Keynes was right......

[georgem]

Reading an article on Keynesian "Arse-Backwards" Economics....

"The latter opens the possibility of regulating the economy through money supply changes, via monetary policy. Under conditions such as the Great Depression, Keynes argued that this approach would be relatively ineffective compared to fiscal policy. But during more "normal" times, monetary expansion can stimulate the economy, mostly by encouraging construction of new housing."

wow, keynes hit the nail on the head with that one. hhmmm....monetary expansion could lead to a boom in housing?? sounds familiar. stupid Fed, and they act like its not thier fault, they knew exactly what they were doing.

so I'll hand it to keynes here, at least he knew one area where his theory would muck things up....housing.

 

[Tom228]

Well Keynes says that the government was needed to stablize the economy through Fiscal Policy.

 

[Mises]

Don't forget Keynes' most famous quote - "In the long run, we'll all be dead." The statement sums up his attitude to the objections posed by his Austrian and neoclassical opponents - it doesn't matter what damage fiscal or monetary policy does to the economy down the road, for if it creates jobs tomorrow then all is well.

The guy was giddy with pride at figuring out that you could push buttons on the "economics" machine to achieve a predictable outcome...in the short run, that is.

 

[Tom228]

Well Keynes wasn't wrong in his time period; the Great Depression. But that's the problem, it was only one event.

 

[Richandler]

Building new things with printed money is a recipe for disaster always. Things should be built through sound investment not runaway borrowing, which creates mass inflation and eventual mass unemployement strings.

 

[Mini-Me]

Don't forget Keynes' most famous quote - "In the long run, we'll all be dead." The statement sums up his attitude to the objections posed by his Austrian and neoclassical opponents - it doesn't matter what damage fiscal or monetary policy does to the economy down the road, for if it creates jobs tomorrow then all is well.

The guy was giddy with pride at figuring out that you could push buttons on the "economics" machine to achieve a predictable outcome...in the short run, that is.

Weird first post from me, but:
If I'm not mistaken, I think you're taking Keynes's quote out of context. I believe he was referring to the fact that Austrian/free market economists trust in the market to work out economic problems "in the long run." Keynes was making the point that market forces are sometimes very slow to act (particularly with regard to recognizing deflationary pressure), and that we'll all be dead before economic downturns are able to fix themselves. While I recognize that Keynes had some valid points about the market's sluggish response to deflationary pressure, I'm no expert on economic or monetary policy - that's Ron Paul's job Someday I hope to be as knowledgeable, though. That said, either despite or because of my noobishness, I already see some theoretical and practical problems with a fixed gold currency that *responsible* fiat money (assuming that's not an oxymoron ) doesn't have. That said, I don't think competing specie currencies have such problems, either...long story though, and I'm still not done brainstorming my viewpoints there.

Anyway, Keynes was apparently "deeply moved" by later criticisms of his general economic theory by Austrian economists (I think Hayek in particular?), so I wonder how much of this he eventually changed his mind on.

 

[diesirae]

A comment

Weird first post from me, but:
If I'm not mistaken, I think you're taking Keynes's quote out of context. I believe he was referring to the fact that Austrian/free market economists trust in the market to work out economic problems "in the long run." Keynes was making the point that market forces are sometimes very slow to act (particularly with regard to recognizing deflationary pressure), and that we'll all be dead before economic downturns are able to fix themselves. While I recognize that Keynes had some valid points about the market's sluggish response to deflationary pressure, I'm no expert on economic or monetary policy - that's Ron Paul's job Someday I hope to be as knowledgeable, though. That said, either despite or because of my noobishness, I already see some theoretical and practical problems with a fixed gold currency that *responsible* fiat money (assuming that's not an oxymoron ) doesn't have. That said, I don't think competing specie currencies have such problems, either...long story though, and I'm still not done brainstorming my viewpoints there.

Anyway, Keynes was apparently "deeply moved" by later criticisms of his general economic theory by Austrian economists (I think Hayek in particular?), so I wonder how much of this he eventually changed his mind on.

This is also astute. As Milton Friedman has argued, a correctly run fiat currency can mimic gold in nearly all ways of interest; in fact, it can be superior in a number of situations, while still ensuring that currency retains its value and does not become a "tax" on individuals holding money.

 

[scooter]

This is also astute. As Milton Friedman has argued, a correctly run fiat currency can mimic gold in nearly all ways of interest; in fact, it can be superior in a number of situations, while still ensuring that currency retains its value and does not become a "tax" on individuals holding money.

I also believe in this method. A properly run fiat currency (with no fractional reserves) would be better than a gold standard in my opinion.

 

[slantedview]

right, monetary expansion (creating money out of nothing and giving it to many people who won't be able to pay it back) does create temporary economic expansion. money buys stuff. stuff exists in the economy. but when that money doesn't perform and can't be paid back, the monetary expansion leads to a greater disruption than would have existed without the expansion.

so, we have a booming economy followed by a crash. the current housing crash is one example.

 

[slantedview]

This is also astute. As Milton Friedman has argued, a correctly run fiat currency can mimic gold in nearly all ways of interest; in fact, it can be superior in a number of situations, while still ensuring that currency retains its value and does not become a "tax" on individuals holding money.

but there exists no possibility to "correctly run" a fiat currency. the reason is conflict of interest, and politics. right now the fed (a privately owned group of bankers) control our currency. you think they don't have interests that conflict with the interests of the greater public? you think they're not incentivized to help bail out wreckless bankers/lenders? this is exactly why we have boom/bust cycles and recessions every few years.

you do realize the fed has, either through the government or directly, given loans to bailout numerous corporations and foreign governments over the years. this is a properly run currency - using the printing of money to bail out companies that are wreckless and fail over and over? obviously not, but of course the same stuff would occur no matter who was running a fiat currency.

again, there exists no possibility to "correctly run" a fiat currency due to politics and conflicts of interest that will always exist.

 

[diesirae]

but there exists no possibility to "correctly run" a fiat currency. the reason is conflict of interest, and politics. right now the fed (a privately owned group of bankers) control our currency. you think they don't have interests that conflict with the interests of the greater public? you think they're not incentivized to help bail out wreckless bankers/lenders? this is exactly why we have boom/bust cycles and recessions every few years.

you do realize the fed has, either through the government or directly, given loans to bailout numerous corporations and foreign governments over the years. this is a properly run currency - using the printing of money to bail out companies that are wreckless and fail over and over? obviously not, but of course the same stuff would occur no matter who was running a fiat currency.

again, there exists no possibility to "correctly run" a fiat currency due to politics and conflicts of interest that will always exist.

Well, I'll avoid commenting on your understanding of the Federal Reserve system, since it's not germane to this discussion. However, the ability to "correctly run" a fiat currency system is no more, or less, difficult than the proposals that Ron Paul has already outlined in his restructuring of the Federal Reserve system.

You can trivially "correctly run" the system by passing laws in Congress which remove the Federal Reserve's ability to print money discretionarily -- instead, adopt Milton Friedman's suggestion and have the Federal Reserve simply print a predetermined amount of money each period, announced in advance. You can do even better if you set tracking bands on the currency, so that the amount prints closely tracks relevant growth rates -- for instance, population growth, in most models.

 

[jonahtrainer]

Well, I'll avoid commenting on your understanding of the Federal Reserve system, since it's not germane to this discussion. However, the ability to "correctly run" a fiat currency system is no more, or less, difficult than the proposals that Ron Paul has already outlined in his restructuring of the Federal Reserve system.

You can trivially "correctly run" the system by passing laws in Congress which remove the Federal Reserve's ability to print money discretionarily -- instead, adopt Milton Friedman's suggestion and have the Federal Reserve simply print a predetermined amount of money each period, announced in advance. You can do even better if you set tracking bands on the currency, so that the amount prints closely tracks relevant growth rates -- for instance, population growth, in most models.

Technology has now made a whole new level of currency possible. Money must be a tangible asset. Money or money substitutes can function as currency.

With digital gold, buying a can of soda or even an oil supertanker is a piece of cake. Because the gold is traded digitally, it can easily be subdivided almost infinitely. Want to buy something that costs a penny? No problem with digital gold, which is perfect for the coming micro-purchases that will increasingly define the Internet services of the Information Age.

Our current monetary system is over 300 years old. Because of this technological advancement the whole idea of banks and central banks are obsolete; not that they will die quietly. They are like 8 track tapes in a digital world.

"Just as the kings struggled with the stirrup-clad knights and the Roman Church fought the printing-press wielding Reformers before the powers-that-be were forced to accept defeat, Welfare-State governments may too fight digital gold in the coming years but they will also fail.

As long as there is even a single sovereign government left anywhere on the planet that will allow the digital gold companies to store their clients’ physical gold in secure vaults on its soil, digital gold currencies will thrive. Actually, many governments will eventually want to invite in the private digital gold companies because the tax revenues on digital gold profits will ultimately be very high! The only conceivable way that digital gold could ever be eliminated is if a single global government, God forbid, somehow controlled the entire Internet and every single square foot of real estate on planet earth. That will never happen!"

The tectonic plates of the monetary system are shifting.

 

[diesirae]

Technology has now made a whole new level of currency possible. Money must be a tangible asset. Money or money substitutes can function as currency.

With digital gold, buying a can of soda or even an oil supertanker is a piece of cake. Because the gold is traded digitally, it can easily be subdivided almost infinitely. Want to buy something that costs a penny? No problem with digital gold, which is perfect for the coming micro-purchases that will increasingly define the Internet services of the Information Age.

Our current monetary system is over 300 years old. Because of this technological advancement the whole idea of banks and central banks are obsolete; not that they will die quietly. They are like 8 track tapes in a digital world.

"Just as the kings struggled with the stirrup-clad knights and the Roman Church fought the printing-press wielding Reformers before the powers-that-be were forced to accept defeat, Welfare-State governments may too fight digital gold in the coming years but they will also fail.

As long as there is even a single sovereign government left anywhere on the planet that will allow the digital gold companies to store their clients’ physical gold in secure vaults on its soil, digital gold currencies will thrive. Actually, many governments will eventually want to invite in the private digital gold companies because the tax revenues on digital gold profits will ultimately be very high! The only conceivable way that digital gold could ever be eliminated is if a single global government, God forbid, somehow controlled the entire Internet and every single square foot of real estate on planet earth. That will never happen!"

The tectonic plates of the monetary system are shifting.

All this does is make gold easier to trade; while this makes gold more attractive as a currency, it really is not different fundamentally than printing bills that say "redeem for x troy oz. gold at Chase Manhattan Bank" in arbitrary small amounts. You could do this today, if you wanted to, and it would take about an hour with a good lawyer and notary. For free bankers, it's a good thing; for a nation, it's old hat.

This does not, however, address the issues that made Milton Friedman's plan more attractive than gold-backed currency for a nation; specifically, fiat money can outperform any commodity if "correctly run" as outlined above. The supply of gold, even free banked gold, will never track the growth rate of a given economy and thus will result in persistent fluctuations in the value of the currency.

In addition, economically speaking, they are not referred to as "money" and "money substitutes". Currency is what you refer to as "money" and "money" is what you refer to as "money and money substitutes".

 

[slantedview]

However, the ability to "correctly run" a fiat currency system is no more, or less, difficult than the proposals that Ron Paul has already outlined in his restructuring of the Federal Reserve system.
.

I was under the impression that Ron just wanted to do away with the Fed?

You can trivially "correctly run" the system by passing laws in Congress which remove the Federal Reserve's ability to print money discretionarily -- instead, adopt Milton Friedman's suggestion and have the Federal Reserve simply print a predetermined amount of money each period, announced in advance. You can do even better if you set tracking bands on the currency, so that the amount prints closely tracks relevant growth rates -- for instance, population growth, in most models.

i'm unfamiliar with this idea... I'll have to think about it. It definately sounds better than what we have now though. Anything is better than what we have now. The problem I see with this is that Congress depends on the Fed's ability to print money whenever it's needed. Also the IMF, World Bank and even other countries depend on the free ability of the Fed to print money for loans to other countries (which are usually not paid back). Congress is all about bailouts and needs the Fed's printing to achieve their bailouts. So restricting the Fed's ability to print causes other problems for Conress.

 

[slantedview]

This does not, however, address the issues that made Milton Friedman's plan more attractive than gold-backed currency for a nation; specifically, fiat money can outperform any commodity if "correctly run" as outlined above. The supply of gold, even free banked gold, will never track the growth rate of a given economy and thus will result in persistent fluctuations in the value of the currency.

good point. but also keep in mind that attempting to fix the money supply growth to the rate of economic growth could be problematic too, being that economic growth is hard to measure and as we know, past growth is often revised up or down many times.

also further complicating things is the fact that economic growth occurs more or less as a result of the availability of money/credit. so more money feeds growth, which triggers an increase in money, etc.

 

[Carole]

First time visit here and novice with regard to money.

Here are a few questions for anyone.

With regard to owning all land-Thousands and thousands of acres in parkland have been given to the United Nations Heritage organization. Wetlands declared and other protected areas declared, etc.

Thousands of acres will be taken through imminent domain, I think, for the NAU highway from Mexico to Canada, with even Spain owning part of it in America. Likewise Canada and Mexico owning parts of it and charging tolls to Americans to use it I suppose.
My question: Would this not be part of the plan to eliminate private property and become the sole owners of all land, especially if Americans can be made to default on all their home loans and property taxes?

My understanding was that banks/lending institutions were actually required by law to lend a certain percentage of money for sub prime mortgages. The ARMs were like a Trojan horse to hook in the not-ready- for-primetime buyer. When I was offered one, I ran like hell and insisted on a fixed rate loan because I could foresee, with inflation and other things, the danger of such a risky scheme. Only because I possessed a little common sense and foresight. My point is that those who would have required lenders to give out these sub-prime mortgages had to know they would begin to fail. Naturally, the lending institutions would then fail, like Countrywide and the big banks would snap them up. I think of it as planned annihilation of competition in banking by the big banking industry. Am I wrong?

Would not much of America fall into the hands of private bankers and foreign nations through schemes such as these? Thus, they could conceivably own all the property for their global endeavor.

Please feel free to destroy my thoughts on this. I want to hear from others who are smarter than I am.

 

[diesirae]

I was under the impression that Ron just wanted to do away with the Fed?


i'm unfamiliar with this idea... I'll have to think about it. It definately sounds better than what we have now though. Anything is better than what we have now. The problem I see with this is that Congress depends on the Fed's ability to print money whenever it's needed. Also the IMF, World Bank and even other countries depend on the free ability of the Fed to print money for loans to other countries (which are usually not paid back). Congress is all about bailouts and needs the Fed's printing to achieve their bailouts. So restricting the Fed's ability to print causes other problems for Conress.

Yes, it would be politically unpopular -- but it you're looking for a monetary policy which removes the tradeoff between stabilization policy and growth, focusing only on growth. Congress would have rededicate where it gets the funds, because the Treasury department would have a reduced income and reduced ability to provide funds. So, all else equal, it would probably require tax increases, or spending cuts.

With respect to what Ron Paul has said about the Federal Reserve, it's not totally clear what his policies are -- he's said "competing currencies" a fair amount, but it's never been totally clear how he intends to implement this; his stated plan could range anywhere from free banking to simply legalizing more forms of tender. In any case, it will require a restructuring of the Reserve, at least in the short run.

good point. but also keep in mind that attempting to fix the money supply growth to the rate of economic growth could be problematic too, being that economic growth is hard to measure and as we know, past growth is often revised up or down many times.

also further complicating things is the fact that economic growth occurs more or less as a result of the availability of money/credit. so more money feeds growth, which triggers an increase in money, etc.

Yes, you're quite right on this point. Tracking growth sounds easy, but it's actually quite difficult -- that's why people turn to modeling, but different macroeconomic models give different indicators. That's why Milton Friedman picked 4% as a kind of generic target. Most of the benefits from this system are gained just by a fixed tracking; either constant, or something people can observe.

First time visit here and novice with regard to money.

Here are a few questions for anyone.

With regard to owning all land-Thousands and thousands of acres in parkland have been given to the United Nations Heritage organization. Wetlands declared and other protected areas declared, etc.

Thousands of acres will be taken through imminent domain, I think, for the NAU highway from Mexico to Canada, with even Spain owning part of it in America. Likewise Canada and Mexico owning parts of it and charging tolls to Americans to use it I suppose.
My question: Would this not be part of the plan to eliminate private property and become the sole owners of all land, especially if Americans can be made to default on all their home loans and property taxes?

My understanding was that banks/lending institutions were actually required by law to lend a certain percentage of money for sub prime mortgages. The ARMs were like a Trojan horse to hook in the not-ready- for-primetime buyer. When I was offered one, I ran like hell and insisted on a fixed rate loan because I could foresee, with inflation and other things, the danger of such a risky scheme. Only because I possessed a little common sense and foresight. My point is that those who would have required lenders to give out these sub-prime mortgages had to know they would begin to fail. Naturally, the lending institutions would then fail, like Countrywide and the big banks would snap them up. I think of it as planned annihilation of competition in banking by the big banking industry. Am I wrong?

Would not much of America fall into the hands of private bankers and foreign nations through schemes such as these? Thus, they could conceivably own all the property for their global endeavor.

Please feel free to destroy my thoughts on this. I want to hear from others who are smarter than I am.

There's a lot here, and it relies on a lot of assumptions I'm not definitely willing to make. However, I would point out that the proposed superhighway is both (1) not a done deal and (2) never implies foreign ownership of US land. Furthermore, banks cannot in general seize assets, such as homes, if the owners are in default -- most jurisdictions require individuals to sell their home at auction; this is what is colloquially known as "being seized by the bank". So, if the banks are trying to seize all land (which I sincerely doubt, since they aren't much good at property management) this is not a very effective way to do it.

 

[slantedview]

With respect to what Ron Paul has said about the Federal Reserve, it's not totally clear what his policies are -- he's said "competing currencies" a fair amount, but it's never been totally clear how he intends to implement this; his stated plan could range anywhere from free banking to simply legalizing more forms of tender. In any case, it will require a restructuring of the Reserve, at least in the short run.

I think Ron usually plays down his commentary regarding exactly what he wants to do with the Federal Reserve since the idea of getting rid of institutions scares a lot of people. He has said though, in no uncertain terms, that he would like to get rid of it. One recent such statement was made during his televised New Hampshire town hall... something to the effect of "i want to be the President who gets rid of the current central bank (spoken after referring to the previous two central banks which were eliminated by previous Presidents)".

How he intends to implement it.... I dunno. I've always thought that the courts could actually axe the Fed if they wanted to, on grounds that it's unconstitutional (the constitution says only the govt. can coin money). Alternatively Congress could obviously repeal the Federal Reserve Act. Not sure what Ron himself would do aside from legalizing competing currency, for starters.

 

[diesirae]

I think Ron usually plays down his commentary regarding exactly what he wants to do with the Federal Reserve since the idea of getting rid of institutions scares a lot of people. He has said though, in no uncertain terms, that he would like to get rid of it. One recent such statement was made during his televised New Hampshire town hall... something to the effect of "i want to be the President who gets rid of the current central bank (spoken after referring to the previous two central banks which were eliminated by previous Presidents)".

How he intends to implement it.... I dunno. I've always thought that the courts could actually axe the Fed if they wanted to, on grounds that it's unconstitutional (the constitution says only the govt. can coin money). Alternatively Congress could obviously repeal the Federal Reserve Act. Not sure what Ron himself would do aside from legalizing competing currency, for starters.

Well, it's just that "getting rid of it" can mean lots of things. People talk about a gold standard... but you still have a Federal Reserve; it just does different things. When he says things like that, it could be translated into policy in a lot of ways.

Fundmentally, only free banking would involved "getting rid of the Federal Reserve" in the literal sense of the phrase.

 

[polomertz]

Ron Paul intends to get rid of the fed by opening up the US market to competing currencies. Current Legal Tender Laws do not allow for anything other than dollars to be used for certain transations. As the gold people say, "You can use it in your daily transactions but you can't take it to the bank and you can't use it to pay your taxes." He plans to eliminate most if not all of those Legal Tender Laws.