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

[ralfyman]

So I take it that you support central banking in general and the Federal Reserve?

Central banking, and in this case a consortium of private banks making decisions, is the inevitable result of free market capitalism.

 

[freeRadical]

Central banking, and in this case a consortium of private banks making decisions, is the inevitable result of free market capitalism.

No it is not inevitable. It is the result of governments adopting Keynesian macroeconomic policies. You can have free market capitalism without a central bank. We had it before the Federal Reserve and we can still have it without the Federal Reserve.

Claiming it is inevitable and saying you support it are two different things.

 

[freeRadical]

The problem for the U.S. goes beyond the minimum wage. The economy is essentially one that involves heavy borrowing and spending across the board, and should probably be discussed in another thread.

You can thank Keynesian macroeconomic theory for that. But, I agree, it belongs in another thread.

Still doesn’t mean you cannot simply say whether or not you support the US federal minimum wage.

 

[ralfyman]

No it is not inevitable. It is the result of governments adopting Keynesian macroeconomic policies. You can have free market capitalism without a central bank. We had it before the Federal Reserve and we can still have it without the Federal Reserve.

Claiming it is inevitable and saying you support it are two different things.

Free market capitalism requires continuous growth, and coupled with innovation, more complex systems. Given that, not just the presence of central banks but banks in general are inevitable, followed by combinations of overproduction and consumption and fallout from risky financial speculation.

If, of course, you are assuming that technologies and new ways to do business remain stuck in the eighteenth century, then you’re right.

 

[ralfyman]

You can thank Keynesian macroeconomic theory for that. But, I agree, it belongs in another thread.

Still doesn’t mean you cannot simply say whether or not you support the US federal minimum wage.

Likely that coupled with deregulation, leading to a global unregulated derivatives market with a notional value of over a quadrillion dollars, or twenty times the size of the global economy.

 

[freeRadical]

Likely that coupled with deregulation, leading to a global unregulated derivatives market with a notional value of over a quadrillion dollars, or twenty times the size of the global economy.

I don’t see what deregulation has to do with a government that encourages borrowing and spending and discourages saving and investing.

 

[freeRadical]

Free market capitalism requires continuous growth, and coupled with innovation, more complex systems. Given that, not just the presence of central banks but banks in general are inevitable, followed by combinations of overproduction and consumption and fallout from risky financial speculation.

If, of course, you are assuming that technologies and new ways to do business remain stuck in the eighteenth century, then you’re right.

You can have continuous growth and innovation without a central bank manipulating the money supply and manipulating interest rates. I don’t know why you think that businesses and technologies would be stuck in the eighteenth century without a central bank.

Don’t forget the Federal Reserve caused the Great Depression

There is no such thing as overproduction, that would violate Say’s Law. Overconsumption, in general, is only possible if you have something pumping excess money into the economy.

 

[ralfyman]

I don’t see what deregulation has to do with a government that encourages borrowing and spending and discourages saving and investing.

Governments usually encourage such through deregulation.

 

[ralfyman]

You can have continuous growth and innovation without a central bank manipulating the money supply and manipulating interest rates. I don’t know why you think that businesses and technologies would be stuck in the eighteenth century without a central bank.

You can’t because without centralization a complex system becomes more unstable. That’s why, not surprisingly, central banks appeared in many countries as industrialization set in.

The catch is that free market capitalism requires increasing growth and innovation, especially financial speculation, which means central banks end up lowering interest rates to boost credit.

The result is fallout from financial risks, which is exactly what happened in 2008.

Don’t forget the Federal Reserve caused the Great Depression

That should not surprise anyone as the Fed is a consortium of private banks.

There is no such thing as overproduction, that would violate Say’s Law. Overconsumption, in general, is only possible if you have something pumping excess money into the economy.

Overconsumption has been taking place for decades, which is why we have

en.wikipedia.org/wiki/Planned_obsolescence

 

[freeRadical]

You can’t because without centralization a complex system becomes more unstable. That’s why, not surprisingly, central banks appeared in many countries as industrialization set in.

Central banks appeared as more and more governments started adopting Keynesian macroeconomic policies.

The catch is that free market capitalism requires increasing growth and innovation, especially financial speculation, which means central banks end up lowering interest rates to boost credit.

The result is fallout from financial risks, which is exactly what happened in 2008.

Why does increasing growth and innovation require financial speculation, low interest rates, and cheap credit?

2008 was not caused by financial risks or speculation. It was caused by low interest rates and cheap credit, both of which lead to bubbles and then, inevitably, busts.

That should not surprise anyone as the Fed is a consortium of private banks.

The Fed being a consortium of private banks has nothing to do with why it caused the Great Depression. It caused the Great Depression when it contracted the money supply by two-thirds during a recession.

Overconsumption has been taking place for decades, which is why we have

en.wikipedia.org/wiki/Planned_obsolescence

Yes, overconsumption has been taking place ever since we had central bank keeping interest rates low and pumping cheap credit into the economy, which is what I said in my original post.

 

[freeRadical]

Governments usually encourage such through deregulation.

Governments encourage borrowing and spending through Keynesian macroeconomic polices such as keeping interest rates low and pumping cheap credit into the economy, not through deregulation. They also discourage savings and investment through the same vehicles and through the tax code.

 

[ProVobis]

Central banking, and in this case a consortium of private banks making decisions, is the inevitable result of free market capitalism.

Not true at all. It’s the government’s (or an arm of same) setting the interest rates and margin requirements, etc. and manipulating the currency and commodities that is exactly the opposite of free market capitalism. Ask Ron Paul et al. Things weren’t that bad when the banks had their own fractional reserve system.

 

[ralfyman]

Central banks appeared as more and more governments started adopting Keynesian macroeconomic policies.

Central banks appeared during the nineteenth century:

en.wikipedia.org/wiki/Central_bank

Why does increasing growth and innovation require financial speculation, low interest rates, and cheap credit?

Because growth and innovation involve more money through investments and loans.

2008 was not caused by financial risks or speculation. It was caused by low interest rates and cheap credit, both of which lead to bubbles and then, inevitably, busts.

What you just described is the result of financial speculation.

The Fed being a consortium of private banks has nothing to do with why it caused the Great Depression. It caused the Great Depression when it contracted the money supply by two-thirds during a recession.

The Federal Reserve made a recession worse, but that recession was caused by increased financial risks:

en.wikipedia.org/wiki/Causes_of_the_Great_Depression#Financial_institution_structures

Yes, overconsumption has been taking place ever since we had central bank keeping interest rates low and pumping cheap credit into the economy, which is what I said in my original post.

The main cause of overconsumption is planned obsolescence:

en.wikipedia.org/wiki/Overconsumption#Causes

 

[ralfyman]

Governments encourage borrowing and spending through Keynesian macroeconomic polices such as keeping interest rates low and pumping cheap credit into the economy, not through deregulation. They also discourage savings and investment through the same vehicles and through the tax code.

The same governments are voted to power by citizens who want middle class conveniences, and this is made possible through increased borrowing and spending. Businesses want the same because that means easy credit to expand and more profits from increased sales of goods and services.

 

[ralfyman]

Not true at all. It’s the government’s (or an arm of same) setting the interest rates and margin requirements, etc. and manipulating the currency and commodities that is exactly the opposite of free market capitalism. Ask Ron Paul et al. Things weren’t that bad when the banks had their own fractional reserve system.

Actually, they support free market capitalism. With low interest rates and fewer requirements, there’s more money to borrow and spend.

In fact, that’s how we got to a global unregulated derivatives market that has a notional value twenty times greater than the global economy.

Finally, given the fact that the government readily provided bailouts at zero or near-zero interest to bankers, and that the Fed is a consortium of private banks, it’s likely that the Fed isn’t an arm of the government. Rather, it’s the other way round.

 

[freeRadical]

The same governments are voted to power by citizens who want middle class conveniences, and this is made possible through increased borrowing and spending. Businesses want the same because that means easy credit to expand and more profits from increased sales of goods and services.

No one elected the Federal Reserve board members and neither the Congress nor the President have any control over what they do.

 

[freeRadical]

Central banks appeared during the nineteenth century:

en.wikipedia.org/wiki/Central_bank

Yeah, and the two we had in the US before the Federal Reserve both failed and were done away with.

Because growth and innovation involve more money through investments and loans.

Which you can get through real savings. You do not have to use the printing press.

What you just described is the result of financial speculation.

No, bubbles are caused by cheap credit injected into the economy. Do you think there would be so much speculation and risk taking in wall street if the Fed wasn’t injecting so much cheap credit into the economy? Businesses no longer care about taking huge risks and speculating because they know both the Federal Reserve and the federal government will bail them out.

The Federal Reserve made a recession worse, but that recession was caused by increased financial risks:

en.wikipedia.org/wiki/Causes_of_the_Great_Depression#Financial_institution_structures

So? Recession is a natural part of the business cycle just like loss is a natural part of Capitalism. That is, until Keynes came along and convinced everyone that we can do away with recession and have a permanent “quasi-boom”. But, as we have seen, that is not possible. Keynesian macroeconomic policies result in bubbles and busts, not permanent “quasi-boom”. It seems the federal government thinks we can do without the loss part too.

It still doesn’t change the fact that the Federal Reserve turned a mild recession into a Great Depression because of their mishandling of the money supply.

The main cause of overconsumption is planned obsolescence:

en.wikipedia.org/wiki/Overconsumption#Causes

How can one overconsume if they don’t have the money to do so?

 

[freeRadical]

Actually, they support free market capitalism. With low interest rates and fewer requirements, there’s more money to borrow and spend.

Low interest rates and emphasis on borrowing and spending is not free market capitalism, it’s Keynesian macroeconomic theory. Stop equating the two, they are not the same. There are many schools of economic theory that don’t support the Fed, low interest rates, or emphasis on borrowing and spending. Like the Chicago School, which is one of the biggest advocates of free market Capitalism around. Milton Friedman was a Chicago School economist and supported free market Capitalism and he hated the Fed.

In fact, that’s how we got to a global unregulated derivatives market that has a notional value twenty times greater than the global economy.

Which wouldn’t be possible without an environment of low interest rates, cheap credit, and governments bailing out businesses.

Finally, given the fact that the government readily provided bailouts at zero or near-zero interest to bankers, and that the Fed is a consortium of private banks, it’s likely that the Fed isn’t an arm of the government. Rather, it’s the other way round.

I would say the Fed isn’t either. It is autonomous and it is trying to keep this sorry excuse for an economy afloat through low interest rates and cheap credit.

 

[ProVobis]

Actually, they support free market capitalism. With low interest rates and fewer requirements, there’s more money to borrow and spend.

That’s only if you look at things from the borrower’s point of view. At the Fed’s pre-determined low interest rates, especially at the 10-yr and 30-yr level afforded by QE, banks are hesitant to lend. Sometimes, depending on economic conditions, they would rather take the Fed’s money and invest it in oil and other commodities, artificially driving up those prices. Then they sell them off and cause crashes. That’s not the way free markets are supposed to work.

Historically they kept interest rates at 3% above the inflation rate. I believe for some 40 years this brought healthy and steady growth into the economy. Then Nixon decided to take us off the gold standard and the Fed has gone crazy with money printing since. First the hyperinflation of the 70’s, followed by the 18% rates to slow that down, then a lowering of rates till they couldn’t lower it anymore. So much for refinancing careers among other things.

 

[ProVobis]

Finally, given the fact that the government readily provided bailouts at zero or near-zero interest to bankers, and that the Fed is a consortium of private banks, it’s likely that the Fed isn’t an arm of the government. Rather, it’s the other way round.

As the Chinese representative said to Hank Paulson in the movie “Too Big To Fail,” (a great movie, by the way), “The relationship of private companies and the government is not so simple.”

When people start arguing whether the Fed (and their 12 member banks) are private or government, that I believe is the wrong argument. They all have balance sheets and they’re all out of whack. Sure people can credit Greenspan, Bernanke and Yellen for stimulating the economy, but they’re the ones who promoted the housing and oil bubbles, inevitably causing the crashes of those markets in the first place.