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underdose
Participant[quote=Allan from Fallbrook]Underdose: A series of excellent posts, thank you.[/quote]
Thank you. Very kind. I’m also deeply grateful for your concrete elaborations. It really helps drive the point home.
[quote=arraya]Money is essentially an abstraction and not constrained by the laws within which material and energy systems must operate. In fact money grows exponentially by the rule of compound interest. Growth based models in finite spaces will fail by definition. They will become canabilistic and unstable before collapse.
A monetary system based on infitite debt growth is not rational. Not even in the ball park.
The invisible hand is a silly superstition on par with santa clause.[/quote]
arraya, I’m puzzled by a couple of things you say. Money grows by compound interest strikes me as an odd claim.
Suppose there is a Lender named Lenny, and a Borrower named Bob. Lenny lends Bob $100 at 10% interest. At the end of two years, Bob owes Lenny $121 dollars. Compound interest at work.
There are essentially two possible extreme outcomes (and degrees in between). 1). Bob pays back in full. 2). Bob defaults.
In scenario 1, Lenny is -$100, +$121, Bob is +$100, -$121. Add it all up, the sum is zero. Net, Lenny +$21, Bob -$21. Money didn’t grow, it just changed hands.
In scenario 2, Lenny is -$100, Bob is +$100. Again, sum zero. It doesn’t matter that Bob may have spent the $100. It transferred from Bob to someone else, maybe Sal the Supplier. Lenny -$100, Bob +$100, -$100, Sal +$100. Still zero. The compound interest only existed on paper and was never paid.
Compound interest only transfers purchase power from one entity to another, it does not make the money supply grow. Right now the US government is on the wrong side of compound interest, transferring purchase power to our creditors.
I’m also with patientrenter concerning your invisible hand/Santa Claus claim. It’s a rather empty dogmatic claim. No one claimed there really is a magical invisible hand. It’s a metaphor, not a myth. My example above of the housing bubble absent government intervention shows the metaphorical invisible hand at work. A shortage of loanable funds causes interest rates to rise, encouraging savings and squeezing out would-be borrowers. The “invisible hand” is just an idiomatic way of describing market forces. Are you suggesting market forces are comparable to Santa Claus? You astutely observe that oil will run out, and when it does (barring we’ve gotten off our oil addiction with alternatives before that day) the price will go through the roof. The “invisible hand” of the oil shortage will stifle consumption by making it prohibitively expensive. Will you call it a myth on that day?
Participant[quote=Allan from Fallbrook]Underdose: A series of excellent posts, thank you.[/quote]
Thank you. Very kind. I’m also deeply grateful for your concrete elaborations. It really helps drive the point home.
[quote=arraya]Money is essentially an abstraction and not constrained by the laws within which material and energy systems must operate. In fact money grows exponentially by the rule of compound interest. Growth based models in finite spaces will fail by definition. They will become canabilistic and unstable before collapse.
A monetary system based on infitite debt growth is not rational. Not even in the ball park.
The invisible hand is a silly superstition on par with santa clause.[/quote]
arraya, I’m puzzled by a couple of things you say. Money grows by compound interest strikes me as an odd claim.
Suppose there is a Lender named Lenny, and a Borrower named Bob. Lenny lends Bob $100 at 10% interest. At the end of two years, Bob owes Lenny $121 dollars. Compound interest at work.
There are essentially two possible extreme outcomes (and degrees in between). 1). Bob pays back in full. 2). Bob defaults.
In scenario 1, Lenny is -$100, +$121, Bob is +$100, -$121. Add it all up, the sum is zero. Net, Lenny +$21, Bob -$21. Money didn’t grow, it just changed hands.
In scenario 2, Lenny is -$100, Bob is +$100. Again, sum zero. It doesn’t matter that Bob may have spent the $100. It transferred from Bob to someone else, maybe Sal the Supplier. Lenny -$100, Bob +$100, -$100, Sal +$100. Still zero. The compound interest only existed on paper and was never paid.
Compound interest only transfers purchase power from one entity to another, it does not make the money supply grow. Right now the US government is on the wrong side of compound interest, transferring purchase power to our creditors.
I’m also with patientrenter concerning your invisible hand/Santa Claus claim. It’s a rather empty dogmatic claim. No one claimed there really is a magical invisible hand. It’s a metaphor, not a myth. My example above of the housing bubble absent government intervention shows the metaphorical invisible hand at work. A shortage of loanable funds causes interest rates to rise, encouraging savings and squeezing out would-be borrowers. The “invisible hand” is just an idiomatic way of describing market forces. Are you suggesting market forces are comparable to Santa Claus? You astutely observe that oil will run out, and when it does (barring we’ve gotten off our oil addiction with alternatives before that day) the price will go through the roof. The “invisible hand” of the oil shortage will stifle consumption by making it prohibitively expensive. Will you call it a myth on that day?
Participant[quote=Allan from Fallbrook]Underdose: A series of excellent posts, thank you.[/quote]
Thank you. Very kind. I’m also deeply grateful for your concrete elaborations. It really helps drive the point home.
[quote=arraya]Money is essentially an abstraction and not constrained by the laws within which material and energy systems must operate. In fact money grows exponentially by the rule of compound interest. Growth based models in finite spaces will fail by definition. They will become canabilistic and unstable before collapse.
A monetary system based on infitite debt growth is not rational. Not even in the ball park.
The invisible hand is a silly superstition on par with santa clause.[/quote]
arraya, I’m puzzled by a couple of things you say. Money grows by compound interest strikes me as an odd claim.
Suppose there is a Lender named Lenny, and a Borrower named Bob. Lenny lends Bob $100 at 10% interest. At the end of two years, Bob owes Lenny $121 dollars. Compound interest at work.
There are essentially two possible extreme outcomes (and degrees in between). 1). Bob pays back in full. 2). Bob defaults.
In scenario 1, Lenny is -$100, +$121, Bob is +$100, -$121. Add it all up, the sum is zero. Net, Lenny +$21, Bob -$21. Money didn’t grow, it just changed hands.
In scenario 2, Lenny is -$100, Bob is +$100. Again, sum zero. It doesn’t matter that Bob may have spent the $100. It transferred from Bob to someone else, maybe Sal the Supplier. Lenny -$100, Bob +$100, -$100, Sal +$100. Still zero. The compound interest only existed on paper and was never paid.
Compound interest only transfers purchase power from one entity to another, it does not make the money supply grow. Right now the US government is on the wrong side of compound interest, transferring purchase power to our creditors.
I’m also with patientrenter concerning your invisible hand/Santa Claus claim. It’s a rather empty dogmatic claim. No one claimed there really is a magical invisible hand. It’s a metaphor, not a myth. My example above of the housing bubble absent government intervention shows the metaphorical invisible hand at work. A shortage of loanable funds causes interest rates to rise, encouraging savings and squeezing out would-be borrowers. The “invisible hand” is just an idiomatic way of describing market forces. Are you suggesting market forces are comparable to Santa Claus? You astutely observe that oil will run out, and when it does (barring we’ve gotten off our oil addiction with alternatives before that day) the price will go through the roof. The “invisible hand” of the oil shortage will stifle consumption by making it prohibitively expensive. Will you call it a myth on that day?
Participant[quote=Allan from Fallbrook]Underdose: A series of excellent posts, thank you.[/quote]
Thank you. Very kind. I’m also deeply grateful for your concrete elaborations. It really helps drive the point home.
[quote=arraya]Money is essentially an abstraction and not constrained by the laws within which material and energy systems must operate. In fact money grows exponentially by the rule of compound interest. Growth based models in finite spaces will fail by definition. They will become canabilistic and unstable before collapse.
A monetary system based on infitite debt growth is not rational. Not even in the ball park.
The invisible hand is a silly superstition on par with santa clause.[/quote]
arraya, I’m puzzled by a couple of things you say. Money grows by compound interest strikes me as an odd claim.
Suppose there is a Lender named Lenny, and a Borrower named Bob. Lenny lends Bob $100 at 10% interest. At the end of two years, Bob owes Lenny $121 dollars. Compound interest at work.
There are essentially two possible extreme outcomes (and degrees in between). 1). Bob pays back in full. 2). Bob defaults.
In scenario 1, Lenny is -$100, +$121, Bob is +$100, -$121. Add it all up, the sum is zero. Net, Lenny +$21, Bob -$21. Money didn’t grow, it just changed hands.
In scenario 2, Lenny is -$100, Bob is +$100. Again, sum zero. It doesn’t matter that Bob may have spent the $100. It transferred from Bob to someone else, maybe Sal the Supplier. Lenny -$100, Bob +$100, -$100, Sal +$100. Still zero. The compound interest only existed on paper and was never paid.
Compound interest only transfers purchase power from one entity to another, it does not make the money supply grow. Right now the US government is on the wrong side of compound interest, transferring purchase power to our creditors.
I’m also with patientrenter concerning your invisible hand/Santa Claus claim. It’s a rather empty dogmatic claim. No one claimed there really is a magical invisible hand. It’s a metaphor, not a myth. My example above of the housing bubble absent government intervention shows the metaphorical invisible hand at work. A shortage of loanable funds causes interest rates to rise, encouraging savings and squeezing out would-be borrowers. The “invisible hand” is just an idiomatic way of describing market forces. Are you suggesting market forces are comparable to Santa Claus? You astutely observe that oil will run out, and when it does (barring we’ve gotten off our oil addiction with alternatives before that day) the price will go through the roof. The “invisible hand” of the oil shortage will stifle consumption by making it prohibitively expensive. Will you call it a myth on that day?
Participant[quote=SDEngineer]
I agree with you that Greenspan (and the Fed in general) should NEVER have held that much power over currency, and the Fed should have remembered that one purpose behind regulation is to regulate not only the downside of the economy, but the upside as well, so that bubbles don’t form as easily, or grow as large.
[/quote]This goes back to my original question, who is regulating the regulators? If anyone is “deregulated”, it’s the Fed. But the markets aren’t deregulated, not so long as the Fed exists, because the Fed is doing the regulating. The Fed may be doing it very poorly and inconsistently, but they are still regulating in the sense of trying to manipulate the economy. Any call for more regulation is simply a call for some agency, if not the Fed then someone similar, having even more power than the “too much” that Greenspan already had. That’s a pretty big contradiction.
Incidentally, the Fed was established in 1913. The Fed’s role in the stock market bubble of the 1920’s is well documented. The recurrent claims above that the free markets are to blame for the Great Depression are patently false.
Participant[quote=SDEngineer]
I agree with you that Greenspan (and the Fed in general) should NEVER have held that much power over currency, and the Fed should have remembered that one purpose behind regulation is to regulate not only the downside of the economy, but the upside as well, so that bubbles don’t form as easily, or grow as large.
[/quote]This goes back to my original question, who is regulating the regulators? If anyone is “deregulated”, it’s the Fed. But the markets aren’t deregulated, not so long as the Fed exists, because the Fed is doing the regulating. The Fed may be doing it very poorly and inconsistently, but they are still regulating in the sense of trying to manipulate the economy. Any call for more regulation is simply a call for some agency, if not the Fed then someone similar, having even more power than the “too much” that Greenspan already had. That’s a pretty big contradiction.
Incidentally, the Fed was established in 1913. The Fed’s role in the stock market bubble of the 1920’s is well documented. The recurrent claims above that the free markets are to blame for the Great Depression are patently false.
Participant[quote=SDEngineer]
I agree with you that Greenspan (and the Fed in general) should NEVER have held that much power over currency, and the Fed should have remembered that one purpose behind regulation is to regulate not only the downside of the economy, but the upside as well, so that bubbles don’t form as easily, or grow as large.
[/quote]This goes back to my original question, who is regulating the regulators? If anyone is “deregulated”, it’s the Fed. But the markets aren’t deregulated, not so long as the Fed exists, because the Fed is doing the regulating. The Fed may be doing it very poorly and inconsistently, but they are still regulating in the sense of trying to manipulate the economy. Any call for more regulation is simply a call for some agency, if not the Fed then someone similar, having even more power than the “too much” that Greenspan already had. That’s a pretty big contradiction.
Incidentally, the Fed was established in 1913. The Fed’s role in the stock market bubble of the 1920’s is well documented. The recurrent claims above that the free markets are to blame for the Great Depression are patently false.
Participant[quote=SDEngineer]
I agree with you that Greenspan (and the Fed in general) should NEVER have held that much power over currency, and the Fed should have remembered that one purpose behind regulation is to regulate not only the downside of the economy, but the upside as well, so that bubbles don’t form as easily, or grow as large.
[/quote]This goes back to my original question, who is regulating the regulators? If anyone is “deregulated”, it’s the Fed. But the markets aren’t deregulated, not so long as the Fed exists, because the Fed is doing the regulating. The Fed may be doing it very poorly and inconsistently, but they are still regulating in the sense of trying to manipulate the economy. Any call for more regulation is simply a call for some agency, if not the Fed then someone similar, having even more power than the “too much” that Greenspan already had. That’s a pretty big contradiction.
Incidentally, the Fed was established in 1913. The Fed’s role in the stock market bubble of the 1920’s is well documented. The recurrent claims above that the free markets are to blame for the Great Depression are patently false.
Participant[quote=SDEngineer]
I agree with you that Greenspan (and the Fed in general) should NEVER have held that much power over currency, and the Fed should have remembered that one purpose behind regulation is to regulate not only the downside of the economy, but the upside as well, so that bubbles don’t form as easily, or grow as large.
[/quote]This goes back to my original question, who is regulating the regulators? If anyone is “deregulated”, it’s the Fed. But the markets aren’t deregulated, not so long as the Fed exists, because the Fed is doing the regulating. The Fed may be doing it very poorly and inconsistently, but they are still regulating in the sense of trying to manipulate the economy. Any call for more regulation is simply a call for some agency, if not the Fed then someone similar, having even more power than the “too much” that Greenspan already had. That’s a pretty big contradiction.
Incidentally, the Fed was established in 1913. The Fed’s role in the stock market bubble of the 1920’s is well documented. The recurrent claims above that the free markets are to blame for the Great Depression are patently false.
Participant[quote=sdduuuude]
Pure market economies do involve regulation. Regulation has to exist to ensure that fradulent participants are punished, and contractual agreements are being honored. That’s where most people get it wrong. People think a free market is where everyone is free to do what they want and that the participants are required to be perfect citizens. This is dead wrong.A free market requires that it’s participants are free from others infringing upon their rights, and to do this, transactional rules and regulations are needed.
For example, on critical element of a free market is that of property rights. Property rights must be upheld, and violations of property rights (theft) must be punshed for a free market to remain free. This can be considered a kind of regulation, yet it is a critical part of the free market.[/quote]
Okay, my last sequential post. A lot was said since I was on last night, so there was a lot to respond to…
sdduuuude, you are my hero for making this point. I make the same distinction. The term “regulation” is overloaded. We should be more precise and say whether we are referring to “rule of law” or “market manipulation”. I favor “rule of law” regulation (and incidentally, the inaccurately much-reviled-as-an-anarchist Ayn Rand did too. She said that is exactly what government’s role should be, protecting private property rights.) But market manipulation regulation is at direct odds with rule of law regulation because it allows (encourages) the government to violate private property rights instead of protecting them.
Participant[quote=sdduuuude]
Pure market economies do involve regulation. Regulation has to exist to ensure that fradulent participants are punished, and contractual agreements are being honored. That’s where most people get it wrong. People think a free market is where everyone is free to do what they want and that the participants are required to be perfect citizens. This is dead wrong.A free market requires that it’s participants are free from others infringing upon their rights, and to do this, transactional rules and regulations are needed.
For example, on critical element of a free market is that of property rights. Property rights must be upheld, and violations of property rights (theft) must be punshed for a free market to remain free. This can be considered a kind of regulation, yet it is a critical part of the free market.[/quote]
Okay, my last sequential post. A lot was said since I was on last night, so there was a lot to respond to…
sdduuuude, you are my hero for making this point. I make the same distinction. The term “regulation” is overloaded. We should be more precise and say whether we are referring to “rule of law” or “market manipulation”. I favor “rule of law” regulation (and incidentally, the inaccurately much-reviled-as-an-anarchist Ayn Rand did too. She said that is exactly what government’s role should be, protecting private property rights.) But market manipulation regulation is at direct odds with rule of law regulation because it allows (encourages) the government to violate private property rights instead of protecting them.
Participant[quote=sdduuuude]
Pure market economies do involve regulation. Regulation has to exist to ensure that fradulent participants are punished, and contractual agreements are being honored. That’s where most people get it wrong. People think a free market is where everyone is free to do what they want and that the participants are required to be perfect citizens. This is dead wrong.A free market requires that it’s participants are free from others infringing upon their rights, and to do this, transactional rules and regulations are needed.
For example, on critical element of a free market is that of property rights. Property rights must be upheld, and violations of property rights (theft) must be punshed for a free market to remain free. This can be considered a kind of regulation, yet it is a critical part of the free market.[/quote]
Okay, my last sequential post. A lot was said since I was on last night, so there was a lot to respond to…
sdduuuude, you are my hero for making this point. I make the same distinction. The term “regulation” is overloaded. We should be more precise and say whether we are referring to “rule of law” or “market manipulation”. I favor “rule of law” regulation (and incidentally, the inaccurately much-reviled-as-an-anarchist Ayn Rand did too. She said that is exactly what government’s role should be, protecting private property rights.) But market manipulation regulation is at direct odds with rule of law regulation because it allows (encourages) the government to violate private property rights instead of protecting them.
Participant[quote=sdduuuude]
Pure market economies do involve regulation. Regulation has to exist to ensure that fradulent participants are punished, and contractual agreements are being honored. That’s where most people get it wrong. People think a free market is where everyone is free to do what they want and that the participants are required to be perfect citizens. This is dead wrong.A free market requires that it’s participants are free from others infringing upon their rights, and to do this, transactional rules and regulations are needed.
For example, on critical element of a free market is that of property rights. Property rights must be upheld, and violations of property rights (theft) must be punshed for a free market to remain free. This can be considered a kind of regulation, yet it is a critical part of the free market.[/quote]
Okay, my last sequential post. A lot was said since I was on last night, so there was a lot to respond to…
sdduuuude, you are my hero for making this point. I make the same distinction. The term “regulation” is overloaded. We should be more precise and say whether we are referring to “rule of law” or “market manipulation”. I favor “rule of law” regulation (and incidentally, the inaccurately much-reviled-as-an-anarchist Ayn Rand did too. She said that is exactly what government’s role should be, protecting private property rights.) But market manipulation regulation is at direct odds with rule of law regulation because it allows (encourages) the government to violate private property rights instead of protecting them.
Participant[quote=sdduuuude]
Pure market economies do involve regulation. Regulation has to exist to ensure that fradulent participants are punished, and contractual agreements are being honored. That’s where most people get it wrong. People think a free market is where everyone is free to do what they want and that the participants are required to be perfect citizens. This is dead wrong.A free market requires that it’s participants are free from others infringing upon their rights, and to do this, transactional rules and regulations are needed.
For example, on critical element of a free market is that of property rights. Property rights must be upheld, and violations of property rights (theft) must be punshed for a free market to remain free. This can be considered a kind of regulation, yet it is a critical part of the free market.[/quote]
Okay, my last sequential post. A lot was said since I was on last night, so there was a lot to respond to…
sdduuuude, you are my hero for making this point. I make the same distinction. The term “regulation” is overloaded. We should be more precise and say whether we are referring to “rule of law” or “market manipulation”. I favor “rule of law” regulation (and incidentally, the inaccurately much-reviled-as-an-anarchist Ayn Rand did too. She said that is exactly what government’s role should be, protecting private property rights.) But market manipulation regulation is at direct odds with rule of law regulation because it allows (encourages) the government to violate private property rights instead of protecting them.
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