Yonosa wrote:

nest0r wrote:

Huh?

@nestor, I'm not too serious there, just trying to say the guy didn't think much about it, to accept his position so readily, I accept mine but with the knowledge that when the time and opportunity comes I will bitterly resist totalitarianism.

Because obviously anyone who actually thinks about the issues would have to agree with you, right?

But I'm pretty sure nest0r's interjection was aimed at your giant "Wake up, Sheeple!" rant.

Yonosa wrote:

I never got into the issues of currency though...

The 'issues of currency' is one of the central components of Austrian school of thought. More to the point, isn't that what the video was about?

I don't want to diminish your interest in the field, but Austrian economics is completely out of date. It dismisses large parts of macroeconomics which are nearly universally accepted now as being true. Going to the Mises institute to study economics reminds me of that Simpsons episode, where those religious men have 'PhDs in Truthology'. Or indeed, a doctorate in physiocracy . It's outside what is accepted today as good economics.

That's not to badmouth the Austrian economists. Hayek, Mises and the rest of them were all certainly great economists. And so was Keynes. Their theories have just been examined and improved upon. I'm not a Keynesian, I'm certainly right wing leaning (like anyone who studies economics), but nobody rationally comes out of an economics lecture a fan of the Austrian school. It's usually those who get a bit carried away by Ayn Rand. Nowdays most economists agree with eachother 90% of the time, even those from opposite sides of the spectrum. There's not really this large battle between Austrian economics and Keynesian economics - something you'll discover in Econ101

For those who missed it:

http://www.youtube.com/watch?v=vVkFb26u9g8

IceCream wrote:

lagwagon555 wrote:

The independance of the central bank is what keeps the money supply (relatively) stable.

why does it keep it stable?

Hey here is a great link to do with Japan's stagflation, it explains the different economic viewpoints.

Also at the other economist in the post, please read this article.
http://mises.org/daily/1099

Here's another great book: http://books.google.com/books?id=g_TSZb … mp;f=false

Dense but worth it.

Her various articles and papers, scattered about the Web, are worthwhile as well. She's got some entries at Huffington Post, even though I don't like the site: http://www.huffingtonpost.com/saskia-sassen

Last edited by nest0r (2010 April 24, 6:04 am)

No problem, glad to help

And yeah, banks creating money out of thin air, it's quite a complicated process, but I'll try to explain it quickly and clearly. It's no way near as simple as 'banks type in a number and bam instant cash!'. But banks (commercial banks, the ones you and I use) do create money indirectly, under a controlled process.

Reserve banks don't just set discount rates (the interest rate at which the central bank loans to commerical banks). They also impose reserve ratios on banks, which means that banks have to have a certain amount of cash in reserve to loan out a certain amount of money. Usually this is 10%. So say for example, given the central bank sets the reserve rate to 10%, a commercial bank borrows $100 from the central bank. Because of the reserve ratio, the bank has to keep 10% of that cash as a reserve, but it can loan out the rest. So the bank accepts $100, keeps $10 as reserves and lends out the $90. This is as fair as it sounds, and there's no 'money creation' involved as implied by that video, a bank is only giving out what it has borrowed. However... (duh duh duhhh....)

Ok, the same bank can now loan out $90. Someone borrows this off the bank, and buys $90 of anime DVDs. This $90 then goes to a different bank, the bank of the anime store owner. Now, this means this Bank 2 accepts $90. If it wants to loan out this money, it has to reserve 10%, and it can loan out the rest. So it puts $9 as reserves, and can loan out $81. Now, someone else borrows this money from Bank 2, and buys goods, transfering money to Bank 3 (or Bank 1 for that matter). This bank now has $81, so it puts $8.10 into reserves and loans out $72.90. And so on and so on...

The end effect is that all this money will end up as bank reserves as it circulates around the economy. And the total amount of money that is loaned out by each bank is the amount of money that is introduced into the money supply. By logic, if $100 is introduced into the money supply by the central bank, and the reserve rate is 10%, and all of the $100 ends up as bank reserves, the amount of money truly introducted into the economy is 10x the amount the central bank introduces. This equals $1000. So for every $100 the central bank introduced into the economy, $900 is 'created' by the commercial banks. Say if the reserve ratio was 5%, then this would mean that for every $100 introduced, $2000 would end up in the economy.

So the video is definitely misleading, but it's a bit of a mouthful to explain, as you can probably tell And as to your second question, I truly don't know. Economics is the science of dealing with unlimited wants with limited means. If means become unlimited, economics might become a bad career choice!

IceCream wrote:

ahh, i see. that makes sense. yeah, course they would do that. thanks for explaining!!

but ultimately, even with inflation low, is it still not sustainable? is what that video was saying true, about banks just creating money whenever people want a loan and then adding interest which they don't create? or is it exagerated?

supposing a time when all resources were renewable, wouldn't it be possible to just fix the price of stuff, and print more money without inflation happening?

Fix the price of stuff... if you set an arbitrary number as the price for something it creates further economic distortions.... For example a price floor on milk at $4 when it previously only sold at $3 would cause more farmers to produce milk, but since the price has been fixed and is not what the government has decided, then these farmers are now producing more of a product that people don't want at that price, while forgoing the production of a product more in demand.

The thing is that people seem to think of money as the valuable item in itself, that is incorrect. Imagine there are only 10,000 cellphones in the entire world, those cellphones are very expensive just by the fact that they are fewer in number. Rather if there were 10 trillion cellphones on earth they would be extremely cheap. Money functions the same way, see any country that has gone into hyperinflation, they have never once just stopped printing the money, they kept printing and printing and printing. It is the same reason counterfeiting is treated as such a serious crime, it quite literally drives the value of every other dollar (or w/e currency) down, just by being circulated.  Yet banks function in the same exact way, except with legal sanction so therefore it is not counterfeiting? I mean come on, whether someone is doing the same thing legally or illegally it still results in the same effect.

Also note that during the 1850's-1900's the dollar lost little of it's value, I forget the figure but something like only 3 cents came of in 50 years, and of course, no central bank! Yet just from the 1970's-2010, cars went from 3k to near 40k of the same quality and brand. Its utterly ridiculous considering that cars are now manufactured in much more efficient cost effective ways than they were during the 70s. Also, the dollar lost more during that decade than any other in the said period, something like 20%(forget exactly) of its value just in the 1970s when Nixon put **Price and Wage** in order to curb inflation, instead he increased it to the point of double digits for a few years in the 70s. haha, Didn't help any to unpeg the dollar from gold either, which saw the price of gold rice remarkably relative to the unpegged dollar thereafter. But then again to the Keynesian Economists,

Not to mention that almost all major wars that ever occurred over the past 150+ years have been fought on debt from the central banks.  If central bank debt wasn't available in the form of inflation, enormous taxes would be raised everytime a war started and the citizens support for any said war would not last for any measurable amount of time, the only reason they are not is because they are financed by inflationary debt,  which is fact the same as taxes anyways since;
     
TAXES $10=10 apples this year   but a tax of 20% takes our income to $8=8 apples.
10d=10a , 10-20%tax=8, 8d=8a

Inflation, is simply hidden since the number stays the same!
10d= 10a this year, but next year we get 10d=8a, it is the same thing!

But actually we get both(We are so well endowed are we not?)
TAXES+Inflation
10d-20%taxes=8d, 8d= 6 apples!
YEAH, the central bank system curbs inflation and fights inherent corruption since it is a private group of the world's richest men!
Wait, wait a minute, I am off the mass media daily prescribed narcotics, so it just doesn't seem to make any sense.

I guess I need another dose...

Yonosa wrote:

I am an economics major (Austrian School)...

And you admit it openly?  After the spectacular spill that the "free enterprise" system took not too long ago?  Then again, ideological contortionism is a well-established technique for handling these embarrassments, at least in the short term.

(Don't take this too seriously.  I'm just giving you a hard time.  )

Last edited by gfb345 (2010 April 24, 8:51 am)

IceCream wrote:

...but this kind of vague (or not so vague) gesturing is incredibly depressing i think.

I've reached the conclusion that film documentaries, no matter how well made, are just not the medium for this sort of argument.  They are popular because they are relatively easy to digest (compared to, say, reading a few serious books on the subject, and forming one's opinions more rigorously), but they can't possibly do justice to all the important angles of a question like this.  This is why I can't stand Michael Moore's films, even though I agree with a lot of his points of view.  He's one of the worst offenders, but that's just because he most fully embraces the demands of the medium, which are to "teach through entertainment."  Sorry, some things take work.  One can't "entertain" away the required effort.

IceCream wrote:

what can i, as a person can do? And what system should things be changed TO?

You are in the classic "post-awareness-raising-documentary state-of-mind".  That's their goal: to whip you into a vague sense of helpless apprehension...  That new worry is your "proof" that you have "learned something".  You are no longer like one of those innocents out there who have not yet watched the documentary.  You know.  And Truth rapes...

The first thing I'd do is ignore the documentaries.  The second one, if I'm sufficiently inclined, I'd learn some economics rigorously, and read some serious literature on these topics.  I'd read Paul Krugman's blog more (and therefore RevTK less )...

Last edited by gfb345 (2010 April 24, 9:14 am)

gfb345 wrote:

You are in the classic "post-awareness-raising-documentary state-of-mind"

Whoah, easy tiger... that is quite a cynical view there.

These "documentaries" have their place, as do Michael Moore's movies. I think you're missing the point. The authors of these movies want to raise awareness of issues they have at heart. To reach a wider audience, and actually make it to the big screen, rather than "alternative" festivals that nobody have ever heard of, they have to make a movie, tell a story.

There is nothing wrong with that considering that reality is subjective anyway. If you think there has ever been a documentary which was 100% objective you are deluding yourself. It is your mind, the intellect which is talking. The intellect loves these concepts of right and wrong, truth and untruth, black and white, real and unreal. None of these exist, only concepts. Everything has a place.

As for people discussing the topic without appropriate knowledge and insights, so what? This is also part of a process of raising awareness.

There is a great story Goenkaji tells near one of the last talks at 10 day Vipassana retreats. I don't think it's his, but the way he tells it is really entertaining. Anyway this is the story:

Swimology wrote:

Once a young professor was making a sea voyage.He was a highly educated man but had a little experience of life.In the crew of the ship while he was traveling was an illiterate old sailor .Every evening the sailor would visit the cabin of the young professor to listen to him hold forth on many different subjects.He was very impressed with the learning of the young man.

One evening the sailor was about to leave the cabin after having long conversation, the professor asked, “old man,have u studied geology?”
“What is that, sir?”
“The science of the earth”.
“No sir,I have never been to any school or college.i have never studied anything.”
“Old man.you have wasted a quarter of your life.”
With a long face the old sailor went away. “If such a learned person says so,certainly Its must be true,”He thought .”I have wasted a quarter of my life!”
Next evening again as the sailor was about to leave the cabin the professor asked him,”
Old man, have you studied Oceangraphy?” What is that sir ?”
The science of sea.”
No sir,I have never studied anything.”
“Old man you have wasted half your life.”
With longer face the sailor went away; I have wasted half my life.
Next evening once again the young professor questioned the old sailor have you
Studied meteorology?”what is that sir I have never heard of it Why the science of wind the rain the weather.You have not studied the science of earth on which you live you have not studied the science of the sea on which you earn your livelihood: you have not studied science of the weather which you encounter everyday?old man you have wasted three quarters of your life.
The old sailor was very unhappy. The nextday the oldsailor came running to the cabin
And cried ,”Professor sir,have you studied swimology?”
“Swimology?What do you mean?”
“Can you swim,sir?”
“No.I don’t know how to swim.”
“Professor sir you have wasted all your life! The ship has struck a rock and is sinking
Those who can swin may reach the near by shore, Iam so sorry professor sir You have
Surely lost your life.”

On the corporations being evil, well, corporations are simply the amplification of human desires. Humans evil? Nahh

Good read:

http://mises.org/Books/mysteryofbanking.pdf