From The Founder's Desk
columnist: Walt Thiessen

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Reader Comments:

Posted By: Christopher Espinal
Date: 2008-02-17 15:36:09

Walt....where do you get your information? I would like to know?

What books have you read, statistics you have that show artificial inflation is harming the country as opposed to helping it. I would to view your materials that lead you to criticize our economy.

 

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Posted By: Chad_Underdonk
Date: 2008-02-17 15:59:39

Its patently observable Chris. Have you looked at the price of gas, bread, milk, or any other basic commodity? You know the basic fuels we use to keep our people and thus our economy going? Those prices have gone up significantly in the last few years as compared to greenback dollars. But if you compare them to gold they have changed little if at all. Thus inflation is  a problem.

The #1 driver of inflation in this country is the paranoid inability of the Feral Reserve to accept that some deflation is in fact normal. Instead of letting our economy run its course and experience natural ups and downs it has instead been making a steady and long climb to the biggest peak in the roller coaster. And once cross that peak our economy is goins to hit lows than no American alive today has ever experienced.

Disagree all you like, real inflation cannot be stopped by monkeying with the numbers to make it appear low, or by changing the rate of borrowing. It will always have an eventual effect on the economy because there is no such thing as a free lunch. Too bad the American people are going to be picking up the tab for the amazing buffet that has been presented to those who have manipulated the system for decades. 

 

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Posted By: Christopher Espinal
Date: 2008-02-17 16:16:20

Real Inflation? What the Hell is that?

Inflation can be stopped if they just stop printing or tinkering with the MS. We don't want zero inflation because that is not going to drive up the economy or slow it down...as the FED likes to do.

The price of energy rose because of the middle east. There's still violence there! Gold is not a fine indicator because we need inflation, that's how our economy runs.

No, deflation may not be a great thing for our economy because of wage spirals.

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Posted By: Christopher Espinal
Date: 2008-02-17 16:35:09

More on Gold:

Gold (foriegn product) depends on the value of our money abroad = which depends on xchange rates = which depends on demand for our money abroad = which depends on USD money supply in foriegn countries = which depends on how low our bank interest rates are here at home (lower interest rates at home leads investors to look for higher interest rates abroad)

These steps that lead to higher gold prices in relation to our interest rate is important. So that graph you mention has alot to say! However, the Exchange Rate is the problem. Americans have already pumped alot of money abroad which is why it's becoming increasingly expensive to purchase oil. However, once Americans see that foriegn prices are too huge, they will start purchasing products here at home. And then that will lead to an upsurge in GDP. Then the value of the dollar in relation to oil and gold will rise.

Our money needs inflation to curb a potential recession.

Chad...please learn macroeconomics and the FED's activities before criticizing. I'm surprised you don't know that the FED has to create inflation and doesn't want zero inflation.

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Posted By: Dagny
Date: 2008-02-17 17:04:44

Christopher Espinal - The Federal Reserve is a private banking cartel, it does NOT work for our benefit, at two points in our early history Presidents forced it to dissolve (back when it was called a "National Bank"), as such an entity was seen as an unconstitutional threat to our newly acquired independence.

I might add that since its latest inception date (1913) America has become very familiar with boom and bust cyles as there is a direct correlation between these "cycles" and "monetary policy."

You would benefit from reading ANY of the Austrians: Mises, Hayek, Rothbard, PAUL of course! Unfortunately, it's pompous, condescending statists like yourself that have helped us into this financial nightmare.

Chris, step beyond the university lectures you dutifully endured and take responsibility for your own education. At the very least, test the validity of your opponents arguments. We "need inflation" like a hole in the head!

Are you a neocon spambot, Chris?

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Posted By: Dagny
Date: 2008-02-17 17:14:20

PS Christopher E. - For the sake of argument:

Simplified definition of inflation:

An increase in the money supply (whether printed or "created" via manipulation of the interest rates),

causing a devaluation of the dollar

resulting in an increase in prices.

 FREE BOOKS ONLINE: http://www.mises.org/

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Posted By: Dagny
Date: 2008-02-17 17:31:31

Hey Chris, my 14 year old just summed it up thusly:

The more dollars they "print," the more dollars are in circulation.

The more dollars in circulation, the less each of those dollars is worth.

The less each dollar is worth, the more dollars are demanded as payment for goods/services so that the provider of such goods or services isn't losing money!

PRICES GO UP AS A RESULT OF INFLATION!

Sure hope university doesn't knock the "smart" out of him ;)

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Posted By: Dagny
Date: 2008-02-17 17:48:39

An excellent, tongue-in-cheek, response to macro/microeconomics, by an authentic limited government, free market type:

"An Introduction to Macroeconomics"

[link edited for length]

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Posted By: Chad_Underdonk
Date: 2008-02-17 18:19:03

Even more dangerous, and closer to the point of this article is this. We have MUCH more money "out" of circulation overseas being held by foreign governments and the upper class of other countries. When/If they decide that the US dollar is no longer a safe harbor to protect their investments they will start dumping that money back into our economy. They will do so by trying to trade those greenback dollars for other things of value: preferred stocks, real estate, commodities, and other goods that have intrinsic value.

 When they dump all those greenbacks into the economy and begin buying things of real value with them we will hit a period of hyper-inflation and the private Federal Reserve and the Federal Government will not have ANY ability to prevent it. The entire system is resting on trust and belief in value, but if people (or foreign entities) stop viewing the dollar as having value our economy will crash so hard it will make the period of hyper-inflation experienced by the Germans prior to WWII look like a happy little fairy tale. 

Chris open your eyes, and stop swallowing information that is given to you by those who are trying to maintain power. If you use their methods and theories to evaluate what you are seeing you will more often than not come to the conclusion that  they are right. But if you think outside the box and take things to their logical conclusion you will see the fallacy of believing in their ability to control anything. All they can do is manipulate our economy through artificial means, and those manipulations lead to economic problems down the road. We are getting closer to the end of that road everyday that they are left to do their thing.

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Posted By: Chad_Underdonk
Date: 2008-02-17 19:38:10

And for the record, the real inflation I was talking about was the changes in actual to the consumer prices as opposed to the bogus minimalized numbers that the private Federal Reserve and those who parrot them like to quote to the world. If you think we've only had 2-3% inflation in the last couple of years you are sadly mistaken.

It doesn't matter if that inflation is due to the price of energy, speculation by individuals trying to outguess the cycle of the welfare/warfare state, or from an over abundance of green backs in the monetary supply. Inflation means that the greenbacks are worth less and less, and because the inflation is exacerbated by artifial controls which prevent deflation (by introducing more money into the supply thus creating inflation)  the free market is not given the opportunity to self correct. The sad part is when everything self destructs the enemeis of free markets will claim that the markets themselves were to blame, and not the manipulation of our fiat money supply or the destruction of value of individual wealth through taxation.

 

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Posted By: Walt Thiessen
Date: 2008-02-17 20:02:52

Chris asks: where do you get your information?

If you really want to understand this stuff Chris, I recommend reading The Case Against The Fed by Murray N. Rothbard. There are other possible resources I could send you to, but that's a really good one.

However, I doubt that's what you really want. Here's a simple test to find out.

Let's assume, for the sake of discussion, that the government has created a new, forced savings program. You (and everyone else) are required by law to set aside $1,000 (money which you have earned by your own labor) which you cannot touch for at least 10 years. You aren't permitted to invest it. You aren't even permitted to earn interest on it. You are only granted two choices. You can save it as $1,000 in Federal Reserve Notes, or you can save it as $1,000 worth of gold at the current price of gold. Once you make your decision, you must leave it that way, untouched, for 10 years, at which point you can dispose of if whatever way you wish.

Which option would you choose? Would you choose to keep the money in dollars or gold? If you choose dollars, there's nothing I can say that will ever prove to you that anything I've ever said about the Federal Reserve and inflation is true.

But if you pick gold to keep your $1,000 in, then the argument is over. You've succumbed and agreed that gold is a better store of value (wealth) than paper money is.

Herein endeth the lesson.

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Posted By: Kishi
Date: 2008-02-17 21:33:46

I didn't stop by to engage in the Chris bashing, but I thought I ought to let you know, Walt, that I enjoyed reading.

The sad part is that the masses, by and large, will only think of the money handout they're getting. Instead of doing the responsible thing, they'll go out and spend it all. The cycle will continue. Something will shock us awake, but until then, McCain will have his way.

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Posted By: Christopher Espinal
Date: 2008-02-17 21:42:23

Dagny: stop reading the conspiracy theory garbage that consumes your mind with fallacies and overexaggerations of the history of the Fed.

Walt: You can't teach old Dog's new tricks. It seems you think I fall in this category. However, I am not here to say that you, Rothbard, and others are wrong. I am trying to acquire the knowledge to challenge the overall ideas of Rothbard and Friedman. Currently, I am here to challenge your understanding of the Fed. You have no understanding of it from what I can tell.

You obviously dismiss challenges by calling people stubborn. This is derived from your assumption that I am in full agreement with the existence of the Fed. If you ever sat in my economics class, you would see that I challenge my professor, a neoclassical monetarist, with Hayek's ideas. Of course, you would never know that. I would appreciate if you and others quit using your insulting statements.

No the argument doesn't end there like you think. That is because macroeconomics becomes way more complex than just store of value. Money has so many different roles than just being a "store of value." If you want to store value you can put your money in gold. Money is no longer just a medium of exchange but a medium to achieve macroeconomic goals.

People put money that they save in securities or some other asset if they want to protect and accrue value. You have that option in this country. Why do you act like you don't? What do you think the rich do in this nation? Take this challenge Walt. Directly annihalate my statements and rebuttals if you think you are equipped to do just that. Don't just write me off by saying that I don't want to learn more than what I have.

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Posted By: Dagny
Date: 2008-02-17 22:17:55

Christopher, I wrote: "The Federal Reserve is a private banking cartel, it does NOT work for OUR benefit, at two points in our early history Presidents forced it to dissolve (back when it was called a "National Bank"), as such an entity was seen as an unconstitutional threat to our newly acquired independence." I might add that since its latest inception date (1913) America has become very familiar with boom and bust cyles as there is a direct correlation between these "cycles" and "monetary policy."

Your response: "Dagny: stop reading the conspiracy theory garbage that consumes your mind with fallacies and overexaggerations of the history of the Fed."

Question: Specifically which part(s) of my comments regarding the Fed are not historic, verifiable fact?  Please, enlighten me.

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Posted By: Christopher Espinal
Date: 2008-02-17 23:08:23

You said that it doesn't work to the benefit of the people. Defend that with statistics that are scientifically sound? Are you worseoff? Are you telling me that you live in the USA and you have been robbed by the FED? You live in the most stable nation in the world. Most economists would agree that the FED is responsible for providing that finest form of stability for this nation (at least in the past several decades). Of course, my intellect is nowhere near the point that I am able to challenge Rothbard or Friedman.

Are you sure that the business cycle began with the Fed? Explain to me what the business cycle is or have your 3 year old do it for me! What does it represent specifically and prove to me that if we are on a gold standard we would have much more stable growth than if we had a Fed.

You do that Dagny, and then come back to me with that information. You will see how absurdly complex it is to even contemplate these issues.

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Posted By: Christopher Espinal
Date: 2008-02-17 23:13:17

By the way, how do you even expect me to trust information from such a libertarian partison hack - Gary North? No he doesn't delve into the varying ideologies, he attacks the fact that Keynes had a lasting effect on how we view economics. Seriously, get an economist who is an economist for the sake of being an economist, not one who only does it to prove himself correct.

Please stop your sarcastic/insulting/arrogant writing style. It doesn't achieve nothing but makes me want to ignore you even more!

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Posted By: Walt Thiessen
Date: 2008-02-18 07:24:24

Chris: I hope you do read Rothbard's book. I doubt that you will, but I would be glad if you proved me wrong.

I can't help but notice that you didn't answer my question. Which option would you take? If the gun was put to your head by the government (as it so often is in other cases) and you had to pick between storing your $1,000 in cash or in gold, which option would you take? Failure on your part to answer this question directly and succinctly constitutes nothing less than a refusal to face the real issue.

As for your claim that, "Money is no longer just a medium of exchange but a medium to achieve macroeconomic goals," I reply that to the best of my knowledge, macroeconomics has no goals. Macroeconomics is simply the study of economics at a 10,000 foot view, in simple terms. To claim that it has goals is to claim that it is an entity. It is not.

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Posted By: Christopher Espinal
Date: 2008-02-18 13:02:24

I never dodged your question. I would put my wealth in assets to protect its value. You say that money is only a store of value. I say that it is much more complex than just being a store of value. It can be used...say by the Fed...to achieve Macroeconomic goals. It's a different story if you disagree with that. Macroeconomics used to be just a 10,000 ft pt of view but today it is a study of analyzing government/everyday functions and their contributions to macroeconomic objectives: those objectives like maintaining stability.

Money is an entity of the consumer if you look at it from your point of view, or an entity of the government if you look at it from Keynes or Friedmans point of view.

You seem to think that if I just layed my eyes upon Rothbards work it would change my life entirely. Once again, the reason why I don't object to specific monetary systems is because it is way to complex for me, given the knowledge that I have, to thoroughly challenge such systems. Thus, I don't necessarily align myself with a specific school of thought like you do. For me to align myself with one school of thought is for me to say that I proved the others wrong. I haven't....

All I am doing is challenging these notions that the Fed is an organization that gets in the way instead of helps. There's no evidence for that in my opinion.

The one largest myth is that inflation is wiping out the middle class. Actually, technology, innovation, and growth is what is causing people to become more productive....the young people that is....They have the technological skills that older generations or those who mostly represent the middle class. Because of that, they make more in relation to the older generations. Look up this professors research on the disappearance of the middle class and the widening income gap - Kevin Murphy...a frickin genious.

Alright I have class soon....I hope this serves you well. Which of the austrian economists' books should I read?

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Posted By: Clayton
Date: 2008-02-18 15:07:17

"Walt: You can't teach old Dog's new tricks. It seems you think I fall in this category. However, I am not here to say that you, Rothbard, and others are wrong. I am trying to acquire the knowledge to challenge the overall ideas of Rothbard and Friedman. Currently, I am here to challenge your understanding of the Fed. You have no understanding of it from what I can tell.

You obviously dismiss challenges by calling people stubborn."

 

Instead of trying to learn about something so you can bash it, perhaps you should try to learn about something and decide if it makes sense. Doing otherwise is stubborn.

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Posted By: Clayton
Date: 2008-02-18 15:12:59

Chris... try reading this.  It is short and sweet and easy to understand regardless of experience.

You are right in stating that money is used as a tool by the government.  You called it "macro-economic goals".  In reality, it is "government's goals" or "federal reserve's goals".  One of those goals is very simple: A form of property tax that no one can fight against.  Read my article to explain:

http://www.thelibertypapers.org/2007/11/13/treatise-on-property-tax-through-fiat-currencies/ 

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Posted By: gravel kucinich paul nader
Date: 2008-02-18 17:30:51

WHERE DUTY CALLS

Nader Gravel & Paul Kucinich

Awake from your slumber
4 Wise Men march with the people
Washington DC

Whistleblowers
Honesty compassion intelligence guts
Not carrots sticks coercive diplomacy

Divided we fall
Mike Gravel
Dennis Kucinich
Ron Paul
Ralph Nader
No bribery blackmail extortion

Rage against the machine
Democracy rising democracy now
Suffer not

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Posted By: Walt Thiessen
Date: 2008-02-18 17:39:24

Chris wrote, "I never dodged your question. I would put my wealth in assets to protect its value."

Yes, you have dodged the question....yet again. Both dollars and gold are considered assets by most people, so saying you would put your wealth into assets still leaves your answer ambiguous.

Please specify: would you choose dollars or gold in the scenario I set up?

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Posted By: Christopher Espinal
Date: 2008-02-19 13:13:37

Clayton: that is exactly what I'm doing....is bashing something until I find that I am wrong. That is essentially what we all do when we are trying to find the "truth."

 

Walt: I didn't dodge the question. You have a scenario:

 

"I can't help but notice that you didn't answer my question. Which option would you take? If the gun was put to your head by the government (as it so often is in other cases) and you had to pick between storing your $1,000 in cash or in gold, which option would you take? Failure on your part to answer this question directly and succinctly constitutes nothing less than a refusal to face the real issue."

 

First you assume that you can't put your money in places to protect its value. Secondly, you assume that the government stops you from putting money into gold assets - if you want gold then buy gold securities. If I want to purchase something I want liquid money: the kind of stuff that inflates (not necessarily because it inflates). The other part is if I want to PROTECT my money or the value of my money, then what should I do: I'll put in assets. The Fed controls the value of liquid money, not the assets that you own. Thus, I arrive at the following conclusion, it depends on what I want to achieve.

 

I define an asset as something that is held to maintain or generate value under some portfolio. The idea of the asset varies throughout business and economics terminology. You are right to call money an asset! Money has more purposes.

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