Comment You dont understand. (Score 2) 146
That man is a hacker. (Using that word properly.)
"Inflation is a way to force extremely wealthy individuals to actively invest their money and put it to work, instead of just locking it into a vault and waiting for it to appreciate in value by keeping it out of circulation."
Nonsense. Extremely wealthy individuals have access to bright specialists to ensure that their money works for them and their money increases faster than inflation.
It's regular old folks who socked away a sum to retire on who actually get stuck paying the bill here.
Austrians are finally getting a little attention precisely because the last 100 years have actually proven them 100% correct. Breaking windows does not help the economy, no matter how happy it makes the window-maker.
The value of technology is truly enormous, yes, but it's not what money is used to measure. Money is medium *of exchange* and it is only the goods and services that are being exchanged which it needs to accomodate, not increases in general productivity due to improvement in technology, but only the tangible products of that productivity.
In a very real way, money is just like any other good. Even though we are used to thinking of all other goods as being valued in units of currency, the valuation works the same in reverse. It's just two ways of looking at the same problem. Any centralised monetary authority therefore falls prey to the calculation problem just as surely as centralised price setting for any other commodity does.
One thing I think we can agree with after reading your post is that there is, at any given time, a theoretical optimum level of money (or currency) in circulation, and the closer to that optimum level the actual level stays, the better the economy will work. But here's the problem. There is no way for a central authority to calculate that level correctly and in a timely manner, it's not difficult it is actually impossible. (In reality we have much bigger problems, it's inevitable that the central authority will wind up abusing its position rather than simply failing to function adequately, but that's another argument.)
It's a price problem, and the only known way to arrive at close approximations of proper price points reliably and quickly enough is through a market. With a market, you dont have a centralised authority, you have a large number of actors acting independently, each with specialised knowledge that is not accessible to the central authority. They are thus able, in aggregate, to do what the smartest and best informed man in the world would not be able to do - properly price commodities. Including money.
Right now the state has a legal monopoly on money. No one else is allowed to provide it. With no competition, there is no market. (And I know many nations have their own currency but they are all fiat currencies tied to the same corrupt banking system, no one is allowed to offer real money which cannot be inflated at will.)
Open up the market in money, and you will get a reasonable approximation of the optimum balance between inflation and deflation, because when there is too little inflation people will be motivated to find ways to provide more money, and when there is too much inflation they wont bother.
A way to provide more money, btw, could be any number of things. Historically it might have meant intensive mollusk cultivation, or expanded mining operations, but it doesnt have to be limited to those things. But in a similar way to how 0-cost email predictably created spam, 0-cost inflation is just too abusable for humans to handle.
One last thing, money is not only used as a unit of exchange but a unit of savings. Again, I think we agree there is an optimum level of savings, but the question is how to determine it. Top down here is a fatal conceit. The only fair and accurate way to determine this is from the bottom up - by a market valuation. The current system effectively drains value out of retirement accounts to fund wars. This is deeply unfair.
The flaws in this system? Well as I said, it's not perfect, but perfect isnt an option. The only real flaw I can see in it is that the powers that be wouldnt be able to enrich themselves from a priviliged position anymore, and thus they obviously arent going to let it happen anytime soon.
I am not working on that assumption and your impression is badly mistaken.
There is a point of balance between the growth in value (causing deflation) and the growth in currency (causing inflation.) The fallacy in our current system is the idea that an elite group of centralised planners with the power to create currency at will could or would keep those in balance.
Metallic money is not perfect, and if you think I think it is you badly underestimate my intelligence. But perfect is not an option, and it's better than fiat currency. In some ideal world where and all-knowing angel sits in the federal reserve and makes the decisions, maybe it could work. But we dont have angels, we have human beings.
The ideal situation is one where you have competing currencies based on whatever works - whether it is gold and silver or pork bellies and corn. But it needs to be based on something tangible - so that the supply cannot be inflated at will, else we are doomed to repeat the boom and bust cycle indefinitely, with tragic results.
If you think I think I 'have it all figured out' you are wrong. One thing I am very sure of is that the economy is more complex than any economists model of it.
This is one of the reasons why relying on central control doesnt work. Even if conflicts of interest and corruption werent issues centralised control of an economy still wont work because of calculation problems.
You're referring more to TARP than the Fed. Quantitative easing via the Fed is for getting the economy going again. It's simply adding to the money supply so banks will lend more thereby stimulating GDP.
Do you understand that banker are creditors, who benefit from a strong currency? So if their unenlightened self interest is the opposite of what they are doing, why are they doing it?
Over the past 20 years the currency supply as estimated by the Fed themselves has gone from $400 billion to $3,000 billion dollars - a gain of $2,600 billion. That means 6.5 times more US currency than *existed* 20 years ago has been *added* to the supply since then, and that's *net* so gross numbers would be even bigger. That's a pretty huge slice of 'pie' even for the richest men on the planet. In the meantime the devaluing aspect that pays for this windfall is spread out evenly among everyone holding US dollars, while the enriching portion hits you alone, so you are taking a relatively small hit for a relatively large return. In sum, your thesis that this is against their self interest is simply ill-founded. Particularly considering that what matters to the very rich is not actual value (since they have more than they could need already) but rather proportional value (since this is the aspect of money that brings power, and at that level money really is only a tool for acquiring power.)
Except that inflation is near record lows, despite trillions in new money. When unemployment is at 10% and factory utilization is below 80%, there is plenty of slack for "new money" to create real value by putting labor and capital to work.
Except that your numbers are heavily massaged for propaganda purposes and dont actually resemble reality. Unemployment numbers only count people that lost their jobs recently (the chronically unemployed become invisible this way) and only people that have no work at all (so people that lose good jobs and have them 'replaced' with minimum wage jobs that they cannot live on dont count as unemployed either.) 'Our' factory utilisation is low because 'we' are busy moving those jobs overseas.
Bryant, for all his flaws and mistakes, was advocating a bimetallic monetary standard, not fiat currency, and your citation of him seems a bit gratuitous.
Even overcooked it is hardly a great food. And cooking does nothing to mitigate the health threat of living pigs in the area. Pigs are noted for how similar their flesh is to that of humans - this is why they are so useful in medical research aimed at human ailments, and also why it is relatively easy for diseases to cross the species boundary - in either direction. A pig stye in the neighborhood is a considerably more serious threat to public health than, say, cattle, goat, or sheep husbandry would pose.
There is ample reason to think that pork tastes like human flesh as well. Havent sampled the long pig myself and not recommending it, but historical records indicate that when cannibals are no longer able to procure it they universally determine pork to the be the only substitute. This has happened in Mexico and Papua in very different time frames. So there is certainly a potential spiritual issue as well for those that think 'bacon is delicious.'
There is plenty of apparently crazy stuff in the Torah to blame G_d for without dissing one of the rules that DO make sense both scientifically and spiritually.
You must make yourself very sad.
"We" dont do any of this. A cabal of the best connected and wealthiest bankers in the country do it, in private, as they see fit, and we get no say. When they inflate the currency, they dont create new value - they just suck some of the value out of the old currency. And then they get to spend the new currency. Great scam. Of course they try to restrain their greed enough to keep the inflation at a level where the increase in GDP can mask it - they dont want to be set on with torches and pitchforks any more than anyone else does.
The cost of feathers has risen, even down is up!
