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The Deceptions of “Price Stabilizationâ€
invite response
2010 Jul 3, 7:41am 13,106 views 119 comments
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RayAmerica
2010 Aug 1, 2:18am
know it’s not easy to be as misinformed (or uninformed ) as you are about the Federal Reserve.
Nice example of a dismissive comment without any substance. Marcus, fully explain exactly the reasons "Nasty" is "misinformed (or uninformed)." If you do, you'll separate yourself from other Libs on this (Hi ellie) site that just make blanket statements without feeling the necessity to explain your position.
marcus
2010 Aug 1, 3:16am
You obviously not only didn't read the thread, you didn't read my response to Nasty trying to say the same.
See your Ford thread, and read it to understand why I know you never even consider what I write.
PeopleUnited
2010 Aug 1, 5:00am
As an ecologist, I have seen how in nature, over time balance is always restored. This is going to hold true for the human animal as well of course. The reason things get out of balance is people try to intervene to uphold some ideal. For example, we think housing should be more affordable so we establish rent controls. This has the effect of reducing the available amount of housing as landlords often find they cannot make a desired return on investment and thus quit maintaining their property. The intervention was worse than the "disease." This is especially true since when it comes to rents people are totally limited by what they earn. There is no need to intervene in the rent market, if people can't afford it, landlords will be FORCED by the wage market to reduce their rent prices.
Central planning fails, and will continue to fail. We best quit fooling ourselves into thinking that government can solve the problems of scarcity in our world. More often than not as governments grow, through wasteful spending, misallocation of resources and needless wars they cause more scarcity than they prevent.
NastySlapper
2010 Sep 10, 4:52pm
this post is suposed to be about the fed’s mandate to keep inflation low
The FED is the cause of inflation.
speaking of The Deceptions of Price Stabilization, here's a real Fairytale as told by the HUD Secretary and is reported in today's Las Vegas Sun
http://www.lasvegassun.com/news/2010/sep/11/hud-secretary-says-vegas-housing-market-stabilizin/
elliemae
2010 Sep 11, 4:13am
Well, then, the world is all flowers & sunshine. We should all move to Vegas because the market is stablizing.
Should we tell the oodles of people out of work and the miles of homes in foreclosure that they're out of the woods? I don't think they can afford the paper and lost their internet access, choosing to buy food instead...
AdHo - your comment above is very clear and well stated. Its the 'invisible hand' at work. Unfortunately "the others" don't understand that simple concept.
marcus
2010 Sep 12, 2:18am
For example, we think housing should be more affordable so we establish rent controls. This has the effect of reducing the available amount of housing as landlords often find they cannot make a desired return on investment and thus quit maintaining their property
This makes some sense. But what you call balance wouldn't be pretty. Consider this.
Say you have an entire region of a major city with escalating rents, up to a price that 65% of the households can afford. Say the supply is such that 65% of the people that work in the area are enough to rent all of these units.
But among the 35% are people who are unemployed, underemployed or otherwise in VERY low paying jobs. How does letting balance occur address their needs? They were and are the reason for subsidized housing. Say their wages don't even support the cost of construction10 miles away?
Leaving the market to figure things out, you would eventually have huge ghetto areas with little better than shacks. In cold winter climates you would have to have public housing of some kind because the corrugated metal roofed shack doesn't work in New York or Chicago.
So you want supply and demand to determine the wage of the lowest skill jobs. And likewise for housing. It's not like this doesn't exist in many places in the world already.
Actually, I don't consider this balance. But if you do, please note that the balancing act isn't through there. If we go there, then crime including violent crime would be much worse, requiring government to spend much more on police and prisons. If you think about it, that would be just another way of injecting our government in to the "natural balancing process."
elliemae
2010 Sep 12, 2:43am
Well, someone's got to be the contrarian. If it weren't Abe & his merry men, it would be someone else. They seem to be bogged down in semantics.
marcus
2010 Sep 12, 3:10am
I was reacting to:
Its the ‘invisible hand’ at work. Unfortunately “the others†don’t understand that simple concept.
But also I was hoping that he might even consider what I wrote and that the "simple concept" of the invisible hand, is too simple.
elliemae
2010 Sep 12, 3:31am
Marcus, I agree with you on many points, and also disagree with you on others. But I truly don't believe that anyone is standing behind the curtain. That concept is too "out there" for me.
marcus
2010 Sep 12, 3:33am
What ? Maybe when you disagree, it is only that you don't understand, or that I'm not being clear enough.
marcus
2010 Sep 12, 3:39am
Please elaborate about the guy behind the curtain. I have no clue what you mean. Is that a reference to wizard of Oz ?
elliemae
2010 Sep 12, 3:48am
AdHo - your comment above is very clear and well stated. Its the ‘invisible hand’ at work. Unfortunately “the others†don’t understand that simple concept.
Yes, it was a Wizard of Oz reference to his statement that there's an invisible hand at work. Abe states that "the others" don't understand that simple concept, but it seems to me that he's a bit paranoid in his belief that someone is pulling the strings on just about everything.
What ? Maybe when you disagree, it is only that you don’t understand, or that I’m not being clear enough.
It could be either, or it could be that we simply disagree. But I don't - nor do you - appear to believe that we are at the mercy of some guy who directs us all with an invisible hand. That's crazy talk.
elliemae
2010 Sep 12, 3:52am
I have a friend who plays the obscure reference game with me. We leave messages for each other that take a while to figure out. Sometimes it gets away from us - sorry.
marcus
2010 Sep 12, 4:15am
Appropriate that you mentioned semantics. "The invisible hand" is a reference to market forces. Abe and Adho were making a point that is not totally without merit. The Mises people take it to a whole other level.
For example many on this site may believe that the invisible hand of the market should have been allowed to take real estate more quickly down in price, to a true "equilibrium," that is, as far as it (the market) wanted. I agree with this in principal, but in reality things are more complex.
Markets tend to overdo it in both directions. Because real estate is leveraged in many cases, with mortgages, if prices had been allowed to fall more, it could have led even more to a negative feedback loop. That is, foreclosures causing lower prices causing more foreclosures and so on. And then negative psychology of this collapse feeding a negative spiral in other markets. At least this is a big part of the rationale for supporting the real estate market with mortgage subsidies, tax credits to buyers etc.
Ultimately it's about risk. The risk of total collapse was a risk that could not be taken. Those who say go with "the invisible hand" are right, that by supporting the market, and advocating what is actually sort of a false market, the government has created another problem.
Sometimes a choice is between 2 or more options which are both (or all) negative.
elliemae
2010 Sep 12, 4:38am
Appropriate that you mentioned semantics.
(ellie giggles, reminded of the way her grandmother used to say, "funny you should mention...")
point taken. :)
Bap33
2010 Sep 12, 4:49am
Honest Abe says
Its the ‘invisible hand’ at work.
Is that when you use your left hand so it feels like someone else?
he larry us
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One of the two mandates of the Federal Reserve is to "stabilize prices". This seemingly innocuous endeavor has deeper implications than most people realize. It does, after all, just seem to be reasonable, and even desirable. But, in practicality, it is a vehicle for those in power to steal from you. Most people have at least a basic understanding of how inflation can benefit the government, and how the government, by printing money, can pay its debts and bill it to you, the taxpayer. This, in itself, is criminal and treasonous on its face. But there are two other less obvious mechanisms in place that are used against you, and are rarely exposed…
The first is deflation. The banks take your money not only by inflating (counterfeiting), but also by deflating. To make this point clear, imagine that you have been given the power to forge/print money (which is done today not with a printing press, but by simply adding "credits" into a computer account.) You would soon learn that you could "credit" yourself with as much money as you want, "lend" it all out, and quickly place most of the people around you in debt. At this point, which of the following options do you think will benefit you the most:
a) Keep printing money as fast as possible, devaluing the currency and causing your debtors to effectively owe you less (the money would be worth less).
b) Stop printing money, causing the value of the currency to rise (meaning it's harder to get, wages decrease, etc.), effectively causing your debtors to owe you MORE.
The term "money" simply describes a medium of exchange. What truly matters is value - which ultimately comes down to production. After all, if it takes you 1,000 hours to produce enough money to buy a new car, the actual amount of fiat currency you used to purchase it doesn't much matter. What matters is that you had to work 1,000 hours for that car.
And this leads directly to the following point…
The second is theft of standard of living. No one notices this. However, it is a powerful weapon that is used against you over the span of your entire life, and understanding it will leave you with a very bad taste in your mouth. It has to do with the idea of technological advancement. It is natural and clear that humans evolve technologies over time to improve their lives. As time passes, we find ways to produce goods and services more efficiently, which in turn makes them less expensive. Nearly everything that you buy should, over time, become cheaper. And hence, over time, your overall level of comfort, wealth, and quality of life (a.k.a. "standard of living") will improve.
Now, recall the honorable mandate of the money forgers to "keep prices stable". Since as mentioned above, in nearly all cases a free market will, over time, cause the real prices of goods and services to decrease such that the average person is able to acquire more of them for the same amount of money (or work), this provides a beautiful cover for those controlling the money supply to skim from the masses. Under the guise of providing price stability they are able to inflate the money supply at a rate that denies working and productive citizens the full fruit of their labor. By "keeping prices stable" what they've effectively done is simply raised the real cost that you must pay for services and goods that are trying to become cheaper. So what happened to the extra "money"? What happened to the extra "fruit" of the producers? It went to the money printers.
The end result is that your standard of living remains "stable" and does not improve. This happens in a way that is essentially invisible to the general population. If citizens were truly aware of the lives they really should be living right now, and who has taken it from them, there would be a revolution tomorrow.
There is no morally defensible position to the concepts of monetary inflation/deflation & "price stabilization".
End the Fed.