Essential Economics for Politicians

[Bruddah IZ]

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

 

[Bruddah IZ]

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.

 

[Bruddah IZ]

This thread was created to show how clueless politicians really are about the economy.

Obama Compares Obamacare to Smartphone That Was Recalled for Catching on Fire

It’s an apt metaphor for the health law—but not in the way the president thinks

https://reason.com/blog/2016/10/21/obama-compares-obamacare-to-smartphone-t

 

[Bruddah IZ]

 

[Bruddah IZ]

 

[Bruddah IZ]

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.

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

 

[Bruddah IZ]

Money is a government-issued instrument, without which the modern market cannot function.

Money is not government issued. The U.S. government sells Treasury Bonds to the Federal Reserve in exchange for Federal Reserve Notes. The aforementioned easily verifiable by the Feds balance sheet.

https://www.federalreserve.gov/mone..._balance_sheet_developments_report_201611.pdf

 

[espola]

Money is not government issued. The U.S. government sells Treasury Bonds to the Federal Reserve in exchange for Federal Reserve Notes. The aforementioned easily verifiable by the Feds balance sheet.

https://www.federalreserve.gov/mone..._balance_sheet_developments_report_201611.pdf

The US Treasury and Federal Reserve are not government institutions? You should write and tell them. I don't think they know that.

 

[Bruddah IZ]

The US Treasury and Federal Reserve are not government institutions? You should write and tell them. I don't think they know that.

One is, one is not. They both know who they are. Hence the balance sheet. But please feel free to write to them and explain the Feds balance sheet to them.

 

[espola]

One is, one is not. They both know who they are. Hence the balance sheet. But please feel free to write to them and explain the Feds balance sheet to them.

Both are. You bring this crackpot theory up every few months, and you are wrong every time.

 

[Bruddah IZ]

Both are. You bring this crackpot theory up every few months, and you are wrong every time.

You're too old to not know the difference and yet you are wrong every time.

 

[Bruddah IZ]

The Board of Governors in Washington, D.C., is an agency of the federal government. The Board--appointed by the President and confirmed by the Senate--provides general guidance for the Federal Reserve System and oversees the 12 Reserve Banks. Board reports to and is directly accountable to the Congress but, unlike many other public agencies, it is not funded by congressional appropriations. In addition, though the Congress sets the goals for monetary policy, decisions of the Board--and the Fed's monetary policy-setting body, the Federal Open Market Committe--about how to reach those goals do not require approval by the President or anyone else in the executive or legislative branches of government.

 

[espola]

The Board of Governors in Washington, D.C., is an agency of the federal government. The Board--appointed by the President and confirmed by the Senate--provides general guidance for the Federal Reserve System and oversees the 12 Reserve Banks. Board reports to and is directly accountable to the Congress but, unlike many other public agencies, it is not funded by congressional appropriations. In addition, though the Congress sets the goals for monetary policy, decisions of the Board--and the Fed's monetary policy-setting body, the Federal Open Market Committe--about how to reach those goals do not require approval by the President or anyone else in the executive or legislative branches of government.

The Federal Reserve was established by Congress. The members of its board are appointed by the President with approval of Congress. Many of its functions overlap with other government bodies, such as the Treasury. The only way it could be eliminated is by an act of Congress and approval of the President.

Congress was wise when it established the Fed to make it as independent as possible from political influence by Congress and the President. Its Governors are appointed for terms of 14 years and cannot be removed except "for cause", and none ever has been. The Fed also funds itself by charging fees to its banking customers, returning its surplus every year to the Treasury, so it can't be blackmailed by threats to cut its funding. Don't confuse that independence with its existence as part of the US Government.

 

[Bruddah IZ]

The Federal Reserve was established by Congress. The members of its board are appointed by the President with approval of Congress. Many of its functions overlap with other government bodies, such as the Treasury. The only way it could be eliminated is by an act of Congress and approval of the President.

Congress was wise when it established the Fed to make it as independent as possible from political influence by Congress and the President. Its Governors are appointed for terms of 14 years and cannot be removed except "for cause", and none ever has been. The Fed also funds itself by charging fees to its banking customers, returning its surplus every year to the Treasury, so it can't be blackmailed by threats to cut its funding. Don't confuse that independence with its existence as part of the US Government.

Which significant functions of the Fed overlap with what the Treasury does or does not do. And why would Congress eliminate their lender of last resort?

 

[Bruddah IZ]

Don't confuse that independence with its existence as part of the US Government.

Every financial crisis that the U.S. economy has gone through has been caused by an increase in the money supply by the Fed. The Fed purchases Government Bonds with the new money/federal reserve notes which drives down interest rates (the price of money). Bonds become an asset on the Feds Balance sheet and the money/federal reserve notes balance it all out as a liability. Not confused about the Feds monopoly on money.

 

[Hüsker Dü]

Every financial crisis that the U.S. economy has gone through has been caused by an increase in the money supply by the Fed. The Fed purchases Government Bonds with the new money/federal reserve notes which drives down interest rates (the price of money). Bonds become an asset on the Feds Balance sheet and the money/federal reserve notes balance it all out as a liability. Not confused about the Feds monopoly on money.

"yes, yes . . . the Bilderburgs . . . the Rothschilds . . . NWO . . . alien wars underground . . . FALSE FLAG! FALSE FLAG! buy gold! BUY GOLD!" Alex Jones or Izzy or both?

 

[Bruddah IZ]

"yes, yes . . . the Bilderburgs . . . the Rothschilds . . . NWO . . . alien wars underground . . . FALSE FLAG! FALSE FLAG! buy gold! BUY GOLD!" Alex Jones or Izzy or both?

Sheesh!! Not only do you watch more Fox channel then anybody else but you're in to the conspiracy theories too!!

 

[espola]

"yes, yes . . . the Bilderburgs . . . the Rothschilds . . . NWO . . . alien wars underground . . . FALSE FLAG! FALSE FLAG! buy gold! BUY GOLD!" Alex Jones or Izzy or both?

I wish I could remember the name of that guy on the 3AM infomercials who was screamingly convinced that the Fed was an instrument of the Devil, or foreign powers, or secret space aliens, or something he couldn't really tell us unless we bought his tapes or DVDs. I thought his head was going to explode right on camera. I'm sure Izzy bought all 7 sets.

 

[Wez]

Every financial crisis that the U.S. economy has gone through has been caused by an increase in the money supply by the Fed.

We know you think that. The world isn't that simple. Sometimes crisis are caused by plain old fashioned greed and speculation.

 

[nononono]

I wish I could remember the name of that guy on the 3AM infomercials who was screamingly convinced that the Fed was an instrument of the Devil, or foreign powers, or secret space aliens, or something he couldn't really tell us unless we bought his tapes or DVDs. I thought his head was going to explode right on camera. I'm sure Izzy bought all 7 sets.

Why were you up at 3:00 am in the first place ???
And secondly, why would you turn on " That " channel at 3:00 am ???