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Schiff: The Real State of the Union 2013


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#106    Einsteinium

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Posted 03 March 2013 - 08:42 PM

View PostYamato, on 03 March 2013 - 06:14 AM, said:

http://www.federalre...about_12594.htm

http://www.thefreedi...y.com/stability

"Inflation stability" is a nonsense idea.  It's an oxymoron.  Just call it what it is, inflation.

Commodity-based currencies like the Australian dollar, the Canadian dollar, the New Zealand dollar have proven better holders of value than the US dollar, although paper money is in a state of global devaluation right now vs. real assets when central banks are printing massive amounts of it.   Returning to the gold standard, if we were to do so, would be a process of transition.  It couldn't happen overnight.   What I would suggest as one step in that direction is to nullify Nixon Shock.  The US dollar as the world's reserve currency is propped up by nothing but market sentiment.  So it's extreme irony that someone who doesn't believe in the power of market sentiment, or the fact that market sentiment is the keeper of real value in the economy, can ride on this wave of fiat currency having value as if the promise of government is what matters.  The government can print more money and hand us our nominal dollars back, it's proven itself to be a consummate catastrophe at maintaining the real value of our money.

If it's never been intended to have stable currency, then that really shouldn't be the primary reason for the Fed's existence then should it?   It's a charade, as you point out.  If the purpose is "stable inflation" then they should lower themselves into the well of truth and admit it.   You would need to be able to cite your sources for believing your claim though as you're not an expert and I have no idea where you're getting your information at.

The federal reserve website itself is my source.

From the site:


The Federal Reserve System, often referred to as the Federal Reserve or simply "the Fed," is the central bank of the United States. It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system. The Federal Reserve was created on December 23, 1913, when President Woodrow Wilson signed the Federal Reserve Act into law. Today, the Federal Reserve's responsibilities fall into four general areas.
  • Conducting the nation's monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices.
  • Supervising and regulating banks and other important financial institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers.
  • Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets.
  • Providing certain financial services to the U.S. government, U.S. financial institutions, and foreign official institutions, and playing a major role in operating and overseeing the nation's payments systems.
So you can see. The goal of maintaining a stable value for our currency is not stated. Just the goal of maintaining the stability of THE SYSTEM and stable PRICES. I had to dig a little to find exactly what is meant by 'stable prices' and I found the answer the the site for the European Central Bank:
  • "Price stability is defined as a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%."
The Governing Council has also clarified that, in the pursuit of price stability, it aims to maintain inflation rates below, but close to, 2% over the medium term.

So as you can see, in order to maintain so called 'price stability' a stable rate of inflation is necessary. And by the way. A stable rate of inflation is not an oxymoron. It is simply a stable rate of change. If you cannot grasp this idea imagine a car accelerating. The car can accelerate at a constant rate, but its speed will be increasing. Say its rate of acceleration is 5mph per second. So every second its speed increases by 5mph. The speed represents the value of our currency (in reverse, the faster the car goes, the less our money is worth) and the acceleration represents inflation. I agree that I think that this type of system is unsustainable. Your assertion that our currency is fiat is true, it is not backed by any hard asset. But market sentiment gives value to everything. Gold has value because the market gives it value. If nobody wanted gold, it would have no value. So if the market gives value to our currency, who are we to challenge the market? For as you say, the market is always right and always will dominate. So the market giving value to our currency therefore our currency has value, for as long as the market gives it value.

All I am trying to say is that things are not as simple as you see them to be. But your view is the commonsense view that I think we would all be smart to pay attention to and learn, but common sense and logic are not the things the market or our government follow, sadly.

SOURCE1

SOURCE2

Edited by Einsteinium, 03 March 2013 - 08:44 PM.


#107    Yamato

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Posted 04 March 2013 - 10:21 AM

View PostEinsteinium, on 03 March 2013 - 08:42 PM, said:

The federal reserve website itself is my source.

From the site:


The Federal Reserve System, often referred to as the Federal Reserve or simply "the Fed," is the central bank of the United States. It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system. The Federal Reserve was created on December 23, 1913, when President Woodrow Wilson signed the Federal Reserve Act into law. Today, the Federal Reserve's responsibilities fall into four general areas.
  • Conducting the nation's monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices.
  • Supervising and regulating banks and other important financial institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers.
  • Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets.
  • Providing certain financial services to the U.S. government, U.S. financial institutions, and foreign official institutions, and playing a major role in operating and overseeing the nation's payments systems.
So you can see. The goal of maintaining a stable value for our currency is not stated. Just the goal of maintaining the stability of THE SYSTEM and stable PRICES. I had to dig a little to find exactly what is meant by 'stable prices' and I found the answer the the site for the European Central Bank:
  • "Price stability is defined as a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%."
The Governing Council has also clarified that, in the pursuit of price stability, it aims to maintain inflation rates below, but close to, 2% over the medium term.

So as you can see, in order to maintain so called 'price stability' a stable rate of inflation is necessary. And by the way. A stable rate of inflation is not an oxymoron. It is simply a stable rate of change. If you cannot grasp this idea imagine a car accelerating. The car can accelerate at a constant rate, but its speed will be increasing. Say its rate of acceleration is 5mph per second. So every second its speed increases by 5mph. The speed represents the value of our currency (in reverse, the faster the car goes, the less our money is worth) and the acceleration represents inflation. I agree that I think that this type of system is unsustainable. Your assertion that our currency is fiat is true, it is not backed by any hard asset. But market sentiment gives value to everything. Gold has value because the market gives it value. If nobody wanted gold, it would have no value. So if the market gives value to our currency, who are we to challenge the market? For as you say, the market is always right and always will dominate. So the market giving value to our currency therefore our currency has value, for as long as the market gives it value.

All I am trying to say is that things are not as simple as you see them to be. But your view is the commonsense view that I think we would all be smart to pay attention to and learn, but common sense and logic are not the things the market or our government follow, sadly.

SOURCE1

SOURCE2

The stable rate of inflation serves to enable the stable rate of growth of government.   The way our politicians are handling the sequester today is proof enough to see what this shell game really is.   They're speaking about miniscule reductions to the increases in future spending as if they're a coming nightmare.  That's the kind of entitlement complex they have to ever-greater amounts of spending in future years.  These permanent increases in government spending through time are sacrosanct for the bureaucrats.   The growth in our economy has no such guarantee.   They're putting the cart before the horse by laying out their spending plans ahead of time and worrying about revenues to pay for it in retrospect, and fear mongering about immaterial adjustments to their plans just to put the first bandaid on the nation's books.   So then, how are they ever going to feed an ever-growing government?   With omnipresent inflation, and permanent erosion of the purchasing power of our money.   So the benefit that we get from this is bigger government.  That's no benefit I'm interested in having down the road, that's a terrible cost, to our economy, our freedom, and our security.   There is no such thing as permanent growth as the previous video showed.  People who have been indoctrinated into believing it's possible are duly misled, and I'll take the former Comptroller General's word that we're not going to be able to grow our way out of this fiscal cancer that is itself growing exponentially inside of us.

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Edited by Yamato, 04 March 2013 - 10:25 AM.

"The power to declare war, including the power of judging the causes of war, is fully and exclusively vested in the Legislature.  The Executive has no right, in any case, to decide the question" ~ James Madison
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#108    Frank Merton

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Posted 04 March 2013 - 10:29 AM

View PostEinsteinium, on 02 March 2013 - 08:59 PM, said:

Whereby the federal reserve was to ensure that the rate of inflation was to remain stable, not the value of our currency. This was done on purpose to provide the central bank with the tools necessary to regulate the rate of inflation. By allowing inflation and an elastic money supply the idea was that out government along with the central bank (they are separate entities by the way, the central bank acts of its own accord) can thus manipulate the money supply when needed specifically to balance the cut throat business cycle and level out the peaks and valleys of the cycle.

I agree and think it is basically a smart way to go.  Trying to keep a currency absolutely stable implies that you have to have periodic deflation, and deflation is not achieved without major suffering, high suicides, poor health, stress, and so on.  At the same time, however, whatever inflation is to be allowed must be kept as stable as possible, so that people can plan and so that indexed contracts can work.

Unemployment is a far worse problem for a people than slow inflation -- provided pensions are indexed to protect the elderly.


#109    Yamato

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Posted 04 March 2013 - 11:03 AM

View PostFrank Merton, on 04 March 2013 - 10:29 AM, said:

I agree and think it is basically a smart way to go.  Trying to keep a currency absolutely stable implies that you have to have periodic deflation, and deflation is not achieved without major suffering, high suicides, poor health, stress, and so on.  At the same time, however, whatever inflation is to be allowed must be kept as stable as possible, so that people can plan and so that indexed contracts can work.

Unemployment is a far worse problem for a people than slow inflation -- provided pensions are indexed to protect the elderly.
Dreams of endless inflation is a dream for the Haves.  If you own land, homes, currencies, commodities, equities, and the prices for these things deflate a little, yeah then you get hurt a little.    The more of these things you own, the more you get hurt.   If someone owns 100 mansions and the housing market collapses they get hurt 100 times as much as the guy who owns one.  If someone owns 100,000 ounces of gold, they get hurt 100,000 times as much as someone who owns one.  What's wrong with that?   They make 100,000 times more when the prices are inflating.   Why can't they take their lumps on the flip side?

Nobody said "absolutely" except the Fed's bulldog stubbornness to have chronic inflation absolutely.  Everything goes up and down, as the video disproving endless growth showed you.  Only government growth goes in one direction, and only for so long.  This is a game of diminishing returns and diminishing value for unsustainable growth and unimaginable debt as our reward.  

Explain this "major suffering, high suicides, poor health, stress and so on when prices come down 2% every now and then, and then.   Take me down that slippery slope.   These indoctrinated expectations of endless inflation have been the game they're playing since Alan Greenspan and under that Keynesian ideology, we see market cap deflation at 50+% in one year in the major indexes.  There must have been plenty of suicides there but you're just bilking for Wall St. if that's what you are about.  

When something goes down 50% it has to go back up 100% to return to break even.  Real assets like gold have more than doubled in the same period during that dollar-denominated fiasco that took five years to return to flat line.   When your loved ones get sick and their insurance doesn't cover what ailment they have and you realize you have to pay out of pocket to save their lives, and then you see what the bill is, you'll know how painful inflation is then.

"The power to declare war, including the power of judging the causes of war, is fully and exclusively vested in the Legislature.  The Executive has no right, in any case, to decide the question" ~ James Madison
"Peace cannot be achieved by force, only by understanding."  ~ Albert Einstein
"To deny people their human rights is to challenge their very humanity.   To impose on them a wretched life of hunger and deprivation is to dehumanize them." ~ Nelson Mandela
"I like your Christ, I do not like your Christians.  Your Christians are so unlike your Christ." ~ Mahatma Gandhi

#110    AsteroidX

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Posted 04 March 2013 - 11:09 AM

Its all written in a language 99% of the Americans dont understand yet are forced to live under. Repeal the Act of 1871 and start to see things go straight.


#111    Frank Merton

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Posted 04 March 2013 - 11:32 AM

View PostAsteroidX, on 04 March 2013 - 11:09 AM, said:

Its all written in a language 99% of the Americans dont understand yet are forced to live under. Repeal the Act of 1871 and start to see things go straight.
I'm a feriner; please explain or elaborate or educate.  Thanks.


#112    Einsteinium

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Posted 04 March 2013 - 05:03 PM

View PostYamato, on 04 March 2013 - 11:03 AM, said:

Dreams of endless inflation is a dream for the Haves.  If you own land, homes, currencies, commodities, equities, and the prices for these things deflate a little, yeah then you get hurt a little. The more of these things you own, the more you get hurt.   If someone owns 100 mansions and the housing market collapses they get hurt 100 times as much as the guy who owns one.  If someone owns 100,000 ounces of gold, they get hurt 100,000 times as much as someone who owns one.  What's wrong with that?   They make 100,000 times more when the prices are inflating.   Why can't they take their lumps on the flip side?

Nobody said "absolutely" except the Fed's bulldog stubbornness to have chronic inflation absolutely.  Everything goes up and down, as the video disproving endless growth showed you.  Only government growth goes in one direction, and only for so long.  This is a game of diminishing returns and diminishing value for unsustainable growth and unimaginable debt as our reward.  

Explain this "major suffering, high suicides, poor health, stress and so on when prices come down 2% every now and then, and then.   Take me down that slippery slope.   These indoctrinated expectations of endless inflation have been the game they're playing since Alan Greenspan and under that Keynesian ideology, we see market cap deflation at 50+% in one year in the major indexes.  There must have been plenty of suicides there but you're just bilking for Wall St. if that's what you are about.  

When something goes down 50% it has to go back up 100% to return to break even.  Real assets like gold have more than doubled in the same period during that dollar-denominated fiasco that took five years to return to flat line.   When your loved ones get sick and their insurance doesn't cover what ailment they have and you realize you have to pay out of pocket to save their lives, and then you see what the bill is, you'll know how painful inflation is then.

Please explain why endless inflation is impossible? All that is required is a steadily increasing money supply relative to population.

Furthermore, as I have stated before, the vast majority of economists favor a low but steady rate of inflation. So you are saying here that you know better than the vast majority of economists, and that they not only have it wrong, but have it so wrong that it is comparable to having a PhD mathematician getting 2+2 wrong.

Edited by Einsteinium, 04 March 2013 - 05:45 PM.


#113    Yamato

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Posted 05 March 2013 - 08:59 AM

View PostEinsteinium, on 04 March 2013 - 05:03 PM, said:

Please explain why endless inflation is impossible? All that is required is a steadily increasing money supply relative to population.

Furthermore, as I have stated before, the vast majority of economists favor a low but steady rate of inflation. So you are saying here that you know better than the vast majority of economists, and that they not only have it wrong, but have it so wrong that it is comparable to having a PhD mathematician getting 2+2 wrong.
Again, endless inflation is impossible because it's just another example of endless growth.  Endless growth is impossible (as already shown by the video you're still invited to view so you can understand the math) because simply put, the capacity to serve that endless growth is impossible.  There are limits to growth, whether that is capital and resources, or physical limitations like geography, space, or time.   A city's population growth is limited by many factors and certainly all of the aforementioned as just one example.

You're justifying endless growth of one thing because it coincides and supports endless growth of another thing.   Why do you want endless population growth?   Aren't there enough people already?   Are your "vast majority" of economists ecologists?  Do they prevent wars?  Are they interested in altruism or benevolence, or the minimization of suffering?

"The power to declare war, including the power of judging the causes of war, is fully and exclusively vested in the Legislature.  The Executive has no right, in any case, to decide the question" ~ James Madison
"Peace cannot be achieved by force, only by understanding."  ~ Albert Einstein
"To deny people their human rights is to challenge their very humanity.   To impose on them a wretched life of hunger and deprivation is to dehumanize them." ~ Nelson Mandela
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#114    Einsteinium

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Posted 05 March 2013 - 02:00 PM

View PostYamato, on 05 March 2013 - 08:59 AM, said:

Again, endless inflation is impossible because it's just another example of endless growth.  Endless growth is impossible (as already shown by the video you're still invited to view so you can understand the math) because simply put, the capacity to serve that endless growth is impossible.  There are limits to growth, whether that is capital and resources, or physical limitations like geography, space, or time.   A city's population growth is limited by many factors and certainly all of the aforementioned as just one example.

You're justifying endless growth of one thing because it coincides and supports endless growth of another thing.   Why do you want endless population growth?   Aren't there enough people already?   Are your "vast majority" of economists ecologists?  Do they prevent wars?  Are they interested in altruism or benevolence, or the minimization of suffering?

I did watch the video and I did not learn anything new. I understand compound interest and I understand that 7% growth means a doubling every 10 years. I am not justifying endless economic growth, I agree with you that endless economic growth is impossible with finite resources. Endless population growth is also impossible. What I am trying to explain to you, is that endless inflation is not impossible. Because it is not growth, it is a slow and steady de-valuation of the worlds currencies. There are no mathematical limits on devaluation because it is not growth. At 2% inflation $1,000 now will be the same value as $2,208 40 years from now. Eventually it gets ridiculous at even a modest 2% rate. Tens of thousands of years from now we would have to bring wheelbarrows of cash to the store to buy a loaf of bread for example. But there is no limit to devaluation. Growth yes, but devaluation which is the basis for inflation, no. That is all I am saying.

I do not know what the vast majority of economists think about ecology, war, altruism, or the minimization of suffering. But I do know that they are experts in analyzing the ways in which society allocates scarce resources and how certain pressures or changes can effect the allocation of resources for a given society.


#115    Frank Merton

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Posted 05 March 2013 - 02:08 PM

I dare say endless growth is possible.  Once population is stable and the resource base is put on a self-sustaining basis (probably this century) there will still be steady technological advance, resulting in steadily improving living standards and therefore unending growth.


#116    Yamato

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Posted 05 March 2013 - 08:53 PM

View PostFrank Merton, on 05 March 2013 - 02:08 PM, said:

I dare say endless growth is possible.  Once population is stable and the resource base is put on a self-sustaining basis (probably this century) there will still be steady technological advance, resulting in steadily improving living standards and therefore unending growth.
Then you don't understand the central tenet of economics, the allocation of scarce resources.  To presume endless growth you must also presume endless resources.  This is the scourge of the world right now.  Overpopulation, dying ecosystems, the successful indoctrination of people like you to believe that endless growth is possible.  You can't or refuse to understand the math, you don't have any respect for the virtues of fiscal much less ecological responsibility and you think that limitless growth of one thing (population or government, take your pick, but you get both, it's a two-for-one) is reason enough for endless growth of another (money supply --> prices).

My questions from #113 weren't answered.  Even if you believe something is possible, and as the entire history of mankind proves it is for a LIMITED time, it doesn't mean it's right.  You understand minutia like whales or other small examples of this great topic, but you can't put it together yet and see the big picture.   When I'm discussing the environment, the global ecosystem would be the big picture.  This big picture here is even bigger than that.

"The power to declare war, including the power of judging the causes of war, is fully and exclusively vested in the Legislature.  The Executive has no right, in any case, to decide the question" ~ James Madison
"Peace cannot be achieved by force, only by understanding."  ~ Albert Einstein
"To deny people their human rights is to challenge their very humanity.   To impose on them a wretched life of hunger and deprivation is to dehumanize them." ~ Nelson Mandela
"I like your Christ, I do not like your Christians.  Your Christians are so unlike your Christ." ~ Mahatma Gandhi




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