An age of understanding in economics is coming

[ababba]

It's much worse. It affects the price of money, which is a bigger part of the economy than just the price of shoes.

It has worse consequences. It creates bubbles. It created the dot com bubble and the housing bubble.

We've had this debate in other threads. I disagree that the two bubbles were the result of monetary policy. I think the dotcom bubble was about people having too high of expectations for future earnings of internet companies. There were some other issues involved like restrictions on sales by insiders and short sales constraints. A repeal of those regulations would have reduced the impact of the bubble. The housing bubble happened because everyone, buyers and creditors had too high expectations for future housing price appreciation.

[Kregisen]

I think some of you guys are being $#@!s to ababba. He seems like a pretty knowledgable person on the subject, so if he's wrong, debate him, don't try making fun of him and telling him to leave an online forum. If this forum only had "omg kill the government anarchy yay yay yay" people I would've never joined. The whole point is to talk about different stances on issues.

As an econ minor this is a very interesting issue and I don't know enough to say that either theory is better for the economy as a whole. I think Keynesian theory is immoral just because the government is spending the citizen's money for them, but I don't know if it's necessarily worse for the economy as a whole than Austrian economics - economists all disagree - there is no one supreme answer, and there may never be.

[low preference guy]

We've had this debate in other threads. I disagree that the two bubbles were the result of monetary policy. I think the dotcom bubble was about people having too high of expectations for future earnings of internet companies. There were some other issues involved like restrictions on sales by insiders and short sales constraints. A repeal of those regulations would have reduced the impact of the bubble. The housing bubble happened because everyone, buyers and creditors had too high expectations for future housing price appreciation.

Can't. stop. laughing.

[ababba]

money is a representation of access to resources, creating more money and handing it out to your buddies doesn't change the amount of resources, it just drives up the number of dollars it takes to acquire a resource... making it harder for average people to acquire them and giving the banking buds prime access to those limited resources.
that is central planning. government picks winners and losers and shift resources via money creation and handing out to politically connected.

If thats what monetary policy did, I would agree with you. On the other hand, I don't think exchanging money for bonds has large effects on the distribution of wealth. I did a calculation in one thread where I argued that banks earn about 30 thousand dollars on a one billion dollar treasury trade with the government. Its hardly a gain to build an economic system around.

[low preference guy]

I think some of you guys are being $#@!s to ababba. He seems like a pretty knowledgable person on the subject, so if he's wrong, debate him, don't try making fun of him and telling him to leave an online forum. If this forum only had "omg kill the government anarchy yay yay yay" people I would've never joined. The whole point is to talk about different stances on issues.

As an econ minor this is a very interesting issue and I don't know enough to say that either theory is better for the economy as a whole. I think Keynesian theory is immoral just because the government is spending the citizen's money for them, but I don't know if it's necessarily worse for the economy as a whole than Austrian economics - economists all disagree - there is no one supreme answer, and there may never be.

No, he is a violent person. He supports a system which can only survive if threats against innocents are made. I can't freely choose to transact in gold and silver because there is a violent threat that if I do, my wealth will be confiscated or I will go to jail. That threat is backed up by hundreds of guns the government owns, and abba supports those threats against me. He is a criminal.

[Travlyr]

I have no idea what you are talking about. I didn't do anything to the native americans or have anything to do with slavery, given I was born in the 1980's.

Both of you guys are really smart. Ron Paul wrote "End The Fed" Yet, both of you defend central banking and Keynesian economics.
Why?

Let me rephrase this. One of you guys are really smart, and he is keeping his mouth shut.

[torchbearer]

I want plans by the many, not be the few.

[Travlyr]

I think some of you guys are being $#@!s to ababba. He seems like a pretty knowledgable person on the subject, so if he's wrong, debate him, don't try making fun of him and telling him to leave an online forum. If this forum only had "omg kill the government anarchy yay yay yay" people I would've never joined. The whole point is to talk about different stances on issues.

As an econ minor this is a very interesting issue and I don't know enough to say that either theory is better for the economy as a whole. I think Keynesian theory is immoral just because the government is spending the citizen's money for them, but I don't know if it's necessarily worse for the economy as a whole than Austrian economics - economists all disagree - there is no one supreme answer, and there may never be.

It's the violence. Take it somewhere else.

[Kregisen]

No, he is a violent person. He supports a system which can only survive if threats against innocents are made. I can't freely choose to transact in gold and silver because there is a violent threat that if I do, my wealth will be confiscated or I will go to jail. That threat is backed up by hundreds of guns the government owns, and abba supports those threats against me.

That logic is why so many newbies on here get scared away and never vote for Ron...because if they aren't libertarian on something, people like you go ape$#@! and start yelling at them because they support "the government that is threatening violence on me". You'll never win over anyone engaging people like that.

[hazek]

I think some of you guys are being $#@!s to ababba. He seems like a pretty knowledgable person on the subject, so if he's wrong, debate him, don't try making fun of him and telling him to leave an online forum. If this forum only had "omg kill the government anarchy yay yay yay" people I would've never joined. The whole point is to talk about different stances on issues.

As an econ minor this is a very interesting issue and I don't know enough to say that either theory is better for the economy as a whole. I think Keynesian theory is immoral just because the government is spending the citizen's money for them, but I don't know if it's necessarily worse for the economy as a whole than Austrian economics - economists all disagree - there is no one supreme answer, and there may never be.

Good post, but one small problem. ababba is not interested in a debate, he is not making any arguments. All he does is make statements based on his beliefs with zero facts backing it up. All we are doing is presenting countless of arguments backed up with facts and he keeps ignoring them. Sorry but I really don't see the point of giving a person like that any attention and wouldn't mind at all if he just left.

[torchbearer]

If thats what monetary policy did, I would agree with you. On the other hand, I don't think exchanging money for bonds has large effects on the distribution of wealth. I did a calculation in one thread where I argued that banks earn about 30 thousand dollars on a one billion dollar treasury trade with the government. Its hardly a gain to build an economic system around.

how much does it cost me to buy money, and how much does it cost jp morgan to buy money?

[low preference guy]

That logic is why so many newbies on here get scared away and never vote for Ron...because if they aren't libertarian on something, people like you go ape$#@! and start yelling at them because they support "the government that is threatening violence on me". You'll never win over anyone engaging people like that.

What "logic"? Supporting violent threats against innocents is wrong and is a plain description of what he does. There's no weird "logic" behind that statement.

[Travlyr]

Central banking promotes violence. If you are for that, then why post on a liberty forum?
Liberty, Peace, & Prosperity

Peace is our middle name.

[RonPaulGetsIt]

How exactly can a theory which is incapable of making a quantitative prediction be taken seriously as a theory which predicts the future?

You know a bubble will pop and malinvestments will be shown for what they are. it is literally like knowing a bubble will pop but you don't know when.

If I build a large brick building having on hand only 90% of the necessary bricks, there is no theory that can say when precisely I will discover my error. The Austrian theory lets you know there is an error but the timing is impossible. The keynesian fools go on merrily building the house until they have used their very last brick only then discovering their error.

[Seraphim]

I agree with the thread title.

[ababba]

how much does it cost me to buy money, and how much does it cost jp morgan to buy money?

They are both pretty close to a dollar for a dollar, JPM sometimes gets a dollar for 0.99997 dollars.

[ababba]

You know a bubble will pop and malinvestments will be shown for what they are. it is literally like knowing a bubble will pop but you don't know when.

If I build a large brick building having on hand only 90% of the necessary bricks, there is no theory that can say when precisely I will discover my error. The Austrian theory lets you know there is an error but the timing is impossible. The keynesian fools go on merrily building the house until they have used their very last brick only then discovering their error.

I guess the key is then whether the Austrian theory tells us anything about how big the error is?

[torchbearer]

They are both pretty close to a dollar for a dollar, JPM sometimes gets a dollar for 0.99997 dollars.

it will cost me about me about 7-10% to buy money(sometimes way more), jpmorgan gets it for close to zero at the feds window.

[ababba]

it will cost me about me about 7-10% to buy money(sometimes way more), jpmorgan gets it for close to zero at the feds window.

You can get a dollar in exchange for a dollar if you pay immediately. You are talking about getting a dollar now in exchange for the possibility of you paying it back in the future. There is a lot of risk involved in loaning to you. Short term rates to high quality companies are very close to the zero at the feds window.

[torchbearer]

You can get a dollar in exchange for a dollar if you pay immediately. You are talking about getting a dollar now in exchange for the possibility of you paying it back in the future. There is a lot of risk involved in loaning to you. Short term rates to high quality companies are very close to the zero at the feds window.

are you talking about high quality companies that required being bailed out?
i have a better credit rating.

[ababba]

are you talking about high quality companies that required being bailed out?
i have a better credit rating.

It also matters what the maturity of the debt is. Obviously a short term overnight loan should have a different interest rate than your 30 year mortgage. Any individual has a much greater chance of default than major fortune 500 companies. Some of these companies do default, but that doesn't mean that they have a greater chance of defaulting than a consumer with your characteristics. Vanguard Prime Money Market is a short term fund that buys commercial paper of these companies. Its currently yielding .07%.

[torchbearer]

Tom Woods explains the business cycle to ababba

[torchbearer]

It also matters what the maturity of the debt is. Obviously a short term overnight loan should have a different interest rate than your 30 year mortgage. Any individual has a much greater chance of default than major fortune 500 companies. Some of these companies do default, but that doesn't mean that they have a greater chance of defaulting than a consumer with your characteristics. Vanguard Prime Money Market is a short term fund that buys commercial paper of these companies. Its currently yielding .07%.

citigroups has a worse credit record than i do, do they have preference because of their history of being bailed out?
i lose because there is no government garuntee on my losses?
central planning.

[ababba]

citigroups has a worse credit record than i do, do they have preference because of their history of being bailed out?
i lose because there is no government garuntee on my losses?
central planning.

I don't support the bailout.

[torchbearer]

I don't support the bailout.

well, isn't that special.
but your support or lack of support of the bailouts doesn't change the moral hazard introduced into our economic system by the fake money system of the federal reserve, nor does it change the consequential lending practices that stem from such policies.
this is how an economy of federal reserve intervention rewards loser and punish winners.
i'm assuming you skipped the tom woods video i posted too.

when you get smacked with the truth, put head into sand.

[ababba]

well, isn't that special.
but your support or lack of support of the bailouts doesn't change the moral hazard introduced into our economic system by the fake money system of the federal reserve, nor does it change the consequential lending practices that stem from such policies.
this is how an economy of federal reserve intervention rewards loser and punish winners.
i'm assuming you skipped the tom woods video i posted too.

when you get smacked with the truth, put head into sand.

Moral hazard from fiat currency? Why don't you explain that.

[torchbearer]

Moral hazard from fiat currency? Why don't you explain that.

hell, i don't know where to start with that one-
let's start with congressional spending.
in a gold based system, if congress borrows the majority of savings available- interest rates would rise and as the rate gets higher, market forces would disuade more borrowing by the congress. in a fiat system, more money is created artificially removing the savings/borrowing limit that would set on congress.
then the next one-
if my company knows it will get bailed out because it is "too big to fail" and its senior members sit on the governing board of the fed, i will make investment bets that i may not make otherwise if i was to suffer the loss.
if you go to the casino knowing that if you lose- the loss will be paid by someone else. you will behave differently in your betting.
do i need to use stick figures for the above as a form of illustration? i tried to keep the words simple.

do you need more explanation of moral hazard?

[ababba]

hell, i don't know where to start with that one-
let's start with congressional spending.
in a gold based system, if congress borrows the majority of savings available- interest rates would rise and as the rate gets higher, market forces would disuade more borrowing by the congress. in a fiat system, more money is created artificially removing the savings/borrowing limit that would set on congress.
then the next one-
if my company knows it will get bailed out because it is "too big to fail" and its senior members sit on the governing board of the fed, i will make investment bets that i may not make otherwise if i was to suffer the loss.
if you go to the casino knowing that if you lose- the loss will be paid by someone else. you will behave differently in your betting.
do i need to use stick figures for the above as a form of illustration? i tried to keep the words simple.

do you need more explanation of moral hazard?

The first one isn't moral hazard at all. There is no risk involved that satisfies the definition of moral hazard.

In addition, the Fed does not have to monetize the debt, ever if it chooses not to. You can have monetary policy without debt monetization and we can talk about the likelihood of monetization, but it isn't required.

The Fed isn't responsible for the bailouts of banks in the TARP program, so I'm not quite sure where your going with the second point. They were involved in loaning money to AIG but this was a collateralized loan and not an equity investment as in the case of TARP.

And this misses the point that we can argue about whether the nontraditional monetary policies of the Fed during the financial crisis were a good idea or not, but this isn't an argument against traditional monetary policy, that doesn't involve more extreme lender of last resort type events.

[torchbearer]

The first one isn't moral hazard at all. There is no risk involved.

In addition, the Fed does not have to monetize the debt, ever if it chooses not to. You can have monetary policy without debt monetization and we can talk about the likelihood of monetization, but it isn't required.

The Fed isn't responsible for the bailouts of banks in the TARP program, so I'm not quite sure where your going with the second point. They were involved in loaning money to AIG but this was a collateralized loan and not an equity investment as in the case of TARP.

And this misses the point that we can argue about whether the nontraditional monetary policies of the Fed during the financial crisis were a good idea or not, but this isn't an argument against traditional monetary policy, that doesn't involve more extreme lender of last resort type events.

you asked how fiat currency creates moral hazard. i showed you how.
are you $#@!ing stupid or you purposely avoiding the topic you invited because you got stuck in the ass with truth dicks?

[Travlyr]

do you need more explanation of moral hazard?

You left out the part where if things don't work out as planned and it costs more money than they anticipated, then they take more money from people who had nothing to do with it.

And if the innocent people who had nothing to do with it whatsoever don't pay the ransom, then they take your property and maybe even your freedom if you really resist.

Enslavement at the point of thugs and guns.