Site Information
About Us
- RonPaulForums.com is an independent grassroots outfit not officially connected to Ron Paul but dedicated to his mission. For more information see our Mission Statement.
https://mises.org/library/truth-about-tulipmania
Bubbles are necessarily "constrained to certain sectors." That's the whole point.Can government fiscal actions cause bubbles? Yes. Are they the only cause? No. Do government actions always lead to bubbles? If so, then why are bubbles constrained to certain sectors- not the entire economy? Like the housing bubble or the stock market bubble or the gold bubbles?
The state cannot will new resources into existence.
Resources are redirected from one sector (that which better satisfies consumer demand) to another (that which profits politicians/lobbies).
The thing is, isn't the requirement that banks pay specie payments itself a regulation? That's a part of Rothbard's argument that doesn't make sense to me. He had this concept of contractual rights of depositors that banks were allowed to violate because the federal government didn't enforce those rights. But wouldn't the government forcing banks to maintain some arbitrary rights of depositors itself a manipulation of the market?
Moreover, the effective money supply is controlled by the banks. Government's can, of course, put policies into place that encourage certain activity, but it is the banks that expand the money supply through offering credit; if anything, governments cap expansion. Indeed, from 1929 to 2007, other than for two brief periods in the 70s and 90s, banks had expanded credit to the maximum amount that regulations would allow. Again, no one was forcing the banks to expand credit this much; they were just being prevented from expanding it even more.
Lets say all of that is not true and government banking and fiscal policy caused the expansions and inevitable contractions. Wouldn't a rational market have seen it coming? Wouldn't they have anticipated how the War of 1812 would have affected monetary policy, and hence the markets? Wouldn't rational markets factor in "artificial" expansions and contractions?
Terminology is important.
Neither the private sector nor the public sector can really create resources. Resources are just there...human resources, natural resources, which are combined together to create manufactured resources, which are then used to create wealth. The public sector can do that, the private sector can do that. The private sector just tends to be much more efficient at doing it...except in a few well-established cases.
But, given that the private sector is not always rational, and will not always use the resources available (for example, when their balance sheets are hurting and they can't take any more projects), the public sector can step in and utilize those resources. The US government has no financial constraints and is only constrained by the resources they can purchase without causing inflation (as I've mentioned above).
To clarify, any resources the public sector uses, the private sector cannot. But, in terms of financial wealth, the US government does not need to get it from the private sector. The Federal government is the issuer of the currency. They control the printing press. Unless they tie themselves in knots, the US government can never go bankrupt. The only constraint, again, is a real constraint....as they print money and buy resources, there will be fewer resources available to the private sector. To the extent that the private sector and public sector bid over resources, you will get inflation, which the government can only extinguish via taxation, which reduces the private sector's ability to bid on resources.
You cannot, on one hand, complain about how banking affected the economy in the 1800s and then say that such huge ships in interest rates had no effect on the situations in the 1920s...
Firstly, the Federal Reserve was the lender of last resort. That alone had an effect. The number of bills discounted by the central bank soared until the end of 1920:
http://www.freebanking.org/wp-conten...920sassets.jpg
Secondly, M2 (best supply of money we have for the time), fell about 6% between 1920-21 and rose by about 7% between 1921-1922. In 1921, the funds rate went from 7% to 4.5-5% by the end of the year. The recovery started around July of 1921, so the rate cuts did precede recovery. Not to mention that the Federal Reserve did proto-QE when it tripled its holding of US bonds between 1921-1922.
I think we just disagree on how perfect the market us. Plus, I don't think you understand how in the current system, the federal government is a source of net financial wealth and the domestic private sector is not.
I don't think we can come to an agreement. I (as Zippy has) can point you to the many times markets have failed, and you'll just always blame the government. No matter how tiny or large, it is always the government's fault. Reversely, anything positive that happens is always due to markets, and never the government.
1) Not every country has fiat currency with a floating exchange rate
2) Not every country has the productive capacity of the United States.
For example, India has a fiat currency with a floating exchange rate (although not a risk-free rate; we will ignore that). But its people just aren't productive enough. India doesn't have enough productive resources to be "rich" yet. As they run larger and larger deficits, they will just get inflation as the private sector "runs out" of available productive assets.
Last edited by Dr.No.; 06-17-2017 at 03:50 AM.
Connect With Us