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Thread: Basic Economics, Questions about the Fed, and Alternative Points of View

  1. #1

    Basic Economics, Questions about the Fed, and Alternative Points of View

    One of the many books on my reading list includes "How an Economy Grows and Why It Crashes" by Peter D. Schiff. I admit I basically know nothing about economics other than what I've gathered from the news etc. over the years, and my own experiences. While the book makes it easy for me to understand the basic story of what's been happening to the US (and global) economy over the past century or so, it raises some questions:

    • is it really true that since Nixon took us off the gold standard, that there really is nothing tangible our money is tied to other than faith in the money? It seems completely ludicrous to me that the entire world economy is based on nothing.
    • Did the crises in the early 20th century really warrant the creation of the Fed? And was the Fed really that evil before FDR? Or was FDR really the one who weaponized it? I'd love some more material to read about FDR and the Fed.
    • Is there any credible argument for Keynesian theory, because the way it's been laid out here seems like it's a giant scheme with no safety net.
    • If the Fed is supposed to control inflation/deflation, why has there been so much inflation the past 100 years, and do they just do a good job of masking any negative effects?
    • Is deflation really that bad? I almost want to make an announcement, that, after learning a bit more about this seemingly ticking time bomb that is our economy, that I would be honored to take on deflation and a resetting of the economy so my children, grandchildren do not have to suffer worse consequences, and resent me decades from now.


    I clearly need some more education in this area, so if anyone has any good follow-up books to this one, or good resources I can use to investigate any of these questions further, I would appreciate it very much. Thanks!

    edit: I should add, who are the proponents to the current system, and are there any good, credible arguments for this current system? I would like to learn it thoroughly enough to be able to refute any of the oppositions claims.



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  3. #2
    Check out "The Creature from Jekyll Island."

  4. #3
    Quote Originally Posted by libertashine View Post
    One of the many books on my reading list includes "How an Economy Grows and Why It Crashes" by Peter D. Schiff.
    Fantastic book. I would include that in any introductory course on economics.

    Quote Originally Posted by libertashine View Post
    [*]is it really true that since Nixon took us off the gold standard, that there really is nothing tangible our money is tied to other than faith in the money? It seems completely ludicrous to me that the entire world economy is based on nothing.
    Federal Reserve Notes (FRNs) used to be redeemable for gold or silver, but that's no longer the case. Welcome to ludicrocity.

    Quote Originally Posted by libertashine View Post
    [*]Did the crises in the early 20th century really warrant the creation of the Fed? And was the Fed really that evil before FDR? Or was FDR really the one who weaponized it? I'd love some more material to read about FDR and the Fed.
    On the creation of the Fed: https://mises.org/library/case-against-fed-0

    FDR didn't weaponize the Fed. FDR was a Fed puppet. Just Google FDR and "Bank holiday" -- FDR was a lacky, not a mover and shaker.


    Quote Originally Posted by libertashine View Post
    [*]Is there any credible argument for Keynesian theory, because the way it's been laid out here seems like it's a giant scheme with no safety net.
    If you honestly want to give Keynesianism a fair shake, you need to read his words and not base your opinions on his detractors (like me). Read his General Theory. I read it and I had problems with some of his analysis which did not take TIME into the equation. He built up a scenario where there'd be a downward sloping labor supply curve which I personally found ridiculous. But again, I'm a detractor, if you want to learn, pick up a copy for yourself and check it out.

    Quote Originally Posted by libertashine View Post
    [*]If the Fed is supposed to control inflation/deflation, why has there been so much inflation the past 100 years, and do they just do a good job of masking any negative effects?
    The Fed controlls inflation/deflation for the benefit of its owners. Not the general public.

    Quote Originally Posted by libertashine View Post
    [*]Is deflation really that bad? I almost want to make an announcement, that, after learning a bit more about this seemingly ticking time bomb that is our economy, that I would be honored to take on deflation and a resetting of the economy so my children, grandchildren do not have to suffer worse consequences, and resent me decades from now.[/LIST]
    No, deflation is not bad. Deflation means the currency of today is worth more tomorrow. That encourages savings and increases buying power of existing currency. Where deflation might be considered bad is where someone has a debt. If I borrow $10 today and plan to pay off the debt tomorrow with $11, if that $11 is worth $15 through deflation, I'm paying an $11 debt with $15. I lose. In an inflationary scenario, it makes sense to leverage purchases with loans. Pay back the 2021 loan with 2030 dollars? Pretty good deal.

    Quote Originally Posted by libertashine View Post
    I clearly need some more education in this area, so if anyone has any good follow-up books to this one, or good resources I can use to investigate any of these questions further, I would appreciate it very much. Thanks!

    edit: I should add, who are the proponents to the current system, and are there any good, credible arguments for this current system? I would like to learn it thoroughly enough to be able to refute any of the oppositions claims.
    In addition to Schiff's book that you mentioned above, I'd recommend the following


    The Case Against the Fed

    Lessons for the Young Economist

  5. #4
    Quote Originally Posted by libertashine View Post
    is it really true that since Nixon took us off the gold standard, that there really is nothing tangible our money is tied to other than faith in the money? It seems completely ludicrous to me that the entire world economy is based on nothing.
    The idea is that the US government has an interest in not destroying its currency, so the possibility of a hyper-inflationary collapse will prevent them from doing so. Think of it like walking along an unstable cliff's edge where, the closer you get to the edge, the more money you can put in your pocket, but the more risk you are taking that the ground you are walking on will suddenly collapse from underneath you and send you hurtling to your death.

    Did the crises in the early 20th century really warrant the creation of the Fed?
    No. The Fed is the third incarnation of a central bank in the US. The First and Second Banks of the United States were founded earlier based on the model of the Bank of England but were closed partly because of mismanagement and partly because of much stronger anti-colonization sentiment in the US in that era.

    And was the Fed really that evil before FDR? Or was FDR really the one who weaponized it? I'd love some more material to read about FDR and the Fed.
    The Federal Reserve is a private entity created by an act of the US Congress. It is "the worst of both worlds" in respect to public/private. As a private entity, it is not subject to FOIA and cannot be investigated -- even by the FBI -- without probable cause. As a public entity, it is not subject to congressional regulations on banks or other commercial entities... it is only subject to regulations that Congress specifically passes regarding the Federal Reserve. And seeing as the Federal Reserve is the single largest revenue source for the congressional budget, you can imagine that the nature of this "regulatory" relationship is ingratiating to the utmost.

    This private/public structure of the Fed (including the deceptive use of "Federal" in the name to suggest to the ordinary American that it is a public department, like the FBI or DEA) was intentional. So, let that marinate and think about whether the origins of the Fed were sinister from the get-go. In fact, the Fed is not merely sinister, it is an outright criminal racket and has been since day one.

    Is there any credible argument for Keynesian theory, because the way it's been laid out here seems like it's a giant scheme with no safety net.
    Keynesian theory is hocus-pocus because it denies/ignores what Austrian theorists term "the time-structure of production." This fancy term just means "it takes time to build/make something" and that time cannot be ignored. Keynesian theory is based on this false notion that the economy is like a car-engine, and it goes faster or slower based on how much you press the gas-pedal (inflation, that is, money-printing) or brakes (deflation, that is, credit calls). It's economic alchemy, utter nonsense. The primary purpose of the vast bulk of the staff of the Federal Reserve (the single biggest employer of degreed economists) is to make this Keynesian alchemy appear to be scientific and rational.

    If you want to understand the details, I cannot recommend the following lectures highly enough... very accessible:





    If the Fed is supposed to control inflation/deflation, why has there been so much inflation the past 100 years, and do they just do a good job of masking any negative effects?
    Yes. "Inflation is always and everywhere a monetary phenomenon" (Milton Friedman) It's slightly more subtle than that but, to a first-approximation, the exclusive cause of inflation is money-printing by the Fed. More or less all the devaluation of the dollar since 1913 has been the direct and sole effect of the Fed's money-printing. "There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." (John Maynard Keynes) He absolutely knew what he was doing!!

    Is deflation really that bad? I almost want to make an announcement, that, after learning a bit more about this seemingly ticking time bomb that is our economy, that I would be honored to take on deflation and a resetting of the economy so my children, grandchildren do not have to suffer worse consequences, and resent me decades from now.
    An artificially induced deflation is also destructive. People use cash to trade goods and services and most people are (unwittingly) in an extremely vulnerable position of having no backup for cash, a highly liquid good like silver (or even cigarettes!) that can be used as cash in the case of a deflationary collapse. Where inflation "floods" the economy with more and more cash, deflation creates an artificial desert where no one has any cash that can be used for hand-to-hand exchange. Such a collapse can reduce an entire economy to primitive barter overnight and it is the threat of this collapse that the Fed hangs over the head of the US government whenever the government starts getting too big for its breeches.

    I clearly need some more education in this area, so if anyone has any good follow-up books to this one, or good resources I can use to investigate any of these questions further, I would appreciate it very much. Thanks!
    MUST WATCH:



    edit: I should add, who are the proponents to the current system, and are there any good, credible arguments for this current system? I would like to learn it thoroughly enough to be able to refute any of the oppositions claims.
    Buckle up, you're biting an iceberg. The single most important resource is https://mises.org/library/books

    Almost every Austrian text ever published is available in PDF/HTML form for free. There are some newer books you have to pay for, but the main body of Austrian theory is right there for anyone to access.

    For starters, I recommend Economics in One Lesson by Henry Hazlitt and The Law by Frederic Bastiat. Then, I recommend reading the first section of Human Action directly. While Mises was a scholar and this book was written to a scholarly audience, he is also an exceptionally clear writer. You will have to search some of the unfamiliar terms he uses on Mises.org (or feel free to reply to this thread or even DM me). From there, I recommend Rothbard, Hoppe, Hulsmann and basically any other Austrian economist.

    As a note of caution... be ready to have your world literally turned upside down, we've been lied to more than you would dare to imagine...
    Last edited by ClaytonB; 02-01-2021 at 01:37 PM.
    Jesus Is Lord

  6. #5
    Answers in bold.

    Quote Originally Posted by libertashine View Post
    One of the many books on my reading list includes "How an Economy Grows and Why It Crashes" by Peter D. Schiff. I admit I basically know nothing about economics other than what I've gathered from the news etc. over the years, and my own experiences. While the book makes it easy for me to understand the basic story of what's been happening to the US (and global) economy over the past century or so, it raises some questions:

    • is it really true that since Nixon took us off the gold standard, that there really is nothing tangible our money is tied to other than faith in the money? It seems completely ludicrous to me that the entire world economy is based on nothing.
      A: Yes, this is why it's called fiat. One of the definitions of fiat: "an arbitrary decree or pronouncement, especially by a person or group of persons having absolute authority to enforce it"
    • Did the crises in the early 20th century really warrant the creation of the Fed? And was the Fed really that evil before FDR? Or was FDR really the one who weaponized it? I'd love some more material to read about FDR and the Fed.
      A: Not really, but this is one of the arguments leftist professors and economists use all of the time. There were regular booms and busts that self-corrected, on average, faster than the ones we have now. I suggest reading The Creature from Jekyll Island. You may also want to start perusing mises.org
    • Is there any credible argument for Keynesian theory, because the way it's been laid out here seems like it's a giant scheme with no safety net.
      Keynesian Economics is just another school, but with its own focuses on spending/expenditure. They view savings as a "no-no" in short. Despite the well researched and argued points from Austrians that savings are what help contribute to wealth creation via various vehicles such as investments or saving for a purpose.
    • If the Fed is supposed to control inflation/deflation, why has there been so much inflation the past 100 years, and do they just do a good job of masking any negative effects?
      The Fed has a mandate, it goes something like this: "Inflation is good. Too much is bad, too little is bad. We like around 2% or so a year to 'prove' things are growing." There's been so much inflation because we have fiat currency, there's nothing backing it anymore. No precious metal to tie it to, etc. So, the Fed ad Congress print and spend, print and spend, etc. And it's what has led to our national debt being nearly $28 trillion: https://usdebtclock.org/ and the non-audited Fed's balance sheet being over $7 trillion: https://www.federalreserve.gov/monet...centtrends.htm
    • Is deflation really that bad? I almost want to make an announcement, that, after learning a bit more about this seemingly ticking time bomb that is our economy, that I would be honored to take on deflation and a resetting of the economy so my children, grandchildren do not have to suffer worse consequences, and resent me decades from now.
      I don't know. I know you don't want a lot of deflation, and the worst is stagflation, which I believe is what hit 1970s U.S.


    I clearly need some more education in this area, so if anyone has any good follow-up books to this one, or good resources I can use to investigate any of these questions further, I would appreciate it very much. Thanks!
    A: Go to mises.org, that's the best place to start! Good luck.

    edit: I should add, who are the proponents to the current system, and are there any good, credible arguments for this current system? I would like to learn it thoroughly enough to be able to refute any of the oppositions claims.
    A: Read Paul Krugman's stuff if you want modern arguments FOR today's current system. Then, I'd suggest listening to Tom Woods and Bob Murphy's Contra Krugman podcast. It's no longer active, but you can still listen to the episodes. They used to refute Krugman's weekly editorials.
    Welcome to the R3VOLUTION!

  7. #6
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  8. #7
    If the dollar is worth less every day, then salaries go down every day. How many people can get a raise every day?

    Quote Originally Posted by acptulsa View Post
    I think what the newcomer to this discussion has the most trouble understanding is the dollar is not a dollar--it's a nickel.

    What do I mean? Well, my old man got out of the Army Air Corps after WWII and got himself a good job paying a dollar an hour. How is that a good job? Easy--it was 1946 and the dollar was still a dollar. As in, when he wanted a Pepsi he paid a nickel for it--now it costs a dollar. When he wanted to ride a bus, he put seven cents in the meter, or a nickel and a half--now it costs a buck and a half. When he wanted to sit down and have a cup of regular old coffee, he paid a dime, or two nickels--now it costs two bucks. When he put gas in the car (it was always cheap in Oklahoma), he paid 14.9 cents per gallon, or three nickles--now it costs three bucks. When he was hungry for lunch, he bought a deluxe double hamburger with all the trimmings for a silver quarter, or five nickles--now it costs five bucks. When he wanted to go to a movie, he paid thirty-five cents or seven nickles--now it costs seven bucks. And when he shopped for a new top of the line Dodge Custom with heater and radio and other options, it would set him back two grand, or forty thousand nickles--now it costs forty thousand dollars.

    The Pepsi isn't any wetter, the gas doesn't burn any brighter, the double burger isn't any more filling, and the movie doesn't last any longer today (with no newsreel, serial and cartoon, it actually doesn't last as long). So, there's only one explanation. The dollar is no longer worth a dollar. The dollar is worth a nickel. Period.

    Why do you think all the five and ten cent stores have been replaced with dollar stores?
    That's powerful incentive for corporations to support the Fed and inflationary policies by itself.
    Quote Originally Posted by DamianTV View Post
    Define Terrorist please.

    According to, well, pretty much both political parties, the other party is now guilty of Terrorism.
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