San Diego Housing Bubble News and Analysis

I have Griffin's book.

I also have Rothbard's
A History Of Money And Banking In The United States. Now that's a book that should be required reading for all. The electorate is unaware that it's our own fractional reserve banking system and the central banks monetary policies that create the boom and bust in our economy since the creation of the Fed in 1913.
And inflation is highly misunderstood. Prices of everything cannot all go up if the stock of money in circulation remain constant. If we're all paying more for gas then prices of everything else must come down
simply because we have less money to bid them up. Yet the financial dogma of today make it sound like it's some alien being.

Panama has no central bank. Ever read that article?

Here's an audio summary of the book by the author:
http://video.google.com/videoplay?docid=...

Here's a free PDF the Murray Rothbard book that you mentioned:
http://mises.org/books/historyofmoney.pdf

Here's a link to the Panama article that you mentioned. I am in the process of reading it and will try to comment later:
http://mises.org/story/2533

I didn't expect an overwhelming response to this thread, but I am surprised that only one person on this website has responded to it in the 4 days it has been online.

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." - Henry Ford

I had ordered the book,

The Creature from Jekyll Island : A Second Look at the Federal Reserve

twice from Amazon and they cancelled the order both times (claiming they were out of stock, even though I waited for weeks on back-order). Conspiracy theory? ;)

Will review these links, and greatly appreciate the post/links!

Amazon took a really long time (3-4 weeks) to send my order as well. You can try this link that I got to from the author's site (http://freedom-force.org):
http://realityzone.stores.yahoo.net/crfr...

I have never ordered through them before, but I bet it won't be any worse than your experience with Amazon.

Sorry for the delay in responding to the challenge.
I still don't find the concepts presented particularly interesting or compelling.

To address the specifics:
The primary problems with the argument made by the interviewer and interviewee in your video are systemic.
See below.

While there are some distinctions between value based on precious metal and value based on precious paper, the primary difficulty with trying to distinguish the two is that they are both based on social contract. Neither can be eaten or used as a tool(jewelry is an adornment and not a tool). Neither addresses anything at the foundation of the need hierarchy. That is distinct from say, rice in medieval Japan or salt in ancient sub-Saharan or Saharan Africa (or gas in the Road Warrior). Both precious metal and precious paper are based on the assumption of mutual acceptance of an otherwise largely useless item as a medium of exchange. Putting us on a standard that is underpinned by a specific commodity is as much artifice as making it strategic and arbitrary. The discussion on planning is expanded below.

Regarding the question of central planning (not specifically Keynesian General Theory) I feel that the correct path lies in the middle. Central economic planning can be done in ways that benefit associated individuals and builds wealth or it can be done poorly and stifle quality of life. I think China in the 2000's is an example of the former and that China in the 1960's is an example of the latter.
Regarding Keynes: Essentializing his theses, he believes that the only time that we (or any society) maximize our production-possibilities curve is when we are fully mobilized (as in war) and that un-regulated or un-stimulated economies tend toward less-than-full employment. Ergo, if we want full production and employment it is advisable to attempt to stimulate the economy through outlays (among other means). I think elements of this basic philosophy underpinned the economic expansion of both the post-war era as well as the Reagan years.
I don't see see early Keynes to be antithetical to most intelligent economics. I see it as essentially an expansion on the classical view (which I see as somewhat limited).
Regarding fractional reserve banking, it has been a staple of banking essentially forever (in some form or another). The attempt at regulation in the early part of the last century was kind of revolutionary in its attempt (and relative success) at mitigating the dangers of FRB (as experienced in the 19th century). Essentially money and economics are just a means by which to meet needs and move wealth. In many ways, FRB made banking more efficient. It existed when money was essentially just pieces of gold (your precious metal above). I think we owe the success of banking as an institution in large part to FRB.
As I said previously regulation and planning can be done well or poorly. I think eliminating this basic function of banking would be an unduly restrictive burden on banks. Could capital and banking still exist without it? Maybe. Its kind of like asking if democracy could exist without capitalism. Again, maybe. In both cases there is not much in the way of positive examples.

Yeah I figured.
I see the basic problem in asserting that the Fed is a cartel in that a cartel exists between peers. THese can be gov'ts (eg: opec) or companies (eg: SO/Sherman/Rockefeller). I cant see an institution governed by political appointees with the power of monetary policy as anything other than a government entity. Their stock is non-transferable and member banks are beholden to the political appointees. In the sense that any government is a cartel of power then I guess the speaker has a point. However, thats like calling the army a gang. It misses (and muddles) the point. You could potentially call it a public-private partnership but it would still be the most government-centric version of these.

Greekfire, let me know when you get to the chapter-

The Origins Of The Federal Reserve from Rothbards book "A History of Money and Banking in the United States".

Our nations history shows that the federal government cannot behave responsibly with money.

Bretton Woods was actually an in-the-middle approach agreed upon by the victorious allies after World War 2. In this, the US dollar was used as a "reserve" currency by the foreign central banks in which they could pyramid their own currencies. And unlike the previous gold standard, only central banks can exchange paper dollars for gold. To make way for this new "gold exchange" system, FDR had Fort Knox built to store the peoples confiscated gold. For their own good no doubt. Influenced by Keynesian economics, the US proceeded to print away while countries such as West Germany, France, Italy and Switzerland began to achieve prosperity without as much printing. The dollar became overvalued in relation to gold and increasingly overvalued against other currencies. The result was chronic and continuing deficit in the American balance of payments from the early 1950s on. This drained the gold out of the country as foreign central banks continued to exchange their paper dollars for gold,
until Nixon finally "freed" the dollar from gold and broke our agreement. Gold was not the cause of the breakdown, it was the the federal governments deep desire to have the ability to spend as it wish without the irritating process of collecting taxes.

Economists say prices are determined by supply and demand in the freemarket. So then the price of borrowing money (interest rates) should be determined by the supply of loanable money, correct?

In other words, if the supply of savings are scarce,
then rates should be high to reflect the scarcity.
This is no arbitrary price(the rate) because this is
the consumers preference with regards to their money. If they want to save more and spend less this month, supply of savings would be up and rates down. The entrepreneurs follow the consumers preference and makes production plans accordingly.
The planners ignore this important price signal and routinely pump bank reserves to force the rates down.
The system gets flooded with new money and sometimes
creates unsustainable production and employment. Unsustainable because since there were no real savings in the first place, so the consumption only continue as long as the money spigot is open.
The bust arrives once the planners decide it is now time to drain bank reserves and force rates upwards.
Now that's some economic belief system.
Everyone including
the planners blame the malaise on everything else but their own actions. Just turn the TV on and listen.

Fiat currencies have many problems that is true. The problem I have with Creature and other writings of its ilk is it would supplant one form of extremism with another. Since no one alive today was alive during the last period when the dollar was backed by gold they tend to idolize a commodity or precious metals backed currency. They tend to forget that those currencies have their own problems. Namely that the boom bust cycles are just as severe only you have the added fear of a run on your currency with will automatically start a deflationary collapse.

There is nothing wrong with fiat currency, just there is nothing wrong with commodity currency. They both have pluses they both have minuses. Its all in how you manage them.

If you can't fuck it, eat it, or use it to keep you warm, its not truly money. Fat chicks are the ultimate currency. Everything else is just a metaphor.

Josh

I can't believe you turned my argument into a Joseph Francis quote.

I mean really.

It might take some time, but I'll chime in when I get there. I agree, the political and monetary scientists can't behave responsibly with money. They always start off with the "best intentions", but they inevitably abuse their power. Examples:

Bank of Venice
Bank of Amsterdam
Bank of Hamburg
Bank of England
Bank of North America (our 1st central bank)
First Bank of the US (our 2nd central bank)
Second Bank of the US (our 3rd central bank)
Federal Reserve (our 4th central bank)

Greek while you're finding out how Panama fared without a central bank, no FDIC, and no currency of their own, check out the Swiss franc which was backed by gold until very recently.

The free market gave us Americans the high standard of living which some Chinese citizens are just now starting to enjoy, something that eluded the planners for decades.
Those genius Chinese government planners have just discovered
how to create wealth and raise the standard of living:
Just get out of the way.

The above quote is the only part of your post that made sense. The other parts (eg: cost of money) were predominantly inaccurate or at the very least, inane.

The point about Keynesian maneuvers having their limits over time is accurate and well-taken.

The stagflation of the carter years is the best example of this limit.

Uh no.
Have you known anyone trying to do business there now?

Getting out of the way is a pretty creative take on their policies.

Wealth can not be built without credit expanding.

If you base the amount of money available on gold so that credit growth is based on Gold then you limit how fast you can expand credit since Gold would have to be acquired to support the debt.

All currencies are fiat now. Its doesn't matter if it is fiat because its the governments that have been so reckless over the last 50 years spending it. Our spending is out of control due to the leaders we have elected not on the currency.

A country with a flat tax or a consumption tax and a constitutional amendment to require a balanced budget would do great with fiat money.

John

Please elaborate.

A country with a flat tax or a consumption tax and a constitutional amendment to require a balanced budget would do great with fiat money.

It would also never have a large military or be able to fight wars of any size, or build massive infrastructure. On the one hand it would dramatically shrink GDP and encourage savings, which we need. It would also help conserve the environment. On the other hand since we have such a large debt, don't you think that shrinking GDP which as a corollary shrinks tax revenues, we'd be slitting our own throats?

I know this post is a bit derivative, maybe jficquette can open a new thread to discuss?

On another note what bothers me about Creature is the none-too-subtle escapism that the author engages in. He talks about the monetary scientists and political scientists (bankers and politicians) being unable to resist spending more than we collect in taxes. Its escapist because we elect them. If we the people are so f#$king stupid we elect those who promise to spend the most, that is what we'll get.

Don't blame politicians, blame the voters. Democracy is expensive and it requires an informed polity.

Josh

All I mean is that if we had a balanced budget and taxes based on consumption with no income tax or some type of flat tax then we would take away the punch bowl from the politicians who spend money to get votes.

Having a balanced budget would be the same as have a gold standard in some ways because you could only expand the budget based on economic activity and not just to pander to the masses. With a balanced budget you would have no reason for the government to borrow money. Borrowing money is the transaction that prints money. You can't create money without creating debt.

I guess I am saying its not the fiat currency system its the politicians who take advantage of it and they only take advantage of it because it works for them. There are no restraints to how much debt they can pile on because we don't require a balanced budget.

John

What it would do is keep private money from being confiscated by the feds to waste on itself. Rather then shrink the GDP it would make it grow because the money would be used more efficently.

I guess I am a supply sider (g).

As far as a new thread, go ahead and start one if you wish. It would be a great topic.

Thanks,

John

Informed Polity?

http://www.mises.org/story/2837

Josh, the Mexican government defaulted on their bonds
and the large NY banks were holding a chunk of it.

The Fed performed for its creators and bailed them out. But bailing the banks, sticking the bill to the American taxpayer while labeling the action as a matter of national emergency needed political and intellectual cover. It was a grandslam right over the peoples heads.

An informed electorate is key, I agree.

But most members of the media and congress all the way up to the white house were drinking from the same punch bowl served at American universities.

How do we fix that?

A basic course on money and credit is a good start. High school econ courses are almost totally useless. I don't remember a single thing from them. In the short term there isn't a fix. That's the whole point. If the people aren't honest, their politicians won't be either. I really am disgusted when I hear people blame the gov. There are always corrupt people and institutions. Spotting them and making sure they don't multiply is the job of an informed populace.

Of course we don't have that, which is the root of the problem. So for the next decade or so, we are going to suffer first deflation (occurring now) then inflation. Maybe next cycle we'll get a bit smarter, but I wouldn't count on it.