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InvisibleSilversoul
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Re: Does Ron Paul have a chance? [Re: blazenn]
    #14422081 - 05/08/11 09:49 PM (12 years, 9 months ago)

Quote:

Rebirtha said:
This is not true. The 'standard' part of the gold standard is saying you are holding the value of a dollar standard to an amount of gold. A true gold standard is not pure gold coins, it is easily a currency backed by gold where there is no price but a weight.



It is saying that such-and-such amount of money is worth such-and-such amount of gold.  That is price fixing, pure and simple.  By comparison, the money in your wallet is not set to any one good, but simply acts as a means of exchange for other goods.  The goal of price stability is to make sure that the money maintains a stable relationship with as many goods as possible, rather than a single commodity which bears no relationship to what most people buy.

Quote:

This is true yet the federal reserve consistently gets market expectations wrong such as the housing bubble, neither is perfect. But I agree with you in many regards.



No doubt the Fed has made some bad decisions, though I think that both its defenders and detractors overestimate the influence the Fed actually has over monetary policy.  They all assume that the money supply is controlled exogenously, when in fact it is set endogenously by the demand for loans.  The recent housing bubble was simply a very extreme case of an 18-year cycle that goes back hundreds of years.  It was made worse by Wall Street deregulation which allowed an ungodly amount of debt to be piled on top of the rising land values, but the source of that cycle is to be found in the real economy(particularly), more so than in the monetary system.

Quote:

you seem to believe the USD has a permanent spot at the top of global currencies, which would be a pretty naive assumption.



I make no such assumption.  What I say is as true for England or Australia as it is for the US.  It is not necessary for a government to have the world's reserve currency in order to have monetary sovereignty in their own country.


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OfflineGastronomicus
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Re: Does Ron Paul have a chance? [Re: Silversoul]
    #14422547 - 05/08/11 11:25 PM (12 years, 9 months ago)

This is a non sequitur but here is a fascinating article on why gold has been used for currency

http://furthertheless.com/2010/11/why-is-gold-used-as-currency/


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OfflineRebirtha
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Re: Does Ron Paul have a chance? [Re: Silversoul]
    #14423416 - 05/09/11 07:21 AM (12 years, 9 months ago)

The printing of money is not always set endogenously, hence bailouts, stimulus, and quantative easing. The fed gives money essentially directly to the government for projects where it can't borrow and tax and this has nothing to do with lending rates. Also I don't agree with the assessment of the 18 year bubble though I do believe it took part over the course of more than a decade. I believe the cause were as most bubbles artificially low interest rates (easy credit) coupled with the legislation to allow people who normally can't afford homes. With low interest rates and less restrictions to buying homes demand soared and so did prices. Housing prices were doubling and tripling in 10 year periods, becoming one of the best investments for many people. People constantly blame predatory lending as well. I think the predatory lending is more carelessness than anything else. With housing prices soaring and interest rates very low banks and lenders didn't care whether the person who took out the mortgage could afford it or not, because as long as the price of houses went up the bank was considered the deal a low risk win. More carelessness than predatory IMO. Also the subprime crisis was largely carried out by none other than Fannie Mae and Freddie Mac. I don't think this was normal market condition at all, it reeks of government intervention.

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InvisibleSilversoul
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Re: Does Ron Paul have a chance? [Re: Rebirtha]
    #14424211 - 05/09/11 11:41 AM (12 years, 9 months ago)

Quote:

Rebirtha said:
The printing of money is not always set endogenously, hence bailouts, stimulus, and quantative easing.



The bailouts essentially help cancel out the bad debt that the banks had.  Of course the stimulus puts more money in the economy.  That's the point.  Yes, the government can spend money directly into the economy.  My point was simply that Central Banks do not control the money supply by their tinkering with interest rates and reserve requirements, because banks will continue to lend exactly as much money as the market demands.  As for quantitative easing, it's pretty much like pushing on a string.  The Fed is flooding banks with reserves, but they're not lending because the amount of money they lend has nothing to do with the amount of reserves they have.

Quote:

The fed gives money essentially directly to the government for projects where it can't borrow and tax and this has nothing to do with lending rates.



Actually, it lends to the government.  I would prefer it just give the money directly to the government like you say, but yes, the government can get money from the Fed, which is why I mentioned that

Quote:

Also I don't agree with the assessment of the 18 year bubble though I do believe it took part over the course of more than a decade.



And that's because you haven't studied the issue.  Except for the Keynesian era from WWII to the early 70's, the cycle has pretty much gone on uninterrupted for at least the past 200 years.  The reason it tends to be about 18 years has to do with the way mortgages are financed.

Quote:

I believe the cause were as most bubbles artificially low interest rates (easy credit) coupled with the legislation to allow people who normally can't afford homes.



And the reason you believe that is because you don't grasp the concept of endogenous money.  That's okay.  Most economists haven't picked up that concept either.  But the fact is that banks create credit first and then seek deposits, which means that they loans based on the current market demand, and set interest rates according to the demand for money.  Credit is always as easy for them as finding borrowers who they trust to pay back the loans.

The legislation myth you mention is a bunch of bullshit.  The sub-prime mess didn't start until well after the housing boom was already under way, and had much more to do with derivatives than anything else.  The reason banks were lending to all these borrowers that couldn't pay back was not because the government was forcing them to.  That's ridiculous.  They were doing it because they could bundle all these bad mortgages with good ones and sell them off as AAA-rated securities to someone else.

Quote:

With low interest rates and less restrictions to buying homes demand soared and so did prices.



The low interest rates and easy credit were fueled by the rising land prices that were driven by market demand.  Land prices inevitably goes up because, as Will Rogers once said, "They ain't making any more of it."  And it is this rising value that fuels other speculative activity and malinvestment.  A stupifying number of people seem to think that this recession is unique in being caused by a land bubble.  It's not.  The recession of the early 90's was caused by one, as was the one in the early 70's, as was the Great Depression.

Quote:

Housing prices were doubling and tripling in 10 year periods, becoming one of the best investments for many people. People constantly blame predatory lending as well. I think the predatory lending is more carelessness than anything else. With housing prices soaring and interest rates very low banks and lenders didn't care whether the person who took out the mortgage could afford it or not, because as long as the price of houses went up the bank was considered the deal a low risk win. More carelessness than predatory IMO.



That "carelessness" is inevitable when you a rising asset like land providing the base for all kinds of other speculative activities.  Land prices do not fluctuate in the same way that other commodities do.  They keep rising and rising until the bubble pops.  The rising values of land are what drives demand for it, which in turn increases the value of land.  Until we address that, such as by shifting taxes onto land values, the boom-bust cycle is here to stay.

Quote:

Also the subprime crisis was largely carried out by none other than Fannie Mae and Freddie Mac.



They came late to the game.  The subprime crisis was well underway by the time they joined in.  As I said, it was fueled by derivatives.

Quote:

I don't think this was normal market condition at all, it reeks of government intervention.



The government's main role in this was in repealing Glass-Steagall, which led to all kinds of ponzi finance.  But that simply amplified a problem that would have existed anyway.  Land values themselves have to be addressed, which is why I advocated land value taxation.


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OfflineRebirtha
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Re: Does Ron Paul have a chance? [Re: Silversoul]
    #14424238 - 05/09/11 11:49 AM (12 years, 9 months ago)

Thanks for your input, I'll have to read up on some of things you mention. I justed started formally studying economics at a university so there is a lot that is not in the big picture. Do you think what the Fed is doing is sustainable though? And do you agree with Schiff's assesment of the markets back in 06 and 07 that I posted here http://www.shroomery.org/forums/showflat.php/Number/14423975 ?

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InvisibleSilversoul
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Re: Does Ron Paul have a chance? [Re: Rebirtha]
    #14424371 - 05/09/11 12:20 PM (12 years, 9 months ago)

Quote:

Rebirtha said:
Thanks for your input, I'll have to read up on some of things you mention. I justed started formally studying economics at a university so there is a lot that is not in the big picture.



Well, it's good to study heterodox theories alongside your formal economics education.  I'd particularly recommend Debunking Economics by Steve Keen.  It's basically the best summary of heterodox economics out there, and should supplement your economics education nicely.

My guess is that your classes will teach you what's called the Real Business Cycle theory.  Let me know if you can make sense of it, because it always struck me as a bunch of bullshit.  For all the flack I give the Austrian school, at least they can recognize a bubble when it's right under their noses.  RBC theory doesn't even acknowledge the existence of bubbles.  That's why after the crash there were all these economists shouting "Nobody saw it coming!" by which they mean that their models are incapable of predicting something like this, and since they're respectable professionals in their field and they didn't see it coming, that therefore no one else out there saw it coming.

Quote:

Do you think what the Fed is doing is sustainable though?



If you're referring to quantitative easing, I don't think it's either sustainable or unsustainable.  I think it's basically useless.  As I said, it's like pushing on a string.  As for the Fed in general, I don't think there's anything wrong with having a lender of last resort.  I do think it's bullshit that the government has to borrow from the Fed instead of having the Treasury create its own money.  But that's another topic.  Basically, I think the real imbalances are in the real economy, and that whatever issues are in the financial sector simply amplify those problems.

Quote:

And do you agree with Schiff's assesment of the markets back in 06 and 07 that I posted here http://www.shroomery.org/forums/showflat.php/Number/14423975 ?



I think the Austrian business cycle theory catches part of the picture but mistakes the culprit.  The Austrians understand the buildup of debt and the misallocation of capital, but they mistakenly blame it on central banks because they mistakenly think money is exogenous(as do most economists for that matter).  As such, they can use their models to predict when a bubble will burst.  Therefore, it doesn't surprise me that Schiff saw this coming.  His predictions since the crash about the upcoming hyperinflation have been repeatedly wrong, and to me they prove that he doesn't really understand money.


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OfflineRebirtha
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Re: Does Ron Paul have a chance? [Re: Silversoul]
    #14424412 - 05/09/11 12:33 PM (12 years, 9 months ago)

Hyperinflation or just serious inflation would only happen as velocity picks up, the distortion has been made. Has it not?

The distortion:

Velocity of money




The distortion of printing money has already been made and is by definition inflation. We haven't really seen prices go up except in heavily traded commodities, and we know the inflation is here in parts because of declining value of the dollar. When banks start lending as the economy picks up there will be inflation though how intense is left up to speculation. It does seem like an unprecedented increase in the money supply. Schiff is wrong until velocity picks up not to mention we know that inflation can take over a year to happen under normal market conditions, 3 or 4 years with no velocity would explain it pretty well.

Edited by Rebirtha (05/09/11 12:42 PM)

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InvisibleSilversoul
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Re: Does Ron Paul have a chance? [Re: Rebirtha]
    #14424486 - 05/09/11 12:45 PM (12 years, 9 months ago)

Inflation is here, but hyperinflation fears are based on a misunderstanding of how hyperinflation comes about.  Hyperinflation is whole other beast altogether.  It's actually a form of debt deflation, where the debt is owed in foreign currency.  It involves three factors: loss of productive capacity, foreign currency liabilities, and loss of ability to tax.  Here is a good synopsis on why hyperinflation is not coming.


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Edited by Silversoul (05/09/11 01:01 PM)

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OfflineRebirtha
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Re: Does Ron Paul have a chance? [Re: Silversoul]
    #14424549 - 05/09/11 01:04 PM (12 years, 9 months ago)

I have heard multiple interviews where Schiff says he doesn't think hyperinflation will come but serious inflation will. Raising interest rates in this economy to fight it would definitely slow down productive capacity as well.

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InvisibleSilversoul
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Re: Does Ron Paul have a chance? [Re: Rebirtha]
    #14424576 - 05/09/11 01:09 PM (12 years, 9 months ago)

The price spike is global and has a lot more to do with oil price shocks than anything else.  Raising interest rates won't do shit.


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OfflineRebirtha
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Re: Does Ron Paul have a chance? [Re: Silversoul]
    #14424677 - 05/09/11 01:32 PM (12 years, 9 months ago)

I"m not talking about now, i'm talking about if there was growing inflation though several Federal Reserve Presidents have come forward saying we need to be ahead of the curve on inflation by raising interest rates.

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InvisibleSilversoul
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Re: Does Ron Paul have a chance? [Re: Rebirtha]
    #14424699 - 05/09/11 01:36 PM (12 years, 9 months ago)

Quote:

Rebirtha said:
I"m not talking about now, i'm talking about if there was growing inflation though several Federal Reserve Presidents have come forward saying we need to be ahead of the curve on inflation by raising interest rates.



Again, read the article I posted for why hyperinflation is not coming.  Raising interest rates will not curb monetary expansion because, as I already explained, credit creation is demand-driven, not supply-driven, as is often supposed.  Meanwhile, inflation has less to with the total amount of money and more to do with where the money gets allocated.  When people spend new money on bidding up asset prices instead of on production, then you're going to get inflation.  And by that reasoning, we probably will get inflation, considering the profits that Wall Street has been seeing while the rest of us are in a slump.


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OfflineRebirtha
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Re: Does Ron Paul have a chance? [Re: Silversoul]
    #14424760 - 05/09/11 01:50 PM (12 years, 9 months ago)

I wasn't saying hyperinflation is coming if that's what you were inferring. So when the economy picks up you don't forsee banks lending their excess reserves? Bernanke himself even admits that we will have to raise interest rates like China, ECB, India, Argentina if this inflation isn't as he puts it 'transitory'

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InvisibleSilversoul
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Re: Does Ron Paul have a chance? [Re: Rebirtha]
    #14424797 - 05/09/11 01:57 PM (12 years, 9 months ago)

Quote:

Rebirtha said:
I wasn't saying hyperinflation is coming if that's what you were inferring. So when the economy picks up you don't forsee banks lending their excess reserves?



They will lend their reserves according to what the market will bear.  But it makes no difference because even without those reserves, they could create the money out of thin air and get the reserves out of the money they created.  That's what it means for money to be endogenous.

Quote:

Bernanke himself even admits that we will have to raise interest rates like China, ECB, India, Argentina if this inflation isn't as he puts it 'transitory'



Yes, because Bernanke also mistakenly believes money to be exogenous.  Most of what the Fed does is based on this misconception.  They can serve a regulatory function, but any sort of inflation targeting through interest rates is bound to fail.

What I actually find funny about calls for a gold standard is that we currently think about our monetary system as if we were still on a gold standard.  Under a gold standard, reserves really did matter.  Under a gold standard, the government had to borrow money overseas if it needed any more to spend into the economy.  And we still impose these limitations on ourselves as if they still applied.  Endogenous money describes how money actually works in a credit-based system, and it can work quite well as long as we learn the rules for such a system instead of acting as if we were still on the old system.


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Edited by Silversoul (05/09/11 02:16 PM)

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Re: Does Ron Paul have a chance? [Re: Silversoul]
    #14425600 - 05/09/11 04:57 PM (12 years, 9 months ago)


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Re: Does Ron Paul have a chance? [Re: skatealex2]
    #14425703 - 05/09/11 05:16 PM (12 years, 9 months ago)

what happens if we lose our spot as the worlds reserve currency? Its happened before, and china is already ditching Dollar reserves for items such as copper.

How can we expect to just introduce trillions of dollars out of thin air and not experience inflation? Gold and Oil charts and par-for-par but everything is getting more expensive. The same people who predicted the 2008 mortgage crisis predict MUCHMUCH  worse.

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Re: Does Ron Paul have a chance? [Re: realfuzzhead]
    #14425745 - 05/09/11 05:22 PM (12 years, 9 months ago)

It's tough....both the Nanny State Left and the Family Values right are going to attack him 24/7 if he starts gaining any traction in the polls.


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Re: Does Ron Paul have a chance? [Re: starfire_xes]
    #14425757 - 05/09/11 05:24 PM (12 years, 9 months ago)

yessir. Im just hoping people begin to see what is happening to the standard of living and the price of common items.. if shit comes to shit he just might have a chance

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InvisibleSilversoul
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Re: Does Ron Paul have a chance? [Re: realfuzzhead]
    #14425769 - 05/09/11 05:27 PM (12 years, 9 months ago)

Quote:

realfuzzhead said:
what happens if we lose our spot as the worlds reserve currency? Its happened before, and china is already ditching Dollar reserves for items such as copper.



If we lose our spot as the world's reserve currency, our currency becomes devalued, but that's not the same as inflation.  It's a one-time price adjustment.  That in no way changes our monetary sovereignty over our own economy.

Quote:

How can we expect to just introduce trillions of dollars out of thin air and not experience inflation?



Suppose I were to counterfeit trillions of dollars indistinguishable from real dollars, but rather than spend these dollars, I just buried them in my back yard.  Would that cause inflation?  You fool yourself by thinking of money strictly in terms of quantity, and not in terms of velocity and circulation(or, for that matter, allocation).

Quote:

Gold and Oil charts and par-for-par but everything is getting more expensive. The same people who predicted the 2008 mortgage crisis predict MUCHMUCH  worse.



Other than Peter Schiff, how many other economists are you aware of that predicted this crisis?  Were you even aware of those outside the Austrian school who predicted it?

For my part, I wouldn't be surprised if things do get worse, but it won't be hyperinflation.  The problem we face is further debt deflation.  There's still a lot of debt out there to be deleveraged, and as long as we keep treating those speculative debts as legitimate, we're still in the hot seat.  Unfortunately, the power in Washington sides with the creditors and not with the people.


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InvisibleFlop Johnson
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Re: Does Ron Paul even have a chance? [Re: skatealex2]
    #14425776 - 05/09/11 05:29 PM (12 years, 9 months ago)

Quote:

fbi365 said:
No chance.  Sorry




I will vote for him every time he runs, but the colossal ignorance of the drooling masses will most definitely prevent anyone who is even remotely qualified from getting into office. It's just a fashion show, folks.

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