Essential Economics for Politicians

Discussion in 'Off Topic 2' started by Bruddah IZ, Oct 19, 2016.

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  1. Bruddah IZ

    Bruddah IZ DA

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    Interest rates are prices. They impart information. They tell a business person whether or not to undertake a certain capital investment. They measure financial risk. They translate the value of future cash flows into present-day dollars. Manipulate those prices — as central banks the world over compulsively do — and you distort information, therefore perception and judgment.

    Interest rates ought to be discovered in the market, not administered from on high. They can’t do their essential work if someone, say a central bank, is muscling them around. Let’s get the central banks out of the business of using interest rates — and stock prices and exchange rates, too – as instruments of national policy. Today, investors live in a hall of mirrors: They don’t know which values are real and which are distorted by monetary manipulation. Market-determined rates will help restore clarity.--http://www.nationalreview.com/article/441128/james-grant-monetary-manipulation-must-end
     
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  2. Bruddah IZ

    Bruddah IZ DA

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    The Federal Reserve Is Hillary Clinton’s Secret Weapon

    https://mises.org/blog/federal-reserve-hillary-clinton’s-secret-weapon

    Say what you want about Donald J. Trump, but he is correct about one thing: the Federal Reserve has, with near certainty, been holding interest rates down for political purposes — namely, to aid Hillary Clinton in getting elected president of the United States.

    In September’s first presidential debate, Mr. Trump said:

    We have a Fed that’s doing political things. … The Fed is [being awfully] political by keeping the interest rates at this level. And believe me: The day Obama goes off, and he leaves [office], and goes out to the golf course for the rest of his life to play golf, [is the day that] they raise interest rates. … The Fed is being more political than Secretary Clinton.

    The Federal Open Market Committee's (FOMC) September meeting minutes, released on Wednesday, have proven Mr. Trump’s assertion to be true. As the 2016 election season draws to a close, the Fed has suddenly become more bullish on the prospect of raising interest rates — and this precipitous change-of-heart has come despite there being few notable signs of hope in the US’s economic data.
     
  3. Bruddah IZ

    Bruddah IZ DA

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    Six Things to Consider About Inflation

    As an economic term, “inflation” is shorthand for “inflation of the money supply.”

    The general public, however, usually takes it to mean “rising prices” which is not surprising since one of the common effects of an increase in the money supply is higher prices. However, supporters of government policy often say, “If quantitative easing (QE) and its terrible twin, fractional reserve banking, are so awful, why have we got no inflation?”

    To address this conundrum, there are six related factors that are noteworthy:

    https://mises.org/blog/six-things-consider-about-inflation
     
  4. Bruddah IZ

    Bruddah IZ DA

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    Number One: we need to be clear about the terms we are using. Instead of talking about “inflation” in the loose sense, as above, it is more accurate to speak of currency debasement, which is the real impact of fiat money creation by any means. We experience currency debasement as declining purchasing power. Two sides of the same coin: one reflects the other.

    Number Two: the above question overlooks the fact that the measures used in this process are inherently unreliable. The decline in purchasing power is most evident when objectively measured by reference to an essential commodity such as oil — rather than against the Consumer Price Index (CPI). The CPI purports to reflect the prices of ingredients selected by government statisticians in what they consider to be a typical, but notional, basket of “consumer goods and services.” This basket, whose contents are varied periodically, results in an index that cannot be trusted as an objective barometer. It supports the wizardry of non-independent Treasury statisticians, and relates to goods that scarcely feature in your shopping basket or mine.

    Blowing Bubbles
    Number Three: newly created fiat money must go somewhere — and so it goes into the grasp of its first receivers, the banks, the financial institutions, government institutions, and urban moneyed classes who least need it — widening the gap between rich and poor — and thereby building asset bubbles in property, luxury cars, yachts and the myriad baubles that only the very rich can afford to acquire. So never say that “there is no price inflation” — it’s just that those asset prices don’t figure in the official CPI stats.

    Number Four: The European Central Bank (ECB) is no slouch when it comes to money creation out of thin air, and banks within the euro zone have therefore come to rely on it for survival. The solvency of Southern EU countries is dependent on the promise of limitless — thanks to Mario “Whatever it takes” Draghi — fiat money bailouts from the ECB. But, until the next bailout arrives, governments of Europe will do their coercive best to prop up their insolvent banks by any means, fair or foul. In Italy, for example, the government has now “invited” the country’s pension funds to invest 500 million euros in a bank fund called “Atlante,” which has been formally set up as a buyer of last resort to help Italian lenders (whose bad debts equate to a fifth of GDP) reduce their toxic burden. Having run out of other people’s money the Italian government is now trying to raid the nation’s pension funds.

    Number Five: In the same vein, you have no doubt heard reference to “helicopter money.” This is a variant of QE favored by certain politicians who talk blithely about the need for “QE for the people.” The idea is to by-pass the treasury mandarins by dropping newly printed money directly to the people via government spending, so that they (rather than the already-rich classes) can benefit from the bonanza and aid the economy by spending their new-found wealth. Again, this notion commits the fundamental error of equating “money” and “wealth.” If everyone suddenly finds that free handouts have swelled their bank accounts, how long will it be before prices follow? (And since even helicopter money originates at the central bank, you can be sure that the financial sector will somehow get its hands on it first anyway!)

    Number Six: the final point concerns the corrosive effect of the deliberate and utterly misguided suppression of interest rates which, if they were allowed to find their own market level, would represent the time-value of money, or what the private sector is prepared to pay for liquidity — either for spending now or saving for future spending.
     
  5. Bruddah IZ

    Bruddah IZ DA

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  6. Bruddah IZ

    Bruddah IZ DA

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  7. Bruddah IZ

    Bruddah IZ DA

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  8. Bruddah IZ

    Bruddah IZ DA

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    There is in all of us a strong disposition to believe that anything lawful is also legitimate. This belief is so widespread that many persons have erroneously held that things are "just" because laws make them so. Thus in order to make plunder appear just and sacred to many consciences, it is only necessary for the law to decree and sanction it.--Frederic Bastiat writing on government-sanctioned counterfeiting: 1. government paper money and fractional reserve banking.
     
  9. Bruddah IZ

    Bruddah IZ DA

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  10. Bruddah IZ

    Bruddah IZ DA

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    ....and Wez.
     
  11. Bruddah IZ

    Bruddah IZ DA

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  12. Bruddah IZ

    Bruddah IZ DA

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  13. Laced

    Laced SILVER ELITE

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    Money is a government-issued instrument, without which the modern market cannot function. Money, without government setting interest rate, is like a bird without wings. Free market in the purest sense cannot exist without government enforcement. For example, freedom of contract is nothing more than an abstract concept without government enforcement through its court system. Practically speaking, you'll find the purer form of free market in China, Brasil, India and a few other emerging economies. If you speak to any businessman who's done transactions in these jurisdictions, the overwhelming majority of them would rather do a transaction in the US. As a matter of fact, they'd rather sell in the US at lower prices in the US. Aside from our infra structure, they have greater confidence in our legal system that spell out each party's rights and obligations. Such confidence arises precisely because UCC has been universally adopted in the US. That is government "intervention" you can call it, but it's precisely such government "intervention" that truly makes the market stable and free.

    There're economists who argue otherwise, but they're on the fringe. They have an antiquated view of the market. Mainstream economists accept that there has to be government action to ensure a free market. The issue is no longer whether, but how much.
     
  14. Wez

    Wez DA

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    Laced, you're pissing on the magic free market fantasies of the clowns who inhabit this forum...
     
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  15. Sheriff Joe

    Sheriff Joe

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    You are a dope.
     
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  16. Bruddah IZ

    Bruddah IZ DA

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    The U.S. Government does not issue money. The Federal Reserve issues money to the Government by purchasing Government Treasury Bonds. This is no small point.
     
  17. espola

    espola DA

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    I have a quarter in my pocket that says you are wrong.
     
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  18. Bruddah IZ

    Bruddah IZ DA

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    I didnʻt get that he is pissing on free markets at all. Thatʻs your progressive inner dialogue.
     
  19. Bruddah IZ

    Bruddah IZ DA

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    A coin quarter? But what do you say?
     
  20. Bruddah IZ

    Bruddah IZ DA

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    Government does not set interest rates either. The Federal Reserve does. Agree that government must exist to enforce contracts and private property rights.
     

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