patrick.net

Which is it ? Inflation benefiting the biggest borrower the US govt. , or deflation burning all the borrowers, especially the biggest one. How can it be both ?

It is hard to understand the Federal Reserve. Not saying that I do nearly as well as I would like. Things I don't understand scare me. But for the record, I believe that there are much more important factors effecting the changing value of money than the Fed trying to enrich bankers. The Fed does maybe excessively attempt to effect those other factors with it's policies, but usually with the goal of benefiting the economy as a whole as much as possible, and bankers only very indirectly.

Clearly that is what they believe anyway.

"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."

Just out of curiosity, do you believe in "free markets" for the whole world. If so, then all seven billion should have hope of this great standard of living that even we are not close to ?

How do you reconcile that with where the planet is at with natural resources, and the environmental degradation that has come with free market improvements in standards of living so far. Is it really the Fed holding us back ?

I wonder whether the fed and other policies have facilitated too much growth in recent decades

It isn't the Federal Reserve alone; it is the central banking system as a whole.

Your question about believing in "free markets" for the whole world is unclear; I don't know if you are asking what I feel is proper, or what exists in reality. I personally advocate a free market (within certain reasonable bounds, of course - which is a separate discussion). What exists in the real world, of course, is quite different. Some economies/nations talk as if they have one, but do they? Every significant economy in this world that I am aware of is under the direct or indirect control of a central banking system (or worse). The slow rape I describe above is perpetrated on nearly all productive citizens, worldwide.

But yes, I do assert what you suggest: if any nation breaks these binds and extricates themselves from such control, they will thrive fantastically. Was this not exactly the case with our nation between 1776 and 1913? We removed the leeches, and look what happened. They returned, and look what happened.

Food for thought.

Seems you missed my big question. What are we 300,000,000 out of 7 billion ?

Yeah, I noticed that right after I posted the response to the first one. But then I read it again, and wasn't exactly sure what you meant. Could you define it/them (concerning natural resources, etc.) better?

As for your reference to the rest of the world, I believe I did address that.

marcus says

How do you reconcile that with where the planet is at with natural resources, and the environmental degradation that has come with free market improvements in standards of living so far. Is it really the Fed holding us back ?

I don't really want to elaborate and get all doom and gloomy. It's just that I don't really see the Fed as the bogeyman you do, and I think that looking forward there are bigger constraints on our standard of living.

Here is some reality:

You have fallen into the fallacy of anthropomorphosis; your argument is based upon ascribing human characteristics and emotions to a nonhuman entity. Whatever you opinion of the Fed may be, this type of argument is always flawed.

And you may have fallen into the trap of circumlocution. You have attempted to project an educated air, while simultaneously demonstrating a certain insecurity with the English language and efficient logic. How does one "fall into" a fallacy? Why use a word, and then define it?

For you to ponder:
a) To what non-human entity have I ascribed which traits?
b) How is such a presentation "always flawed"? One can certainly make a perfectly intact logical argument in such a way. Stating that this approach is "always flawed" may feel good rolling off your tongue, but is incorrect.

Except that it does improve, and it improves immensely. On the whole, we enjoy the highest quality of life that has ever been known on the planet.

It has not improved nearly as much as it should have. The central banks are not gods, and cannot restrain all of technology. That is NOT the point. The point, if you will forgive me restating what was already made clear, is that the central banks have created a mechanism to skim your productivity via money control. You may choose to ignore the 95% devaluation of our currency by the Fed. You may choose to believe that the average working person should be enslaved for 30 years to buy a home, when an honest money system would allow for such in less than half that time. You may point with pride at a nice computer, television, or car without ever knowing what you really could be pointing at.

99.999% of human beings could have never afforded anything that you own. Just strolling down to the corner store to buy a fresh orange was an unheard of luxury only a few years ago. Hopping on an airplane and flying coast to coast was only for the wealthy. Actually owning your own automobile, much less two, was inconceivable.

I have lived around the globe, and in third world nations for some time. I will not waste time detailing to you what I've seen, and the conditions under which many people must live - not only a few years ago, but right now. You will see that I haven't digressed.

Your point is that our standard of living has risen. My point is that it has risen far more for a certain group of non-producers than for those who have engineered and produced, and continues to do so. If you are unable to see this in our Western civilization because you are laughing with your buddies over a frappuccino then maybe you are fine with it. It is probably a bit clearer, however, to that guy in Burma who has paid for your Blackberry a hundred times.

I thought Troy's point about anthropomorphizing the Fed made sense. Because this "skimming" and other descriptions of yours implies a motive, as if the Fed were a person looking to enrich himself or his buddies. I see no evidence that is the case ( unless the feds buddies are our entire economy). But this isn't to say, that I think the fed, our our general fiscal policies are nearly perfect.

It is true that in one sense, inflation can be like a tax, if incomes don't increase as much as prices. And it is true that relative to housing, health care (costs), college tuition and other costs of living our standard of living has decreased. But that's over the last 30 years or so. If you compare to 1913 though, it is so much better in many ways. And if you compare to the developing world, we are way ahead.

Lets say for the sake of argument that we have a decreasing standard of living. We also have the Fed, always tinkering with monetary policy in ways (outcomes) that are very difficult to grasp. I just don't see that you (or the various websites that rant about this) have convinced me in the slightest that this is effect and cause.

Oh, it was Nomograph, not Troy. Sorry. I knew it was you, blame it on not having my coffee yet.

the name changing .. I must say .. is very funny. lmao

Those $15 words .... I feel are being used as compensation devices. lmao

marcus says

I thought Troy’s point about anthropomorphizing the Fed made sense. Because this “skimming” and other descriptions of yours implies a motive, as if the Fed were a person looking to enrich himself or his buddies.

The central banks are run by very real people, with very real motives. The anthropomorphosis assertion is weak. It would make sense if one tried to compare an economy, or natural market forces, to a person.

Nomograph says

That’s pure Pollyanna fantasy. Historically, 99.9999% of people had ZERO chance of becoming landed.

Maybe after your 15-year program has made everyone a landowner, then all the children in the world can hold hands and sing songs of peace.

Historically, the same structures have been in place. I was told about my fantasies several years ago as well, when I talked about $300,000 homes selling for under $150,000 in short time. Recognizing that I can now buy the same place for less than half the price (and in less than half the time), the onus is on you to demonstrate the fantasy of my economics.

Nomograph says

That’s the reality of free markets, and I’m afraid your argument has gotten lost in the bitter morass of unfairness.

Look deeper.

Here is an example of another kind of flawed logic. Shortly after Bush became president, he was considered a joke in many circles. I recall there was even a satirical TV show about him and his presidency. Then 9/11 happened. Bush gained a huge amount of respect in the aftermath of that tragedy, and that tragedy also probably made possible our adventures in Irag, which Cheney and other neocons had written about extensively in their "Project for a new century."

An entire cottage industry has been built around the logic "just look to see who benefits," to conclude that 9/11 was an inside job. If you believe that, please let's not go there. My point is that most conspiracy theories use this kind of reasoning (if you want to call it that).

As far as I can see, your "argument" is very similarly built, and it is the reason that Nomograph's point is good. You look at nearly independent simultaneous events and then conclude that these were somehow cause and effect, based on peoples motives on the cause side.

Where exactly did the skimmed profits go ? Was it to the salaries of bank ceos ? Was it to the Hedge fund managers ? Maybe it was to the profits of insiders who knew what monetary policy would be before it happened. Help me out here, give me some specific examples from start to finish.

NastySlapper says

You may choose to believe that the average working person should be enslaved for 30 years to buy a home, when an honest money system would allow for such in less than half that time

I predict "Honest money" would keep renters as renters and owners as owners, since if renters are able to save money, landlords are able to raise rents.

NastySlapper says

You may choose to believe that the average working person should be enslaved for 30 years to buy a home

Actually if I were to try to identify the single biggest reason for the housing bubble, I think it is that over the last 70 years, housing has been so CHEAP, that there was a perception that it always is a great deal, and will always go up. And people saw it going up, and their desire to not miss out was greater than any other rational way of looking at it.

Why did they feel this way ? Because of their experience. The 30 year mortgage during inflationary times HAD ALWAY WORKED OUT WONDERFULLY !! Everyone knew stories of their parents or of friends who had effectively bought homes for MUCH LESS THAN THEY WERE NOW WORTH. A typical person 10 years into paying off their mortgage had payments far under what the same place would rent for, and could sell at a great profit if they wanted.

It wasn't always that way. But even in times of lower housing inflation, the mortgage has been a fair way to purchase property. My parents arranged their mortgage directly with the seller, and eventually payed it off early.

I think I may have partially answered my own earlier question about where the skimmed profits (caused by inflation) went. But I don't see that as a diabolical plot. Certainly my middle class family benefited.

marcus -

Why is the idea of going into debt for the rest of your life based upon the hope that government control over the money supply and Ponzi-styled investments will leverage your bets and make you wealthy something to be proud of? What is being produced in this situation? How can this be good for a nation?

How about the idea of working/producing, owning a home outright in 10-15 years, and knowing that everything you've worked for is still yours and that no one has the ability to arbitrarily devalue it?

I believe NastySlapper is correct in regard to The Fed. Most should understand that the Federal Reserve Banks, along with all the other Central Banks in the world in essence control the contries they occupy because they have the keys to the printing press. Besides printing money, they can also control the amount of liquidity made available as well.

What people need to do is to look at history. When the United States was formed, Central Bankers from England were trying desperately to integrate a central bank into our country, part of the reason why we came here to begin with. Second, there have been many like Andrew Jackson and the sort who fought to stop the formation of a central bank. Let's not forget that most of the people who signed the Declaration of Independence became marked men for signing such documents that in effect cut out the bankers. Also note that the Federal Reserve Act was signed over the Xmas holiday behind most of the congresses backs without their knowledge. Why all the lies and secrecy?

So in short, what you need to do is ponder on the idea that if central banks were such a positive thing, why were our forefathers trying to escape it's grip on their wallets???

interesting debate guys. From what i've read about the federal reserve, it's primary goal is price stability because it encourages capital formation and a friendlier investment environment. Full employment is more like a secondary consideration in practice as price stability is more condusive to longer term economic growth, whereas inflation would be nice right now, but has inertia and can be hard to control, witness stagflation in the 70's and so on.
It also tries for moderate long term interest rates, which relates to bringing inflation under control.

jljoshlee - your statements, though well intentioned, are exactly the kind of ingrained sentiments my original post tries to challenge. Of course these ideals sound only sensible, but I argue two things:

a) central banks use these arguments to convince us that they are looking out for us, and to justify the ridiculous amount of power they hold over us with the exclusive right to arbitrarily re-value our assets.

b) the principles and objectives you pronounce will occur quite naturally, more efficiently, less erratically, and - most importantly - more fairly, via a simple free market apparatus.

We can have all of these things without paying a middle man. "Central banking" is a worldwide cabal; the biggest and most important confidence job in the history of humanity.

NastySlapper says

a) central banks use these arguments to convince us that they are looking out for us, and to justify the ridiculous amount of power they hold over us with the exclusive right to arbitrarily re-value our assets.

How does the Fed revalue our assets? In real terms?

NastySlapper says

b) the principles and objectives you pronounce will occur quite naturally, more efficiently, less erratically, and - most importantly - more fairly, via a simple free market apparatus.

I would strongly argue the opposite. The free market does not act less erratically, more fairly, and it's very unclear if it acts more efficiently. It will find a local minimum, but I don't think it finds the absolute minimum. And it's fairer only if you like to have all wealth concentrated to a very small percentage of the population.

Your assets are re-valued in terms of money; not real terms. Your debt is re-valued in real terms. The two may be related depending on your situation. I worded it this way on purpose.

Your suggestions about the inefficiency of free market capitalism is an opinion, and one that you would be forced to defend with aged arguments, most of which are flimsy. But I will not embark on that right here.

NastySlapper says

Your suggestions about the inefficiency of free market capitalism is an opinion,

Of course. As are your assertions from the post I referenced. But I'm not sure how you can comment on my arguments before I have even made them... Seems like you may have a closed mind.

NastySlapper says

Your suggestions about the inefficiency of free market capitalism is an opinion,

Of course. As are your assertions from the post I referenced. But I'm not sure how you can comment on my arguments before I have even made them... Seems like you may have a closed mind.

tatupu70 says

But I’m not sure how you can comment on my arguments before I have even made them… Seems like you may have a closed mind.

I referred to "your suggestions", which by definition means that I do not KNOW what you will argue, correct? But I have significant confidence that I could guess very accurately what arguments you would use to attack free markets, as I've been down that road countless times, and countless times have heard the same arguments. You may be different. I hope so.

Similarly, I have relative confidence that you are "left of center". Ironically, this is due to a degree of close-mindedness of your own. Here is why:

1) You used this term without any real basis, mostly for emotional reasons (I simply claimed that your suggestions were much-disputed opinions, which they were, and the defense of them is flimsy, which it is). The general conservative nature of my statements is uncomfortable to you.

2) My original post may not suit your taste, but it is scarcely "opinion". In fact, the brunt of it simply offered perspective for consideration. It didn't deliver opinions, and the few assertions projected were undeniable (do you wish to argue that the fantastic devaluation of our currency since 1913 is fantasy, or that inflation/deflation do not manipulate the wealth of citizens, or that these acts have benefited the average citizen relative to the banks as a whole?).

3) No one right-of-center would "strongly argue" against the essential merits of a free market. (At least I have yet to encounter this.) Even the left generally defend free markets, albeit usually it is by pretending that our current markets ARE "free" when they are far from it (for an example of this, reference Nomo's comment "that’s the reality of free markets") - they appreciate the concept of freedom more than its application.

Add these things together, and it is almost certain where you stand politically. But you are right - I am presuming. I would be happy to be wrong. :)

NastySlapper says

You used this term without any real basis, mostly for emotional reasons (I simply claimed that your suggestions were much-disputed opinions, which they were, and the defense of them is flimsy, which it is).

Again--you say that my defense of my opinion is flimsy when I haven't even presented it. You must really be gifted. How about you tell me who will win the 5th at Pimlico tomorrow?

NastySlapper says

You used this term without any real basis, mostly for emotional reasons

Which term?NastySlapper says

No one right-of-center would “strongly argue” against the essential merits of a free market. (At least I have yet to encounter this.) Even the left generally defend free markets, albeit usually it is by pretending that our current markets ARE “free” when they are far from it (for an example of this, reference Nomo’s comment “that’s the reality of free markets”) - they appreciate the concept of freedom more than its application.

Not sure where my political affiliation came into play. Do you automatically discount arguments made by someone "left of center" in your opinion? Regardless of their merit? Another sign of closed-mindedness. Personally, I find that I am conservative in some areas and liberal in others. I think both sides of the aisles have some good ideas and some bad ideas...

What I wrote and what you read are two completely different things.

I find that the anti-fed view is not conservative per se, although I have uniformly observed that it is made by people who are likely to buy in to conspiracy theories. And by people that refuse to take the time to understand the Fed. I guess if you think that the typical tea party member is what you call conservative, then maybe it is a conservative point of view.

I wonder what George Will or David Brooks, two right of center columnists that I respect think of the fed.

NastySlapper says

do you wish to argue that the fantastic devaluation of our currency since 1913 is fantasy

No, but I wish to argue that it is irrelevant. More relevant would be comparing the average adult income, or the average household income in a real way, say by defining a basket of goods, and then determining how many of those baskets of goods they could buy then versus now. Obviously the average person is FAR better off now, but I would not be simple minded enough to therefore declare causality. "We are better off now, than in 1913, therefore the fed is good." I would not make such an absurd argument.

mfs.admin says

So in short, what you need to do is ponder on the idea that if central banks were such a positive thing, why were our forefathers trying to escape it’s grip on their wallets

The world was a very different place then. We are a very different country with all kinds of international interdependence. Back then, we wanted to be left alone to grow ( not that we weren't going to do international trade at all ). I don't really see that escaping England's central bank in the 18th century provides any insight into what our own 20th century central bank does or does not do for us.

NastySlapper: Long ago, I traded derivatives (exchange traded regulated ones) on US Treasury Bonds. And so it behooved me to try as best as I could to understand the Fed. At the time Marcia Stigum's books were sort of the bible. I gained a partial understanding. I think more than yours, because I did not start with the writings of conspiracy theorists. But still, my understanding is limited.

Here is my request to you. My guess is that you probably don't have much respect for university professors, but could you please find a half way main stream respected economist or economics professor that holds your view of the Fed ? I don't mean someone who is calling for more transparency or other changes, but someone who hold a similar view as to it being as you said, "a cabal," or "a confidence job," or explaining more clearly for me exactly how it is that they are stealing from us ?

I want to know, who are the people who not only have a deep understanding of the federal reserve, but who also have serious intellectual credibility out there who see it the way you do ? There must be one or two.

NastySlapper says

What I wrote and what you read are two completely different things.

OK--by all means, please help me out. What did I misunderstand?

NastySlapper: If your research into the Fed, started with Von Mises, or someone with a similar thesis, then please realize, that would be like using Honest Abe ( yes our very own ) as a starting point for learning about the our Republican and Democratic parties.

Do you understand ?

Nice post Nastyslapper, keep up the good work. I'd like to point out electronics, probably the best if not only example of the REAL free market today. If we (as humans, not as a nation) weren't becoming more efficient (good deflation) at producing electronics could you imagine what these little wonders would cost us? Remember when Plasma TVs first came out? Everyone seems to accept "good" deflation when it comes to electronics. Yet they will argue that deflation is bad, that people would stop buying things (waiting for cheaper prices) when it comes to everything else which would of course spiral into a depression, yadda yadda yadda.

tatupu70 says

I would strongly argue the opposite. The free market does not act less erratically, more fairly, and it’s very unclear if it acts more efficiently. It will find a local minimum, but I don’t think it finds the absolute minimum. And it’s fairer only if you like to have all wealth concentrated to a very small percentage of the population.

I'd like to see the argument.

marcus -

Your assessment of me is wildly inaccurate.

Most of my exposure to "conspiracists" consists of explaining to them how they are delusional.

I am sure I am far better read than you have guessed. It is rather insulting to put in the time, money, and discipline to absorb that much literature and then be told that I haven't. You have also insulted yourself by asserting that I started out learning economics from conspiracy theorists without any basis for such a claim whatsoever.

Why do you suggest that I don't respect university professors? I would have quit college at some point if that were so.

Several years ago, I vehemently tried to tell people what was about to happen to this country and to the real estate market in particular. Over the course of a few years, I met about six people who didn't think I was completely wrong (the owner of this site being one of them). Many grew angry that I would suggest they might be mal-invested. As events unfolded it became clear that I was, in fact, completely correct. So, after investing considerable time, effort and resources into learning these things and repeatedly being shown correct, I have a hard time abandoning what I've learned simply because someone feels that it is "his turn" to be right.

About your request: you should first realize that nearly all mainstream economists have been horribly wrong in assessing or predicting nearly every major economic event. You might think that sounds like an over-generalization, but it isn't too hard to see if you look for it. I would advise paying special attention to those who foresaw these things correctly than the mere artists who've written about them in hindsight.

But here is a direct answer (not all of the following people share the singular view on the Fed presented here, but all have garnered my respect for their objectivity): you can try reading Friedman, Murray Rothbard, Mises, Gary North, and even Adam Smith or Ayn Rand for a glimpse at sound and honest economics. And yes, I've done my time with men like Keynes, Marx and even with works such as Bernanke's embarrassing book on the Depression. Have you?

I was asking for current well respected economists that share your view. Not your own personal economics training that qualifies you. I think you can find one or two, but not many. By the way, this issue definitely has no one party bias. People are usually a little extreme right or left if they want the fed abolished.

As for: NastySlapper says

Several years ago, I vehemently tried to tell people what was about to happen to this country and to the real estate market in particular

I felt the same way as did many people, especially people in the super bubble markets and people who read this and countless other sites like it (not as good as Patrick's). Although I have yet to pat myself on the back for it. It was a no brainier, except for the question of exactly when and how it would collapse.

You mentioned Marx. Check this out, an interesting and fun anti-capitalism video. He too would be against the fed, but also more broadly against capitalism in general.
http://www.whyweworry.com/2010/07/05/capital-contradictions/

North is current, and the best.

Is that this guy ? http://www.sullivan-county.com/nf0/fundienazis/gary_north.htm

note: that's circa 1999

Yes. I told my friend that you would probably send such a reply. Just a FYI.

You probably already knew that I was going to post this link, but I couldn't resist...

http://people.smu.edu/acambre/garynorth/

NastySlapper says

You have also insulted yourself by asserting that I started out learning economics from conspiracy theorists without any basis for such a claim whatsoever.

It would seem I wasn't so far off.

I'm faced with an interesting dilemma that is somewhat funny. It is this: I know that I can ask you a question right now, and you will avoid answering it. And once you do so and I tell you that I knew that you would avoid it, you will choose to think I am delusional, and attempt to rally others to support you (since feeling accepted is more important than the truth). However, if I tell you beforehand that you will avoid the question, you will attempt to answer it in spite. (E.g., if I had told you ahead of time that you would quickly post such a response about North, you wouldn't have done it. Get it?) Oh, well, here it is anyway...

-------
I am aware of such things. Yet I've labeled North as the best economist around right now.

Your point is that I am supposed to feel bad about my ability to see through the forest, while you take pride in prejudice and ignorance. (Is it opinion or fact that you are ignorant of North's economics?)

I can only show you the truth; I can't make you drink it.

"There is no subtler or surer means of overturning the existing basis of society than to debase the currency". Is our government lying to us or just withholding the truth, because our own government is debasing our currency. Isn't our government supposed to protect our rights???

And this classic statement from Richard Doughty "I would burn the Federal Reserve to the ground, letting the burned out ashes remain there forever as a fabulous yet graphic reminder to future Americans as to what the hell will happen when you ignore your own Constitutional requirements that money be backed by gold, and then compound the laughable folly by letting an evil institution like the Federal Reserve create too much money and credit out of a fiat currency, which causes inflation in prices, and especially for the horrifying process of allowing the Federal Government to constantly deficit spend and grow, which causes flammable distortions in the economy."

End the Fed !

Abe--

Remind me again where it says in the Constitution that money must be backed by gold?

NastySlapper says

while you take pride in prejudice and ignorance

I told you already my "bible" years ago on this was Marcia Stigum. The whole point of my question to you was, please help me bridge the gap, by referring me to well respected economists who hold your view. Obviously hundreds of economics PHDs work for the fed, so it can be argued that they overly influence the economics profession. But still, I just wanted to hear an argument that reflected less ignorance of what the fed does, or even how inflation works.

I was looking for someone with undisputed intellect, understanding of the fed, and objectivity who has your opinion, because I am honestly interested in hearing a better explanation than the one from Mises or various conspiracy websites or yours that just make totally unbacked statements, sort of like Abe, as if that were enough.

You're correct, I did not look in to North's economics. When I heard what he did about the Y2k issue, and that he wants to execute gay men, I figured I knew enough.

Yes, I prejudged his expertise in economics. But that's fair, I asked you to give me someone with intellectual credibility.