Thank you SenorBeef. I’m looking for a semi-serious discussion of this very important topic. Not “he’s dumb, that’s dumb”.
I’m not saying your ideology is doing well - others are doing a much better job of arguing against it - just that his behavior was not bolstering his side, and quite the opposite in fact. I hate having to wince because someone who I think is on the right side of the argument is making an awful case for it.
So, no small businessman successfully handles debt? If you have a business plan that involves making enough from the business started by using the borrowed money to pay back interest and principle and make a profit, then the loan works. If the business plan doesn’t involve making enough money, then it is a bad plan.
If we didn’t have loans, only the Romneys and their ilk could start a business. Is that what you want?
Hi again, JoeTheBartender. Like you, I feel that there is a government-financial complex which doesn’t serve the American people well. I was hopeful that the OWS would lead to public awareness and political reforms. However, to succeed we must understand what the real problems are and, just as important, what they are NOT.
I’m glad to hear that Ron Paul is not one of your mentors. He’s not an economist. However, we’re still waiting to hear what expert economists you are in tune with, as your ideas do not match my readings. (I trust you don’t assume that hundreds of economic scholars are in cahoots with a conspiracy and truth is now only to be found on Youtube! 
)
I’d ask you to separate your complaints about leaving the gold standard from “fractional reserve” banking. They’re different issues. Privately-created paper money (a more straightforward term than the bugaboo “fractional reserve”) co-existed with a gold standard for centuries. (And by the way, gold has intrinsic value in a way that paper does not. I don’t blame you for tuning out Dopers who don’t even seem to understand this much.)
I’d also ask you to clarify your understanding of inflation. You cite that money has lost 85% of its value since 1970. What does this mean to you? Do you think 85% of Americans’ wealth has somehow been misappropriated?
The thrill of compounding leads to scary-sounding numbers. The loss of value you speak of averaged 4.2% per year. Moreover, inflation averaged 7.9% annually from 1970 to 1982 and only 2.8% from 1982 to 2014. The higher inflation was associated with particular conditions.
More importantly, you should understand that predictable inflation is relatively harmless, indeed even beneficial. If everyone expects 2% inflation this year, and 2% the next year, this can be factored into interest rates, cost-of-living adjustments, etc. Predictable inflation is fine if we understand the dollar as an arbitrary measuring rod. High or unpredictable inflation is a problem and, though 7.9% isn’t particularly high as inflation rates go, lessons were learned from the 1970-82 period.
IMO, considering stable inflation of 2.8% to be a serious problem displays poor understanding of economics. Would you like cites from economists of various schools who think 2.8% inflation is preferable to 0% inflation?
For that portion of their wealth that’s in cash…yes, isn’t it?
For that portion that’s invested materially, it isn’t so bad. But inflation really is a loss of wealth for bank accounts, retirement accounts, stock market investments, etc.
(“Misappropriated” is a bad word for it. If a hurricane wipes out your house, your house hasn’t been “misappropriated.” Just lost.)
Did you ignore my mention of “predictable” inflation? When people speak of cash, they’re usually speaking of money earning at least some interest in the money market; the interest rate is tied to inflation expectations. All other things being equal, interest rates will be 2% higher when inflation rates are 2% higher.
(Yes, I know money markets presently pay very little interest, even less than the small inflation rate. The post-2008 monetary situation is atypical.)
Stock market investments are tied to material wealth and business prospects, and not to cash earning no interest. True, economic problems including high inflation can lower business profitability. However, deflation is a bigger concern to business prospects than inflation.
I didn’t ignore it; I just don’t understand it. What’s the difference and why does it matter? It’s still money lost, isn’t it? How does it do me any benefit (or reduce my loss) if the inflation was “expected?”
Not everyone reading these threads is an economics graduate.
If you put $1000 in a 5% account with no inflation, at the end of a year you have $1050 of spending power.
If you put $1000 in a 7% account with 2% inflation, at the end of a year you have about $1050 of “constant dollar” spending power.
Do you need a cite that interest rates rise when inflation rises? Do you need a cite that cash earning no interest is just a “lubricant” for commerce and is a small part of the economy; most wealth, even if measured as narrowly as the FRB’s “M2”, earns interest or is otherwise invested?
Other people are making the case. When I see his posts, I see someone who won’t listen (notice how he doesn’t reply to those who do take him to task less brusquely than I did, and with citations), and I see someone who is evading answering questions about where he gets his ideas. His posting shows me he’s not worth the effort that other posters are already doing a nice job of providing, so I have zero problem not wasting my time.
Great. Then don’t waste our time by posting without content and making your side look bad to have you on it. That would take even less of your time. Win for everyone.
I’ll post what I like when I like to, within board rules.
Will you please calm down? No, I don’t need a cite. Your word is fine here.
I did not know that interest rates rise when inflation rises. That’s comforting to learn.
Um, no, sorry. If you tried to palm off an individual’s IOU as money, you’d be arrested for counterfeiting. By government fiat, only banks are allowed to claim their debt is currency, not you or me.
Please, “government regulation” should have relegated the fraudulent practice of fractional reserve banking to the garbage heap of history. Contrary to your opinion, I think all bankers are fraudulent. I guess in your opinion just a little fraud is okay, huh? As long as they don’t go too far, and have to get bailed out by the taxpayers, right? To bad every 10 or 20 years that’s exactly what happens. That the too big to fail banks get bailed out while the smaller banks get taken over by larger ones is exactly the purpose of the Fed, to concentrate the wealth in the hands of the biggest banks. And if that’s not the purpose of the Fed, then they’re doing something wrong because that sure is the results.
Silver’s “price” isn’t stable? You mean in relation to the inflation-built-in federal reserve notes? Yeah you’re right, it was under a dollar in 1960 and now it’s $16 an ounce. Unstable to the upside, because there’s a finite amount of silver and an infinite amount of Federal Reserve notes. And after all isn’t that what inflation really is?
I choose not to invest with companies that write a lot of debt, those companies that do are free to, not my problem. They just don’t get any of my money.
I’m not “basing my case” on that, I just like to be factual and accurate, and your statement was not accurate.
The only people who should be scared of compounding inflation are the Fed, the banks and the people who support them. To the rest of us, it’s an undeniable fact that the Fed and fractional reserve banking, is the driver of inflation.
I’m sorry, but I really can’t relate to someone who thinks the Fed fights inflation when they’re worried when inflation is less than their target of 2%. If the Fed fights anything it’s deflation. Because then they’re worried that their loans are going to be serviced and end up as the worthless pieces of paper that they really are.
Oh and I know those other priorities. One is making sure the biggest banks remain profitable even at the expense of the people of the United States.
Let me just quote a former Fed chairman here please…
Gold and Economic Freedom by Alan Greenspan And since Mr. Greenspan is now no longer beholden to the bankers for his income he’s back to advocating real money instead of debt-based fiat paper.
So, except to the bankers who profit handily from it, how is debt-backed fiat currency superior to PM currency?
In order to answer that, I need to establish that we agree on this point. That a 2% inflation rate indicates there is more money in circulation than the total value of goods and services in the economy. Do you agree with that statement?
Patently false, and just recent history shows you don’t know what you’re talking about. The interest rate on T-bills in 2004 was 4.15%. If I had 1000 ounces of gold and sold them in 2004 and bought T-bills, about $400,000 worth, today my account would be about $600,000. If I kept my gold, today it would be worth in Federal Reserve notes about 1.2 million. I’m no economist but that looks like about twice as much. Do you want to retract that statement please?
Haha, like economics is a science or something? You don’t need to be approved by the Chicago School of Economics to have some common sense. Especially when that common sense contradicts the feds wishes.
How many credit cards did he have 60 years ago?
Just by making those two statements back to back shows you have no idea what “intrinsic value” means.
“Underlying, essential, inherent value.”
Your first statement illustrated gold’s intrinsic value. Then you denied has any.
That’s funny.
How come you guys don’t listen to your Fed chairmans?
Remarks by Governor Ben S. Bernanke
At the Conference to Honor Milton Friedman, University of Chicago, Chicago, Illinois
November 8, 2002
So the ex-chairman of the Federal Reserve contradicts your assertion that the gold standard caused the Great Depression and instead that the Federal Reserve caused it.
Got any other brilliant assertions?
Oh, I’ve just been late with my replies. I don’t think those others are doing a good job at all.
In the current system, you would be right that the uppercrust would be the only ones to be able to start a business. But if we had true savings and investment rather than bank debt created money that wouldn’t be the case and the Romney’s wouldn’t have all that money anyway.
Septimus, I’ll get back to you on this. It’s late and I have to get up in the morning. I’ll reply tomorrow night.
(I’ve taken the liberty of adding point numbers 1-4 in the following quote.)
(1) You define fractional reserve banking to be fraudulent and conclude that the fractional reservers are fraudulent. I tried to show that the paper (or plastic) money created by private banks is conceptually the same as IOU’s with very high credit rating. We’re finished on this. You can try to learn or we can agree to disagree.
(2) I’m confused by your response. Do you think FRB is corruptly seeking Wall Street profits? Its own profits? In any event, don’t conflate 2% inflation with Zimbabwe-style hyperinflation. I’m through with the question of whether a low inflation rate like 2% is good or bad. You can try to learn or we can agree to disagree.
(3) There’s no necessary connection between “money” and material wealth. No.
(4) Perhaps I phrased my claim poorly. Gold prices fluctuate, and obviously it would have been good to buy in 2004. I was thinking of the relationship between gold and T-bond values over very long periods, where fluctuating prices and rates get averaged out.
No need. Debate should feature quality not quantity.