Despite the massive fiscal stimulus package of nearly $800 billion approved by Congress early last year and trillions of dollars pumped by the Fed, the rally in various key economic data seems to be coming to an end. Their plan: do it again. FULL ARTICLE by Frank Shostak
Source link: http://archive.mises.org/13926/does-the-us-economy-need-another-stimulus-package/
Does the US Economy Need Another Stimulus Package?
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Give a man a dollar and he produces nothing to be consumed. Give everyone a dollar and nothing is produced for them to consume. The means (stimulus) preclude the end (economic growth). Makes sense to me!
If we take Keynes’ and Krugman’s logic to their extreme, why not just print money for everyone instead of expecting work? Do they not realize that tons of money and nothing to buy with it won’t do the world a lick of good?
It reminds me a bit of a movie I just watched, Survival of the Dead. It was a particularly awful movie, but one of the points in the plot was an argument over what to do with $1 million and 300 dollars found in an abandoned armored truck. All I could think was, “The dead are coming back to life in massive hoardes and are out to eat your flesh. Society has collapsed. What good is a bunch of green paper going to do?”
Printing money to help in a recession seems to be just as useful as cash in a zombie apocalypse.
>Do they not realize that tons of money and nothing to buy with it won’t do the world a lick of good?
But in the Keynsian short-run there are goods, produced in the pre-Keynsian era, that stimulus money can buy. Sure, a sufficiently continued stimulus will eventually use up those goods but that’s in the long-run. And dead people can’t use them anyway.
The purpose of the government is NOT to do the world good. It is to destroy the US middle class and transfer power to the international corporations. The banking situation could have been solved by paying off every residential mortgage and every student loan. That would stimulate the economy for less that one of the trillion dollars they made to disappear. Combine that with a 25% import duty on everything and there would be all kinds of new and good jobs.
Libertarians
“Combine that with a 25% import duty on everything and there would be all kinds of new and good jobs.”
Idiot.
I have noticed a rather naive tendency on this site to attribute benevolent intentions to government coupled with ongoing surprise that things don’t work out that way. The assumption here for example that government and economists actually intend to help the economy and, for one reason or another it just didn’t work out.
Rather than paying attention to what people intend, what they believe, or what they say, we should keep our eyes on what actually happens. All governments everywhere have the net effect of transferring money and power from the entire population to a very small group by means of force.
To state that the stimulus “didn’t work” is a delusion. It had the expected and predictable effect.
The effect was, indeed, predictable, though the “Quantitative Easing” (read: “stimulus”) was far weaker than the FED had hoped.
What was the effect, then?
In order to avoid repetition I will refer to the general sketch provided in my earlier comment below without lengthy explanations so please check it out here:
http://blog.mises.org/13926/does-the-us-economy-need-another-stimulus-package/#comment-725242
if finding the argument difficult to follow as such.
Now, what happened with the QE1 trillions was that very simply the FED owners (cf. §1 below), i.e. the “satanic trillionaires” a.k.a. the Owners of the “Too-Big-To-Fail Banks” bailed out themselves (cf. §3 below) with the kind assistance of FED (cf. §2 below) and their puppets in the U.S. Govt, Senate and Congress (cf. §5).
Thus, the money was spent by the too-big-to-fail bankers to prevent their own bankruptcy and consequently, it never reached the U.S. economy, the grass-root banks (which consequently are still failing in hundreds) not to even mention the “people” amid the mortgage/housing mess in which FED got them into.
In fact, passing any money to the grass-root economy (cf. §§ 6-7) would have been (and it still is) impossible from the viewpoint of the FED (or – which comes to the same – the “satanic trillionaires”): should any money slip from their hands to the U.S. economy, it would trigger inflation, which would soon turn into hyperinflation.
While the satanic trillionaires usually love (hyper)inflation, in today’s circumstances such a possibility is eyeballed as utterly negative by them, because their FED stooges are currently in the process of blowing up the well-known U.S. bond/treasury bubble.
Should the funny money would appear in the U.S. economy, inflation would skyrocket, which – as everyone understands – would bring the latest FED bubble into a premature collapse, because it would be pretty nonsensical to invest in long-term U.S. bonds/treasuries as inflation would eat the yield in no time.
Thus, the effect of QE1 was that the “satanic trillionaires” bought some extra time by bailing out themselves with the U.S. taxpayers money.
In the context of my previous comment (below), I find that one may call this be a predictable result, indeed.
I therefore agree with “guard”…
Surprisingly, Paul Krugman has been proved right on this one. Los Angeles received $111 million and created 56 jobs – about $2 million a job. Lets see, there are 15 million people out of work, so a $30 trillion stimulus package would put everyone back to work. (If we use John Williams number of 30 million unemployed, then all we need would be a $60 trillion stimulus). Isn’t this exactly what Paul Krugman has been saying? That we were not spending enough? This is the problem with us Austrians – we need to learn to think outside of the box!
The ‘box,’ in this case, being reality.
I knew the answer before reading the article.
I think most people are starting to realize how ridiculous all this stimulus and inflation business is.
Use the money to fix dangerous freeway bridges and it is money well spent. Use it to build a new I-5 freeway bridge across the Columbia and it will save a few thousand people several hours a day.
Those bridges are dangerous and inefficient BECAUSE they’re government owned and maintained. Why would more government fix the problem?
I don’t use that bridge. Why should I pay for it?
I very seldom use that bridge but if your state needs a bridge that bad I will be glad to help you.
A Libertarian world really is a money grubbing dog eat dog Ayn Rand world , isn’t it? Screw everyone else.
That’s the socialist. Screw everyone else, *I* want that bridge, but make someone else pay for it.
No, just screw your bridge.
“I very seldom use that bridge but if your state needs a bridge that bad I will be glad to help you.”
Oh, it doesn’t matter if you’re glad or not. Your buddies in DC don’t really give a damn if you’re glad, or if you use your bridge, or if you use anyone else’s bridge.
They don’t even care if the bridge makes economic sense for the users on either side of the crevice.
But there’s one thing they do know:
You’re gonna pay for that bridge whether you like it or not; and screw you if you don’t want to.
well spent= subjective
A example of an objective use of tax money is?
zero
Excellent explanation of the simple science of economics.
My belief is that “truth” (especially in money items) is simple, so simple that you should be able to explain it to a kindergarten graduate.
When, on the other hand, our policies are so complex and contrived that they require constant and repeated explanations by PhDs and Nobel Prize winners to make sense ….. In fact they make no sense at all.
The Keynsian theories remain just that, theories. And we have no proof of their effectiveness … Ever.
One minger niggle – Keynes doesn’t have theories, simply hypothesis. A hypothesis is graduated into a theory once testing establishes that the model is fairly correct. A theory then gets graduated into a law after many generations of observations that react as predicted.
Keynesian economics falls under a hypothesis that has never managed to fit observed reality. Where real scientists would reject a hypothesis when it fails to predict the outcomes and come up with a new hypothesis, Keynesian economists continue to insist that we need more time until reality magically bends to the will of the “theory”.
Even if it’s just this simple inability to understand the difference between a theory and hypothesis, it’s enough evidence to discount Keynesians as “scientists”.
@J. Murray
I’ll second that. Keynes’ “theory” is really a pipe dream for fractional reserve banking. It seems correct on the surface, but the fundamental flaw is the fundamental effect of thin-air as money.
In my view, there are two sides to the Keynesian idea of economy, not just the one economy. One side is the banking system itself and it’s related institutions. The other side is the real economy. Between the two, any emission of notes (money created) leaves the bank and enters the economy. What left the economy in the “exchange”? Real goods and services. The economy suffers a loss every time the money enters the economic system from the banking system.
Keynes never considered this aspect. So once the fundamental flaw is ignored, anything could work, so long as it’s spending. Bank spending is the trading of no value from the banking system, for real value from the economic system. This is a direct loss to the economic system.
Money creation is akin to a vacuum in Physics. Keynes’ “theory” is that creating more “suck” stimulates the economic system. The problem is that vacuums don’t suck. There is no force there. The movement of gas into a vacuum is due to the energy of the gas itself meeting no resistance in the direction of the vacuum, not the vacuum magically pulling the gas in to the empty space. More stimulus sucking on the blood and guts of the economy is not going to make the economy healthier! It’s not going to do anything but re-direct energy toward a low-pressure area, the area chosen for the injection of “nothing” funds. Boom- then bust.
Krugman want’s to open the hatch on the spaceship to freshen the air within. Stupid.
This essay impressed me so much that I sent it to one of my friends who also has first hand knowledge of our less recent social/economic history. His response also impressed me to the point that I obtained his permission to post it here so that some of the younger crowd who can’t possibly understand the context of our times in the same way that us old codgers do. Here it is:
What experts? like Krugman (and even this author) fail to mention is that Government fiscal policy (borrowing) during WW II wasn’t the only thing taking place. The people at home suffered a much lower standard of living—even compared to the Great Depression. We had no new cars, tire rationing, gas rationing, food rationing, Victory Gardens, string saving, saving of cigarette foil, et al. Yes, there was government borrowing to finance the military buildup, but from whom? The people: buying War Bonds and stamps. And did we ever produce! Three shifts, seven days a week unleashed the the greatest production of planes, tanks, arms, ammo, et al the world had ever seen.
After the war, the pent-up demand for those goods and services people were deprived of during the war led to the economic expansion that followed—as well as the return of the servicemen to the labor market. I don’t think that theoretical discussion of money supply back then had as much to do with it as a total commitment by the people (including children) to win the war.
The prevailing liberal economic theory is that low interest rates and government borrowing (from China et al) are THE ANSWER. I don’t. Those of us who were prudent enough to save had our investment income cut, thereby reducing our propensity to spend and/or suffer a lower standard of living, certainly not a spur to the economy. Moreover, I don’t see that those low interest rates have had a significant positive effect. And the current wars certainly haven’t elicited anything like the total commitment of WW II. All I see now is Government borrowing rapidly heading to bankruptcy.
This is a very difficult situation. The economy of US is really in bad shape. Some say it is worse than any time since the Great Depression. I believe it is actually worse than the Great Depression because of the level of debt. At the time of the Depression, neither governments nor individuals were deeply in debt. We were a nation of savers. Now we are a nation of spenders, living beyond our means. Individuals and governments at all levels are over their heads in debt, some literally drowning.
I believe it is actually worse than the Great Depression because of the level of debt.
why would that matter?? whos debt?
if debt brings a good or service to use faster and this good or service is more efficient than a previous good or service…why would the debt matter?
I was also thinking like this some time ago, but luckily someone on the site explained to me that it fails due to scarcity of physical goods. Any use of scarce goods as inputs for “bringing a good or services to use faster” can only happen if you forego some other use of those goods. The concept of debt does not affect this at all.
Google “Marginal Productivity of Debt”
Deefburger and Joe R’s post sum things up best. The real economy is very elastic and always wants to return to its natural order. Distortions such as excessive printing of money, or artificialy low interest rates only temporarily influence economic patterns.
Money that is diverted to unproductive schemes drags down the creative, productive portions either through direct taxation or destruction of savings through inflation. Fractional reserve banking in tandem with fiat money is a recipe for disaster.
Joe R’s post is a good example of what happens when an economic distortion is removed. The real economy tries to return to its natural order. Britain on the other hand kept rationing in force long after the war and lagged behind the US for years.
Hi, FrankI read the article and seeing that you are obviously a nice person with good intentions I do not say this to insult, but while reading your article some of its assumptions, such as”(…) in order to maintain their life and well-being, people require final goods and services and not money”drew my attention and made me think the following:Do you seriously believe that the FED admins, the satanic trillionaires owning that facility, or their U.S. Govt, Senate and Congress puppets have anything to do with maintaining the life and well-being of the people?
“Do you seriously believe that the FED admins, the satanic trillionaires owning that facility, or their U.S. Govt, Senate and Congress puppets have anything to do with maintaining the life and well-being of the people?”
I’m not quite sure how you drew that conclusion. None of those individuals you mentioned provide final goods and services that people want.
Hi, J. – and why not others as well.
As briefly mentioned in my previous comment, I found the main article really nice and I very much agree on the ideas proposed there.
The reason why I brought up the FED, “satanic trillionaires”, etc. in this connection is that I have a very bad feeling that it is exactly these parties that consciously stand in front of any improvements and/or solid ideas like those suggested by Frank in his article, so let me explain this in some detail:
Contrary to the common misbelief, the U.S. is not a sovereign country, which – according to the definition – prints and distributes (through “loans”) its own currency, or “money”, if you prefer that.
The definition of a sovereign country and its direct relation to the capability of controlling (= printing) the currency is caused by the fact that the party controlling the money flow actually controls some 90-99% of the activities taking place in the country in question.
Such an amount of control over the U.S. suggests that the FED (or its owners to be precise), rather than the U.S. Govt, U.S. Senate or U.S. Congress actually IS the U.S. Administration by definition.
This relation is shown by the current U.S. financial practices, in which the U.S. Govt, rather than issuing money on its own, borrows it from the FED – or rather, from its private owners, the “satanic trillionaires”.
The resulting relation between the United States and the FED is that of a client and his master, just as by taking a loan you’ll be a client of the bank you’re dealing with, especially if you have borrowed more money than you’re able to pay back immediately, if demanded.
Just as your bank takes interest in your capability of paying back by keeping eye on your assets, guarantees, incomes, etc. the private bankers controlling the FED take keen interest on what the U.S. admistration (puppets) are doing with the money borrowed by the satanic trillionaires through the FED (note, however, that the Owners do not put a cent of their own to these borrowings, they simply print it, create it from air).
Seen from this point of view the U.S. is not a democracy, but rather resembles a classical pyramid scheme, which in this case has – roughly speaking – the following structure:
1. The “Owners” (a.k.a. “satanic trillionaires”, call them as you prefer)
2. The Fed
3. The “Too-Big-To-Fail-Banks”
4. Multinational corporations
5. Government (including its admins, army, police, public services, etc.)
5. Corporations, companies, etc.
7. The U.S. “People”
In this way the FED control goes all the way down to the parties providing final goods and services that people want.
Also the actions of the FED look highly dubious, when eyed in the long run: the key policy of FED as to the borrowing of the money is to maintain yearly 2% inflation.
Basically, this is why the FED came into my mind while reading the main article, because Frank’s very reasonable conclusion (on which I fully agree with him), namely that “The key factor for a sustained economic recovery is the buildup of real savings” is the exact opposite of the FED’s policies: their 2% inflation goal, when successful, means that any savings of the people lose their entire value within a generation.
Squarely, it is pointless to save (in the healthy sense increasing the wealth of the people and their enterprises) as long as the FED exists, since it is actually the purpose of the FED’s inflation goal to actually transfer the savings of each generation to the pockets of the “satanic trillionaires”.
On the other hand, when no suh inflatory policy (in order to rob the people) is possible, usually due to the underlying conditions of economic slowdown, the FED is tasked to make profit for its owners anyway, which is done – as you can confirm based on the developments of the latest decade – by creating financial bubbles.
Thus, the IT bubble bursted by 2000, then they made the housing/mortage bubble (bursted from 2007 on) and now they’re blowing the U.S. bond bubble…
FED’s policies are directly opposite to everything Frank advocates (and I agree with), and just I do have serious doubts on whether they have anything to do with with maintaining the life and well-being of the people.
Hoping this will clarify my position.
Very good. Thanks.
Stimulus isn’t needed, debt relief is. But a lot of you savers will complain that that would be unfair to you. Fine. So here is a solution:
1. Set reserve requirements to 100% to put banks out of the counterfeiting business.
2. Create and distribute to each US adult a sufficient and equal amount of new legal tender fiat (United States Notes).
This would:
a. allow underwater homeowners to pay down their mortgages to market price levels.
b. compensate savers for years of suppressed interest rates.
c. fix the banks in nominal terms.
d. fix state tax revenues.
e. reflate the economy without significant inflation risk.
f. provide a sufficient amount of real currency for the banks to practice 100% reserve banking.
ref: Deuteronomy 15, Leviticus 25.
e. reflate the economy without significant inflation risk.
f. provide a sufficient amount of real currency for the banks to practice 100% reserve banking.
REFLATE the economy? In other words, just keep on propping up prices to hide falling real value only point the initial wave of relief more in my direction.
and
REAL CURRENCY? Just print it up, right? Real currency. You can do the same thing with the same effect in your basement using your very own digital printer. But wait… maybe the fact that you and not the government printed the money makes it not real. Is that the difference between real and not real money? Is that what you got from reading the article we’re discussing here? Are the referenced bible verses relative to turning water into wine? Something akin to turning counterfeit money into real money?
If I had a better command of the language, maybe I could articulate my thoughts more congenially, but I’m at a loss here and I apologize in advance.
In other words, just keep on propping up prices to hide falling real value only point the initial wave of relief more in my direction. Joe R
What I advocate is a ONE-TIME reset in which borrowers AND savers get an equal amount combined with 100% reserve banking.
Is that the difference between real and not real money? Joe R
The banks typically have pyramided about 30-1 on top of real currency. As that debt is repaid, the “money” is destroyed which is DEFLATION. I propose to replace that temporary money (credit) with real money.
Is that what you got from reading the article we’re discussing here? Are the referenced bible verses relative to turning water into wine? Something akin to turning counterfeit money into real money? Joe R
Ask yourself how our economy went from boom to bust virtually OVERNIGHT with no material damage to the economic base. Shall we suffer a Depression merely because of unjust indebtedness?
Scoff at the Bible if you wish but many Austrians are believers. Unfortunately they believe (in many cases) more in Mises, an agnostic Jew, than Moses, a believing one.
Someone with more patience than me can continue this because I need to spend my efforts at something more reasonable – like defying the laws of gravity.
… because I need to spend my efforts at something more reasonable – like defying the laws of gravity. Joe R
Like many Austrians, you have fallen into the logical error that since price inflation is bad then deflation must be good. In fact neither are good.
I apologize for throwing up my hands in despair at the monumental differences in our understanding of the physical world. I will try to patiently endeavor to persevere.
Like many Austrians, you have fallen into the logical error that since price inflation is bad then deflation must be good. In fact neither are good.
Nothing I’ve said can possibly lead to that conclusion.
Help me understand where you’re coming from:
What is the difference between inflating the currency and deflating the value of the currency?
Do you really believe that printing money sufficient to nullify all debt (and then simultaneously distributing it to all debtors with the proviso that it could not be used for any other purpose) would have no effect on the value of enormously increased amount of currency then in circulation?
Here is an easy way to understand this.
Suppose that I, as an individual have more debt than I can afford to service or repay, based on my current income. What choices do I have?
a) Liquidate assets.
b) Cut my expenses so that I can afford to service the debt.
c) Default. Let the creditors seek relief.
d) Increase my income, so that I can afford to service the debt.
e) Borrow more money and use part of the money to service existing debt.
f) Negotiate with the creditors to restructure the debt.
g) Theft – steal someone else’s property. (Illegal for me as an individual).
h) Threats of violence against creditor – force them to restructure. (Illegal for me as an individual).
i) Counterfeit money. (Illegal for me as an individual).
Unless I have left some thing out, these are the same options option to the government, except g, h and i are not illegal for the government.
Except for “e” I agree. Selecting option “e” however creates an endless loop because you’ll be obligated to repay even more than you began owing. Your only saving grace would be if you could foist your increased debt on future generations of people you don’t even know. (Illegal for you as an individual) In the case of the government doing the same thing, not so much.
I did not mean to imply it would fix the problem – only extend and pretend. It still is an option. Indeed this is a very good model of how consumers behaved during the housing bubble. Also, many people have in the past and still do use credit cards to pay for current expenses.
Incidentally, IMHO, b and d are the only viable long term options. b is the easiest option for an individual with moderate debt.Unfortunately, for governments, b and d are next to impossible, (raising taxes in this model is option g, although this is not illegal for the government).
What is the difference between inflating the currency and deflating the value of the currency?
Do you really believe that printing money sufficient to nullify all debt (and then simultaneously distributing it to all debtors with the proviso that it could not be used for any other purpose) would have no effect on the value of enormously increased amount of currency then in circulation? Joe R
The key is to simultaneously set reserve requirements to 100% along with the distribution. That would eliminate the banks’ ability to create temporary money (credit). I merely propose replacing temporary money (which is the source of the boom-bust cycle) with permanent money. From that point on, banks could only lend money that had been deposited with them for that purpose along with their own capital. The only source of new money would then be the Fed and Treasury. The Fed should be abolished too, BTW. It is obscene that the US Treasury should borrow what it can create for free. Hamilton set that up to buy the support of the rich for the young American government. That need is long gone.
Long term solution after the bailout? Separate the private sector from government interference by allowing government money to be legal tender for government debts only. Allow private money supplies. Abolish the IRS. Eliminate the capital gains tax on PMs and common stock.
Summary: Bailout the victims of the current system (everyone), prevent the problem from reoccurring and allow liberty in money creation for optimum economic growth.
Sorry, but I am not in favor of eliminating the government in the short run. True capitalism would have allowed it to wither away a long time ago. But instead of true capitalism, we have had fascism since at latest 1913.
Summary: Bailout the victims of the current system (everyone), prevent the problem from reoccurring and allow liberty in money creation for optimum economic growth.
In a nutshell, hold no one accountable for their malinvestments and (except for eliminating fractional reserve banking) do the exact same thing we’ve been doing since 1913. All the people who made irrational investments get another bailout and all the people who were more prudent get the bill. The immorality of that suggestion is quite simply amazing to me.
All the people who made irrational investments get another bailout and all the people who were more prudent get the bill. Joe R
What part of “the savers would get an equal distribution” don’t you understand? Everyone would be fixed in nominal terms including the banks. There would be losers in real terms perhaps, those, including the banks, who are waiting like vultures to get assets on the cheap. Screw em, deflation is just as much a part of the wicked fractional reserve lending scheme as inflation is:
“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered.” attributed to Thomas Jefferson from http://wiki.monticello.org/mediawiki/index.php/Private_Banks_%28Quotation%29
Fractional reserve lending cheats both savers and borrowers. We should not let the bankers drive a wedge between us.
We don’t have any disagreement over fractional reserve banking. If banks were solely responsible for their own solvency, it wouldn’t exist.
What I still fail to understand is why you believe that printing and distributing tens of trillions of new dollars wouldn’t completely obliterate the value of the dollar. As a result – those who used their counterfeit money to pay off debts would seem to be rendered whole, while those who saved and prudently didn’t accrue unserviceable debts would wind up with valueless money instead of the relatively more valuable money they originally had. Everybody would be destitute.
People have to assume responsibility for their actions and suffer or benefit from their consequences. There is no quick, painless fix.
As a result – those who used their counterfeit money to pay off debts would seem to be rendered whole, while those who saved and prudently didn’t accrue unserviceable debts would wind up with valueless money instead of the relatively more valuable money they originally had. Joe R
I disagree. Abolishing FRL in itself would be hugely deflationary. I don’t propose inflating the money supply but just REPLACING some of the temporary debt-money (credit) with genuine debt free, permanent legal tender.
Well, I expect people will need to feel some more heat before they see the light.
REPLACING some of the temporary debt-money (credit) with genuine debt free, permanent legal tender F. Beard
Replacing greenbacks with gold. Why didn’t you say that earlier?
Replacing greenbacks with gold. Why didn’t you say that earlier? Joe R
Credit is not temporary because it is based on a paper currency. It is temporary because it is lent into existence and is destroyed as it is repaid. There is the cause of the boom-bust cycle, an elastic money supply.
As for paper per se, common stock is clearly a better form of PRIVATE money than PMs even though it is just paper. As for government money, it is backed by the taxing authority of the government along with government fees.
Gold is a tool of the bankers. Liberty is the antidote to tyranny, not gold or silver.
For a minute there I thought you might just possibly have a point. I was mistaken.
When I sell something on credit, I use the payments. I either save them or buy something else to sell. The items I sell aren’t destroyed and the payments aren’t either.
Artificially imposed interest rates and inflationary monetary practices cause the business cycle.
Ever wonder why no stimulus has ever been – or ever will be – paid in gold?
When I sell something on credit, I use the payments. I either save them or buy something else to sell. The items I sell aren’t destroyed and the payments aren’t either. Joe R
Banks issue credit in other people’s goods and services not their own. They are thus counterfeiters. It is true that the banks wish to continually extend credit so that the destruction part of fractional reserve does not become apparent but it is still always there. As FR loans are repaid, the money (credit) is destroyed. Actually, the phrase “fractional reserves” is a bit of a misnomer since banks are not constrained by reserves these day. New-temporary-money-for-new debt is more accurate: In exchange for an IOU to repay, plus collateral in many cases, the banks create new deposits that can be spent.
I’ve already stipulated that FR is problematic and undesirable.
Unless it’s fundamental to your labeling money temporary and permanent, make your case without bringing FR into it. Credit does not depend on it.
Unless it’s fundamental to your labeling money temporary and permanent, make your case without bringing FR into it. Credit does not depend on it. Joe R
Maybe. For instance, a very rich person could cause the boom-bust cycle merely by lending out a huge amount of money, and then stopping to do so suddenly. The effective money supply would then shrink back to its previous amount. So now let’s press on to the concept of loaning money itself whether it be permanent or temporary:
“You shall not charge interest to your countrymen: interest on money, food, or anything that may be loaned at interest. You may charge interest to a foreigner, but to your countrymen you shall not charge interest, so that the LORD your God may bless you in all that you undertake in the land which you are about to enter to possess. Deuteronomy 23:19-20 (New American Standard Bible)
It seems we have been disobedient in two ways:
1. loaning at interest to our fellow countrymen.
2. counterfeiting via fractional reserves.
I suggest we forgive so that we may expect forgiveness:
For judgment will be merciless to one who has shown no mercy; mercy triumphs over judgment. James 2:13
There are ways to do investment that do not require borrowing and lending such as common stock and the modern day equivalent of tally sticks. I suggest we use our American ingenuity and leave counterfeiting and usury behind after a general bailout of the population.
I am a foreigner who isn’t superstitious. What now?
Well, a bailout of everyone would be an effective way to reflate the economy. But if you have no religious (or moral) basis to do so then I guess you will be stuck with either ineffective Keynesian stimulus or dangerous Austrian austerity.
Here’s a new one from the Atlantic:
“If the Recovery Act failed to stimulate Americans’ confidence, it’s because it replaced more things than it built. It filled the crater left by the financial crisis. By and large, it succeeded. But its success has been nearly invisible. After all, a filled hole looks like nothing at all.”
The only problem is now that the crater is even bigger than when we started – not filled in.
The “Recovery Act” bailed out the villains not the victims and has put US further in debt to them.
Let’s see if I’ve got this solution of yours right:
Bailout everyone to reflate the economy.But not like the previous 100 times the Treasury/FED has done it.
This time:
1. We bailout EVERYONE even those with no debt.
2. We use permanent, debt free money instead of temporary, credit money – and;
3. We don’t simply increase the supply of currency with debt free money, we use it to REPLACE the temporary, credit money.
4. This replacement can be accomplished through some sort of religious or moral transformation.
Since all US Treasury Notes are credit money, I assume it will all have to be replaced with, say… Octavian currency.
Let’s see if I’ve got this solution of yours right:
Bailout everyone to reflate the economy.But not like the previous 100 times the Treasury/FED has done it.
This time:
1. We bailout EVERYONE even those with no debt.
2. We use permanent, debt free money instead of temporary, credit money – and;
3. We don’t simply increase the supply of currency with debt free money, we use it to REPLACE the temporary, credit money.
So far so good.
4. This replacement can be accomplished through some sort of religious or moral transformation.
Yes, partially so. The Austrians claim to have a principled, moral take on things but they ignore that folks were driven into debt by the government backed counterfeiting cartels. Even the McMansions can be forgiven if one realizes that people in most cases were seeking to secure their retirements with them. Suppressed interest rates force people to speculate.
In practice, the replacement is simple; have Congress mandate 100% reserve lending and have the US Treasury send every US adult a big fat check. The amount should be sufficient to allow every underwater homeowner (on average) to pay down his mortgage to current price levels TIMES at least TWO since double is the minimum restitution for theft in the Old Testament.
Since all US Treasury Notes are credit money, I assume it will all have to be replaced with, say… Octavian currency.
Currently all US paper currency is Federal Reserve Notes. However, the US Treasury could easily issue debt-free United States Notes (Greenbacks).
Posted on Lew Rockwell today:
20 Signs That the Economic Collapse Has Already Begun for One Out of Every Seven Americans
The US needs true capitalism including liberty in money creation but the VICTIMS of the current system should be bailed out too.
The Austrians don’t ignore anything.
Except possibly the ability of magic to create debt free money.
Except possibly the ability of magic to create debt free money. Joe R
The bankers create money-as-debt all the time as if by magic. One does not cure debt with more debt. The government has the power and the moral duty to free the population from the government backed counterfeiting cartel.
As for the value of government fiat, consider that English tally sticks were used successfully for 800 years. Their ultimate value was based on the fact that the government accepted them for taxes.
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