What to Do with the Deficit?

facko · March 23, 2009, 1:16pm

[quote]dhickey wrote:
facko wrote:

I’m sorry, but you happen to misunderstand the role of the federal reserve. The government does not protect the federal reserve…the federal reserve protects the government. Fractional reserve banking is the MAIN issue…this is a crisis of credit. This whole situation is a crisis of inflation due to ridiculous amounts of created money being poured into the economy. I don’t understand how you can’t see that?

I don’t misunderstand the role of the fed. Fractional reserve banking and other inflationary policy are a fraction of issues that impact the overall health of our economy. The Fed is only allowed to do this by the actions of the federal gov’t.

What would happen if the federal gov’t allowed competing currencies?

You do realize we had recessions and depressions before fiat currency, don’t you?

Well it sounds like you just read some great article on fractional reserve banking and inflationary policy. You are now are quite convinced that these two things alone are the root of all that ails us.

I would encourage you to keep reading. What you’ll find is that there are many other issues hampering economic growth in this country. You will also find that fractional reserve banking and especially other inflationary policy are symtoms, not root causes.

You sounded like a real jackass in your first post on this thread. There are very sharp people on this board. You should make sure you really know what you are talking about before calling others out in the way you did.[/quote]

The problem is…I do more than read…I’ve had over 5 separate economic based classes in college so far as that is my major. If you think I have read some article on fractional reserve banking and said oh okay I understand the economy now, you are wrong. However, they are root causes, not symptoms, there my friend you happen to be wrong.

dhickey · March 23, 2009, 4:08pm

Ahhh…college student. Makes sense now.

You can skip most of the introductory stuff then. Read Von Mises, Hayek, Rothbard, and Smith. They will certainly reinforce what you already know and love about fractional reserve banking and monetary policy, but will also address other dangerous policy and practice.

Then think about all the policies that have to with economics. Trade barriers, direct subsidies, taxation, bureaucratic regulation of every part of the economy, trampling of property rights and freedom of association, gov’t bailouts, deficit spending, welfare, social security, our education system, etc.

To say that fractional reserve banking and fiat currency is root cause of all our economic ills is just plain silly. It no doubt plays a significant role but to focus on this alone is irresponsible. If this is what they are teaching you, I would go to a different school, or take some time to think things through on your own instead of regurgitating what your progressive professors and text books tell you.

Ryan_P_McCarter · March 23, 2009, 5:44pm

Classic dhickey! “If what the economics professors who have degrees and get paid to do this don’t agree with me, you might think about changing schools.”

katzenjammer · March 23, 2009, 6:00pm

[quote]facko wrote:

The problem is…I do more than read…I’ve had over 5 separate economic based classes in college so far as that is my major.
[/quote]

That is so damned funny and in so many ways! lol!

tGunslinger · March 23, 2009, 6:36pm

[quote]katzenjammer wrote:
facko wrote:

The problem is…I do more than read…I’ve had over 5 separate economic based classes in college so far as that is my major.

That is so damned funny and in so many ways! lol! [/quote]

I’ve heard rumors, myths, really, of men who have had three, and the old men in the town square sometimes whisper of a hero who once had four.

But five…

No, never five. “Five cannot be done; it is incomprehensible!” they said.

But it is in harsh times that greatness is revealed, and legends are given the opportunity to demonstrate their greatness. Perhaps the arrogance of the old men was wrong, perhaps five can be done. Perhaps five must be done!

For we come now to a bleakness none of us can fully understand. Perhaps it is from this sterile soil that a Legend of Five must emerge if we are to endure.

False legends have passed through here before, claiming five, five!, before breaking beneath their trials. Let us have hope that this time the rumors are true: that a true Legend of Five has risen. May he show himself to be true, and deliver of us from what evils may come.

DoubleDuce · March 23, 2009, 6:49pm

[quote]tGunslinger wrote:
katzenjammer wrote:
facko wrote:

The problem is…I do more than read…I’ve had over 5 separate economic based classes in college so far as that is my major.

That is so damned funny and in so many ways! lol!

I’ve heard rumors, myths, really, of men who have had three, and the old men in the town square sometimes whisper of a hero who once had four.

But five…

No, never five. “Five cannot be done; it is incomprehensible!” they said.

But it is in harsh times that greatness is revealed, and legends are given the opportunity to demonstrate their greatness. Perhaps the arrogance of the old men was wrong, perhaps five can be done. Perhaps five must be done!

For we come now to a bleakness none of us can fully understand. Perhaps it is from this sterile soil that a Legend of Five must emerge if we are to endure.

False legends have passed through here before, claiming five, five!, before breaking beneath their trials. Let us have hope that this time the rumors are true: that a true Legend of Five has risen. May he show himself to be true, and deliver of us from what evils may come.[/quote]

Yeah, but he should try a math competition vs. drivethrough.

facko · March 23, 2009, 6:53pm

My professors have yet to ever touch on anything of substance regarding the truth of the federal reserve. However, I can tell it will be absolutely futile to debate with anyone on this board as 90% of you are neo-conservatives and somehow let that bleed into your economic babel.

3

5

7

katzenjammer · March 23, 2009, 7:07pm

[quote]facko wrote:

3

5

7

[/quote]

Verily I say unto you, the hero who comes among us to make the claim of “five,” and smite a beast of straw he calls “neocon,” will go by the sign of three prime numbers. Believe this truly.

tGunslinger · March 23, 2009, 3:14pm

[quote]Ryan P. McCarter wrote:
Classic dhickey! “If what the economics professors who have degrees and get paid to do this don’t agree with me, you might think about changing schools.”[/quote]

Except in this instance, he happens to be correct.

Fiat currency and fractional reserve are NOT causing this. Blaming them for causing this is like blaming the sports car when a teenage girl wraps it around a tree.

Fiat currency and fractional reserve banking are superior to what came before when they’re used responsibly. But government irresponsibility, bailouts, handouts, subsidies, and “safety-nets” have stifled our ability to learn how to use these things responsibly.

Government intervention that distorts the perception of risk is what is causing this. The failures of AIG, Citi, et al. should stand as a monument to how fractional reserve can turn on you when used irresponsibly. Instead, their continued artificial existence stands as evidence that you can defy risk and still come out ahead. And they exist today only because of gov’t intrusion.

Fiat currency is superior, strategically speaking, to a commodity-backed currency. Exchange rates and dollar values can be easily manipulated to your advantage. Look at China: devalued currency means exchange rates favorable for exporting means an advantageous position for Chinese industry. If their strategic position changes, the value of their currency can be readily altered. It’s more difficult, but not impossible, to do this with commodity currency.

However, the price of this advantage is that the currency must be used responsibly: you cannot print your way out of a jam. If fiat currency is used as a money tree, the whole currency collapses.

So in today’s America, I think a commodity currency would be preferable, but that’s a condemnation of our gov’t irresponsibility, not on the idea of fiat currency itself.

If the five-courses guy’s professors are teaching him that fiat currency and fractional reserve systems will inevitably lead to collapse, regardless of how they’re used, they’re wrong. Period. Abusing these systems will lead to collapse.

If those professors are teaching him that basic human nature can quickly cause these systems to collapse, and they should thusly be avoided, I don’t entirely disagree.

orion · March 23, 2009, 4:08pm

[quote]tGunslinger wrote:
Ryan P. McCarter wrote:
Classic dhickey! “If what the economics professors who have degrees and get paid to do this don’t agree with me, you might think about changing schools.”

Except in this instance, he happens to be correct.

Fiat currency and fractional reserve are NOT causing this. Blaming them for causing this is like blaming the sports car when a teenage girl wraps it around a tree.

Fiat currency and fractional reserve banking are superior to what came before when they’re used responsibly. But government irresponsibility, bailouts, handouts, subsidies, and “safety-nets” have stifled our ability to learn how to use these things responsibly.

Government intervention that distorts the perception of risk is what is causing this. The failures of AIG, Citi, et al. should stand as a monument to how fractional reserve can turn on you when used irresponsibly. Instead, their continued artificial existence stands as evidence that you can defy risk and still come out ahead. And they exist today only because of gov’t intrusion.

Fiat currency is superior, strategically speaking, to a commodity-backed currency. Exchange rates and dollar values can be easily manipulated to your advantage. Look at China: devalued currency means exchange rates favorable for exporting means an advantageous position for Chinese industry. If their strategic position changes, the value of their currency can be readily altered. It’s more difficult, but not impossible, to do this with commodity currency.

However, the price of this advantage is that the currency must be used responsibly: you cannot print your way out of a jam. If fiat currency is used as a money tree, the whole currency collapses.

So in today’s America, I think a commodity currency would be preferable, but that’s a condemnation of our gov’t irresponsibility, not on the idea of fiat currency itself.

If the five-courses guy’s professors are teaching him that fiat currency and fractional reserve systems will inevitably lead to collapse, regardless of how they’re used, they’re wrong. Period. Abusing these systems will lead to collapse.

If those professors are teaching him that basic human nature can quickly cause these systems to collapse, and they should thusly be avoided, I don’t entirely disagree.[/quote]

So fiat currencies could work if only democratically elected politicians would use it wisely and for the good of all and if those at the steering wheel are not tempted by the fact that they can move billions and are completely untouchable.

In other words, fiat currencies do not work and never will, for we need a currency system that can be run by mere human beings.

dhickey · March 23, 2009, 8:38pm

[quote]orion wrote:

In other words, fiat currencies do not work and never will, for we need a currency system that can be run by mere human beings.

[/quote]

In today’s world with today’s laws, yes. Any currency could be protected with the rule of law. If I knew how to highlight text in a post, I would highlight the word ‘could’.

The problem is the abusers, not the instument of abuse. No matter what you do with the currency, those in power will still negatively effect the economy if allowed.

What’s the alternative to them printing money? History tells us it’s ridiculously hight income tax rates, tariffs, and borrowing money with no plan to pay it back. Is this really any better than inflation?

orion · March 23, 2009, 9:29pm

[quote]dhickey wrote:
orion wrote:

In other words, fiat currencies do not work and never will, for we need a currency system that can be run by mere human beings.

In today’s world with today’s laws, yes. Any currency could be protected with the rule of law. If I knew how to highlight text in a post, I would highlight the word ‘could’.

The problem is the abusers, not the instument of abuse. No matter what you do with the currency, those in power will still negatively effect the economy if allowed.

What’s the alternative to them printing money? History tells us it’s ridiculously hight income tax rates, tariffs, and borrowing money with no plan to pay it back. Is this really any better than inflation?[/quote]

I do not know how history can tell you this when monarchies rarely exceeded 10% in government spending, income taxes were a unusual thing and there were only gold currencies.

Also, inflation hides costs.

If todays governments can only be financed by a ridiculously high income tax, that is what it already costs us now. People would have to face true cost of their actions.

dhickey · March 23, 2009, 9:46pm

[quote]orion wrote:
If todays governments can only be financed by a ridiculously high income tax, that is what it already costs us now. People would have to face true cost of their actions. [/quote]

Precisely. The root of the problem is not monitary policy. It is abuse by our elected officials. If you think the gold standard and a 100% reserve system will change this in any way, you are dreaming. We ( i don’t know about austria) need to return to rule by law. We need to limit the power of the federal gov’t. If you can successfully do this, a fiat money supply and fractional reserve banking will not be nearly as ominous.

I don’t like our monetary policy one bit, but I don’t beleive the gold standard, or a 100% reserve system is the panacea many think it is. The biggest (so far) financial catastrophy in US history happend while on the gold standard. It also had very little to do with fractional reserve banking, although that seems to be the popular pictorial.

facko · March 23, 2009, 10:10pm

[quote]dhickey wrote:
orion wrote:
If todays governments can only be financed by a ridiculously high income tax, that is what it already costs us now. People would have to face true cost of their actions.

Precisely. The root of the problem is not monitary policy. It is abuse by our elected officials. If you think the gold standard and a 100% reserve system will change this in any way, you are dreaming. We ( i don’t know about austria) need to return to rule by law. We need to limit the power of the federal gov’t. If you can successfully do this, a fiat money supply and fractional reserve banking will not be nearly as ominous.

I don’t like our monetary policy one bit, but I don’t beleive the gold standard, or a 100% reserve system is the panacea many think it is. The biggest (so far) financial catastrophy in US history happend while on the gold standard. It also had very little to do with fractional reserve banking, although that seems to be the popular pictorial.

[/quote]

There are many bright economists who would disagree. If you believe that government should have no involvement in economy, you my friend are the one who is blind.

dhickey · March 23, 2009, 10:45pm

[quote]facko wrote:
dhickey wrote:
orion wrote:
If todays governments can only be financed by a ridiculously high income tax, that is what it already costs us now. People would have to face true cost of their actions.

Precisely. The root of the problem is not monitary policy. It is abuse by our elected officials. If you think the gold standard and a 100% reserve system will change this in any way, you are dreaming. We ( i don’t know about austria) need to return to rule by law. We need to limit the power of the federal gov’t. If you can successfully do this, a fiat money supply and fractional reserve banking will not be nearly as ominous.

I don’t like our monetary policy one bit, but I don’t beleive the gold standard, or a 100% reserve system is the panacea many think it is. The biggest (so far) financial catastrophy in US history happend while on the gold standard. It also had very little to do with fractional reserve banking, although that seems to be the popular pictorial.

There are many bright economists who would disagree. If you believe that government should have no involvement in economy, you my friend are the one who is blind. [/quote]

Bold statement. Care to back it up with logic? Marx was a bright economist so your first sentence tells me nothing. There are also plenty of Keynesians, but that doesn’t mean their economic theory is valid.

Gov’ts job is to protect us from force, coersion, and fraud. Not to babysit us and protect us from ourselves.

facko · March 23, 2009, 11:07pm

[quote]dhickey wrote:
facko wrote:
dhickey wrote:
orion wrote:
If todays governments can only be financed by a ridiculously high income tax, that is what it already costs us now. People would have to face true cost of their actions.

Precisely. The root of the problem is not monitary policy. It is abuse by our elected officials. If you think the gold standard and a 100% reserve system will change this in any way, you are dreaming. We ( i don’t know about austria) need to return to rule by law. We need to limit the power of the federal gov’t. If you can successfully do this, a fiat money supply and fractional reserve banking will not be nearly as ominous.

I don’t like our monetary policy one bit, but I don’t beleive the gold standard, or a 100% reserve system is the panacea many think it is. The biggest (so far) financial catastrophy in US history happend while on the gold standard. It also had very little to do with fractional reserve banking, although that seems to be the popular pictorial.

There are many bright economists who would disagree. If you believe that government should have no involvement in economy, you my friend are the one who is blind.

Bold statement. Care to back it up with logic? Marx was a bright economist so your first sentence tells me nothing. There are also plenty of Keynesians, but that doesn’t mean their economic theory is valid.

Gov’ts job is to protect us from force, coersion, and fraud. Not to babysit us and protect us from ourselves.[/quote]

So people who work for the government do not fit into the “ourselves” category? Where does the line exist? And you are accusing me of being unlogical…

dhickey · March 23, 2009, 11:12pm

[quote]facko wrote:
dhickey wrote:
facko wrote:
dhickey wrote:
orion wrote:
If todays governments can only be financed by a ridiculously high income tax, that is what it already costs us now. People would have to face true cost of their actions.

Precisely. The root of the problem is not monitary policy. It is abuse by our elected officials. If you think the gold standard and a 100% reserve system will change this in any way, you are dreaming. We ( i don’t know about austria) need to return to rule by law. We need to limit the power of the federal gov’t. If you can successfully do this, a fiat money supply and fractional reserve banking will not be nearly as ominous.

I don’t like our monetary policy one bit, but I don’t beleive the gold standard, or a 100% reserve system is the panacea many think it is. The biggest (so far) financial catastrophy in US history happend while on the gold standard. It also had very little to do with fractional reserve banking, although that seems to be the popular pictorial.

There are many bright economists who would disagree. If you believe that government should have no involvement in economy, you my friend are the one who is blind.

Bold statement. Care to back it up with logic? Marx was a bright economist so your first sentence tells me nothing. There are also plenty of Keynesians, but that doesn’t mean their economic theory is valid.

Gov’ts job is to protect us from force, coersion, and fraud. Not to babysit us and protect us from ourselves.

So people who work for the government do not fit into the “ourselves” category? Where does the line exist? And you are accusing me of being unlogical…[/quote]

I am the only person that fits into myself. You are yourself. I am not yourself and you are not myself.

You’re not that bright and I am no longer going to waste my time being silly with you.

Regards

facko · March 23, 2009, 11:19pm

[quote]dhickey wrote:
facko wrote:
dhickey wrote:
facko wrote:
dhickey wrote:
orion wrote:
If todays governments can only be financed by a ridiculously high income tax, that is what it already costs us now. People would have to face true cost of their actions.