CNBC anounced that there will be a press release out of the G-7 meeting at 6 PM. Hank Paulson will make an announcement at 6:45!
-C
Hello Barrt:
I have done a lot of reading on what happened to gold when it was taken in 1933. Maybe this will answer your "what if gold was taken" question.
This link http://www.wellsfargonevadagold.com/confiscation-order.pdf is the Executive Order demanding that gold be turned in to a Federal Reserve Bank, branch or agency or to any member bank.Everyone who is thinking of gold or that has gold should look at this link.Seeing it in black and white…well you’ll see what I mean.
Note the gold to beturned over then were gold coins, and gold bullion. There are exclusions as you canread on the second page. In fact I have a client who had me secure the name www.ProtectYourGold.com he is thinking of turning bullion to jewelry before this happens - good luck, bowling balls falling quickly to earth come to my mind.
As Chris’s videos show they then created money and gave everyone $20.65 an ounce for their gold, once they had it they set the price of it to $35.00. Some perverted idea of a kiss before maybe?
This link is by a Constitutional Law Professor who discusses the case of a lawyer who had gold and argued that the law wasn’tconstitutional. He won round one and then they re-issued the order and he lost round 2. Of course, his gold was in a banks safe deposit box, so I don’t think he ever saw his gold after the bank siezed it on behalf of the order. So keep it home and get robbed or risk jail and a fine if you want to become a criminal, leave it in the bank and bah bye.
http://users.rcn.com/mgfree/Economics/goldHistory.html
The other thing I learned is that when other countries would give US Dollars back for gold in exchange is this: The Fed would give them coins not coins siezed and melted into bars. Coins were like 96% pure, so on a million bucks they saved 4% by giving them coins since they gave coins at face value not melt weight.
What I can’t understand, and I’m asking, I’m NOT unpatriotic and I think a gold standard would be better than the sham du jour: Isn’t it unconstitutional to use anything BUT coin of gold and silver as tender, isn’t that what our Constitution says??? Last I knew, the Constitution only lists two crimes by name, Treason and Counterfeiting. Seems to me that a Fiat system is well… let me say that one day at band camp I had a Secret Service Agent on my plane, I put him in the jumpseat on the way to DC. He had a dog with him, the dog sniffed chemicals used to bleach one dollar bills so the counterfeiters could use the paper to print larger denominations. Why that comes to mind???
Seems to me this is why we are right here right now today. As an ex-airline captain I know what happens when you plan a journey on your chart and then you forget that chart in the crew room…Yah think Congress left our chart at some lobbyist’s bar? And I may have missed it, but I didn’t see that (Constitutional fact) mentioned in the article.
So, we’d likely see gold "purchased" (sounds a bit like a mugging to some I have explained this to) for what they deem to be an appropiate price, and issued in some likely new currency, and then, once they had it, we could expect that if history follows the last 100 years, gold would go up in value 75% after it left the investors hands.
…Even muggers can’t add that insult to the injury.
Reading all this makes me realize that money (and or gold) may not be the only thing lost during a depression.
Oh well, as an optimist I am hopeful that we will go back to a gold standard and put the boom to bust bubble cycle behind us along with ravaging the planet of her resources.
Interesting read all at http://www.financialsense.com/fsu/editorials/dollardaze/2008/1010.html
I’d question a lot of it after reading the inflation rates, after watching Chris’s videos I dug out receipts from 2001. WOW! 5.1% I wish!!!
Estimating a Price for Gold
A troy ounce is 31.1 grams, thus the 161,000 tonnes of gold is equal to 5,176 million ounces of gold. Dividing the total amount of currency (US$3.8 trillion) by 5,176 million ounces gives us a figure of US$738 per ounce.
The chart below shows the composition by currency of such a comparison.
The next chart indicates the break-down in price for an ounce of gold by dividing the currency and demand deposits of the world ($18.4 trillion) by the estimated number of aboveground gold (5,176 million ounces).
Extrapolating the present inflation rates for both gold and paper currency produces an annual price increase of 5.2% (6.6% paper inflation - 1.4% gold inflation) for the price of gold.
Conclusions
These two analyses are meant to provide a measure of comparing the amount of gold in the world to the amount of paper money using published official sources. The two measures of money used are themselves quite limited in scope.
Currency as physical paper is the most restrictive form of measuring the money supply and the most straightforward method conceptually. It is generally accepted practice to also include demand deposits when discussing money supply, as this is a form of money available to the depositor upon demand. Savings accounts are sometimes considered as money, but not always, as it may be argued that the bank (in theory) may demand some time to acquire physical cash to redeem a withdrawal.
Obviously the inclusion of other broader forms of money (various instruments of savings deposits, money market deposit accounts, repurchase agreements, money mutual funds, etc) would further increase the price of gold in such a comparison.
Whether such comparisons are of value beyond that of curiousity, I leave to the discretion of the reader.
"Translation: The US dollar’s role as the world’s reserve currency is up for debate." – Dr. M
Indeed. In fact, Bretton Woods III will just ratify the dollar’s erosion of reserve currency status which has already occurred under Bretton Woods II (the unplanned and chaotic transition to free-floating fiat currencies which started with a bang when Nixon closed the gold window on 15 Aug 1971). Before that, the US dollar was THE reserve currency. Since foreign central banks could convert dollars to gold, the dollar was "as good as gold."
Given that statists prefer discretion over rules which hem them in, I doubt that fixed exchange rates (which prevailed during BW I) are on the menu. I doubt even more that gold and silver would be given ANY role, when the authorities are babbling about "unlimited liquidity." With a gold-backed currency, there’s no such thing as "unlimited liquidity." And that’s a good thing. Didn’t those bankers learn in Econ 101 that scarcity is a fact of life, and nothing is available in "unlimited" quantities? Evidently not – thus, the mess we’re in today.
A global currency is what they really want. You can already hear the meme being spread – "no country is big enough to face this on its own."
But a global currency is a pretty big step. And the IMF is way too small to help with a global bailout. A halfway solution might involve a global central bank, authorized to hold reserves in multiple existing currencies. This would move the present currency swap lines in-house, in such an integrated institution.
However, the main purpose of a global central bank is to create more fiat credit. Merely with the puny resources of our domestic Federal Reserve, Goofball Greenspan managed to Bubble most of the planet with his check-kiting schemes. It ought to be obvious that establishing a global central bank would simply repeat this appalling fraud on an even larger scale. But that won’t stop them from trying. And it won’t stop Greenspan from offering his services as Maestro of the Global Reserve Bank.
Bottom line, the Bubble blowers are plotting how to gin up Bubble III. This will require massive borrowing (already in the pipeline) to create the raw material (debt) to be magically transformed into new credit and currency. Yes, it will be inflationary. And inflation, in real terms, shrinks debt relative to GDP, by debasing the currency in which the debt is denominated. Sounds good to a politician: 3 years at 10% inflation, and 30% of our debt burden goes away, in real terms. Then we can borrow 30% more and PARTY! COOL!
Other than Dr. Martenson, do you hear ANY experts, anywhere, diagnosing our current predicament as monetary in origin? Me neither. Even the great Dr. Roubini steers clear of rejecting the fiat currency regime. The sad result is that the global monetary system is being radically redesigned, this weekend, by people who don’t understand the fundamental problem, and therefore are using the wrong principles to fix it. Their objectives – "unlimited liquidity" and "more fiat credit" – are the source of the problem. DUH! WE BE DOOMED!
"Ron Paul’s philosophies would create policies that would lead to this same scenario"
Respectfully - You couldn’t be more WRONG. Sure - the regulated economy models of Mussolini, Hitler & Lenin are the solution.
Many of the "wealthy elite" you describe, have profited exactly FROM the government-protected monopoly granted the Federal Reserve System Banks, and that is "regulation" turned AGAINST the citizens of the USA.
What do you think inflation/devaluation of the fiat-currency results from, but the "regulation" you so propose???
What Ron Paul has proposed (consistently), is exactly what the Founding Fathers proposed, which we are NOT following, which is the US CONSTITUTION, Article I Sec 8 & 10.
One only needs to read the warnings, and the passion behind them, which the Founding Fathers espoused, regarding the dangers of having a private-for-profit Central Bank issuing the currency of the USA, with that currency backed by NOTHING, and the danger that posed for all the citizens (sovereigns) of the USA, not just for the wealthy.
The Federal Reserve issuing the nation’s currency is the source of the problem, and that is NOT CONSTITUTIONAL.
"wealthy elite make the rules"…
That was the reason for having a Bill of Rights and a Constitution - to prevent monopolistic protectionism and cronyism. The fact is, if we were using "honest money", backed by gold & silver, the highly leveraged CDS market, et., etc., would collapse only to the detriment of those betting, and not pulling the rest of the economy into it.
For the last 85 years, we have lived under a "regulated" economy, to the destruction of the middle class, and the empowerment of those "on the inside" of government power and banking.
Beyond the following, I suggest you actually read Ron Paul’s writings on the subject.
Thomas Jefferson - "I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a moneyed aristocracy that has set the Government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs."
Thomas Jefferson - "If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."
James Madison - "History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling the money and its issuance."
John Adams - "All the perplexities, confusion and distress in America arise not from defects in their Constitution or Confederation, nor from want of honor or virtue, so much as downright ignorance of the nature of coin, credit, and circulation."
Andrew Jackson - "Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the grace of the Eternal God, will rout you out"
Andrew Jackson (His Tombsone) - "I Beat the Bank!"
Woodrow Wilson - "I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world. No longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men."
Franklin D Roosevelt - "The real truth of the matter is, as you and I know, that a financial element in the large centers has owned the government of the U.S. since the days of Andrew Jackson. History depicts Andrew Jackson as the last truly honorable and incorruptible American president."
.
Now that’s an interesting american political character. First a marxist, then a proponent of SDI, now a perennial candidate for president as a Democrat (making Democrats quite uncomfortable). He is constantly reinventing himself.
I’m not sure which part of the 3 hour video you were referring to, however, in relation to the question about what happens when gold is illegal to own.
I’d like to ask a question about this chart from Schwab & Co.below:
My question is this: What if we backed out the fuzzy math (GDP and Debt and Unemployment and CPI), how would the chart below look then in 2008 terms???
I just finished "I.O.U.S.A". From what I see our debt is not 10.3Trillion it is 53 Trillion.
Chris’s video about GDP Fuzzy math I believe was circa 2003.
Do we have any numbers for this year’s quarters. I seriously thinkit would make a great comparison to what the "experts" tell us. I’m soooo tired of reading them quote our health based on Enron math. Talk about riches to rags.
These numbers just seem way to optimistic, money supply+3%? I don’t think Ben does anything at just +3%.
I recall in early 2007 debt was "8.7" trillion and theGDP was 13.5 trillion so debt was 64% of GDP
So if we use Chris’s 2003 40% off of GDP in 2007 then
debt was "8.7" trillion and the GDP to 8.1 trillion sodebt EXCEEDED GDP
and if we use the real debt of 53 trillion (8.7 + 7 for SS + 26for Medicare + 1 Misc)
debt 53 trillion and GDP of 8.1 trillion so our debt exceeded GDP by 640% ?
So when I hear our debt is only 64% of GDP I should be hearing weowe 640% more than we make? And not that debt is only 64% of GDP…
If so, then aren’t we a subprime borrower? Shhhh don’t tell China we mightloose the big house. And don’t tell any investors or all the oil may come outof the engine.
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Maybe I read this wrong but is it that you believe that under unregulated capitalism, the wealthy become so wealthy that they pervert Democracy? So no regulation means total perversion of Democracy while partial regulation leads to partial perversion of Democracy?
If so, then I think we need to get rid of Democracy so there is nothing to pervert.
I like that thought. Give me anarchy any day. The State is just chaos. Who really needs that?
There is a ‘school of thought’ that’s very possibly also true, see www.professorfekete.com, that the Federal Reserve was first
instituted to rediscount 90 day commercial paper (bills of exchange), which were backed by real assets, as in consumer goods. In exchange for discounted paper the Federal Reserve would extend its credit (Federal Reserve Notes) which were more readily accepted than commercial paper, thus greasing the wheels of commerce. These Fed notes were only backed 40% by gold.
When the 90 day bills matured the credit would be retired.The aim was to ‘sustain the balance between production of marketable goods and the creation of currency’.
For the system to work effectively though, the Federal Reserve Notes had to be redeemable in gold, as did the commercial paper, which they were until 1933. The Federal Reserve was not supposed to monetize government debt, except under heavy tax penalty, but this clause was never enforced by the government. This is why the government defaulted on its domestic gold obligations in 1933.
[quote]Respectfully - You couldn’t be more WRONG. Sure - the regulatedeconomy models of Mussolini, Hitler & Lenin are the solution.
Many of the "wealthy elite" you describe, have profited exactly FROM
the government-protected monopoly granted the Federal Reserve System
Banks, and that is "regulation" turned AGAINST the citizens of the USA. [/quote]
Uh, no. There’s a reason the wealthy elite are the biggest supporters of deregulation. Further, none of these character have the slightest need of any of these systems. They might give a slight leg up, but it is hardly relevant in the face of the extreme power of their already existent capital.
The reality, GDon, is that we have had completely unregulated capitalism before, just turn the pages back to the start of the industrial revolution. Boom and bust cycles were so wild and extreme that Great Depression equivalent events happened every 20-40 or so years. When unemployment struck women, children and men where thrown in the ditches to die. Average life spans dropped in half. Factory work was nothing short of slave labor, and if you so much as complained you’d be blacklisted – your name circulated amongst other factory owners – so that you could never hold a job again (a death sentence).
Indeed, the only reason anyone suffered it, was because it wasn’t a whole lot worse then the fudelism system (which makes Lenin’s communism look like utopia…). The only thing preventing a repeat of those past horrors is not changes in human nature, humans remain precisely the same. Instead, it is numerous good, and thoughtfully designed regulations and controls.
To put it simply, it is the nature of corporations and capitalism to lift itself up by pushing others down. It arises from these fundamentals that the most "perfect" corporation does not view its employees as humans, as having rights, or even deserving of an income.
Hell, capitalism has little desire to even improve the quality of the nations in which it exists (being a parasite is a faster path to wealth). It is again regulations and rules that direct capitalism to this task.
Capitalism is much like government. Everyone should hate it. It is never trustworthy, but we have to put up with it because the alternatives are worse. Since we must have it, we have to take steps so that we remain the masters and they our servants.
[quote]
What do you think inflation/devaluation of the fiat-currency results from, but the "regulation" you so propose???[/quote]
You can’t have an unregulated currency. Even implying that such is possible makes shows a lack of thought and consideration. All currencies are symbols of exchange and, as such, are only as good as their ‘word’. It is necessary that some entity makes sure that the currency remains intact.
This is true even if you use gold. Or do you think that people wouldn’t debase gold coinage in mass? If so, open a history book.
[quote] What Ron Paul has proposed (consistently), is exactly what the
Founding Fathers proposed, which we are NOT following, which is the US
CONSTITUTION, Article I Sec 8 & 10.[/quote]
Ron Paul is in error. The problem isn’t the Fed. The problem is how the Fed is designed. It needs to be built just like any other completely untrustworthy branch of government – with oodles of checks and balances.
As a side I’ll also point out that we abandoned the gold standard because we weren’t, and never did, follow it.
[quote]One only needs to read the warnings, and the passion behind them, which
the Founding Fathers espoused, regarding the dangers of having a
private-for-profit Central Bank issuing the currency of the USA, with
that currency backed by NOTHING, and the danger that posed for all the
citizens (sovereigns) of the USA, not just for the wealthy.[/quote]
All currencies are backed by nothing. Or do you not realize that gold is just another currency? Currencies work because individuals agree to honor them. Nothing more, nothing less. The dollar could go away tomorrow if every vendor on Earth decided they’d rather use oak tree leaves instead.
Next, the Central bank is neither private nor for-profit. Read the available wikipedia article for god’s sake. Instead, the Fed is a strange quasi-private-public hybrid.
Now, if you want to abolish and replace the regional Federal banks with a fully (or more) public variation, I’m all for it. To be frank though, the Fed as it exists works pretty well. Far from perfect, but it has proven itself better than nothing at all.
I’m all for reviewing its design and trying to come up with a better idea though.
[quote]
That was the reason for having a Bill of Rights and a Constitution - to prevent monopolistic protectionism and cronyism. [/quote]
No, the bill of rights was to prevent government tyranny. Protectionism and cronyism were considered undesirable but acceptable so long as tyranny didn’t take hold.
[quote]The fact is, if we were using "honest money", backed by gold &
silver, the highly leveraged CDS market, et., etc., would collapse only
to the detriment of those betting, and not pulling the rest of the
economy into it. [/quote]
Honest money has little to do with this mess. This is a debt problem, a consumption problem, a deregulation problem, a weak regulation problem, a bad regulation problem, and even a too much regulation problem… all at the same time.
(What we need isn’t more or less regulations what we need is the right regulations.)
Or do you honestly think that unregulated banks wouldn’t use leverage just because the currency was gold based? Like, say, it was during the pre-Great Depression era? Oh wait… I guess they did use leverage back then too.
Further, the honesty of our currency hasn’t even entered the equation yet. When it does, you’ll know because we’ll have double or triple+ digit inflation.
Further, even if there was no government interference in this mess, things would still fall onto the shoulders of the people. They are the ones that get thrown onto the street after a foreclosure. The banks, like any good corporation, are always on the lookout on how to shove off their mistakes onto someone else. Given their greater wealth, the power of being the creditor, etc… they are more than likely to succeed.
Thankfully, we live in a democracy. And while the government has been undermined, once the silent majority stops being silent, apathetic, and disengaged (cause, say, they don’t have a job!). Things will swing hard. Just like they did during the Great Depression.
[quote]For the last 85 years, we have lived under a "regulated" economy, to
the destruction of the middle class, and the empowerment of those "on
the inside" of government power and banking.[/quote]
?
???
Open a history book.
Overall the middle class has strengthened dramatically over the last 85 years. Just compare wealth distributions. In fact, the most regulated economies in this world have the strongest middle class. Visa versa, under periods of deregulation, say the current administration, we have seen a vast weakening (or, in better times, a relative weakening) of the middle class.
The government has become empowered though. But that has less to do with economics then with fear mongering to convince the complacent people to give up more power. Beware the terrorists! They murdered 3000 people in one years, which is… uh… 18% of the yearly murder rate! Fear! Fear!
(How much money did we spend on police forces here in the states? I bet you a lot less than a trillion dollars!)
[quote]
Beyond the following, I suggest you actually read Ron Paul’s writings on the subject.[/quote]
I’ve read enough. Compared to most his vision is stronger. However, he is struck, like most his age, by the cold-war anti-communist/socialist propaganda poisoning that has infected the intelligence of the US population. The free market has its merits, but it isn’t a divine gift handed down by heaven that can fix everything.
Socializing, and Privatizing are two different tools. They each have their arenas of superior performance.
As a summation to all your quotes: all the more reason to regulate banks!
–
Steve
please use citations when using quotes. many of them come off the net which is very unreliabe
i have not been able to find the thomas jefferson quote anywhere" if the american people ever allow private banks…"
if anyone can find that citation i would be most grateful. because right now it is bogus and we need to have a higher level of integrity on this amazing site .
thank you gdon
prohibition… outlaw bongs and only outlaws will have bongs
oh yes organized crime will have one more item in its catalog. prices will go thru the roof
and eliot ness will be exhumed
I don’t know Chris Martenson, personally, but I can probably make a sure bet that he is working longer than 10 hours a day maintaining information, emails, and the website. With this site being so clean of advertising, I doubt he is getting the financial support he needs. I don’t want the website blipping with ads. We should help Chris, by donating (if you can), so he can continue his AWESOME work and dedication! I’m not sure if he even needs financial support but maybe he doesn’t want to ask for it. When/if you’re able, I don’t think it would hurt to throw him a few extra dollars his way. It is a great blogging page for all of us to utilize. I know I’ve enjoyed reading EVERYONE’s commentaries! Thank you for your time, and thank Chris for his time and efforts!
Caroline
p.s. I don’t know about you, but I felt guilty when I saw only two ads on his website. I began to assume he made most of his money through donations alone. If I’m wrong, please inform me of this!
This is an interesting table (thanks, Dave, post #27), but the numbers look flaky to me.
Several of the figures under "Great Depression" appear to pertain to a 3 or 4-year period from 1929 to 1932 or 1933:
– GDP growth -27%; Industrial production -52%; U.S. exports -66%
To be compared with the annual (or annual average) figures in the "Today" column, these multi-year changes need to be annualized, making them much smaller (somewhere between a third and a fifth as large).
With the suggested corrections, the point holds that the US is not experiencing double-digit annual losses in industrial production and exports, as it did during 1929-1933 … YET. Given that the authorities still haven’t admitted that we’re in recession (even as banks teeter and GM and Ford turn into penny stocks), this "GD vs. Today" comparison should be revisited in 2009.
I’d also add that Unemployment figures in the USA, if calculated in the same terms they were in the Great Depression, would today be around 12-15%.
–
Steve
I cound not have written a better reply…seriously.
I still think folks are missing some central points…points highlighted in the Crash Course. Libertarianism is very sexy and harkens back to the frontiersman’s life. Many of us would like to think we live up to this romanticized image, however the world is not a frontier, there are not limitless opportunities as pecieved during westward expansion. ALL GROWTH has come at the expense of others, this was just hidden because these were sometime very distant populations. Now this relationship has slapped us in the face with a ‘free trade’ economic system where wealthy cannibalize the wealth of the masses and ABSOLUTELY polarizes income and wealth distribution (having nothing to do with laziness). This is because the system cannot achieve real growth, which is mandatory, as Chris points out in a lending/debt system.
As Steve indicates, it is some of the smart regulation that emerge from the great depression grew the middle class by allowing for greater participation in the economy and dispersed wealth. It has been the commendeering of this gov and this system by wealthy interests that has steered this train from it’s course. Viet Nam built debt that began some deregulation and this was expanded by Reagan, then Bush I, then Clinton, then Bush II…all of them. Clinton tinkered with taxes in order to create a surplus. Everyone of these administrations along with most other representatives drank the same Milton Friedman ‘free trade’ koolaid. ‘Free trade’ / ‘choice’ and privatization are central to Neoliberalism…a concerted agenda by wealthy to create new economic conventional wisdom through the use of think tanks and to infiltrate and influence goverment (lobbyists, etc) to take the reigns of regulation as to entrench itself within the structure of society. Ever notice that supposed repulicans who continue to preach "small, efficient gov" continue to grow gov and spending. This is not accidental but a well organized movement to solidify a new economic society that creates a "responsible" class of men (or those most deserving of civic leadership). Amazingly this is completely spelled out in the philosophies and mantras of the founders of this movement. The movement of Neoliberalism is a growing area of scholarly research and it would be of interest to look this up…a good place to start is "A Brief History of Neoliberalism" by David Harvey.
Also, from a comment about Lenin and socialism, do you think this is what I am suggesting? I don’t. Please don’t conflate the Marxist critique of Capitalism with Lenin soicalism…socialism/communism are economic/political ideologies that draw from Marx. What is important in this critique is labor. Labor is the most important mechanism in an economy…it creates the wealth! A Capitalist ‘free trade’ system that cannot grow due to a limited world and again end up cannibalizing the labor classes to achieved the expected growth (interest rate) ending is growing unemployment. And since markets are reactionary, there tends to be a lack of investment for transitionary periods (economic downturns) where capital tends to hoarded which exaggerates these downturns. The new regulatory policies after the GD (New Deal, etc.) has the specific agenda of keeping some directed investment (such as infrastructure) flowing and reducing unemployment. That investment, while not the most efficient, always pays economic benefits in the future and keeps labor working, living, and supporting markets (hopefully local).
Further, Gdon, I do not disagree with many points about central banks, but this is not the end all and be all of issues. I also never made any argument that our current regulatory system is desirable…it has been infliltrated! The argument is really is about preserving economic competition AND democracy at the same time. If this is the goal, then a separation of economy and government needs to be preserved…with a transparent, checked and balance gov representing the people making smart and basic rules that serve to preserve democracy while encouraging competition. It is genarlly a simple concept, but is not one with absolutes (i.e. this system works for every situation and all citizens). It requires diligence, continued input and oversight, and an intelligent and ACTIVE population. All these components are currently absent.
Free markets make a handy scapegoat for Marxist apologists. The boom and bust cycles with which we are familar is a product of bank credit expansion through central banking and fractional reserve banking, both products of government intervention. The Bank of England was the first to employ this system in 1694. Marx saw its ill effects and blamed capitalism. The economist who did get it right was Ludwig von Mises. Mises knew that savings and production were the means by which a nation became wealthy. The central banking system perverts that process by substituting debt for savings and consumption for production
Where the alchemists failed to produce gold from lead, the interventionists did one better; they turned paper into money. The excess production of money is the root cause of inflation. It’s the favorite of statists because it allows them to spend beyond what they could through direct taxation.
The phases of inflationary cycles were described by Mises. In the early stage, small amounts of new money have a strong stimulating effect. As the cycle continues, the masses start to notice small increases in prices; consumption increases while savings decrease. This progesses to the speculative phase where the public borrows and spends to beat higher future prices. Speculation becomes rampant, the money is loose and living standards fall. At this stage, massive injections of money have no effect on keeping the boom going. It ends with a hyperinflationary blowoff when the currency collapses into nothingness.
Interventionists have been getting away with blaming laissez faire capitalism for decades. There is no free market; it is all regulated with regulations more complicated and detailed than the tax code. There was no deregulation in the free market sense. The regulations were written to legalize fraud and theft. There is no free trade; foreign trade agreements like NAFTA have tomes of regulations and a tribunal to arbitrate disputes. By contrast, free trade between the states is dictated by one paragraph in the Constitution.
Market economies are infinitely complex, too complex for manipulation without producing damaging consequences. No nation can become wealthy by the socialist nostrums of neighbor stealing from neighbor through the agency of government. The real ideologues are the ones who insist government knows best. It’s a shame that so many blame free market capitalism for today’s problems without knowing what free market capitalism if. If government was explicitly prohibited from intervening in the market and distorting prices, THEN we would be looking at a free market. But that would be impossible. Because in a free market there would be no central bank.
ajparrillo said:
ALL GROWTH has come at the expense of others
Only in socialist economies - government steals from Peter to pay Paul. In a real free market economy both buyer and seller benefit by trade.
What is important in this critique is labor. Labor is the most important mechanism in an economy…it creates the wealth!
Without savings and and the risk taking activity of entrepreneurs in the marketplace, labor has no productive outlet.The labor theory puts the cart before the horse.
A Capitalist ‘free trade’ system that cannot grow due to a limited
world and again end up cannibalizing the labor classes to achieved the
expected growth (interest rate) ending is growing unemployment.
Market prices regulate finite resources with infinite human demand. It is the destruction of wealth by socialist means that idles labor. No human or committee of humans, no matter how educationed can replace rationing by the market pricing system.
It has been the commendeering of this gov and this system by wealthy interests that has steered this train from it’s course.
It will remain that way as long as the poor and middle classes with their insignificant single vote think they can direct government to steer wealth in their direction. The distribution of wealth hasn’t changed since Victorian times. For as long as the voters endorse this system of stealing, the wealthy have the edge.
Will they ever learn? Do they want to learn?
This is fun. Those involved in this debate, in ways, are arguing some of the same central points without recognition that this is occurring. Considering the response of Hewittr, I guess I would be considered to be scapegoating free markets…this is wrong. I scapegoat contemporary regulated markets that masquerade as ‘free markets’. I must stress again that markets are NOT synonymous with capitalism. Once there is wealth and investment, markets begin to be regulated by the accumulaton of wealth to a smaller and smaller proportion of a population which begin to become those political elites. My entire point is that there is no one systemic smart bomb that handles econonmic and political lifestyle. I would propose that less numerous ‘rules’ are needed in smaller markets, but as a system becomes larger, where actors are anonymous with vastly varying geographies, then rules become necessary since there is less knowledge needed to make decisions and the community mechanism, important in local markets, ceases to exist.
While I do not prescribe to one philosophy of political economic structure, I am weary to discard important observations because other points are distasteful to my worldview. In other words, don’t throw the baby out with the bathwater in terms of Marx…also one needs to understand the writings historical context. Marx was observing and critiquing patterns and utilizing these observed patterns to predict the outcome; the central focus being class struggle (not important?). I always find it interesting that Marx argues that the rise of communism would eventually result in socialistic dictatorship. In the end, Marx was a theorist that inspired political and economic movements. As long as these are not conflated, value can be extracted even if the central thesis may be distasteful to one’s worldview.
As for von Mises…an originator of the contemporary Neoliberal philosophy…there was a disdain for populist democracy that maybe some others share. There was a specific agenda for a politcally entrenched economic structure that allocated power to a small proportion of ‘responsible men’. How is one proven to be ‘responsible’? By being rich. The central ideologies of the founders of the Neoliberal movement have been well researched and documented. I guess if one is not a proponent of democracy, then Neoliberalism could be very tasty.
As fun of this debate is…I really think so. I understand that I am not going to turn an individual away from a deeply held view of the world especially in a forum where we are all strangers. DO take away that I appreciate the debate and we can all agree that this is what is missing in society…a hearty debate of fundamentals. I HOPE we all agree at some central point that all men (used in classis sense) deserve opportunity to work and support offspring in as much ‘liberty’ as possible. I quote ‘liberty’ only because the interpretive variation of what this means in interactive society…especially in the context of larger political and economic structures. Good stuff all!