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| Which candidate do you think would be the worst president? |
| Barack Obama |
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12% |
[ 6 ] |
| Mitt Romney |
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4% |
[ 2 ] |
| Newt Gingrich |
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22% |
[ 11 ] |
| Rick Santorum |
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41% |
[ 20 ] |
| Ron Paul |
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18% |
[ 9 ] |
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| Total Votes : 48 |
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Kuros
Joined: 27 Apr 2004
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 Posted: Fri Feb 24, 2012 8:42 pm Post subject: |
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| Unposter wrote: |
First of all, thanks to all of you tried to answer my question.
Second of all, Kuros, I never said Obama "controlls" the stock market. I have come to expect more from you than that. But, do you disagree that he has a "strong influence" on it. Isn't the stock market an indicator of the economy? |
I came down rather hard on you, I admit, but the stock market is a TERRIBLE indicator of the health of the economy. You were on better ground with unemployment, but the President's impact on that is often indirect, although unfortunately too many evaluate a President based on unemployment rates. Yes, I disagree strongly that any President could have any significant influence on the stock market in a reasonably free market system. I'm sure his pronouncements have unintended short-term ripples, as the market is very jumpy. But if I were a supporter of a President, the LAST thing I'd accept that the President had responsibility over was stock market performance.
Let me take this moment to point out that I am not really an Austrian, per se. I appreciate their presence in the debate, but I am more of a non-Keynesian than anything else. I more interested in Austrian criticisms of Keynesianism or the status quo than Austrian solutions.
| unposter wrote: |
Anyway, can you give me some ideas about what the economy would look like under a Ron Paul administration? |
You could expect some short-term pain, although its easy to overstate this because Ron Paul wouldn't be able to get too many of his programs through Congress. I would expect some austerity measures and his administration to slash as much of the Federal budget as possible, particularly in discretionary and military spending. I have a feeling Ron Paul wouldn't tackle Medicare reductions despite his rhetoric, simply because its not his top priority and he would quickly find himself spread too thin. The big three entitlement programs are actually popular among the GOP base, but you wouldn't know it from discussing it with them (you'd quickly find out after cutting these programs).
I expect he would unilaterally end the drug war, which is a matter the President actually has immense power over. I would also expect a revolution in the way he utilizes the Department of Justice; he would probably be the first President to use the DoJ to challenge a host of existing laws that he would be loathe to enforce.
I expect he would declare war on the Fed. This would extremely interesting, as Presidents historically have been extraordinarily deferential to the Fed Reserve. (This has changed under the Obama administration, actually, but its a rather untold story. So the Left would attempt to eviscerate Ron Paul for overreaching in honest ignorance about how Obama has tamed the Fed over the past few years). The Fed would probably withstand a Ron Paul presidency, though, but expect its emergency powers to be restricted (not a bad thing). |
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fermentation
Joined: 22 Jun 2009
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| Posted: Fri Feb 24, 2012 9:26 pm Post subject: |
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| Its funny how people voted for Paul but not Romney. If you think Obama is terrible, what makes you think Romney will be any better? Dude is just an establishment puppet who will do pretty much the same things Obama does. |
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ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
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| Posted: Sat Feb 25, 2012 12:25 pm Post subject: |
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| fermentation wrote: |
| Its funny how people voted for Paul but not Romney. If you think Obama is terrible, what makes you think Romney will be any better? Dude is just an establishment puppet who will do pretty much the same things Obama does. |
The poll askes for a single "worst" candidate. This elicits a response based on one's greatest fears. Romney is milquetoast, representing the least chance of any change, so the least fear. |
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Unposter
Joined: 04 Jun 2006
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| Posted: Sat Feb 25, 2012 11:08 pm Post subject: |
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Again, thanks for the honest answers, and some good information there, too!
I have some more questions if you don't mind:
Do you think cutting the federal budget will lead to a decline in wages and eventually to a decline in prices as people have less money to spend?
Do you think "austerity" (I guess there is a wide possibility of what that can mean) programs would hurt current stock prices and home values?
What do you think will be the impact of a "shifting of burden" from the Federal level to the state level? Would there be additional costs for states that did not have the "infrastructure" to run some of the programs that are now being run at the federal level?
Do you think states will enact more draconian drug laws if the federal government stops enforcing drug laws? (I will assume there won't be the political support in Congress to change the laws but if you disagree I would be interested to hear your thoughts and ideas).
Will Ron Paul do anything in terms of unemployment insurance or other programs to help the currently unemployed?
Obama said that his stimulous was an investment in the U.S. economy (research, investments in new technologies, infrastructure development - I don't know what all). Do you think that is possible? Was it just poorly executed? Has it worked? Could it still trigger improvements in the economy?
Do you think Ron Paul would repeal any/all of the health care reforms?
I understand that is a lot of questions. Answer any (or none) that you can. Sadly, I probably have more questions... |
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comm
Joined: 22 Jun 2010
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| Posted: Sun Feb 26, 2012 2:03 am Post subject: |
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| Unposter wrote: |
1. Do you think cutting the federal budget will lead to a decline in wages and eventually to a decline in prices as people have less money to spend?
2. Do you think "austerity" (I guess there is a wide possibility of what that can mean) programs would hurt current stock prices and home values?
3. What do you think will be the impact of a "shifting of burden" from the Federal level to the state level? Would there be additional costs for states that did not have the "infrastructure" to run some of the programs that are now being run at the federal level?
4. Do you think states will enact more draconian drug laws if the federal government stops enforcing drug laws? (I will assume there won't be the political support in Congress to change the laws but if you disagree I would be interested to hear your thoughts and ideas).
5. Will Ron Paul do anything in terms of unemployment insurance or other programs to help the currently unemployed?
6. Obama said that his stimulous was an investment in the U.S. economy (research, investments in new technologies, infrastructure development - I don't know what all). Do you think that is possible? Was it just poorly executed? Has it worked? Could it still trigger improvements in the economy?
7. Do you think Ron Paul would repeal any/all of the health care reforms?
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(My numeration for ease of answering)
1. Cutting the Federal budget doesn't erase money, it keeps it in people's pockets. So technically, this is an increase in wages. However, ending deficit spending would reduce economic activity... but it would also reduce inflation and increase everyone's spending power.
2. If inflation dramatically decreases, the dollar will have more buying power. This decreases the nominal value of things like stocks, commodities, homes, etc. that are valued in dollars. Cutting deficit spending would therefore decrease the nominal value of these things, simply because each dollar buys more of it.
3. The primary effect would be that many things would be cut, and those that States take up would be much more efficiently run. Most States have a smaller version of the Federal programs that would be cut (Dept. of Education, Dept. of Interior, etc.) and these would likely be expanded.
4. Actually, the President has a LOT of power in deciding what Federal laws are enforced. The higher-ups serve at the pleasure of the President, so he simply has to tell them not to enforce these laws. Similarly, he has the authority to pardon anyone convicted of a Federal crime. Paul has stated that he wouldn't be opposed to pardoning non-violent drug offenders (particularly for simple possession).
5. Paul wouldn't, but the States would be welcome to.
6. If we had zero debt or a surplus (as Keynesian theory would expect after a market upswing) I wouldn't be opposed to the stimulus plan. You'll find the details of why it's a dangerous gamble in my last post before this one...
7. He would do everything in his power to end it as a Federal program, yes. |
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jaykimf
Joined: 24 Apr 2004
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| Posted: Tue Feb 28, 2012 10:01 am Post subject: |
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| Kuros wrote: |
Not at all. I presented a CRFB study and then an EU study accompanied by reasoned argument. And what I got in return was a NYTimes op-ed and moaning about cheap shots from a poster who is accustomed to taking cheap shots at me.
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OK, I guess you could argue that a simplistic Non sequitur is better than an ad hominem, but not by much.
You smugly asserted that those who thought Ron Paul would be the worst candidate , needed some education on US gov't fiscal affairs and cited a study supposedly showing that Ron Paul would be the best (or least bad) on reducing the deficit. It simply does not follow that being the best on the deficit, says anything about whether Paul would be the worst or best candidate, since reducing the deficit is not the only issue to be considered. Furthermore , since the study's methodology ignores any potential macrodynamic effects, it is not even clear that Paul's policies would actually end up being best on the deficit. Policies that resulted in a depression would actually make the deficit even worse. There is a whole range of potential policies for addressing the deficit. Some policies may be much better , others much worse. The policies that cut the deficit by the largest amount are not necessarily the best policies. The study takes no stand on whether Paul's policies are the best or worst for addressing the problems the U.S. faces. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Wed Feb 29, 2012 6:19 am Post subject: |
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The Stimulus wasn't very effective. It cost $250,000 per job.
Total Stimulus, with Fed Reserve funds counted, was $3.4 trillion
| Quote: |
Obama was promising to �save or create� 3 million jobs, a promise he fell way short of. Since he took office, the labor force participation rate has dropped from 65.7 percent to 63.7 percent, resulting in over 4.7 million people have been dropped out of the civilian labor force.
In fact, there were almost 142.2 million people employed when Obama took office. Now, that number dropped to a low of 137.9 million in Dec. 2009 and has only risen to 141.6 million since then. The economy is not even keeping up with the growth of the population, let alone reclaiming a single one of the lost 8 million jobs in this recession.
Romer�s call for more �stimulus� was similar to that of New York Times columnist Paul Krugman. In 2009, he claimed that the Obama �stimulus� was too small to fill a $2.1 trillion hole. So, with the sorry state particularly of the labor market, were Romer and Krugman right?
When actions by the Federal Reserve to expand its balance sheet are taken into consideration � it purchased $1.25 trillion of mortgage-backed securities, $150 billion of Fannie and Freddie debt, and $1.191 of trillion treasuries since Jan. 2009 � the total �stimulus� issued by government has totaled nearly $3.4 trillion.
That exceeds what Romer and Krugman called for by over $1 trillion � with little to show for it. Romer had claimed if the �stimulus� passed that unemployment would be down to 6 percent by now.
Not only did it pass, but the Fed threw $2.6 trillion on top of it for good measure. Yet, a true measure of unemployment that takes into account the drop in working age adults from being counted by the government shows that rate is at 11.01 percent. Those underemployed at 17.6 percent. |
I realize the Stimulus was inefficient, and cannot form a perfect stand-in for well-targeted macroeconomic intervention. Nevertheless, macroeconomic policy is made in this country with this Congress and this Fed. So part of my position against Stimulus is that it won't work with these clowns, although I am also skeptical that macroeconomic stimulus can really ever add justifying value. |
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sirius black
Joined: 04 Jun 2010
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| Posted: Wed Feb 29, 2012 9:36 am Post subject: |
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The more I see of Santorum the scarier he gets. He's gone from bafoonery to straight out dangerous in some cases. you wonder how a guy like that gets elected. Pennsylvania has been described politically as Philadelphia and Pittsburgh at each end with Alabama inbetween.
Funny thing is though as a VP on the ticket he could get Romney the election with a little luck. |
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bucheon bum
Joined: 16 Jan 2003
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| Posted: Wed Feb 29, 2012 11:07 am Post subject: |
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| Kuros wrote: |
The Stimulus wasn't very effective. It cost $250,000 per job.
Total Stimulus, with Fed Reserve funds counted, was $3.4 trillion
| Quote: |
Obama was promising to �save or create� 3 million jobs, a promise he fell way short of. Since he took office, the labor force participation rate has dropped from 65.7 percent to 63.7 percent, resulting in over 4.7 million people have been dropped out of the civilian labor force.
In fact, there were almost 142.2 million people employed when Obama took office. Now, that number dropped to a low of 137.9 million in Dec. 2009 and has only risen to 141.6 million since then. The economy is not even keeping up with the growth of the population, let alone reclaiming a single one of the lost 8 million jobs in this recession.
Romer�s call for more �stimulus� was similar to that of New York Times columnist Paul Krugman. In 2009, he claimed that the Obama �stimulus� was too small to fill a $2.1 trillion hole. So, with the sorry state particularly of the labor market, were Romer and Krugman right?
When actions by the Federal Reserve to expand its balance sheet are taken into consideration � it purchased $1.25 trillion of mortgage-backed securities, $150 billion of Fannie and Freddie debt, and $1.191 of trillion treasuries since Jan. 2009 � the total �stimulus� issued by government has totaled nearly $3.4 trillion.
That exceeds what Romer and Krugman called for by over $1 trillion � with little to show for it. Romer had claimed if the �stimulus� passed that unemployment would be down to 6 percent by now.
Not only did it pass, but the Fed threw $2.6 trillion on top of it for good measure. Yet, a true measure of unemployment that takes into account the drop in working age adults from being counted by the government shows that rate is at 11.01 percent. Those underemployed at 17.6 percent. |
I realize the Stimulus was inefficient, and cannot form a perfect stand-in for well-targeted macroeconomic intervention. Nevertheless, macroeconomic policy is made in this country with this Congress and this Fed. So part of my position against Stimulus is that it won't work with these clowns, although I am also skeptical that macroeconomic stimulus can really ever add justifying value. |
Did I miss something? How is buying debt and bad mortgages a stimulus? It's a bailout and an attempt to salvage the financial markets.
And who knows how many more jobs would have been lost if not for the stimulus? Yes, Obama's plan didn't achieve what his team hoped for, but I think that's partially because they didn't realize how dire things were....
Not to excuse him or the stimulus, but I would hardly say it is proof that the idea was bad. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Wed Feb 29, 2012 12:21 pm Post subject: |
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| bucheon bum wrote: |
| Kuros wrote: |
The Stimulus wasn't very effective. It cost $250,000 per job.
Total Stimulus, with Fed Reserve funds counted, was $3.4 trillion
| Quote: |
Obama was promising to �save or create� 3 million jobs, a promise he fell way short of. Since he took office, the labor force participation rate has dropped from 65.7 percent to 63.7 percent, resulting in over 4.7 million people have been dropped out of the civilian labor force.
In fact, there were almost 142.2 million people employed when Obama took office. Now, that number dropped to a low of 137.9 million in Dec. 2009 and has only risen to 141.6 million since then. The economy is not even keeping up with the growth of the population, let alone reclaiming a single one of the lost 8 million jobs in this recession.
Romer�s call for more �stimulus� was similar to that of New York Times columnist Paul Krugman. In 2009, he claimed that the Obama �stimulus� was too small to fill a $2.1 trillion hole. So, with the sorry state particularly of the labor market, were Romer and Krugman right?
When actions by the Federal Reserve to expand its balance sheet are taken into consideration � it purchased $1.25 trillion of mortgage-backed securities, $150 billion of Fannie and Freddie debt, and $1.191 of trillion treasuries since Jan. 2009 � the total �stimulus� issued by government has totaled nearly $3.4 trillion.
That exceeds what Romer and Krugman called for by over $1 trillion � with little to show for it. Romer had claimed if the �stimulus� passed that unemployment would be down to 6 percent by now.
Not only did it pass, but the Fed threw $2.6 trillion on top of it for good measure. Yet, a true measure of unemployment that takes into account the drop in working age adults from being counted by the government shows that rate is at 11.01 percent. Those underemployed at 17.6 percent. |
I realize the Stimulus was inefficient, and cannot form a perfect stand-in for well-targeted macroeconomic intervention. Nevertheless, macroeconomic policy is made in this country with this Congress and this Fed. So part of my position against Stimulus is that it won't work with these clowns, although I am also skeptical that macroeconomic stimulus can really ever add justifying value. |
Did I miss something? How is buying debt and bad mortgages a stimulus? It's a bailout and an attempt to salvage the financial markets.
And who knows how many more jobs would have been lost if not for the stimulus? Yes, Obama's plan didn't achieve what his team hoped for, but I think that's partially because they didn't realize how dire things were....
Not to excuse him or the stimulus, but I would hardly say it is proof that the idea was bad. |
I agree that buying debt and bad mortgages is a bailout. But its money spent, and the opportunity cost is the same: money spent on bailouts is money unavailable for stimulus is money unavailable for paying down the national debt. Thus, its very bad macroeconomic policy (a term broader than stimulus and which encompasses bailouts), which is the assumption I started from when I admitted that stimulus in theory should perform better than the stimulus we got. Perhaps I should have used the term 'macroeconomic intervention' all the way through. The bailout happened, money was spent, and the macroeconomic effect was very poor. |
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jaykimf
Joined: 24 Apr 2004
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| Posted: Thu Mar 01, 2012 10:00 am Post subject: |
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| Kuros wrote: |
I agree that buying debt and bad mortgages is a bailout. But its money spent, and the opportunity cost is the same: money spent on bailouts is money unavailable for stimulus is money unavailable for paying down the national debt. Thus, its very bad macroeconomic policy (a term broader than stimulus and which encompasses bailouts), which is the assumption I started from when I admitted that stimulus in theory should perform better than the stimulus we got. Perhaps I should have used the term 'macroeconomic intervention' all the way through. The bailout happened, money was spent, and the macroeconomic effect was very poor. |
Sorry, but you're wrong. It is true that if the Fed. Govt. spends money on one thing there is an opportunity cost and the money cannot be spent on something else. It is not the same with the Fed. When the Fed spends money on one thing, it does not take the money away from something else. The Fed has a bottomless checkbook and unlimited spending power. It simply creates the money that it spends and does not have an opportunity cost in the same way that the Govt. does.
Furthermore, when the Fed buys mortgage securities, it does not simply give the money away. It receives financial assets which theoretically could yield a profit. Of course we all know that considering the quality of the assets, they are going to end up with a loss. I have no idea how much that loss will eventually be. Have you seen any hard statistics on how much they will end up losing? It is invalid to assume the entire investment will be lost.
In addition the purchases were not made as investments or for the purpose of creating jobs. The intention was supposedly to prevent the total collapse of the banking system. The program should be judged on whether it achieved that purpose. Or perhaps on whether it was necessary or desirable to achieve that purpose. It should not be judged on how many jobs it created. If the banking system had collapsed, it is impossible to know how many jobs would have been lost.
As for the Fed's purchase of treasuries, it is not spending money that could otherwise be used to pay down the national debt. On the contrary, it essentially is reducing the government's debt. That is the process by which the government's debt is monetized. The Fed creates money to buy U.S. debt and the $ 1trillion+ that the Fed will receive as the Govt. pays off the securities will be turned around and remitted to the U.S. Treasury.
Furthermore, Fiscal policy and Monetary policy are not the same thing. They operate in different ways for potentially different purposes. It is simply not right to lump them together and simplistically pass judgement as if they were the same thing and had the same purposes and the same results. Whether the Fiscal stimulus was good or bad economic policy should not be decided based on the results of the Fed's monetary policy. Some people insist that the stimulus was not successful because it did not return us to the level of prosperity we previously enjoyed. Others maintain that it was successful because we are doing much better than we would have without it. Krugman and others who said that a much larger fiscal stimulus was necessary may be right. Whatever monetary policies the Fed may have undertaken were simply not the Fiscal stimulus that was being asked for. They are not the same thing and do not have the same effect. |
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visitorq
Joined: 11 Jan 2008
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| Posted: Thu Mar 01, 2012 11:35 am Post subject: |
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| jaykimf wrote: |
| The Fed has a bottomless checkbook and unlimited spending power. It simply creates the money that it spends and does not have an opportunity cost in the same way that the Govt. does. |
Yeah the Fed is pretty much god-like. They can just wave a magical wand and create limitless sums of money to solve all our problems. That's simply all there is to it, and (since the Fed has such an aura of mystique wrapped around it) there cannot be any negative consequences involved.
| Quote: |
| Furthermore, when the Fed buys mortgage securities, it does not simply give the money away. |
The Fed does simply give the money away when they have interests rate a near zero. The main reason the mortgage bubble was created in the first place. Buying back the worthless assets afterward does not magically give them value.
| Quote: |
| In addition the purchases were not made as investments or for the purpose of creating jobs. The intention was supposedly to prevent the total collapse of the banking system. The program should be judged on whether it achieved that purpose. Or perhaps on whether it was necessary or desirable to achieve that purpose. It should not be judged on how many jobs it created. If the banking system had collapsed, it is impossible to know how many jobs would have been lost. |
What a bunch of sophistry. Of course the Fed should be judged for the overall state of the economy, since we would not be in this situation were it not for the Fed first enabling the bubble to form and then "preventing the collapse of the banking system", as you say, which is simply incentivizing the risky behavior of the suicide bankers (and prevents bad assets from being liquidated so they can be put to more productive use). What it really signifies is that the banks can do whatever they want, no matter the cost, and will always be bailed out. Resulting inflation also means that resources are misallocated away from wealth producers into the hands of money creators, which has a negative impact on the real economy (including unemployment).
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| As for the Fed's purchase of treasuries, it is not spending money that could otherwise be used to pay down the national debt. On the contrary, it essentially is reducing the government's debt. That is the process by which the government's debt is monetized. The Fed creates money to buy U.S. debt and the $ 1trillion+ that the Fed will receive as the Govt. pays off the securities will be turned around and remitted to the U.S. Treasury. |
More nonsense and sophistry. Monetizing the debt is the same as reducing it? What a joke. None of the favorable outcomes you predict have ever happened in the history of central banking. Because that debt is not eliminated, it is simply repackaged and sold off, without creating any real value whatsoever (because it has none). The only result of this ongoing shell game has been and will continue to be prolonged stagnation at best, and rampant inflation (or even the destruction of the dollar) at worst.
| Quote: |
| Furthermore, Fiscal policy and Monetary policy are not the same thing. They operate in different ways for potentially different purposes. |
And yet they are obviously directly related to one another. Fiscal policy like bailing out mega-banks that have inflated massive economic bubbles (with free money from the the Fed) directly affects the money supply insofar as it incentivizes said destructive behavior. Last time I checked the banks were still trading derivatives (and paying out record bonuses while the rest of the economy rots). They are simply trying to use fiscal policy to reflate the bubble. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Fri Apr 06, 2012 5:53 am Post subject: |
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| jaykimf wrote: |
| Kuros wrote: |
I agree that buying debt and bad mortgages is a bailout. But its money spent, and the opportunity cost is the same: money spent on bailouts is money unavailable for stimulus is money unavailable for paying down the national debt. Thus, its very bad macroeconomic policy (a term broader than stimulus and which encompasses bailouts), which is the assumption I started from when I admitted that stimulus in theory should perform better than the stimulus we got. Perhaps I should have used the term 'macroeconomic intervention' all the way through. The bailout happened, money was spent, and the macroeconomic effect was very poor. |
Sorry, but you're wrong. It is true that if the Fed. Govt. spends money on one thing there is an opportunity cost and the money cannot be spent on something else. It is not the same with the Fed. When the Fed spends money on one thing, it does not take the money away from something else. The Fed has a bottomless checkbook and unlimited spending power. It simply creates the money that it spends and does not have an opportunity cost in the same way that the Govt. does. |
Money creation has an effect. It creates inflation. This represents a wealth tax.
Moreover, the Fed doesn't have the complete power to create money that you or its critics ascribe to it.
| Quote: |
| The real power to create money lies not in the Fed�s ability to print it, but in the multiplier effect of fractional reserve banking. |
So I get to repeat your favorite phrase: you are wrong. |
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Privateer
Joined: 31 Aug 2005
Location: Easy Street.
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| Posted: Fri Apr 06, 2012 7:42 pm Post subject: |
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| ontheway wrote: |
| fermentation wrote: |
| Its funny how people voted for Paul but not Romney. If you think Obama is terrible, what makes you think Romney will be any better? Dude is just an establishment puppet who will do pretty much the same things Obama does. |
The poll askes for a single "worst" candidate. This elicits a response based on one's greatest fears. Romney is milquetoast, representing the least chance of any change, so the least fear. |
I voted Romney as worst candidate precisely because with him there is least chance of any change. Just more of the same old disastrous agenda being pushed down our throats.
The same goes for Obama, but Romney would do it more ruthlessly. |
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jaykimf
Joined: 24 Apr 2004
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| Posted: Mon Apr 09, 2012 8:50 am Post subject: |
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| Kuros wrote: |
| jaykimf wrote: |
| Kuros wrote: |
I agree that buying debt and bad mortgages is a bailout. But its money spent, and the opportunity cost is the same: money spent on bailouts is money unavailable for stimulus is money unavailable for paying down the national debt. Thus, its very bad macroeconomic policy (a term broader than stimulus and which encompasses bailouts), which is the assumption I started from when I admitted that stimulus in theory should perform better than the stimulus we got. Perhaps I should have used the term 'macroeconomic intervention' all the way through. The bailout happened, money was spent, and the macroeconomic effect was very poor. |
Sorry, but you're wrong. It is true that if the Fed. Govt. spends money on one thing there is an opportunity cost and the money cannot be spent on something else. It is not the same with the Fed. When the Fed spends money on one thing, it does not take the money away from something else. The Fed has a bottomless checkbook and unlimited spending power. It simply creates the money that it spends and does not have an opportunity cost in the same way that the Govt. does. |
Money creation has an effect. It creates inflation. This represents a wealth tax.
Moreover, the Fed doesn't have the complete power to create money that you or its critics ascribe to it.
| Quote: |
| The real power to create money lies not in the Fed�s ability to print it, but in the multiplier effect of fractional reserve banking. |
So I get to repeat your favorite phrase: you are wrong. |
No, what I said is correct. I have never denied that the Fed's creation of money can cause inflation. On the contrary, I pointed out in my post from which you quoted above that the Fed's creation of money is the process by which it can monetize the debt. Please read this: http://en.wikipedia.org/wiki/Monetization#Effects_on_inflation In fact though, the creation of additional money may or may not result in inflation depending on the circumstances. It is interesting that you should bring up inflation and then cite an article that explains why inflation has not been a significant problem. Please read this: http://home.hiwaay.net/~becraft/FRS-myth.htm#hd22
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| The infusion of little pieces of paper, electronic impulses, or even chunks of precious metal will not increase the capacity to produce as much as they increase demand for output. Price increases are the result. Only when capacity is not being utilized, such as during economic contractions, will growth in output automatically match the growth in demand without noticeably raising prices. |
In fact there has been modest inflation in recent years, but the point you seem to be missing is that the Fed clearly intended and desired to create a modest amount of inflation. Therefore the inflation cannot be considered to be an opportunity cost, but on the contrary the Fed considered it to be an additional benefit. It may well be true that under different circumstances, inflation could be considered an opportunity cost, but for the period in question that is clearly not the case. Your opportunity cost argument is simply wrong.
As for the article you cited, I pretty much agree with everything the author says. There is nothing in that article that in any way contradicts what I said. I never said that the Fed has complete control over the money supply. Obviously it goes without saying that due to fractional reserve banking, the largest majority of the money supply is actually created by the banks and not the Fed. What I said is still true. The Fed can simply create however much money it chooses to spend. That much is absolutely true, even if it is also true that they cannot control how much additional money the banks will end up creating. |
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