We've had the Fed for almost 100 years by now. Assuming that pumping money into the economy is the same as pumping smack into someone's veins how do we kick the habit without getting the shakes and seeing dead babies crawl up along the ceiling? The short term pain might be accepted by the folks here, but I'm just wondering how you're going to convince a bunch of monetary junkies that the short-term corrections and pain are worth an economy with a more stable base. How do you get people to kick the habit? Cold turkey or methadone?
I like Ron Paul's proposal of allowing for and creating a competing currency. The market can decide if the dollar is worthy or worthless, and would most likely choose the latter in a truly free market.
Reisman has a suggestion of going to a 100% paper reserve then to a 100% gold reserve. Check out the Mises Circle Newport Beach podcast for his idea.
Rothbard had another suggestion, the details of which escape me. But iirc, it was to peg the dollar to gold at a certain ratio, then move to gold.
All in all, I think Ron Paul has the best transitional method. Not quite cold turkey, but cold turkey enough.
Can anybody think of the possible short-term negative consequences to Paul's method?
CrazyCoot: Can anybody think of the possible short-term negative consequences to Paul's method?
The Parasite Class and their Statist lackeys will go batshit crazy?
Assuming that pumping money into the economy is the same as pumping smack into someone's veins...
do you believe that pumping money into the economy is the same as pumping smack into someones veins?
Yes I do.
I to fully agree with Paul’s (actually Hayek’s) plan, and totally disagree with other libertarian plans as I think of them as unrealistic.
Regarding the Hayek plan the only negative consequence I can think of is that it would take at the every least e decade for a competing currency to gain circulation. In the meantime the Fed would wreck havoc. But there would be no bust, at most a stagfaltion period.
On the bright side, sounder foreign currencies would start being used in transactions among EX-IM business entities form the every onset and at least for transactions amid financial institutions, gold could come into use within a year. So, it is a sensible plan, as long as we stick to it long enough.
I’d also add that the Fed should be privatized right away, should legal tender law be abrogated.
This thread also reminded me that I need to publish my Graduation Paper touching these issues
The best short-term solution is exactly the same as used by Volcker in the '80s. Interest rates need to raised overnight, history has proven it to be the only viable way to kick the habit. There's no point in proceeding by baby steps: it would be the same as taking away drug bit by bit. Junkie will be back to his old miserable self in hours. Once interest rates have been raised to more realistic levels you can start implementing a gold standard (or a copper standard, or a silver standard... whatever).
There are two big problems o this strategy. The first is that, of course, you need fiscal responsibility. Not only it makes economic sense but I believe governments should lead by example: no point asking people sacrifices if you continue to spend like crazy, no matter how grandiloquent are your stated goals. The second is you need a politician ready to take short term "pain" in return for middle to long term gains. I personally do not like Reagan but I have always appreciated his determination to back Volcker no matter what. The question is: do we have that kind of politician right now? (Rhetorical question of course)
"We've had the Fed for almost 100 years by now."
if the federal reserve (and the resultant banking laws that it and congress implement) is truly harmful, the disease and ill, i have seen it called at mises sites would taking every known dollar, as best as they could tell and assigning a govt held gold amount to it, then destroying the federal reserve and the complex of shifting reserve requirments that now exist - work?
dispersing shoebox sized amounts of gold (5kg would be around 7million current paper-dollars) to the banks for holding and for depositor redeeming if desired?
ie 11 trillion divided by roughly 260 million ounces of gold (what someone at mises says the fed has?) divided by 31 grams (grams in a troy ounce) would be about 1400 current paper-dollars per gram of gold (i believe enough to make a readable handheld coin http://store.nwtmint.com/product_details/2078/ )
what ever it came out to be exactly.
if at that point the dollar was defined at 1400/gold gram if anyone wanted to take their own gram of gold to mint or get dollars for they would get 1400$ and some gold inflation would take place?
or would just making the 'dollar' mean specifically '1 gram of metal-money'....1gd is 1g of gold , 1sd is 1g of silver? the gold-dollar (1 gram of gold) would start at roughly 1400 of current paper-dollar purchasing power and adjust itself from there via new minting from personal gold holdings?
and some silver inflation would occur from minting.
then the market could take over with known terminology and adjust or reject as necessary.
sthomper: "We've had the Fed for almost 100 years by now." if the federal reserve (and the resultant banking laws that it and congress implement) is truly harmful, the disease and ill, i have seen it called at mises sites would taking every known dollar, as best as they could tell and assigning a govt held gold amount to it, then destroying the federal reserve and the complex of shifting reserve requirments that now exist - work? dispersing shoebox sized amounts of gold (5kg would be around 7million current paper-dollars) to the banks for holding and for depositor redeeming if desired? ie 11 trillion divided by roughly 260 million ounces of gold (what someone at mises says the fed has?) divided by 31 grams (grams in a troy ounce) would be about 1400 current paper-dollars per gram of gold (i believe enough to make a readable handheld coin http://store.nwtmint.com/product_details/2078/ ) what ever it came out to be exactly. if at that point the dollar was defined at 1400/gold gram if anyone wanted to take their own gram of gold to mint or get dollars for they would get 1400$ and some gold inflation would take place? or would just making the 'dollar' mean specifically '1 gram of metal-money'....1gd is 1g of gold , 1sd is 1g of silver? the gold-dollar (1 gram of gold) would start at roughly 1400 of current paper-dollar purchasing power and adjust itself from there via new minting from personal gold holdings? and some silver inflation would occur from minting. then the market could take over with known terminology and adjust or reject as necessary.
Hm, the typical Mises/Rothbard approach. Can any "peg-to-metal" enthusiast please tell me, why would anyone want to take gold and lose money? Keep in mind that gold is no longer money, only the dollar is. As gold is only valued for its use-value, and will take a long time to retake its position of means of exchange, for all practical purposes a pegged dollar would require actual conversion into gold only sporadically, and we’d be back to a post civil-war monetary system. Better than the crap the US has now, but far from doing away with inflation.
i havent heard of any money system that said inflation would be dona away with.
the current inflation has produced "when prices are adjusted for inflation, Americans today spend '40% less on clothes, 20% less on food, more than 50% less on appliances, about 25% less on owning and maintaining a car'than they did during the early 1970s." good things, right?? you like paying less for food dont you merl?
http://blog.mises.org/archives/010741.asp
unless you know of lots of other prices adjusted for inflation that make the above ones seem miniscule and insignificant because of the small portions of Americans budgets put toward the above items...then speak up.
i dont know that i said take gold and lose money...the thread is about fed pumping and i assume from a previous question the pumping is a bad thing to the thread starter.
i know gold is no longer money according to us code.
i never said it was.
i offered a suggestion of returing gold as money via a govvt that isnt going to go away but as a way of getting gold out of the govts hands and back as a money.
if paper dollars as you say are crap then why wouldnt redifing the dollar as a gram weight be a problem compared to the crap?
you can resort to barter if the inflation wouldnt be completely done away with.
geez
.
I’m afraid we misunderstood each other.
sthomper: i havent heard of any money system that said inflation would be dona away with.
True. Technically speaking, no monetary system has ever purported to allow for the creation of no new money at all. Even the gold standard saw an average annual increase in the quantity of gold minted somewhere near 3-5% (although Rothbard doesn’t consider this “inflation” as the gold was minted for non-monetary use only). What I mean is that the system you advocate wouldn’t do away with high-paced monetary creation, thus with the business cycle.
sthomper: i know gold is no longer money according to us code. i never said it was. i offered a suggestion of returing gold as money via a govvt that isnt going to go away but as a way of getting gold out of the govts hands and back as a money. if paper dollars as you say are crap then why wouldnt redifing the dollar as a gram weight be a problem compared to the crap?
Here’s the catch. I didn’t mean that “legally” gold is no longer money. I mean that praxeologicaly speaking, gold is no longer money. It has been withdrawn form monetary use since the ’30, and according to the Mises regression theorem of money value, cannot be accepted any longer as money. Even if paper dollars are crap, they are money, praxeologicaly speaking, and even if gold is the best potential money one can think of, it has been withdrawn form use so long that no one will be able to calculate in terms of gold from quite some time after its introduction.
So, as matters stand the US economy can run only of dollars. Defining the paper dollar in terms of gold wouldn’t be a problem. What would be a problem is that this would be no “pegging”, just the fixing of the price of a commodity (gold) in terms of money (dollars). No one would ask to “redeem” (i.e. buy) more gold than necessary for non-monetary purposes, and hence the dollar would still be money for years to come. Simply pegging the dollar to gold would than, hardly do any good. The “abrogate legal tender” way is, I believe, more adequate and speedy.
Merlin:I to fully agree with Paul’s (actually Hayek’s) plan
Good to know. I have only heard referenced to RP, granted it was a CFL event.
maybe you lack understanding or truth telling ability.
"taking every known dollar, as best as they could tell and assigning a govt held gold amount to it, then destroying the federal reserve and the complex of shifting reserve requirments that now exist - work?"
if 11 trillion of so fed dollars and bank credits were backed by an amount of govt gold (i have read its 260 million ounces - about 1400 current dollars per gram) and then the dollar was redefined as "1 gram of moneyd-metal" the new gold dollar would have an instant purchasing power equivalent to about 1400 of the previous paper/fiduciary dollars. as i mentioned above the federal reserve would be abolished along with the policies of reserve bank supporing. reserve requiremtns would be personal risk rather than govt policy and fixing.
private gold making its way into money would possibly create some gold inflation - and affect prices...likely raising some. hopefully leading to better money.
you then provide some crap about praxeologically gold hasnt been money since the 30's because the govt made a legal mandate. thats ridiculous. try to stop being so dishonest.
i had read that what made money inflation harmful for the most part was when credit was quickly created once money had been loaned out. i have never been able to tell if that is true or not, but that is what i read at the mises sites. simply inflating gold (by convincing someone to dig it out of the ground) instead of the laborious effort of adding numbers to a bookkeeping entry was less economically harmful, iow.
sthomper: aybe you lack understanding or truth telling ability. "taking every known dollar, as best as they could tell and assigning a govt held gold amount to it, then destroying the federal reserve and the complex of shifting reserve requirments that now exist - work?" if 11 trillion of so fed dollars and bank credits were backed by an amount of govt gold (i have read its 260 million ounces - about 1400 current dollars per gram) and then the dollar was redefined as "1 gram of moneyd-metal" the new gold dollar would have an instant purchasing power equivalent to about 1400 of the previous paper/fiduciary dollars. as i mentioned above the federal reserve would be abolished along with the policies of reserve bank supporing. reserve requiremtns would be personal risk rather than govt policy and fixing. private gold making its way into money would possibly create some gold inflation - and affect prices...likely raising some. hopefully leading to better money. you then provide some crap about praxeologically gold hasnt been money since the 30's because the govt made a legal mandate. thats ridiculous. try to stop being so dishonest. i had read that what made money inflation harmful for the most part was when credit was quickly created once money had been loaned out. i have never been able to tell if that is true or not, but that is what i read at the mises sites. simply inflating gold (by convincing someone to dig it out of the ground) instead of the laborious effort of adding numbers to a bookkeeping entry was less economically harmful, iow.
aybe you lack understanding or truth telling ability.
I invite you to reconsider your willingness to take part in such discussions when you clearly lack basic manners. Perhaps actually reading some Mises could help?
As for the economic part of your post, it’s again nonsense, for you still can’t understand that nothing can become money just by being pegged to money itself. But than again, I’ll leave at that.