I no longer believe in capitalism. At all.

[Ben Kenobi]

Once you have that problem, then there are actually all sorts of weird things that can happen, and Adam Smith's framework becomes wrong(!).

The Austrian school suggests that the solution to fixing the market is to let the market operate and destroy all the malinvestments. Once the malinvestments are purged then the economy will recover, as investers have confidence that they will see a return on the money. Quantitive easing (especially after what GM did), is a huge deterrent to investment. Putting the union ahead of the investers means that the investers are taking an even greater risk than normal, which means that they are far less likely to lend.

We were doing just fine in 2008 - with the expected crash in pricing and the sudden deflation. Had QE1 not passed - it would have been sharp and short - but then folks like me would have jumped back in and we'd be comparing the size of our e-penis investments right now.

The best action right now - would be to cut corporate taxes in the US and switch from income taxes to a consumption model, and cut government spending. Consumption will actually go up - as you'll kickstart the economy when people have more money to spend. And you'll be rewarding them for going out to work, plus keeping + holding investments, etc.

[Jaguar]

There's no such thing as "letting the market operate" when it comes to supply of money. Try to answer these two simple questions:

(1) What currency will your government use for taxes, or to pay wages to its employees?
(2) Who decides how much of that particular currency is in circulation?

[Ben Kenobi]

(1) What currency will your government use for taxes, or to pay wages to its employees?

The US Dollar.

(2) Who decides how much of that particular currency is in circulation?

Well, seeing as I'm a believer in the Gold Standard - I think that the currency in circulation should remain in proportion with the amount of gold available. Doing this - you can also do away with the federal reserve system. Having one person decide is a function of a command economy.

I'd also be amenable to a mixed standard of commodities, something that we can do today, just so long as it's got a feedback mechanism to ensure that pricing reflects reality and not what the central banks prefer.

[Kuciwalker]

The gold standard is no less command-and-control than fiat money. The gold standard is itself a (massive) government intervention.

It is also frequently a much more harmful intervention than fiat money run by an independent central bank.

[Ben Kenobi]

The gold standard is no less command-and-control than fiat money. The gold standard is itself a (massive) government intervention.

It is also frequently a much more harmful intervention than fiat money run by an independent central bank.

The Gold Standard had exactly zero examples of our present stagnation which has lasted 4 years and counting. We also did not see massive deficits, and governments were required to spend within their means.

Yes, it's government intervention but the hand was much lighter then than it is now. Deficit spending only really came about after the US came off the standard, and one of the reasons the US came off the standard is to finance further deficit spending.

[Jaguar]

There were lots of recessions under the gold standard. Like, really really bad ones.

I understand why you're afraid of discretionary monetary policy; we've given the Federal Reserve an enormous amount of power. I can understand why you want to tie them to a predictable "rule."

But you need to make sure what the right rule is. Kuci and I, in fact, want a robo-Fed that follows a precise rule, too! But the gold standard isn't a good rule to follow.

[Kuciwalker]

There were lots of recessions under the gold standard. Like, really really bad ones.

One was even called the "Great Depression".

[Ben Kenobi]

I understand why you're afraid of discretionary monetary policy; we've given the Federal Reserve an enormous amount of power. I can understand why you want to tie them to a predictable "rule."

But you need to make sure what the right rule is. Kuci and I, in fact, want a robo-Fed that follows a precise rule, too! But the gold standard isn't a good rule to follow.

Jag, I'm afraid of national insolvency. That is why I'm so liquid. I am appalled that Obama has doubled the debt of the US, and that the fiscal ratios are such now that any further borrowing on the part of the federal reserve will slow the economy. Running 10+ percent budget deficits every year, failing to pass a budget, etc.

It frightens me that we don't have good controls on the government to permit it to run 4 years without a budget. If we can't control their spending - they can cripple the nation in a very short span. It frightens me that the US - the US! Has dropped on their credit rating, raising the risk of national insolvency. This reminds me of the end of the Weimar republic.

So yes, I would like to take decisions out of the hands of the federal reserve. If you've got a better 'rule' that could not be amended by the chairman of the federal reserve, I'm all for it.

[Ben Kenobi]

One was even called the "Great Depression".

Which came after - not before, the Federal Reserve.

[Kuciwalker]

But not after the gold standard.

[Ben Kenobi]

But not after the gold standard.

A without B no Great depression

A with B Great depression.

Ergo A is not responsible.

[Kuciwalker]

See #366. You are just wrong on the history.

[Jaguar]

Panic of 1893. Good ol' Grover Cleveland. These things happened.

[Ben Kenobi]

Panic of 1893. Good ol' Grover Cleveland. These things happened.

I thought for sure you'd bring in 1907 - the whole justification for the reserve - a downturn that lasted just 4 months.

Anyways, I stand corrected.

1873- 1893 - 2008
1874- 1894 - 2009
1875- 1895 - 2010
1876- 1896 - 2011
1877- 1897 - 2012
1878- 1898 -
1879- 1899 - recovery.

So we have another year to match the worst recession in the history of the Gold Standard.

[Ben Kenobi]

Kuci and I, in fact, want a robo-Fed that follows a precise rule, too!

As I said previously - I'd like to know more about this precise rule that you and Kuci would like to implement. I'm amenable to a different standard than Gold.