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[Kratos]

Sure, ours. Some inflation is good for the economy. It's getting to be a bit much lately partly because of energy driving up the cost of living. Credit crisis isn't helping, but it's a problem bigger than the US, look at Iceland. Price relationship of the dollar to forigen currency is important, and it's a miracle they keep it so stable given our huge trade deficit, and china is helping by normalizing their money to ours.

I'm totally with you on less goverment, but attempting to tie their hands through a change of currency is not the way to do it.

[SMCengineer]

Sure, ours. Some inflation is good for the economy. It's getting to be a bit much lately partly because of energy driving up the cost of living. Credit crisis isn't helping, but it's a problem bigger than the US, look at Iceland. Price relationship of the dollar to forigen currency is important, and it's a miracle they keep it so stable given our huge trade deficit, and china is helping by normalizing their money to ours.

You're comparing the dollar to other fiat currencies, but to calculate true stability you have to look at inflation charts (calculated by either CPI or PPI), debt charts or money supply charts and you'll clearly see that all have exponentially increased since we came completely off the Bretton Woods system.

I'm totally with you on less goverment, but attempting to tie their hands through a change of currency is not the way to do it.

Unfortunately, you can't have one without the other.

[Kratos]

You're comparing the dollar to other fiat currencies, but to calculate true stability you have to look at inflation charts (calculated by either CPI or PPI), debt charts or money supply charts and you'll clearly see that all have exponentially increased since we came completely off the Bretton Woods system.



Unfortunately, you can't have one without the other.

Creating a more accurate CPI and tighter money policy can be done without nuking the banking system. The political machine in this country and the will of the common man is what's driving us closer to communism. All people can't be equal, because all people aren't created equal.

[SMCengineer]

Creating a more accurate CPI and tighter money policy can be done without nuking the banking system.

Legalizing competing currencies wouldn't disrupt the banking the system in the least bit.

The political machine in this country and the will of the common man is what's driving us closer to communism. All people can't be equal, because all people aren't created equal.

I find it ironic that you say in defense of Keynsian economics.

[Pooks]

The real problem is the Federal Reserve.. it controls the cost of money.

A bank is in business of buying money for cheap and selling it for more.

The Federal Reserve can make money cheap by lowering interest rates, causing more loans, more inflation.

When the economy goes to fast, the federal reserve jacks up the rate, trying to cool things down.

BUT.. THIS IS NOT FREE TRADE... the cost of money should be established by competitive banks. Only if Banks are able to charge each other what they want will we have liquidity in the credit markets. Right now banks are just hoarding all their cash.

"Just because the Fed floods banks with cash doesn’t mean that banks will lend each other money - at the targeted Fed Funds rate, or at any rate. Banks are all fearful of each other - I’m talking on a worldwide basis - they are increasingly hoarding cash as a cushion against their own upcoming losses. They’re facing increasing weakness in their commercial-loan and commercial mortgage-backed securities inventories (the next shoe to drop). And banks are increasingly facing heightened exposure to leveraged loan portfolios on their books that they can’t off-load, and rapidly deteriorating credit-card-based securities and portfolios.

If the Federal Reserve is unable to facilitate overnight-bank lending, and is unable to actually lower the Fed Funds rate to its target rate of 1.5%, what will that do to its credibility? It is devastating that we have no trust in our banks; but if we also lose trust in our central-bank firefighter’s ability to quell the financial conflagration, the darkening skies may make the last three weeks seem only partly cloudy."

[FallenWyvern]

The real problem is the Federal Reserve.. it controls the cost of money.

A bank is in business of buying money for cheap and selling it for more.

The Federal Reserve can make money cheap by lowering interest rates, causing more loans, more inflation.

When the economy goes to fast, the federal reserve jacks up the rate, trying to cool things down.

BUT.. THIS IS NOT FREE TRADE... the cost of money should be established by competitive banks. Only if Banks are able to charge each other what they want will we have liquidity in the credit markets. Right now banks are just hoarding all their cash.

"Just because the Fed floods banks with cash doesn’t mean that banks will lend each other money - at the targeted Fed Funds rate, or at any rate. Banks are all fearful of each other - I’m talking on a worldwide basis - they are increasingly hoarding cash as a cushion against their own upcoming losses. They’re facing increasing weakness in their commercial-loan and commercial mortgage-backed securities inventories (the next shoe to drop). And banks are increasingly facing heightened exposure to leveraged loan portfolios on their books that they can’t off-load, and rapidly deteriorating credit-card-based securities and portfolios.

If the Federal Reserve is unable to facilitate overnight-bank lending, and is unable to actually lower the Fed Funds rate to its target rate of 1.5%, what will that do to its credibility? It is devastating that we have no trust in our banks; but if we also lose trust in our central-bank firefighter’s ability to quell the financial conflagration, the darkening skies may make the last three weeks seem only partly cloudy."

Every thing you said is true, but I don't get the first sentence, nor do you explain why their ability to control the cost of money is a problem.

Fed reserve is not a free market idea. Does that mean that it is evil?

Are free markets/free trade the best thing ever? No. Extreme booms/busts are human nature. The consequences can be very painful.

http://en.wikipedia.org/wiki/Tulip_mania

[SMCengineer]

Fed reserve is not a free market idea. Does that mean that it is evil?

No, but it makes it much more suseptible to political manipulation and corruption.

Are free markets/free trade the best thing ever? No. Extreme booms/busts are human nature. The consequences can be very painful.

http://en.wikipedia.org/wiki/Tulip_mania

Free markets aren't naturally prone to boom/busts cycles. Just as "manias" always have a cause and usually that cause is some expansive monetary policy. Tulip mania is no exception. If you look back at the causes of Tulip mania, you'd see several government policies that served to instigate and bolster the mania. Free coinage, the Bank of Amsterdam and, as result, the influx of gold from the "New World" all led up to a large increase in the money supply and the subsequent Tulip speculation/trade. So, just because fractional reserve banking wasn't the cause of Tulip mania doesn't mean monetary policy wasn't at the root of the problem.

[Kratos]

Legalizing competing currencies wouldn't disrupt the banking the system in the least bit.
.

You don't think it reduces transaction costs to have a single accepted currency?

[SMCengineer]

You don't think it reduces transaction costs to have a single accepted currency?

Absolutely not. If transaction costs rise than how would that be competitive?

[Kratos]

Absolutely not. If transaction costs rise than how would that be competitive?

Well, if a trading partner is forced to accept exchange risk it inevitably raises transaction costs and, subsequently, the product price. If the consumer is forced to exchage to another currency in order to trade it isn't going to be free. Under a common currency there is no exchange related transaction costs to be reduced by competition.

[FallenWyvern]

Sure, ours. Some inflation is good for the economy. It's getting to be a bit much lately partly because of energy driving up the cost of living. Credit crisis isn't helping, but it's a problem bigger than the US, look at Iceland. Price relationship of the dollar to forigen currency is important, and it's a miracle they keep it so stable given our huge trade deficit, and china is helping by normalizing their money to ours.

The credit crisis is huge contraction of money supply, this is quite deflationary.

[SMCengineer]

The credit crisis is huge contraction of money supply, this is quite deflationary.

True, but that doesn't mean that banks aren't sitting on massive reserves and accumulating more. It just means there's a lack of confidence, which in turn leads to less lending.

[Kratos]

The credit crisis is huge contraction of money supply, this is quite deflationary.

I worded that wrong, heath of the economy is hurt by the credit crisis.