Pope Francis claims global economy is close to collapse and describes youth unemployment rates as an ‘atrocity’ in damning message

[ralfyman]

Or to clarify, the problem is an overgrown, centralized government that is out of control of the people, which is what we have right now. And I believe this is due mostly to the creation of a privatized system that is in charge of the currency.

I think it started with industrialists

en.wikipedia.org/wiki/Robber_baron_%28industrialist%29

which took control of the economy, then a pro-business government that led first to the formation of a quasi-central bank:

en.wikipedia.org/wiki/Federal_Reserve_System

followed by a military-industrial complex:

en.wikipedia.org/wiki/Military%E2%80%93industrial_complex

coupled with more blowback:

en.wikipedia.org/wiki/Blowback_%28intelligence%29

but needed in any event to protect a reserve currency:

en.wikipedia.org/wiki/Reserve_currency

after the removal of the gold standard:

en.wikipedia.org/wiki/Gold_standard#Bretton_Woods

due to the cost of increasing military expansionism, and to be replaced by the petrodollar:

en.wikipedia.org/wiki/Petrodollar

needed to keep an economy dependent on consumer spending propped up:

en.wikipedia.org/wiki/Consumer_spending#United_States

coupled with around three decades of Reaganomics promoted by one administration after another voted to power:

en.wikipedia.org/wiki/Reaganomics

in turn part of a middle class ethos that had been around for decades:

en.wikipedia.org/wiki/American_Dream#The_four_dreams_of_consumerism

and both inevitable due to a Triffin dilemma:

en.wikipedia.org/wiki/Triffin_dilemma

and ultimately leading to a financial crash that spread throughout the global economy:

en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%9308

which in turn will ultimately affect other economies:

en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%9308#Emerging_and_developing_economies_drive_global_economic_growth

as they engage in the same borrowing and spending binge, and coupled with hundreds of trillions of dollars in notional value involved in a global derivatives market:

en.wikipedia.org/wiki/Derivative_%28finance%29#Size_of_market

may lead to more financial crashes, some of which might even make the 2007-2008 crash look a walk in the park.

 

[freeRadical]

I think it started with industrialists

en.wikipedia.org/wiki/Robber_baron_%28industrialist%29

which took control of the economy, then a pro-business government that led first to the formation of a quasi-central bank:

en.wikipedia.org/wiki/Federal_Reserve_System

followed by a military-industrial complex:

en.wikipedia.org/wiki/Military%E2%80%93industrial_complex

coupled with more blowback:

en.wikipedia.org/wiki/Blowback_%28intelligence%29

but needed in any event to protect a reserve currency:

en.wikipedia.org/wiki/Reserve_currency

after the removal of the gold standard:

en.wikipedia.org/wiki/Gold_standard#Bretton_Woods

due to the cost of increasing military expansionism, and to be replaced by the petrodollar:

en.wikipedia.org/wiki/Petrodollar

needed to keep an economy dependent on consumer spending propped up:

en.wikipedia.org/wiki/Consumer_spending#United_States

coupled with around three decades of Reaganomics promoted by one administration after another voted to power:

en.wikipedia.org/wiki/Reaganomics

in turn part of a middle class ethos that had been around for decades:

en.wikipedia.org/wiki/American_Dream#The_four_dreams_of_consumerism

and both inevitable due to a Triffin dilemma:

en.wikipedia.org/wiki/Triffin_dilemma

and ultimately leading to a financial crash that spread throughout the global economy:

en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%9308

which in turn will ultimately affect other economies:

en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%9308#Emerging_and_developing_economies_drive_global_economic_growth

as they engage in the same borrowing and spending binge, and coupled with hundreds of trillions of dollars in notional value involved in a global derivatives market:

en.wikipedia.org/wiki/Derivative_%28finance%29#Size_of_market

may lead to more financial crashes, some of which might even make the 2007-2008 crash look a walk in the park.

Again, it sounds like the problem is governments and central banks.

 

[freeRadical]

The Fed doesn’t control money supply. Most money is created by private banks, and that involves lending beyond reserve requirements.

The Fed controls the quantity of money in the economy at any given time. This is a fact. Do you disagree?

How do banks lend beyond their reserves? Where is that outside money coming from?

How do you think a consortium of private banks that operate independently of the government was formed in the first place?

In the case of the Federal Reserve, it was an act of Congress.

The same Congress that’s part of the government that’s seen as a “problem” because it bailed out Wall Street?

Yes, the same Congress.

It works both ways unless savings come from sources other than income.

No, it doesn’t. Do you know what Say’s Law is?

I have lots of evidence for that, but I think I should discuss them in a separate message or thread.

Fair enough. Do that. I would like to see this “evidence”?

But the rates are adjusted for inflation. Also, for taxation, should tax cuts be considered?

forbes.com/2010/03/18/tea-party-ignorant-taxes-opinions-columnists-bruce-bartlett.html

That is, a federal tax burden of 1.7 to 4.2 pct?

Finally, if we don’t want to use money, then we can look the poverty rate. Did that go up significantly during the last three decades?

It doesn’t matter that they are adjusted for inflation, it is still family income.

The poverty rate has been about the same since the New Deal. But that has nothing to do with the middle class because people in poverty are not in the middle class.

The article you shared actually implies the opposite. That is,

It’s not that the multiplier doesn’t exist. It’s that it no longer applies, and that’s because the increase in money supply has gone beyond the multiplier.

This also counters the claim that the Fed is in control of money supply.

No, it doesn’t. It implies the money multiplier doesn’t exist and never did exist.

The Fed is in control of the money supply.

The article that I shared argues that the textbook definition of the multiplier no longer applies. That’s because money supply is far larger than what the definition allows. On top of that, the same definition argues that because of the multiplier, the Fed is in control of money supply.

If the textbook definition doesn’t apply then what is the “new definition” of it?

The Fed controls the money supply.

One more time: the multiplier argues that given a reserve requirement money supply can be kept in control. With a 10-pct requirement, money supply should not exceed ten times that of reserve balances. Following that argument, one can argue that the Fed is control of money supply because it knows that there is a maximum amount that money supply will grow.

One more time: I know what the money multiplier is. The Fed is in control of the money supply because they control monetary policy.

In 2007, money supply was more than a hundred times that of reserve balances. That’s because banks were lending beyond reserve requirements. With that, the Fed has no control over money supply.

How can the money supply be more than that of reserve balances? Where is this outside source of money coming from?

Thus, it’s not that the money multiplier doesn’t exist. It’s that the textbook definition doesn’t exist. What we have is a global economy that is out of control.

That is all your opinion, none of which is backed up by any evidence.

 

[ProVobis]

Yes, I do. As pointed out in the article I shared, the money multiplier textbook definition assumes precisely that: the Fed controls money supply because M2 will never go beyond what is allowed by the reserve requirement. Thus, by adjusting interest rates the Fed is supposed to be able to raise or decrease M2 as needed.

And yet in 2007 M2 was more than a hundred times higher than reserve balances, when it should only be ten times more.

Don’t know why you’re using M2.

It doesn’t measure:

Notes and coins in bank vaults (Vault Cash)

Federal Reserve Bank credit (required reserves and excess reserves not physically present in banks)

Large time deposits, institutional money market funds, short-term repurchase and other larger liquid assets

All money market funds

en.wikipedia.org/wiki/Money_supply

 

[freeRadical]

What you just shared supports my arguments and is the same as what is mentioned in the article I shared earlier: what doesn’t exist is the textbook definition of the money multiplier. Put simply, given a 10-pct reserve requirement, following the multiplier M2 should increase to no more than ten times that of reserve balances. But in 2007, it was over a hundred times more than the latter.

Thus, what we have is something that goes beyond the multiplier.

What I shared does not support your arguments in any way.

How can banks lend more money then they have in reserves? Where are they getting the money to loan from?

Most of money isn’t created by central banks or governments but by private banks, and they involve loans which go beyond reserve requirements. Beyond that is a credit market that overwhelms even unfunded government liabilities.

Again, there is a difference between “create” and “control”. Banks may create it, but the
Federal Reserve controls it.

How can banks loan money beyond reserve requirements? Where are they getting all this extra money from?

It depends on the person’s work.

Most people pay mortgages, and other loans, back with income.

Yes, but savings also requires consumption, unless those savings are gained by means other than selling goods and services.

Savings does not require consumption. Consumption requires savings. You cannot consume without production.

Increased money supply leads to increased credit levels, which in turn lead to more financial speculation, which in turn leads to a financial crash. That’s what happened in 2008.

Do you have any proof that increased money supply causes financial crashes?

Increased money supply leads to more consumption, which can only be backed by increased production of goods, which in turn leads to more environmental damage and eventually a resource crunch.

You have it backwards.

Increased money supply does not lead to more consumption, increased production leads to more consumption. Without an increase in production, an increased money supply just leads to higher prices.

How can you have an increase in consumption without an increase in production?

Do you have any proof that increased production leads to increased environmental damage and a resource crunch?

See above: the article you shared gives the same arguments as what I raised earlier.

No, it doesn’t.

Exactly! The article that I shared, and the one you just presented, gives the same argument: it’s the textbook definition of the money multiplier that doesn’t exist.

They do not give the same argument. You’re right about one thing though, the money multiplier does not exist.

What applies to my argument concerning the multiplier also applies to Keynesian economics. What we are seeing now in terms of credit levels goes way beyond what textbook economics envision.

What we are seeing now is Keynesian Economics 101. Read the General Theory.

 

[freeRadical]

Yes, I do. As pointed out in the article I shared, the money multiplier textbook definition assumes precisely that: the Fed controls money supply because M2 will never go beyond what is allowed by the reserve requirement. Thus, by adjusting interest rates the Fed is supposed to be able to raise or decrease M2 as needed.

And yet in 2007 M2 was more than a hundred times higher than reserve balances, when it should only be ten times more.

Why do you keep talking about M2? No one cares about M2 anymore. It is an archaic way of measuring the money supply.

Given the need for regulation, it’s more like the absence of central banks and governments that’s the problem.

Why would central banks and governments enact more regulation? According to you, they are both in the hip pocket of the “financial elite”.

 

[ralfyman]

Without the Fed, society would find a way to survive, I’m sure.

Definitely, as it survived before the formation of a Fed. But what is causing problems for society involves factors that are beyond even the control of the Fed.

 

[ralfyman]

Again, it sounds like the problem is governments and central banks.

Actually, it’s more like government that needs to keep the petro-dollar propped up in exchange for the vote, the replacement of a central bank with a quasi-central bank, households that vote for one administration after another to keep that petro-dollar propped up to ensure “the American dream,” and the financial elite that provides easy credit to the government and citizens.

 

[freeRadical]

Actually, it’s more like government that needs to keep the petro-dollar propped up in exchange for the vote, the replacement of a central bank with a quasi-central bank, households that vote for one administration after another to keep that petro-dollar propped up to ensure “the American dream,” and the financial elite that provides easy credit to the government and citizens.

Again, sounds like the government is the problem then.

 

[ralfyman]

The Fed controls the quantity of money in the economy at any given time. This is a fact. Do you disagree?

No, it doesn’t. As implied in the article that you shared, most of money is created by private banks that go beyond reserve requirements. With that, the Fed only has control if we assume that textbook economics apply.

How do banks lend beyond their reserves? Where is that outside money coming from?

From the same author of the article that you presented and from the same website:

pragcap.com/why-the-endogenous-money-debate-matters

In the case of the Federal Reserve, it was an act of Congress.

Which should not surprise anyone who realizes that government works for the financial elite.

Yes, the same Congress.

Yeah, I’m sure they’ll do the opposite of what they could not for a century.

No, it doesn’t. Do you know what Say’s Law is?

Yes, it does, unless savings do not come from income.

Fair enough. Do that. I would like to see this “evidence”?

Shared in another message.

It doesn’t matter that they are adjusted for inflation, it is still family income.

It matters because it counters the claim that burden is heavier. And don’t forget tax cuts.

The poverty rate has been about the same since the New Deal. But that has nothing to do with the middle class because people in poverty are not in the middle class.

The last phrase of your paragraph is my point.

No, it doesn’t. It implies the money multiplier doesn’t exist and never did exist.

No, the article you shared proves that the multiplier exists. The point is that the textbook definition doesn’t.

The Fed is in control of the money supply.

No, it’s not. In fact, the article that you shared proves that. With a money supply that goes beyond reserve requirements, the Fed has absolutely no control over money supply.

If the textbook definition doesn’t apply then what is the “new definition” of it?

Read the first article I shared. Then read the one that you shared, plus the third above. The argument is that the multiplier does exist. The difference is that the textbook definition doesn’t because of endogenous money.

The Fed controls the money supply.

No, it doesn’t. Read the three articles shared so far about the multiplier.

One more time: I know what the money multiplier is. The Fed is in control of the money supply because they control monetary policy.

One more time: the money multiplier involves fractional reserve banking, and leads to M2 being ten times that of reserve balances given a reserve requirement of ten percent. That’s why it’s said that the Fed has control of money supply because as long as M2 doesn’t exceed ten times reserve balances then it can control supply by adjusting interest rates.

What’s actual M2? In 2007, it was 100 times greater than reserve balances. How were banks able to lend ten times beyond what reserve requirements allow? Simple. They lend beyond reserve requirements. Thus, the textbook definition of the money multiplier doesn’t exist. What is happening has gone way beyond that.

How can the money supply be more than that of reserve balances? Where is this outside source of money coming from?

It’s explained in the article I shared earlier and in the one above: endogenous money.

That is all your opinion, none of which is backed up by any evidence.

Apparently, even the source that you use supports my argument.

 

[ralfyman]

Don’t know why you’re using M2.

It doesn’t measure:

Notes and coins in bank vaults (Vault Cash)

Federal Reserve Bank credit (required reserves and excess reserves not physically present in banks)

Large time deposits, institutional money market funds, short-term repurchase and other larger liquid assets

All money market funds

en.wikipedia.org/wiki/Money_supply

MB is usually seen in light of required balances, and M1 backed by reserves. M2 is commercial bank money and thus part of fractional reserve banking:

en.wikipedia.org/wiki/Money_supply#Fractional-reserve_banking

M3 and beyond involve funds that might involve other financial institutions.

Therefore, it’s logical to use M2 in light of the money multiplier. However, the actual size of M2 makes the textbook definition meaningless, and shows that central banks have generally no control over money supply.

M3 and MZM shows that even private banks do not know the extent of credit levels worldwide.

 

[freeRadical]

No, it doesn’t. As implied in the article that you shared, most of money is created by private banks that go beyond reserve requirements. With that, the Fed only has control if we assume that textbook economics apply.

Again, there is a difference between “create” and “control”. So you disagree that the Fed controls the quantity of money in the economy at any given time.

Which should not surprise anyone who realizes that government works for the financial elite.

Sounds like government is the problem then.

Yeah, I’m sure they’ll do the opposite of what they could not for a century.

Never said they would, but they have the power to.

Yes, it does, unless savings do not come from income.

No, it doesn’t.

It matters because it counters the claim that burden is heavier. And don’t forget tax cuts.

Inflation has nothing to do with burden of taxation or government. What tax cuts are you referring to? Income tax cuts? Those don’t account for the burden of payroll taxes, property taxes, and consumption taxes.

No, the article you shared proves that the multiplier exists. The point is that the textbook definition doesn’t.

No, it proves that the money multiplier doesn’t exist, period. What is the difference between the textbook definition and your definition?

No, it’s not. In fact, the article that you shared proves that. With a money supply that goes beyond reserve requirements, the Fed has absolutely no control over money supply.

Yes it is. So you disagree that the Fed controls the quantity of money in the economy at any given time?

Read the first article I shared. Then read the one that you shared, plus the third above. The argument is that the multiplier does exist. The difference is that the textbook definition doesn’t because of endogenous money.

It doesn’t exist.

No, it doesn’t. Read the three articles shared so far about the multiplier.

Yes, it does.

One more time: the money multiplier involves fractional reserve banking, and leads to M2 being ten times that of reserve balances given a reserve requirement of ten percent. That’s why it’s said that the Fed has control of money supply because as long as M2 doesn’t exceed ten times reserve balances then it can control supply by adjusting interest rates.

What’s actual M2? In 2007, it was 100 times greater than reserve balances. How were banks able to lend ten times beyond what reserve requirements allow? Simple. They lend beyond reserve requirements. Thus, the textbook definition of the money multiplier doesn’t exist. What is happening has gone way beyond that.

One more time: the multiplier doesn’t exist and you yourself have admitted that. The textbook definition of the money multiplier is the definition. You admit the textbook definition of the multiplier doesn’t exist, thus, it does not exist. Is your definition different?

The Fed controls the money supply with more then interest rates. You ever heard of QE?

How do banks lend more money then they have in reserves without an outside source of money?

Apparently, even the source that you use supports my argument.

No, it supports my argument: the money multiplier doesn’t exist.

 

[freeRadical]

Therefore, it’s logical to use M2 in light of the money multiplier. However, the actual size of M2 makes the textbook definition meaningless, and shows that central banks have generally no control over money supply.

How does the size of M2 prove that central banks have no control of the money supply?

Recently, the Fed announced it is going to raise interest rates in later this year. According to you, this will have no effect on the money supply. We will just have to wait and see now won’t we?

 

[ProVobis]

Definitely, as it survived before the formation of a Fed. But what is causing problems for society involves factors that are beyond even the control of the Fed.

Maybe those factors include the distortion of the marketplace caused by the interest rates and margin requirements forced by the powerful Fed? I think even Greenspan regretted setting the rates all the way down to 1% causing oil prices and housing market to bubble.

 

[ProVobis]

MB is usually seen in light of required balances, and M1 backed by reserves. M2 is commercial bank money and thus part of fractional reserve banking:

en.wikipedia.org/wiki/Money_supply#Fractional-reserve_banking

M3 and beyond involve funds that might involve other financial institutions.

Therefore, it’s logical to use M2 in light of the money multiplier. However, the actual size of M2 makes the textbook definition meaningless, and shows that central banks have generally no control over money supply.

M3 and MZM shows that even private banks do not know the extent of credit levels worldwide.

Actually none of those figures includes the total source of money and the velocity of it. Incomes reported by IRS are probably the closest you will ever get and we know how accurate that isn’t.