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  • Downside For Stocks, But Also For Fed Expectations [View article]
    With regards to timing, what they should have done is scrap the IRS, and just created a flat 5 percent tax. It would have been the same as QE but with the advantage of lower compliance cost thus more productivity. Also there would be no backup of reserves at the banks. The money would stay in the normal courses of transactions.
    Feb 14, 2015. 06:50 AM | 2 Likes Like |Link to Comment
  • Negative Interest Rates: Capital's Reproduction Problem [View article]
    If you consider central bank notes assets or gold as assets on a globally consolidated balance sheet, that would mean everybody owns everything, so when it comes time to consume the assets, are you going to volunteer to eat the CB notes and gold and let everyone else eat the food?
    Feb 13, 2015. 05:09 PM | Likes Like |Link to Comment
  • Negative Interest Rates: Capital's Reproduction Problem [View article]
    One other thing. What is an LJK? Does it stand for something like DUI, or is it someone's initials?
    Feb 13, 2015. 04:56 PM | Likes Like |Link to Comment
  • Negative Interest Rates: Capital's Reproduction Problem [View article]
    "Money can have all these attributes and be backed or unbacked"

    This is all an attempt to make the excuse to justify printing money when asset creation doesn't justify it. In other words, this is just an attempt to deny the reality that all money is backed by assets. Its a basic law of nature, regardless of any rhetoric humans come up with to the contrary.

    If you have one dollar and one apple, just because you print another dollar does not mean you have two apples. All that is happened is that that a piece of each of those dollars is no longer backed by anything. To that extent, they have been diluted.

    Look at your comments above, they all center around the reality that value for money is derived from it being used to get things that make your life better. There is no such thing as unbacked money. To the extent the additional dollar above that was printed, the portion of it that can no longer be satisfied by an apple, is the extent to which it is no longer a money medium.

    If you have a piece of gold, and there is nothing for which it can be exchanged, then it is no longer money. Its just a resource. A resource is meaningless until there is some human action that makes it a part of sustaining or improving your life.
    Feb 13, 2015. 04:53 PM | 1 Like Like |Link to Comment
  • Negative Interest Rates: Capital's Reproduction Problem [View article]
    "Medium of exchange "

    Exchanged for what? Assets. Money is ultimately backed by assets.

    "measureof value"

    Do people value Fed notes because they can eat them? Do people value gold because they can eat gold? People value things that make them feel better? Things that make people feel better are assets. Money is ultimately backed by assets.

    "standard or popularity "

    Its standard and thus popular because it can be universally exchanged for assets. Money is ultimately backed by assets.

    "store of value"

    So, if you had some currency that purchased assets that would all be gone next year, what sort of store of value is that? The reason its storing capacity is eroding is because the assets for which it can be exchanged is eroding. Money is ultimately backed by assets.

    "and they're extensively used"

    Used for what? Do they plan on eating the Bershire Bucks? Or, are they envisioning exchanging those bucks for real assets at some point.

    "I don't even know if they are backed or unbacked. "

    If you couldn't use them for anything (things being stuff) then they are unbacked because they have no value. Money is ultimately backed by assets.

    If we could consolidate all the individual balance sheets of the whole world, money mediums would not be an asset. They would show up on the owners equity side. So would gold. Bank notes and gold are just mediums people use to represent an idea. The idea is ownership. All the real things would be the assets. Assets are things that people eventually consume (though some longer than others) that make their lives better. So all the notes of all the world, only represent ownership in the assets. As such, all notes are backed by assets. There is no such thing as money mediums that are not backed by anything.
    Feb 13, 2015. 03:51 PM | 1 Like Like |Link to Comment
  • Downside For Stocks, But Also For Fed Expectations [View article]
    "not eliminate"

    That's not what Owen believed. He believed the gov had a duty to eliminate financial downturns.

    Who was Owen do you ask?

    I think it is interesting that he was part Cherokee.

    Anyway, here is the legislation he is known for.

    "Owen is especially remembered as the Senate sponsor of the Glass-Owen Federal Reserve Act of 1913"

    The original legislation, the Aldrich-Vreeland Act was never passed into law. It was under Owen and Glass that it was.

    Here's a little quote from Owen.

    “It is the duty of the United States to provide a means by which the periodic panics which shake the American Republic and do it enormous injury shall be stopped.” −Robert L. Owen1

    "shall be stopped" is a little more direct than "minimize - not eliminate". In fact, shall be stopped sounds darn close to "eliminate".
    Feb 13, 2015. 03:38 PM | 1 Like Like |Link to Comment
  • Negative Interest Rates: Capital's Reproduction Problem [View article]
    "the financial sector has exploded and absorbed all the human capital that could have progressed society elsewhere."

    Well, that's the problem with a gov central bank. Its a subsidy for financial markets. Spread a bunch of marbles out on a mattress and then drop an engine block in the middle of the mattress. What happens to the marbles? They all roll towards the engine block.

    A gov central bank is laid on the foundation of gov guns. Laws are passed to create, and all laws must be backed up with force. As such, a gov central bank has a foundation of force. For me, all human interaction should be voluntary. This is nature's way to maximize productivity, and by extension the human standard of living. So from a fundamental principal perspective, I see a gov central bank as inherently flawed. Thus, its no wonder to me that people don't produce better medicine. Why should they, when there's more to be made in financial markets via the subsidies from a gov central bank. Heck, all the marbles rolled toward the engine block. Why not them?
    Feb 13, 2015. 03:30 PM | Likes Like |Link to Comment
  • Negative Interest Rates: Capital's Reproduction Problem [View article]
    "I deny that free markets left to themselves would never result in booms or busts"

    Then you have defeated your own argument with this.

    "I claim that governments did not invent that freedom, merchants did. I claim that bankers and financiers, not central anything, are behind the prosperity and growth"

    A pure free market would be a market free of all coercion and theft. We've never had that, but at times the needle swings that way, and in small locales, even more so. A free market would be totally decentralized because the decision makers would be as many as people you would have. That sort of physics, like in a network for computers, improves the stabiltiy. The most simply, stable platform you can have is a tripod. However, the more points you add the more stable it becomes. Given what nature teaches us, its becomes less and less probable to think that as you divided the decision making process among more and more people with more and more diverse preferences that at some point they would all just magically decide to all make the exact same malinvestment at the exact same time.

    I grant you that prosperity has come from individuals and not a central controlling authority of men, but that just goes to prove my point that by utilizing natures laws of diversity, the chances of collective coordinated mistakes erode exponentially. The only reason you see the booms and busts is via the perpetually meddling of gov that uses its coercive hand to force people all into the same behavior. As such, then when gov changes its mind, it makes sense that a mass collapse would follow.

    "I decline to outlaw them or to attempt to outlaw them"

    You wouldn't have to. If gov was no longer used to put guns in poeple's faces and invest in whatever the overlords had picked for that day, then the booms and busts would just go away all by themselves.

    "free men give us prosperity in the long run "

    But they are not free if they cannot choose what money they want and do not want to use. If the Fed gov can tell us who can have a holding company, who can open a bank, who can issue bank notes, what services you can and can't offer, they are not free from force.

    To the extent people have freedom of choice, they create prosperity, but to the extent they are told what to do, they do not. I simply embrace the former, and use logic to say the latter interferes with our goal of having the highest standard of living possible.
    Feb 13, 2015. 03:26 PM | Likes Like |Link to Comment
  • Negative Interest Rates: Capital's Reproduction Problem [View article]
    "Did no booms or busts exist before the Fed was founded?"

    Boy you sure miss a lot of posts when you write a long, ranting comment. If I am failing to engage in a fight with anyone because of that, I am sorry.

    Anyway, you see this argument all the time. The issue is not necessarily a central bank, but the principle upon which a central bank is built. Its is built on the assumption that gov force can override the laws of nature's pricing mechanism. In other words, its a subsidy. Its built on a theft principle. Theft principles distort prices. It is this action that leads to a boom and then a bust around what the natural price trend line would be of a pure free market.

    Shaw was attempting to create subsidies with the Treas, and thus created an inflationary boom that collapsed when he left. Its the subsidy distortion of gov that causes the boom and bust. So, when we are talking about a CB causing booms and busts, we are talking about that within the context of the general idea that its the gov inteference in prices that causes the boom and bust. So, when the discussion is about the Fed causing a boom and bust, its just happens to be the example of the overall gov price interference.

    "You will find booms and busts coinciding in time and space with modern financial capitalism"

    Well you find them when gov is trying to interfere with financial capitalism. A true free market we have never had. There have been limted pockets of it, but it has never existed globally. At this point its a goal of enlightenment that we should be working towards.

    Here is another example of another gov caused boom and bust. Note, there is no central bank. However, the activity mimics the subsidies a central bank creates.
    Feb 13, 2015. 03:15 PM | Likes Like |Link to Comment
  • Negative Interest Rates: Capital's Reproduction Problem [View article]
    "Funny, you didn't have the courage to use the word "inflation""

    I figured it would be understood. Apparently I was right.

    "then you're advocating high inflation."

    It depends on what you mean by high. The doom and gloom hyperinflation you seem to be alluding to would only occur if fiscal policy clamped down on asset production at the same time note creation went up. That's what Zimbabwe did. You don't need to fall into a doom and gloom scenario in this case. Without the IRS, the compliance costs go way down, and thus production costs. Lower production costs lead to more asset production, and thus the ratio of assets to new notes would be more stabilized. Again, this is why it would be important for everyone to understand the inflation as a tax. Gov schools would likely fail them in this regard. The other factor is that China would have a larger consumer market for their mercantilist economy, thus they would have more capacity to buy our notes and keep inflation and interest rates down. The same would be true for Europe.

    "I can only presume you don't realize what economics has proven over and over again about the destructive effect of "

    Again, what hyper inflation in the US. You haven't been following the threads on SA. Anytime any mentions hyper inflation, they are called a nut.

    "(or the government) is acting as a central banker."

    Yeah, that was my point. It created inflationary policies that led the deflationary panic of 1907. QE does the same thing, though on a smaller scale in the current environment.

    "Your proof falls flat."

    Not at all. A CB note is just that. Its a note. Just like a stock cert if a note. A note represents an ownership right. An ownership right in an asset, and all assets are created by human labor. So, ultimately all notes are valuable based on the labor that can satisfy those ownership rights be creating assets. In the end, all notes are backed by assets that people create. People will value the notes (or gold - gold is just another type of note whose medium happens to be a precious metal that can't be counterfeited) when they feel the notes (money mediums) can be exchanges for assets that will make their lives better. In other words, people value money mediums because they are backed by consumable assets.

    "You're hamstrung by the false notion that backing guarantees money's value."

    Well, then, why don't people value gravel as money? Its because they know it can't be exchanged for anything. You could print Niel bucks all day, but good luck on convincing anyone of their value if people know those bucks are backed by assets they wish to consume.

    "Once this money is no longer scarce"

    No, its the same thing. That's what hyperinflation is. Its such a dilution of the notes as a ratio to assets, that people know that the claim to any real asset is so weak, that the money is basically worthless. Worthless because its not backed by a real asset. People want money when they feel the money has claims to real things. That's what a transaction is all about. Its about exchanging things.

    "And this *stuff* can not be resold to retrieve the money from circulation, so, by my definition, it is unbacked."

    That's why the real backing behind money is the labor that creates the assets. That's why a free market is so critical. A market that is free from tyranny is the most price sensitive and thus the most productive. New assets are constantly coming online to replace the other assets that have been consumed.

    "it is no longer money by definition. It's just a piece of paper."

    Well, that's destroying it. Think of it this way. A bank really doesn't have any real assets. The FF&E are immaterial, or should be for a good bank. So the remaining debits and credits are just a way of distributing ownership rights. The Fed is no different. When it debits and credits, it is doing the same thing. The debit is an accounts receivable from the American populace. The liability is the ownership right is that of the holder of that note. In other words the debit and credit represent a claim someone has on the ability of the US population to create an asset to be consumed. If the Fed debits and credits, but no asset came to fruition, then the balance sheet was just grossed up. To represent the asset was never created, the entry is reversed. Its just destroyed. Its just the accounting mechanics going on.

    "No sir, you have fallen for a "theory" that has been thoroughly debunked."

    When did I ever say I was advocating for MMT. I'm talking about the idea that recognizes that coercion is never a capital creator. As such, you want markets as free of coercion and tyranny as you can possible get them (aka free markets) to maximize price sensitivity and therefore asset creation.

    "No, please don't make any more guesses."

    I wish I could get you to stop with the guessing.

    Anyway, Fed notes don't fund the gov. The productivity of the populace does. When a gov confiscates and monopolizes the money medium, the gov then owns that medium. It does not need to collect it to spend it. It can just issue them in exchange for whatever asset it was allowed to purchase. This is why you don't want to go down this road, but unfortunately we have. That trip has invoked very real aspects of the physical world and pretendng like they don't exist will gastrate your ability to analyze what is going on in the markets (ie not being able to tell the direction of equities and interest rates).

    Of course, that is your choice, so good luck with that.
    Feb 13, 2015. 02:55 PM | 1 Like Like |Link to Comment
  • Downside For Stocks, But Also For Fed Expectations [View article]
    "As I always write: QEP is the worst possible monetary policy except for the alternatives. "

    No, that's not true. The alternative would be a transition to price senstive money creators. Of course, in that scenario, the protectionist forces that believe "working" means "keeping my asset prices up at the expense of the average person", won't be too happy. Which is why central banks are so vigorously defended by special interests. Its like a tariff. It makes domestic producers happy, while everyone esle is forced into having their lifestyles reduced to pay for it.

    The real solutions is rolling back the tons of protectionist fiscal and monetary policies that lead to the rich getting richer and the poor getting poorer. So, saying, "Since we can't have that, then what else can we do besides QE" is a false choice. The alternative is for grown ups to start acting like grown ups again.

    In the meantime, I need to caution everyone to be on the look out for the Fed to make another mistake.

    What's going on here is the Fed is creating the Fed notes that the IRS is sucking up with new and existing taxes. Since we can only use the Fed's monopolized bank notes to buy things, we can only use Fed notes to buy equities. As such, the Fed is providing the extra Fed notes needed to keep equities bid up. Now the Fed is talking about raising the DR, which means pulling some of that support away. The Fed did this big time from 2004 to 2007, and that led to the asset crashes in real estate and equities in 2008 and 2009.

    Now, 25 bps isn't the end of the world, but it is a step in the wrong direction with fiscal policy destroying Fed note effectiveness via taxes and regulations. This is typical gov disjointedness and bungling. Watch out for it. If the Fed does start making the attempt to raise rates, then rates will fall as people flee from equities and back into safety.

    The Fed would be better off by just freezing where they are and stop trying to help. I doubt their egos will let them do that. As such, they pose a threat and we need to be ready to protect ourselves.
    Feb 13, 2015. 02:26 PM | 1 Like Like |Link to Comment
  • Negative Interest Rates: Capital's Reproduction Problem [View article]
    Hey, good fight everyone. Its way more fun this way.
    Feb 13, 2015. 02:16 PM | 1 Like Like |Link to Comment
  • Negative Interest Rates: Capital's Reproduction Problem [View article]
    "All I have asked for in this part of this discussion is that you acknowledge these plain, practical facts. Why is that hard? "

    Becasue they aren't plain, practical facts. They are your beliefs based on false assumptions. I doubt anything I would say to you would convince you and here's why...

    "The Fed is our instrument and it is doing our bidding."

    One of the few things Upton Sinclair said that I agree with is that when someone is paid not to believe something, they won't.

    The atrocities are the countless booms and busts that damage the wealth and livelihoods of millions and millions of people. The wars that govs are more apt to get in because they can pay for it via the stealth tax of central banks. The Panic of 1907, the great depression, the great recession, the dwindling opportunity for more and more people and what's more is the wealth we could have had if not for the rationalizers making excuses for gov regulators because its "serves them" by transferring the wealth from their fellow citizens to them.

    "you don't both acknowledge that and succeed in convincing us, your opinions in the matter will remain utterly without consequence."

    Actually, its just the opposite. I've learned to protect myself, and I have encountered others that have learned the same thing. The consequences of learning to push the cliches and platitudes are real indeed. I simply want others to share in these benefits. Not because I am altruistic, but because it interests me.

    "Maybe it could do it better - tell us how and why. Maybe we should reform it - tell us how and why. Then we will decide whether we agree with you."

    Again, my point is that its fundamental principle is flawed. Its best course of action would be to fade away, and let price sensitive money creators take over. However, people just arent' ready for this yet. Look at how entrenched your are in your position of defending it. Its like the defenders of slavery. They benefited from slavery, so they were immune to any of the reasons why they would be better off without its existence.

    There is progress. There are some people coming to the enlightenment that human relationships should be built on voluntary cooperation and not force. It takes time, and in the mean time, what such people need to do is learn to protect themselves from the wealth transfer that occurs when human relationships are based on force.

    This is why by studying the subsidy mix (the interplay between the bungling of fiscal and monetary policy from gov regulators who have neither the knowledge or the tools to do what they claim the can) you can learn to understand why these booms and busts occur. Like everything in nature, things happen for reasons. When you see inflationary policies being promolgated, you can take advantage of that by riding the asset wave up. Then when you see the gov making another mistake by suddenly panicking and reversing policy, you know its time to take your gains, and then buy back in at the bottom when the bunglers panic again and reinflate.

    What you don't do is believe the lies that its all the free market's fault and that only holy and righteous gov regulators can save you. Its just the opposite, the gov regulators are causing the booms and busts around the natural growth rate of what's left of the underlying free market. That's why as long as the gov doesn't totally kill the growth via regulations, that the central bank can always reinflate the asset prices. That's why you want to get back in at the bottom, and let the Fed transfer everyone elses' wealth your way. Until everyone else comes to enlightenment, its the only way to protect yourself.
    Feb 13, 2015. 02:14 PM | 2 Likes Like |Link to Comment
  • QuickChat #277, January 7, 2015 [View instapost]
    And now I see 2093 on the S&P.
    Feb 13, 2015. 12:26 PM | 1 Like Like |Link to Comment
  • Negative Interest Rates: Capital's Reproduction Problem [View article]
    JasonC's comments also reflect the common tactic of conflating the role of legitimate gov with the abuses of gov. Thus, whenever someone attacks the abuses of gov, they are labeled as "anarchists", or "kooks", because an attack on gov, means you want no gov, as opposed to just wanting legitimate gov vs the abuses of gov.

    To try and say that gov has never been a source of abuse and corruption because the abusers and corrupters got away with it by not being arrested is the height of ignoring reality. The United States owes its existence to people revolting against the abuses of gov, hence illegitimate gov.

    The role of gov is to protect person and property. From that people become free to pursue their own industry for their own improvement. This is what Jefferson said. Jefferson was the 3rd President of the United States, so if the people who claim we can never question gov really believe what they claim to believe, then they shouldn't question a President of the US. Of course, they will, which just goes to show, what they really want is not total obiedence to gov, but cover for when gov subsidizes them.

    In order for gov to fullfill its legitimate purpose of protecting property and person, it needs to be granted force, so it can oppose illegitimate force. The danger is that force will be captured by the very people its supposed to oppose. When that happens, the gov then becomes a tool of theft. Passing a law that requires people to buy the products of the people that paid for the legislation, is no different than just telling one group to give antoher group their money. The cover or fruad that they use to justify the theft is the exchange of the product. This is an attempt to legitimize the theft in the minds of the thieves. The thieves justify it by saying, "well we had a vote and you lost". Here's another law that was passed by the majority.

    "The Fugitive Slave Law or Fugitive Slave Act was passed by the United States Congress"

    I didn't see anyone arresting members of Congress for that, so I guess its OK.

    Here's the bottom line. Gov needs to be subjected to the same market discipline that smart phones are subjected to. There has to be a check to make sure the gov functions as the product in the market its supposed to function as. Calling people "kooks" and "idiots" because they attempt to apply this discipline to the gov product, is a prescription for disaster, and that's reality.
    Feb 13, 2015. 12:16 PM | Likes Like |Link to Comment