply-growth-it-s-much-worse-than-that

Azprint
01-02-2008, 10:56 AM
Just pull out something out of your ass.

theodorelogan
01-02-2008, 10:56 AM
The expansion of the money supply is entirely necessary to support economic growth.

False, as evidenced by 19th century USA

Joe3113
01-02-2008, 10:57 AM
that guy is a Keynesian which means he is the opposite of an Austrian economist... He thinks deficits are needed to help the economy and that inflation is needed, etc.. It is hard to convince people so dug in to their beliefs... he will encounter cognitive dissonance.

if he think money supply has only grown 10% since 1971 then he is completely nuts/

So nobody can give me a witty response. CMON!!!!! :(

ceitniear
01-02-2008, 10:58 AM
Basically, the first people who use it, get to use it before it is fully in circulation and thereby before it becomes devalued.

Matthew Zak
01-02-2008, 10:58 AM
Show him the video of Ron Paul schooling benarkne (I don't care how to spell it) and ask him why the chairmen doesn't explain all this.

OptionsTrader
01-02-2008, 11:02 AM
page 12, Mises and Austrian Economics: A Personal View, by Ron Paul

http://www.mises.org/books/paulmises.pdf

The most common misunderstanding in Washington regarding money is the conviction that economic growth depends on money growth. Ricardo mentioned this, but it was Mises who emphasized and clarified this point—duplication of money units bestows no social benefit. If it did, we’d have a hard time explaining why economic growth did so poorly in the 1970s when the Federal Reserve Board nearly tripled the money supply (M3). Yet today, the vast majority of the bureaucrats and politicians believe that without money growth,economic growth cannot occur. They see money as separate from taxing, spending, and regulatory policies; without an understanding of value, pricing, and money quality, it is virtually impossible to explain to them that prices can easily adjust downward if a free market requires it. The prevailing opinion is that falling prices are synonymous with depression—an obviously erroneous idea. Those who believe this do not understand the nature of capital—that it comes from productive effort and savings. They believe capital is something you get when the Fed increases the money supply.

In A Critique of Interventionism, Ludwig von Mises wrote:

By its very nature, a government decree that “it be” cannot create anything that has not been created before. Only the naive inflationists could believe that government could enrich mankind through fiat money. Government cannot create anything; its orders cannot even evict anything from the world of reality, but they can evict him from the world of the permissible. Government cannot make man richer, but it can make him poorer.

Paul.Bearer.of.Injustice
01-02-2008, 11:04 AM
ask him why the gov't considers repo's and eurodollars insignificant and no longer accounts for M3 data. tracking this shows what the real players are doing with their money

http://inflationdata.com/inflation/Articles/M3_Money_supply.asp

Joe3113
01-02-2008, 11:08 AM
Thanks guys. Keep em coming.....ive got time to write a good response.....he's not online at the moment

OptionsTrader
01-02-2008, 11:10 AM
Thanks guys. Keep em coming.....ive got time to write a good response.....he's not online at the moment

Plenty of fodder here:
http://www.mises.org/studyguide.aspx?action=author&Id=392

austin4paul
01-02-2008, 11:11 AM
In any event, only about 13% (currency and demand deposits) of the US money supply is exposed to inflation. The rest is interest bearing, and in line with the Fisher effect, compensation for the erosion of purchasing power from inflation is received.

Also -- another problem with his logic here is that the interest rates have been set at artificially low rates by the Federal Reserve. This supply of cheap money causes irresponsible investment and speculation, hence we see how the housing bubble and subsequent burst. When this house of cards comes crashing down, the end game is going to be FAR worse than if the market forces had been permitted to deal with this without manipulation from the Fed.

Rebel Resource
01-02-2008, 11:14 AM
Post him the link to this thread....

sdczen
01-02-2008, 11:14 AM
Most financial people will have varied opinions. It's difficult to actually change their minds when they believe in a particular economic philosophy. I would say, give them some information and then move on.

For starters the government stopped releasing the M3 report in 06'. This is the report that actually measures the money supply. So, there is no way he can identify how much money is in circulation. However, this is where you might have an edge. You can go over to: http://www.shadowstats.com/alternate_data

This is a workup of data that is being manipulated by the gov.

Good luck

austin4paul
01-02-2008, 11:15 AM
And another great essay for those interested in further researching monetary policy:

"In his magnum opus, Human Action, Mises wrote:

The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion. There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

http://www.mises.org/story/2810

austin4paul
01-02-2008, 11:19 AM
One more quote from that:

But then finally the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against "real" goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them.

* * * *
Does this sound like anything you've heard in the news lately. Gold is soaring today, by the way. Up almost $23 as I type this!

Scott K
01-02-2008, 11:20 AM
Deflation through the free market is not an evil. Standards of living can still rise during deflation. As long as prices for consumer goods are dropping faster than wages.

austin4paul
01-02-2008, 11:21 AM
I wrote....

The people who get to use the money first before it filters into the system, like big business, military-industrial complex etc, get the most benefit.

Response...

I'm quite sure you can't even explain exactly what you mean by this statement.

Then there's always this snappy response:

Yes I can. What I really mean is - Wake Up America and Vote for Ron Paul!

itsnobody
01-02-2008, 11:22 AM
That guy is an idiot, inflation has gone out of control, the cost of living in the 70s use to be $10,000/year

Tying us to gold would stop inflation, inflation and deficit are not only unnecessary for economic growth, they are harmful, especially harmful to the poor and the middle class

Why would anyone think deficit and inflation are necessary...explain to him that inflation hurts the poor people because the value of a dollar drops, prices go up, etc...

Thumper
01-02-2008, 11:29 AM
You might remind him how the combination of the Versailles Treaty and massive runaway inflation created an environment in Post WWI Germany that allowed Hitler and the Nazi party to rise to power while the whole world watched.

Probably not completely relevant to the discussion, but I always associate inflation with this. When it takes a wheelbarrow full of currency to buy a loaf of bread that you can't even find in supply... you're willing to listen to whoever is saying they can make things better and give up whatever you have to (freedom) in order to keep your family from starving.

rdenner
01-02-2008, 11:29 AM
I have no idea what planet this guy is living on 13% M3 INFLATION SINCE NIXON.. He's on fucking crack.

M3 monetary inflation numbers were pulled by Greenspan just before he left office because they were going vertical. I don't have the links right now, but we were seeing 13% M3 inflation in ONE YEAR, let alone 30 years!!

So call him a fucking liar to start with and force him to prove his statement.


SECOND... To defend your very correct assertion about money being used first. here is the argument explained a little further.

The Treasury issues Bonds that the Federal Reserve "Buys"(very simplistic explaination that he may rip apart, BUT REMEMBER YOU AREN'T ARGUING AGAINST HIM, BUT THE OTHERS THAT READ THE POST ALSO).

The Fed then "injects" this new "liquidity" into the system through loans to other banks.

Those banks GET FIRST USE OF THE MONEY BEFORE THE INFLATION IS SPREAD THROUGH THE SYSTEM!! This is the point where they steal from us.

Use this simplistic explaination.. Imagine an Island where Sea Shells are used as currency. The island lets "JOE" run the islands bank(the Fed) and all sea shells are kept in his cave. He keeps track of everyones sea shells on a ledger and it's a ONE HUNDRED PERCENT RESERVE SYSTEM!! Meaning that if every single person were to "demand" their deposit back, he would be able to redeem 100% of those demands. One day Joe comes up with the idea of issuing a piece of paper for each sea shell(paper money). He issues EXACTLY ONE piece of paper for EXACTLY ONE sea shell. Which means it's STILL A ONE HUNDRED PERCENT RESERVE SYSTEM.

Joe then comes up with an epiphany. IF HE PRINTS MORE PAPER BILLS THAN SEA SHELLS HE CAN LICK THE LIQUIDITY PROBLEM OF THE ISLAND(Keynsian economics!!)... Only problem is that if all the people DEMAND thier sea shells at once, you have a "RUN ON THE BANK". But the chances of that happening are slim as most people only demand less than 10% of their sea shells at any given time.

SO HERE IS YOUR GOTHCHA STATEMENT.. Joe GIVES THE NEWLY PRINTED MONEY TO ONLY HIS TIGHT GROUP OF FRIENDS FIRST!! So if a bottle of water costs a SINGLE SEA SHELL DOLLAR, and in comes Joe's friend with a DEVALUED DOLLAR he's INJECTING INFLATION INTO THE SYSTEM WITH THAT FAKE DOLLAR.

He is in essense bidding for a TRUE ONE DOLLAR COMMODITY with a .998% dollar. He is chasing fewer goods with MORE PAPER DOLLARS. He is in essense getting something for nothing. The inflation will take a while to appear to the lowest levels of the economic scale. BUT THOSE THAT USE THE DEVALUED MONEY FIRST WIN!!!

I have a whole story based around this concept if anyone would like me to post it? It all about Joe and his island bank and how inflation and fiat currency works??

Robert

Cleaner44
01-02-2008, 11:32 AM
The expansion of the money supply is entirely necessary to support economic growth. Are you proposing that the money supply remain fixed so that as productivity and the economy expands, prices decline due to the lack of money, ultimately leading to a crash? As it is, the US money supply, M3, has only expanded by 10% of GDP since President Nixon ended the Gold exchange system in 1972. The anti-monetary system brigade would have us believe that the US money supply is growing at an exponential rate. In any event, only about 13% (currency and demand deposits) of the US money supply is exposed to inflation. The rest is interest bearing, and in line with the Fisher effect, compensation for the erosion of purchasing power from inflation is received. So your hypothesis that the current monetary system is designed to steal money from the masses is largely illusionary.


I like to break things like this down to their simpliest basis. One could debate the finer points endlessly. Go with some basic facts. Forget all of the stats and percentages and inject some common sense.

Expanding the money supply started when bankers realized they could collect more interest by loaning nonexistent money. Is that not dishonest?

M3 is not reported anymore why? Because is would not reveal good news. There is no legitamate reason to hide this information from the public.

We are currently expanding the money supply at such a rate as to cause massive inflation and the Dollar is being debased. Don't believe it, just go to the grocery store.

dshields
01-02-2008, 11:33 AM
The one point he makes is that you always need to increase the supply of money so that there is enough to adequately facilitate trade but not too much to inflate the value of money is true. Google Colonial Script. This is a fiat currency used successfully by the Colonies prior to the Revolution. The money supply was directly regulated by the government. Essentially as GDP increases you need to increase supply so that there is adequate cash to allow trade, this worked extremely well in the Colonies. Now what they didn't have then and what we have today is a FED controlling interests rates and creating money through fractional reserve lending practices. This is where things get out of hand.

He is wrong though on one thing, when the money supply is increased beyond need and inflation occurs, this does INDEED devalue money by the very definition of the word inflation. It may or may not have been the original design but that doesn't change the fact that it happens.

The problem with M3, M2, M1, and MZM statistics is that is doesn't necessarily accurately reflect the true picture. Essentially the MZM is equal to M2 less time deposits, plus all money market funds. This doesn't take in account other accessible accounts such as credit card and lines of credit, things that have become increasingly used with more regularity in place of what are traditionally measured as assets. When you take in account all of these numbers then the inflation figures look much different. Take this Holiday shopping season for an example. Over 25% of all purchases were done with credit and not cash. This newly infused cash was created by someone taking on debt yet this number is not tallied in the MZM statistics.

In general this argument has it's extreme points of view so somewhere in the middle lies the answer.

Dave

Thanehand
01-02-2008, 11:35 AM
Stop.

Seriously.

In the time you've all spent on this single person (who probabaly won't change his or her mind) you could have sent 50 or more handwritten letters for the letter campaign to people who may have never heard of Ron Paul and don't have a clearly unwarranted bias against him.

Melissa
01-02-2008, 11:37 AM
I have a whole story based around this concept if anyone would like me to post it? It all about Joe and his island bank and how inflation and fiat currency work

I would like to see it Robert have been looking for a easy start on economics ---this subject has become my new passion but starting at the beginning so take it easy on me

rdenner
01-02-2008, 11:39 AM
Stop.

Seriously.

In the time you've all spent on this single person (who probabaly won't change his or her mind) you could have sent 50 or more handwritten letters for the letter campaign to people who may have never heard of Ron Paul and don't have a clearly unwarranted bias against him.


I couldn't DISAGREE more. Its incredibly important that we not only support Ron Paul BUT UNDERSTAND WHY!!!

To blindly follow someone is just as stupid as what the country is currently doing.

This MOVEMENT must understand the ideas that Ron Paul espouses as they are truth. It's not enough to just "THINK" that Ron Paul is a truth teller, you have to understand WHY...

The OP was asking as much for himself for this help. He wants to understand why Ron Paul is right on runaway monetary expansion.

READ ROTHBARD and MISES for the best in depth explainations of fiat money and why it's so evil..

Robert

Cleaner44
01-02-2008, 11:41 AM
Stop.

Seriously.

In the time you've all spent on this single person (who probabaly won't change his or her mind) you could have sent 50 or more handwritten letters for the letter campaign to people who may have never heard of Ron Paul and don't have a clearly unwarranted bias against him.

This I must agree with. Wasting time and energy debating M3 and such is not in our best interest. Choose your battles and focus on getting more votes.

rdenner
01-02-2008, 11:41 AM
I would like to see it Robert have been looking for a easy start on economics ---this subject has become my new passion but starting at the beginning so take it easy on me

I'm going to try starting a post in the Grassroots Central.

I'm calling it ISLAND ECONOMICS-AMMO TO USE IN ECONOMIC ARGUMENTS!!


Give me about 5 minutes to get it up there. If you like it BUMP it please.

Robert

jonahtrainer
01-02-2008, 11:41 AM
I wrote....

The people who get to use the money first before it filters into the system, like big business, military-industrial complex etc, get the most benefit.

Response...

I'm quite sure you can't even explain exactly what you mean by this statement.

I would respond with something like this:

We should refine our definitions. Money must be a tangible asset in contrast to a money substitute which has no intrinsic value. Either money or a money substitute may be currency. Because the US$ is a money substitute there exists payment risk in all transactions. Transactions are not extinguished, value traded for value, until the money substitute is accepted by another in exchange for value. During that time, additional money substitutes can be created out of thin air, by the Federal Reserve, and this reduces the purchasing power of all other money substitutes. As is the case with all counterfeiters, those who receive the money substitutes first benefit the most. This amounts to confiscation of purchasing power through inflation (increase of the money substitute supply).

With the advent of new technologies fractional reserve banking and central banks are obsolete and barbarous relics from a bygone age. Using them are like using 8 track tapes when HDDVDs are available. James Turk explains (http://video.google.com/videoplay?docid=-8050173951455100014&hl=en) this.

Chester Copperpot
01-02-2008, 11:44 AM
So nobody can give me a witty response. CMON!!!!! :(

No, im still a little sleepy.. and im listening to kent snyder on alex jones rightnow.. and the guy will be a schmuck..

dshields
01-02-2008, 11:45 AM
I couldn't DISAGREE more. Its incredibly important that we not only support Ron Paul BUT UNDERSTAND WHY!!!

To blindly follow someone is just as stupid as what the country is currently doing.

This MOVEMENT must understand the ideas that Ron Paul espouses as they are truth. It's not enough to just "THINK" that Ron Paul is a truth teller, you have to understand WHY...

The OP was asking as much for himself for this help. He wants to understand why Ron Paul is right on runaway monetary expansion.

READ ROTHBARD and MISES for the best in depth explainations of fiat money and why it's so evil..

Robert

+1

Joe3113
01-02-2008, 11:47 AM
Stop.

Seriously.

In the time you've all spent on this single person (who probabaly won't change his or her mind) you could have sent 50 or more handwritten letters for the letter campaign to people who may have never heard of Ron Paul and don't have a clearly unwarranted bias against him.

I'm Australian dude.

Joe3113
01-02-2008, 11:50 AM
I couldn't DISAGREE more. Its incredibly important that we not only support Ron Paul BUT UNDERSTAND WHY!!!

To blindly follow someone is just as stupid as what the country is currently doing.

This MOVEMENT must understand the ideas that Ron Paul espouses as they are truth. It's not enough to just "THINK" that Ron Paul is a truth teller, you have to understand WHY...

The OP was asking as much for himself for this help. He wants to understand why Ron Paul is right on runaway monetary expansion.

READ ROTHBARD and MISES for the best in depth explainations of fiat money and why it's so evil..

Robert

Yep. I had a basic understanding but I didn't know how to counter all the specifics of this guys argument.

lucius
01-02-2008, 11:50 AM
Core inflation rate is really at 2%?

I agree, go elsewhere, this guy is so inculcated you could stick a fork in him; he's done--much greener pastures.

niall
01-02-2008, 12:11 PM
Post a link to the discussion in question so some of us can dive into the debate with you.

crazyfacedjenkins
01-02-2008, 12:51 PM
I have no idea what planet this guy is living on 13% M3 INFLATION SINCE NIXON.. He's on fucking crack.

M3 monetary inflation numbers were pulled by Greenspan just before he left office because they were going vertical. I don't have the links right now, but we were seeing 13% M3 inflation in ONE YEAR, let alone 30 years!!

So call him a fucking liar to start with and force him to prove his statement.


SECOND... To defend your very correct assertion about money being used first. here is the argument explained a little further.

The Treasury issues Bonds that the Federal Reserve "Buys"(very simplistic explaination that he may rip apart, BUT REMEMBER YOU AREN'T ARGUING AGAINST HIM, BUT THE OTHERS THAT READ THE POST ALSO).

The Fed then "injects" this new "liquidity" into the system through loans to other banks.

Those banks GET FIRST USE OF THE MONEY BEFORE THE INFLATION IS SPREAD THROUGH THE SYSTEM!! This is the point where they steal from us.

Use this simplistic explaination.. Imagine an Island where Sea Shells are used as currency. The island lets "JOE" run the islands bank(the Fed) and all sea shells are kept in his cave. He keeps track of everyones sea shells on a ledger and it's a ONE HUNDRED PERCENT RESERVE SYSTEM!! Meaning that if every single person were to "demand" their deposit back, he would be able to redeem 100% of those demands. One day Joe comes up with the idea of issuing a piece of paper for each sea shell(paper money). He issues EXACTLY ONE piece of paper for EXACTLY ONE sea shell. Which means it's STILL A ONE HUNDRED PERCENT RESERVE SYSTEM.

Joe then comes up with an epiphany. IF HE PRINTS MORE PAPER BILLS THAN SEA SHELLS HE CAN LICK THE LIQUIDITY PROBLEM OF THE ISLAND(Keynsian economics!!)... Only problem is that if all the people DEMAND thier sea shells at once, you have a "RUN ON THE BANK". But the chances of that happening are slim as most people only demand less than 10% of their sea shells at any given time.

SO HERE IS YOUR GOTHCHA STATEMENT.. Joe GIVES THE NEWLY PRINTED MONEY TO ONLY HIS TIGHT GROUP OF FRIENDS FIRST!! So if a bottle of water costs a SINGLE SEA SHELL DOLLAR, and in comes Joe's friend with a DEVALUED DOLLAR he's INJECTING INFLATION INTO THE SYSTEM WITH THAT FAKE DOLLAR.

He is in essense bidding for a TRUE ONE DOLLAR COMMODITY with a .998% dollar. He is chasing fewer goods with MORE PAPER DOLLARS. He is in essense getting something for nothing. The inflation will take a while to appear to the lowest levels of the economic scale. BUT THOSE THAT USE THE DEVALUED MONEY FIRST WIN!!!

I have a whole story based around this concept if anyone would like me to post it? It all about Joe and his island bank and how inflation and fiat currency works??

Robert

Excellent analogy! Use this story.

KMA-NWO
01-02-2008, 12:51 PM
I'm trying to stick up for Dr Paul in some other forums and I'm being attacked by some economist guy....HELP! How should I respond?

I wrote....

Yes but collapse is inevitable when you continually inflate the currency. As you create more fiat currency you are pulling wealth away from the dollars that already exist. That is stealing.

Response...

The expansion of the money supply is entirely necessary to support economic growth. Are you proposing that the money supply remain fixed so that as productivity and the economy expands, prices decline due to the lack of money, ultimately leading to a crash? As it is, the US money supply, M3, has only expanded by 10% of GDP since President Nixon ended the Gold exchange system in 1972. The anti-monetary system brigade would have us believe that the US money supply is growing at an exponential rate. In any event, only about 13% (currency and demand deposits) of the US money supply is exposed to inflation. The rest is interest bearing, and in line with the Fisher effect, compensation for the erosion of purchasing power from inflation is received. So your hypothesis that the current monetary system is designed to steal money from the masses is largely illusionary.

I wrote....

The people who get to use the money first before it filters into the system, like big business, military-industrial complex etc, get the most benefit.

Response...

I'm quite sure you can't even explain exactly what you mean by this statement.

Weakness:


Response...

The expansion of the money supply is entirely necessary to support economic growth. Are you proposing that the money supply remain fixed so that as productivity and the economy expands, prices decline due to the lack of money, ultimately leading to a crash? As it is, the US money supply, M3, has only expanded by 10% of GDP since President Nixon ended the Gold exchange system in 1972. The anti-monetary system brigade would have us believe that the US money supply is growing at an exponential rate. In any event, only about 13% (currency and demand deposits) of the US money supply is exposed to inflation. The rest is interest bearing, and in line with the Fisher effect, compensation for the erosion of purchasing power from inflation is received. So your hypothesis that the current monetary system is designed to steal money from the masses is largely illusionary.


Let me break it up



Response...

The expansion of the money supply is entirely necessary to support economic growth. Are you proposing that the money supply remain fixed so that as productivity and the economy expands, prices decline due to the lack of money, ultimately leading to a crash? As it is, the US money supply, M3, has only expanded by 10% of GDP since President Nixon ended the Gold exchange system in 1972.


First, does he understand M3 is no longer published? Does he also know that M3 doesn't account for all the bank credit that has been dumped in by the banks and people (it takes two to invent money, one to make it up and the other to sucker with it!).

I'm reading As it is, the US money supply, M3, has only expanded by 10% of GDP since President Nixon ended the Gold exchange system in 1972. to mean M3 from Nixon to now has increased relative to GDP by an additional 10% of GDP.

To understand the following one needs to understand the nature of our banking system with exponentially increasing debt (and money supply). In order for something fiat (by decree) to remain equal in value from year to year, the fiat 'something' must increase its value by the inflation rate per year or it's losing money, EVEN IF IT IS GAINING DOLLARS PER YEAR, DOLLAR FOR DOLLAR!

Basically, if COKE stock went up 10% from last year, but we experienced 15% inflation, in reality COKE lost 5% of it's overall value!!! (now realize they don't consider food and energy in the consumer price index, so while CPI says inflation is 2%, it's really 10-15%).

Now, inflation occurs in the form of loans from banks to voluntary debtors. In reality, the whole money supply is based on someone signing an interest bearing, time sensitive debt pledge and having the money invented directly to your account.

Each time an IBTS debt pledge is signed only the principle of the debt pledge is created and given to you (and thus dumped into the rest of the money supply by you). But when the IBTS debt pledge comes due (or taking the aggregate of all payments), the principle AND INTEREST for that debt pledge is collected and returned to the bank! But where did the interest come from for your debt pledge? Well don't feel too guilty, but one or more other people who weren't in debt (or weren't very deep in debt) had to go into debt to create the money for your debt payment.

If you look at the big picture, our banking system depends on exponentially increasing growth, an exponentially increasing amount of resources going from ground to garbage, to continue existing. Once something disrupts the growth of some section of our economy, foreclosures occur in other parts (where money was light). If there's a large enough disruption occurs, it can wipe out the whole house of cards. Usually, these are mitigated by artificially lowering the interest rates and thus encouraging people to borrow. It is only a temporary fix, as has been done since the 87 plunge. Well, now it isn't working anymore.

There are only three ways out of here:
- Increase interest rates to save the US dollar and to finally prompt the liquidation of bad debt (short term pain).
- Inflate and bail out all the bad debt holders, but due to the low overall value of the currency after this solution, prices will be sky high and this will open up opportunities for foreign currency holders to buy up bad debt (little pain in the short term, long term servitude).
- Grab your rope, guns 'n ammo, and take out 'em bankers and allow commodity based currencies (medium term pain, long term freedom).

I don't know much about GDP, but what I've heard is 70% of it is consumer spending. 70% OF THE NUMBER THAT MEASURES OUR WEALTH IS BASED ON CONSUMER SPENDING??? What I do know is the world was swindled into buying into the dollar to the point where most don't realize it's absolutely overinflated and worthless (and thus gold is cheaper than it should be).

Literally, if you were to adjust today's .DJI value compared to the price of gold, using 2000 as a start point, .DJI is in reality under 6000 IN 2000 MONEY (14000 IN 2007/8 MONEY)!!! .DJI LOST VALUE, AND GOLD ISN'T EVEN DONE GOING UP!

Well, that's my two cents.

I suggest rewording, researching, or asking for further elaboration from either me or someone else before using the above.

EDIT: I didn't finish the other half >.<

It isn't illusionary to believe the current banking system, by design (whether a flaw or 'feature'), steals the wealth from a people without them realizing it. No matter how complex you make the tubes connecting all the nodes in the economy, no matter how complex you make exchangeable debt instruments, no matter how you skew numbers and pipe money, if there isn't enough nodes going into debt to pay off older debts, you're sunk. It is illusionary to falsely believe otherwise!

Literally, it is Banks VS [most] Everyone.

jillian
01-02-2008, 12:55 PM
smartest. people. ever.

You guys are awesome!

jointhefightforfreedom
01-02-2008, 12:56 PM
No Idea. I need someone to give me a good IN YOUR FACE response. This guy is a real smart ass.

It's simple !

when a currency is not backed by something substantial (gold) it will continue to decline!
Tell him to explain why the canadian dollar worth more than the US dollar now!


(GAO Official Video)The Governments Dirty Little Secret everyone knows!
David M. Walker, Comptroller General of the United States, speaks about America’s current financial condition and long-term fiscal outlook.

watch the video here:
http://www.jointhefightforfreedom.com/node/88

KMA-NWO
01-02-2008, 12:58 PM
It's simple !

when a currency is not backed by something substantial (gold) it will continue to decline!


but explain WHY and HOW (which I did in my above post)

mbrebstock
01-02-2008, 01:09 PM
i think it is as following:

m3 is the total amount of money in the system

gdp is the total production of a country

if real gdp starts at 100 and increases 3% -> 103
and m3 starts at 100 and increases 6 % -> 106
then there is inflation of 3% and a nominal gdp of 106

according to http://www.forecasts.org/data/data/GDPC96.htm

real gdp was at 3759.997 at 1970-01-01
and was at 11541.614 at 2006-10-01

according to


http://upload.wikimedia.org/wikipedia/commons/thumb/c/c1/Components_of_the_United_States_money_supply.svg/570px-Components_of_the_United_States_money_supply.svg.p ng

m3 was 616.1 in january 1970
and is at 10298.7 in february 2006

gdp increased 207%
and m3 increased 1500 %

-> if there were no inflation m3 would have increased 207% too to-> 1891
instead its at 10298.7 - all this is inflation

i think that means 1 dollar today is equal to 10298.7/1891 -> 1/5.44 -> 18 cent in 1970

<- i'm german so i hope you are able to understand what i try to express in english

newbitech
01-02-2008, 01:09 PM
here is some excellent research.

http://www.nowandfutures.com/key_stats.html

fortilite
01-02-2008, 01:13 PM
i think it is as following:

m3 is the total amount of money in the system

gdp is the total production of a country

if real gdp starts at 100 and increases 3% -> 103
and m3 starts at 100 and increases 6 % -> 106
then there is inflation of 3% and a nominal gdp of 106

according to

real gdp was at 3759.997 at 1970-01-01
and was at 11541.614 at 2006-10-01

according to


http://upload.wikimedia.org/wikipedia/commons/thumb/c/c1/Components_of_the_United_States_money_supply.svg/570px-Components_of_the_United_States_money_supply.svg.p ng

m3 was 616.1 in january 1970
and is at 10298.7 in february 2006

gdp increased 207%
and m3 increased 1500 %

-> if there were no inflation m3 would have increased 207% too to-> 1891
instead its at 10298.7 - all this is inflation

i think that means 1 dollar today is equal to 10298.7/1891 -> 1/5.44 -> 18 cent in 1970

<- i'm german so i hope you are able to understand what i try to express in english


Winner!

To the OP: The Keynsian guy was just using made up numbers because he knew you don't understand economics and wouldn't be able to call bull$h!t on him. Nothing more than that needs to be said.

gdp increased 207%
and m3 increased 1500%

KMA-NWO
01-02-2008, 01:13 PM
My bad, it was 11000 in 2000 (where did i get 7000 from?)

that means .DJI today is under 5000 in year 2000 money (using gold as the inflation-proof comparative), and that's even with gold undervalued.

If estimates of 1500 or more per ounce is correct, that means .DJI should be below 3000 in year 2000 dollars!!!

Grandson of Liberty
01-02-2008, 01:14 PM
So nobody can give me a witty response. CMON!!!!! :(

How about when he challenges your ability to respond: "Certainly not one that would rival your previous pseudo-intellectual babble." Then throw in the comment Mitrosky gave you about him being nuts for thinking the money supply has only grown 10%, and leave it at that. You're not going to convince him anyway.

Goldwater Conservative
01-02-2008, 01:15 PM
Economics is organized common sense. Beware flowery language that sounds non-sensical, or people talking about economic magic tricks that have no drawbacks. The powers that be talk that way to keep the common folk intimidated and confused. Better not to ask questions and just focus on spending money like mad on whatever the bullshit of the day is so the economy doesn't tank. You do want to be a good citizen, don't you?

GoRon2008
01-02-2008, 01:17 PM
Stop.

Seriously.

In the time you've all spent on this single person (who probabaly won't change his or her mind) you could have sent 50 or more handwritten letters for the letter campaign to people who may have never heard of Ron Paul and don't have a clearly unwarranted bias against him.

I am learning something.

Therefore, its not a useless thread.

It might come in handy sometime.

newbitech
01-02-2008, 01:29 PM
Response...

I'm quite sure you can't even explain exactly what you mean by this statement.

The Fisher effect is a lagging adjustment over the long term. As long as the money supply continues to increase, the slack is not going to be picked up.

The money supply (inflation) must remain flat or shrink for a period of time so the nominal rate can adjust to the real rate.

In the mean time, those people or institutions who can cover this difference in lag (read people who get the money first) rake the difference in prices before adjustment.

gang
01-02-2008, 01:32 PM
Money must be a tangible asset in contrast to a money substitute which has no intrinsic value. Either money or a money substitute may be currency. Because the US$ is a money substitute

Sure?
I know money as the generally accepeted medium of exchange.
In a free economy only tangible assets will be that medium. But I'm not sure whether it's a part of the defininition.

Bossobass
01-02-2008, 01:38 PM
I've been in business for myself all of my life, so I use real life examples.

The economy had gone into recession. This was caused by the Fed ordering a contraction in the money supply. IOW, it became much harder to borrow because the banks had much less to lend.

Businesses like mine cut back on inventory, realizing that they would sell less in a recession.

The recession began to end. This was caused by the Fed increasing the money supply. This particular time in the Fed induced cycle of recession/inflation, they increased the money supply by a grossly larger number than GDP, at nearly zero cost to them because they just decree the money supply number, which made the money worth less. This is the singular cause of monetary inflation. There is NO other cause. Only the Fed can cause monetary inflation by printing more money than GDP.

This monetary inflation leads to price inflation. This is when the price of widgets goes up, because the money you're purchasing them with is worth less, or has been diluted. The Fed may say that price inflation is the result of a supply and demand scenario as a smoke screen, but it was they who caused the price to increase by devaluing the currency through inflation of money supply.

I decided to predict when the cycle of contraction was ending and use pre-inflation dollars to dramatically increase my inventory. Most business owners in my business who knew me said it was a youthful indiscretion to be so risky and kept their inventories low.

When the recession did indeed begin to show signs of ending, my competitors cautiously began to increase their inventories, but the prices had jumped.

So now, as demand increased, my competitors, who used their standard markup on the new higher prices, were making less than I was, even though I was selling my inventory for the same price, because I paid less for my inventory than they did.

As the economy further grew because of the increase of credit, my competitors bought more and more inventory, at higher and higher prices. I, on the other hand, still had plenty of inventory at the recession, or pre-inflation prices.

I was able to make a lot more money than my competitors simply because I made my purchase of inventory first, before the effects of the inflated currency made its way to my competitors in the form of higher prices for goods.

Same goods. Just purchased with the new money BEFORE the new money's effects were manifest in higher prices for the goods.

This is how the rich got richer. Imagine if you knew the recession/inflation cycles because you were able to cause them and blame them on Labor Union's higher wages, OPEC's oil embargo/price spikes, Japanese exports dumping, or whatever, while you invested as I did in the scenario above (only on a M-U-C-H larger scale).

In 1971 when Nixon took us off of the Breton Woods gold standard, oil was $2 a barrel and gold was $35.00 an ounce. Eight years later, during Carter's administration, oil was $40.00 a barrel and gold was $800.00 an ounce. :eek:

If you had billions and new exactly when this would occur because you were causing it to occur as a Federal Reserve Bank stock holder and member, and you coincidentally held all of the US government's gold as collateral for the loans you made to her, and were the largest oil company in the world, how much could you amass through this fraudulent scheme? Maybe enough to be able to lend the US government $2 trillion or so for Reagan's huge military buildup? Probably so.

The difference today is that the Fed no longer tells us how much they're increasing the money supply. Inflation numbers have been further obscured by the paradigm shift in the moving of nearly the entire US manufacturing base to China. In that move, manufacturing costs were dramatically slashed, but retail prices here in the US for those goods were not lowered accordingly. Thus, prices could be held constant for a long period, absorbing the inflation and helping to keep the real numbers hidden.

The debt is now over $9 trillion. The interest-only payments are $2 billion dollars every business day. ANYONE who tells you that that doesn't matter, or that it is only a small percentage of whatever, etc. is a moron (or owns the Fed).

Of course it's a subject of extreme complexities, as any story would be as it grew to the size of the global economy over a century of time. There are holes in this story, but only by omissions for the sake of brevity. But, the above is the story in real terms so that even an idiot like me could begin to understand, FWIW.

Bosso

mbrebstock
01-02-2008, 01:39 PM
some corrections

i think it is as following:

m3 is the total amount of money in the system

gdp is the total production of a country

if real gdp starts at 100 and increases 3% -> 103
and m3 starts at 100 and increases 6 % -> 106
then there is inflation of 3% and a nominal gdp of 106

according to http://www.forecasts.org/data/data/GDPC96.htm

real gdp was at 3759.997 at 1970-01-01
and was at 11541.614 at 2006-10-01

according to wikipedia:


http://upload.wikimedia.org/wikipedia/commons/thumb/c/c1/Components_of_the_United_States_money_supply.svg/570px-Components_of_the_United_States_money_supply.svg.p ng

m3 was 616.1 in january 1970
and is at 10298.7 in february 2006

real gdp increased 207%
and m3 increased 1500 %

-> if there were no inflation m3 would have increased 207% too to-> 1891
instead its at 10298.7 - all this is inflation

i think that means 1 dollar today is equal to 1/(10298.7/1891) -> 1/5.44 -> 18 cent in 1970

<- i'm german so i hope you are able to understand what i try to express in english



and according to http://www.forecasts.org/data/data/GDP.htm

nominal gdp was at 1017.3 in 1970-01-01

and 13487.2 in 2006-10-01

-> increase of 1225%

without inflation it would be 3123.1
instead its 331 % higher


-> 1/(13487.2/3123.1) -> 1/4.31 ->
according to that on dollar today is worth 23 cent in 1970


you see this is not very exact and i hope it's true what i write (please correct me if i'm wrong) but the tendency should be right

crazyfacedjenkins
01-02-2008, 01:54 PM
i think it is as following:

m3 is the total amount of money in the system

gdp is the total production of a country

if real gdp starts at 100 and increases 3% -> 103
and m3 starts at 100 and increases 6 % -> 106
then there is inflation of 3% and a nominal gdp of 106

according to http://www.forecasts.org/data/data/GDPC96.htm

real gdp was at 3759.997 at 1970-01-01
and was at 11541.614 at 2006-10-01

according to


http://upload.wikimedia.org/wikipedia/commons/thumb/c/c1/Components_of_the_United_States_money_supply.svg/570px-Components_of_the_United_States_money_supply.svg.p ng

m3 was 616.1 in january 1970
and is at 10298.7 in february 2006

gdp increased 207%
and m3 increased 1500 %

-> if there were no inflation m3 would have increased 207% too to-> 1891
instead its at 10298.7 - all this is inflation

i think that means 1 dollar today is equal to 10298.7/1891 -> 1/5.44 -> 18 cent in 1970

<- i'm german so i hope you are able to understand what i try to express in english

Another great response! This is an excellent breakdown of what has happened. Lot of smart people on this board.

Patrick_Henry
01-02-2008, 02:03 PM
The people who get to use the money first before it filters into the system, like big business, military-industrial complex etc, get the most benefit.

Response...

I'm quite sure you can't even explain exactly what you mean by this statement.

If you want to inflate the dollar by 10%, give every person 10 cents for every dollar they have. What happens now is that 10% percent is given out as credit by bankers who demand every penny and more given back to them. There is clearly a moral issue here as money has been taken from the people and given to the bankers to loan out as credit to the government and the people. I understand that it is useful for a society to allow for loans to be given out, but our system is clearly broken.

mbrebstock
01-02-2008, 02:12 PM
If you want to inflate the dollar by 10%, give every person 10 cents for every dollar they have. What happens now is that 10% percent is given out as credit by bankers who demand every penny and more given back to them. There is clearly a moral issue here as money has been taken from the people and given to the bankers to loan out as credit to the government and the people. I understand that it is useful for a society to allow for loans to be given out, but our system is clearly broken.


if there is a inflation of 10% the people who save money should at least get 10% interest -> that are the 10 cent you talk about for every dollar.

but the people who take the loan have to pay this 10 cent.

Ron2Win
01-02-2008, 02:21 PM
You gotta say that economic expansion is based on the excesses produced by the economy. Having a trade credit and exporting more than importing is what creates excess.

Growth based on debt is great, until you have to pay off that debt. It's like you had a no limit credit card that you'd only have to pay it back in 30 years.

You can buy a new car every year and stuff your house with a 70" LCD. But until you have to pay off those things, you can live like a king.

Since 1995 the USA has had a "fake" growth. It's all credit based.

runderwo
01-02-2008, 02:24 PM
If you want to inflate the dollar by 10%, give every person 10 cents for every dollar they have. What happens now is that 10% percent is given out as credit by bankers who demand every penny and more given back to them. There is clearly a moral issue here as money has been taken from the people and given to the bankers to loan out as credit to the government and the people. I understand that it is useful for a society to allow for loans to be given out, but our system is clearly broken.

Yes, it is useful for a society to allow for loans to be given out, and nobody is suggesting that loans should be outlawed. All we ask is that the loans be made with the bankers' own money, and if the bankers are going to borrow short and lend long, that they be responsible for their own deposit insurance instead of expecting the public to subsidize them through FDIC.

If they are to rely on public deposit insurance to lend out money that isn't theirs, then in exchange they should not be allowed to charge an interest rate on the loan that exceeds the rate of inflation.

The myth is that the latter scenario would halt lending due to lack of incentive, but in reality banks are a cartel that collectively profits from lending. What one bank loans out, another bank receives on deposit. Lending would not occur at such artificial rates and terms once the external costs of a bank run are placed onto the bank rather than onto the public, but loans would still happily take place because making loans is good for business in many ways if you're a banker.

mconder
01-02-2008, 02:25 PM
I know this is anicdotal, but my dad made 30-40K a year in the 80's and did much better financially than I do today making 85K, so this guy is on crack thinking inflation has only been 10%.

smartpeople4ronpaul
01-02-2008, 02:30 PM
I'm trying to stick up for Dr Paul in some other forums and I'm being attacked by some economist guy....HELP! How should I respond?

I wrote....

Yes but collapse is inevitable when you continually inflate the currency. As you create more fiat currency you are pulling wealth away from the dollars that already exist. That is stealing.

Response...

The expansion of the money supply is entirely necessary to support economic growth. Are you proposing that the money supply remain fixed so that as productivity and the economy expands, prices decline due to the lack of money, ultimately leading to a crash? As it is, the US money supply, M3, has only expanded by 10% of GDP since President Nixon ended the Gold exchange system in 1972. The anti-monetary system brigade would have us believe that the US money supply is growing at an exponential rate. In any event, only about 13% (currency and demand deposits) of the US money supply is exposed to inflation. The rest is interest bearing, and in line with the Fisher effect, compensation for the erosion of purchasing power from inflation is received. So your hypothesis that the current monetary system is designed to steal money from the masses is largely illusionary.

I wrote....

The people who get to use the money first before it filters into the system, like big business, military-industrial complex etc, get the most benefit.

Response...

I'm quite sure you can't even explain exactly what you mean by this statement.

Stealing taxes?

Ron2Win
01-02-2008, 02:34 PM
Inflation at 10% is a joke...

You think house prices were taken into consideration when calculating that?

People think of inflation as the price of milk or gas, but it's much bigger.

Ever tried to buy "designer" stuff nowadays? It's not just because these things are luxurious, it's because they have gone up in price tremendously.

VoluntaryMan
01-02-2008, 02:40 PM
If this clown is arguing that an inflation of the money supply is supposed to keep prices static, as opposed to declining (the "problem" he sees with a "fixed" money supply), then it isn't working. Just the opposite of what his argument implies is occurring (and has been since the institution of the FED). Prices have skyrocketed, and the value of unbacked (and, even in Nixon's day, only fractionally "backed" but essentially non-redeamable) has steadily declined.

Your debate opponent apparently doesn't understand the argument, so he wishes to drag you off into some dark alley of jargon, where he feels confident he can cloak his own ignorance. It isn't important to persuade your opponent of anything. What's important is to expose to the audience (assuming there is one) your opponent's incompetence in the subject he's engaged you on.

Simple facts:

1) the dollar was originally fixed to 1/20th an oz of gold (1 oz gold piece = $20).

2) Overall inflation between 1776 and 1913 (birth of FED) was ~20% ($100 was required in 1913 to purchase $80 worth of 1776 goods...roughly).

3) Rate of inflation between 1913 and 1929 (big credit crash and subsequent Great Depression) was ~500%, thanks to fractional reserve banking.

4) The purchasing power of a 2007 dollar equals roughly 0.04 1913 dollars.

Lesson: unnaturally inflating the money supply reduces the value of existing dollars, and is essentially stealing the savings of the thrifty. It encourages borrowing and spending, which are arguably "good" (in the short term) for general commerce (the macro economy), but is disastrous to personal finance (the micro economy), on which all else ultimately depends. To argue otherwise is to argue that the debt bubble can be expanded indefinitely, without ever bursting. Even Keynes wouldn't take that position; his only argument for perpetual inflation was this: "In the long run, we're all dead." Such is the state of popular economic theory. Most economists are just hoping they're already dead before the final collapse...before the rest of us lynch them.

ronpaulitician
01-02-2008, 02:42 PM
The expansion of the money supply is entirely necessary to support economic growth
That line of thinking caused the Great Depression (http://www.constitution.org/mon/greenspan_gold.htm).

scooter
01-02-2008, 02:49 PM
Another thing you can throw in here is that if you are basing the growth of M3 vs. GDP then you have to consider that a HUGE portion of our GDP now is governmental spending, including spending between different agencies.

The GDP is propped up by the deficit spending.

The expansion of M3 (which is WAY off on anyway) has far outpaced the productive growth of the common US citizen. In fact, our per-person production has actually gone down according to some people. We're getting good at living off the welfare state.

Thurston Howell III
01-02-2008, 03:05 PM
M3 numbers haven't been made public for a while now, how does he know what it is?

mbrebstock
01-02-2008, 03:05 PM
Yes, it is useful for a society to allow for loans to be given out, and nobody is suggesting that loans should be outlawed. All we ask is that the loans be made with the bankers' own money, and if the bankers are going to borrow short and lend long, that they be responsible for their own deposit insurance instead of expecting the public to subsidize them through FDIC.

If they are to rely on public deposit insurance to lend out money that isn't theirs, then in exchange they should not be allowed to charge an interest rate on the loan that exceeds the rate of inflation.

The myth is that the latter scenario would halt lending due to lack of incentive, but in reality banks are a cartel that collectively profits from lending. What one bank loans out, another bank receives on deposit. Lending would not occur at such artificial rates and terms once the external costs of a bank run are placed onto the bank rather than onto the public, but loans would still happily take place because making loans is good for business in many ways if you're a banker.

perhaps this is the point:


the inflation itself is not the biggest problem. because 10% of m3 only is cash. for the other 90 % of the money the person who loans it to the bank receives interest and do not have to care about inflation (as long as the interest rate is higher than the inflation rate)

BUT everybody who is in dept has to pay much higher interest rates than the inflation rate - for the "service of the bank" - where there is none because the public insures the hole system and provides the service.

austin4paul
01-02-2008, 03:07 PM
There is clearly a moral issue here as money has been taken from the people and given to the bankers to loan out as credit to the government and the people.

It's worse than that, acutally. The money isn't "taken from the people and given to the bankers to loan out" -- it's simply CREATED OUT OF THIN AIR! People have a big misconception that the bankers take our money and then loan it out to other people and they earn the difference between what they pay depositors for their savings and what they charge the creditors, i.e. if they paid me 2% on my savings and loaned it out to you at 6%, they're earning 4%.

It used to be that way, but today, with reserve banking the Federal Reserve allows banks to create loan against a "reserve" of deposits, meaning they can write more loans than they have funds on deposit. It's really cool for the bankers because then they get to earn interest on money that doesn't exist. There's the real moral issue.

JMO
01-02-2008, 03:26 PM
[QUOTE=j0ew00ds;779919]

The expansion of the money supply is entirely necessary to support economic growth. Are you proposing that the money supply remain fixed so that as productivity and the economy expands, prices decline due to the lack of money, ultimately leading to a crash? As it is, the US money supply, M3, has only expanded by 10% of GDP since President Nixon ended the Gold exchange system in 1972. The anti-monetary system brigade would have us believe that the US money supply is growing at an exponential rate. In any event, only about 13% (currency and demand deposits) of the US money supply is exposed to inflation. The rest is interest bearing, and in line with the Fisher effect, compensation for the erosion of purchasing power from inflation is received. So your hypothesis that the current monetary system is designed to steal money from the masses is largely illusionary.

[QUOTE=j0ew00ds;779919]




What he says in a black and white world would be true. However we live in a world with many variables. Where he fails is how much expansion of money supply do you need to support economic growth?

He is trying to lead you to believe that the money supply is growing at a exponential rate. He is 100% wrong and it's easy to prove because we have a system that does exactly that. You look at the value of the dollar compared to other currencies, if the dollar is increasing in value then on average we are not expanding our money at a greater rate than other countries, if the dollar is devaluing then we are increasing the money supply greater than other countries. Can one argue that the dollar has devalued in the last 6 years? It should be obvious to everyone that we are increasing the money supply beyond what the market can withstand.

He contends that increasing the money supply does not steal from the masses. His contention first is flawed, because as I have proven we are increasing the money supply beyond his exponential rate and the value of the dollar compared to other countries. Second we have the middle class individual who already has a job but does not own a business, he does not receive fair compensation for the devaluation of the dollar, in fact he will lose money. When the dollar devalues the price of foreign products increase, last I looked oil is a foreign product. Every manufactured item and food product moves by oil, which increases the price to do business. What do business do with increased costs to do business? they pass it on to the customer. When the dollar devalues a middle class person who has a job will see prices rise in comparison to their wages. Ask this person how many times has a country that destroyed the value of their currency and was able to maintain a healthy and flourishing middle class.

Scott Friday
01-02-2008, 03:30 PM
So what is wrong with falling prices? :confused:

The computer in front of me would have been unobtainable ten years ago, at any price! However, because of the benefits of increased efficiencies of production, prices have not only plummeted DESPITE our inflationary monetary system but the quality and performance of computers has skyrocketed as well!! The same is true for most of the other wonderful electronic gadgets that make my life so much fun: TV, stereos, computers, cell phones, iPods, and on and on... More products available at lower prices is what leads to an increased standard of living!! Amazingly, most of the companies that produce such goods are doing quite well despite the prices of their goods dropping over time.

You opponent seems to think that keeping prices high is a good thing. I guess that is great if you are wealthy. But for everyone else, it simply means that higher priced goods will continue to be out of reach. Flooding the market with easy credit so people can afford things is no solution. Eventually the bills have to be paid... Ultimately, it is natural and good for prices to fall as the overall real wealth (not some monetary number representing worthless paper) of society is increased.

skolwulf
01-02-2008, 03:32 PM
Sorry didn't take the time to read the whole thread, but thought this might be interesting and topical. http://www.perfecteconomy.com/pg-why-austrian-school-economics-cannot-save-us.html

mbrebstock
01-02-2008, 03:40 PM
[QUOTE=j0ew00ds;779919]

The expansion of the money supply is entirely necessary to support economic growth. Are you proposing that the money supply remain fixed so that as productivity and the economy expands, prices decline due to the lack of money, ultimately leading to a crash? As it is, the US money supply, M3, has only expanded by 10% of GDP since President Nixon ended the Gold exchange system in 1972. The anti-monetary system brigade would have us believe that the US money supply is growing at an exponential rate. In any event, only about 13% (currency and demand deposits) of the US money supply is exposed to inflation. The rest is interest bearing, and in line with the Fisher effect, compensation for the erosion of purchasing power from inflation is received. So your hypothesis that the current monetary system is designed to steal money from the masses is largely illusionary.

[QUOTE=j0ew00ds;779919]




What he says in a black and white world would be true. However we live in a world with many variables. Where he fails is how much expansion of money supply do you need to support economic growth?

He is trying to lead you to believe that the money supply is growing at a exponential rate. He is 100% wrong and it's easy to prove because we have a system that does exactly that. You look at the value of the dollar compared to other currencies, if the dollar is increasing in value then on average we are not expanding our money at a greater rate than other countries, if the dollar is devaluing then we are increasing the money supply greater than other countries. Can one argue that the dollar has devalued in the last 6 years? It should be obvious to everyone that we are increasing the money supply beyond what the market can withstand.

He contends that increasing the money supply does not steal from the masses. His contention first is flawed, because as I have proven we are increasing the money supply beyond his exponential rate and the value of the dollar compared to other countries. Second we have the middle class individual who already has a job but does not own a business, he does not receive fair compensation for the devaluation of the dollar, in fact he will lose money. When the dollar devalues the price of foreign products increase, last I looked oil is a foreign product. Every manufactured item and food product moves by oil, which increases the price to do business. What do business do with increased costs to do business? they pass it on to the customer. When the dollar devalues a middle class person who has a job will see prices rise in comparison to their wages. Ask this person how many times has a country that destroyed the value of their currency and was able to maintain a healthy and flourishing middle class.

i don't think you need a growing money supply for economic growth.

and measuring the dollar in other currencys doesn't show the hole picture - because in europe there is inflation too.

PaulineDisciple
01-02-2008, 03:59 PM
One thing that sticks out for me is the fact that wealthy people from American and other countries are starting to get out of the dollar, a sure indicator that they fully expect the dollar to lose more value in the near future. Ron Paul makes the point that as soon as a currency begins this downward trend, it won't take much for is to quickly collapse at some point, given the right situation. Like say China refuses to lend us any more money or other countries switch to a more sound currency when that discover that they are losing money by holding onto dollars. He is not taking into account that our currency is only worth as much as other countries are willing to value it at. The only reason that our dollar has held it's value so long is that it is the worlds reserve currency. As much as US economists would probably not want to admit it, competition in currency around the world just might end the dollars hegemony in the world. So it looks like your armchair economist either has his head in the sand, or is unwilling to admit the obvious.

libertea
01-02-2008, 04:58 PM
For those who say not to waste time with this, I disagree. This has been the best thread ever for it's educational value.

I agree inflation is stealing and artificial taxation. I am behind RP 100%.

Please further educate me as to the relevance of comparing a 1913 dollar to it's today's $.04 value based on a comparison to gold? What is the purpose of comparing US currency against any foreign currency? This to me seems to muddy the water. Is there anybody here who would like to live under 1913 circumstances? Are we all not better off than they were? There is one common thing that is missing from all economic theory in my observation. That is technological advances. Could the relationship to other currencies mean that their standard of living is catching up to ours? It seems we are measuring money and not wealth?

For a better understanding of wealth, please read Operating Manual for Spaceship Earth (http://bfi.org/node/422), especially chapters 6 and 7.

I see the need to eliminate the stealing aspect. I don't see where inflation or deflation(as with a return to gold) are at all relevant. The market will correct either.

dblee
01-02-2008, 05:21 PM
sorry, i jumped to the end and don't have time to read the whole thing, but here is a crash course in money supply benchmarks http://en.wikipedia.org/wiki/M1_%28economics%29#United_States

the guy is obviously a Keynesian and doesn't believe in supply-side austrian economics. you're n ot going to convert him, but since historically speaking Keynesian econ has repeatedly failed, i think you're in a good position to give him an intellectual smack down.

Copperhed51
01-02-2008, 05:23 PM
Love this thread. I'm learning quite a bit. Also, he's not arguing with just one guy. Everybody else who reads his argument will be learning about Dr. Paul's message and may just end up voting for him. If the OP can't effectively argue with this guy, it will reflect that our entire movement is made up of people who blindly follow their leader. I believe they call people like that sheep...and that's not us. Very important thread.

Thanehand
01-02-2008, 10:04 PM
I couldn't DISAGREE more. Its incredibly important that we not only support Ron Paul BUT UNDERSTAND WHY!!!

To blindly follow someone is just as stupid as what the country is currently doing

I wasn't saying don't learn or blindly follow anyone. I said don't waste time trying to convince someone to change their mind who probably won't - the OP was asking for defense against an attack with a rebuttal.

Joe3113
01-03-2008, 04:32 AM
...

hawks4ronpaul
01-03-2008, 05:23 AM
I'm quite sure you can't even explain exactly what you mean by this statement.

This probably means that he does not understand your statement.

http://hawks4ronpaul.blogspot.com/

hawks4ronpaul
01-03-2008, 05:39 AM
For those who say not to waste time with this, I disagree. This has been the best thread ever for it's educational value.

I agree inflation is stealing and artificial taxation. I am behind RP 100%.

Please further educate me as to the relevance of comparing a 1913 dollar to it's today's $.04 value based on a comparison to gold? What is the purpose of comparing US currency against any foreign currency? This to me seems to muddy the water. Is there anybody here who would like to live under 1913 circumstances? Are we all not better off than they were? There is one common thing that is missing from all economic theory in my observation. That is technological advances. Could the relationship to other currencies mean that their standard of living is catching up to ours? It seems we are measuring money and not wealth?

For a better understanding of wealth, please read Operating Manual for Spaceship Earth (http://bfi.org/node/422), especially chapters 6 and 7.

I see the need to eliminate the stealing aspect. I don't see where inflation or deflation(as with a return to gold) are at all relevant. The market will correct either.

Productivity makes wealth. The dollar value is arbitrary. Fiat money allows government to distort money supply, prices, and information about relative value, which leads to malinvestment and impaired productivity.

http://hawks4ronpaul.blogspot.com/

AceNZ
01-03-2008, 06:31 AM
The expansion of the money supply is entirely necessary to support economic growth.

That's incorrect. Economic growth is possible without increasing the money supply. In fact, economic growth is possible without any money at all.



Are you proposing that the money supply remain fixed so that as productivity and the economy expands, prices decline due to the lack of money, ultimately leading to a crash?

Even with a gold standard, the money supply wouldn't be fixed -- it can vary up-and-down according to market forces (miner's produce new gold, existing gold supplies can be exchanged for dollars, foreign currency can be used to buy gold to be exchanged for new dollars, etc).

Yes, in general prices should decline over the long term. Another way of saying the same thing is that the value of money should naturally increase (people should be rewarded for saving). However, that in no way would lead to a crash. The US had tremendous economic growth, and far fewer and less severe recessions before 1913 when the gold standard was abandoned. In fact, the country's only true "crash" in 1929 happened as a result of the Fed creating lots of new money, with resulting artificially low interest rates -- which in turn fueled stock market speculation, and eventually led to the crash. If the country had stayed on the gold standard, the crash would have been avoided.



As it is, the US money supply, M3, has only expanded by 10% of GDP since President Nixon ended the Gold exchange system in 1972.

Whoa! Check your facts! The ones below are from eh.net and federalreserve.gov:

Nominal GDP in 1972 was $1.2T, seasonally adjusted M3 was $0.8T or 44% of GDP. Nominal GDP in 2006 was $13.2T, M3 was $10.2T or 77% of GDP. So M3 has grown by 33% of GDP over that period (75% in absolute terms), not 10% as you said.

However, why is that even important? Looking at the money supply as a fraction of GDP says nothing about the effect of inflation.



The anti-monetary system brigade would have us believe that the US money supply is growing at an exponential rate.

Here's a graph that shows the rate of change in M3 (with estimated values since the Fed stopped reporting them a few years ago). The growth isn't exponential yet, but it's certainly on its way:


http://www.shadowstats.com/imgs/sgs-m3.gif



In any event, only about 13% (currency and demand deposits) of the US money supply is exposed to inflation. The rest is interest bearing, and in line with the Fisher effect, compensation for the erosion of purchasing power from inflation is received. So your hypothesis that the current monetary system is designed to steal money from the masses is largely illusionary.

Uh, no. Just because money is earning interest doesn't mean that it's not exposed to inflation. All money (and all debt) is exposed to inflation. If you're earning 5% on your savings account, and inflation is 12%, your savings are losing purchasing power (value) at the rate of 7% per year.

Whether or not the monetary system was designed to steal money (really purchasing power) from the masses is irrelevant. The fact is that's precisely what it does. If trillions of dollars are created out of thin air and then spent into the economy, it has the effect of diluting the value of all of the other dollars that are already in circulation. That's a big reason why things cost more today than they did last year. If you put a 100 dollar bill under your pillow 50 yrs ago, you wouldn't be able to buy anywhere near as much with it today as you could back then. That value, that purchasing power, has been stolen by the government through the hidden tax called inflation.