Money & Quantitative Easing

[buster]

Good definition of money:

Quote:
"Money has no purpose or economic value other than to serve as a unit of exchange. The economic purpose of money is to circulate. The real resources are the only constraints, the real goods and services available for exchange aid demand for the currency. The root of the demand for the currency itself comes from its status as the only acceptable means to extinguish tax liabilities. This common denominator of demand leads to savings desires in this currency to provision for future tax liabilities.

I'm so glad we use money instead of the barter system. Makes my life much easier and I'm able to specialize in my labor.

They think they're working for money. They're working to produce real output for real use which in turn earn them tickets which they have the right to exchange in return for the real use of the production of others. And to pay their taxes. And to save those tickets for the future.

That's because they don't hear how savage they sound when they forcefully advocate the usage of a physical commodity in what essentially is a return to the barter system.

We're willingly and intentionally let over 10% of our real labor remain idle because we don't understand what money is. We're willingly allowing human spirits to be crushed, years of life to be wasted, current production for future use, new ideas, new technologies, go unproduced because we think it's all about the pieces of paper we created in the first place in order to facilitate the creation of all this real output"


What is QE?:

http://moslereconomics.com/2011/05/12/qe2-captblogain-your-ship-is-sinking/

Quote:
QE had a deflationary impact by removing interest income out of the economy. Commodities rose to bubble proportions on the mistaken belief that the Fed was printing money via QE. So economic growth and the money supply cannot keep pace with rising commodity prices.


Quote:
Q/E was just swapping bonds for reserves. THe assets were already in the economy so no net increase in the money supply. The goal was to push interest rates low.

 

[Tempest]

Quote:
The economic purpose of money is to circulate.

Is money a store of value?
Quote:
THe assets were already in the economy so no net increase in the money supply.

The FED would disagree:

Quote:
we think it's all about the pieces of paper we created in the first place in order to facilitate the creation of all this real output"

Now we are getting somewhere. Who is doing the deciding on what all of this "wasted labor" should be doing? What information do they have to be making this decision?

 

[PandaBear]

Quote:
We're willingly and intentionally let over 10% of our real labor remain idle because we don't understand what money is. We're willingly allowing human spirits to be crushed, years of life to be wasted, current production for future use, new ideas, new technologies, go unproduced because we think it's all about the pieces of paper we created in the first place in order to facilitate the creation of all this real output"


This is nonsense. Idling capacity is for "just in case" and insurance reason. Something happen and your line is down for 1 hour? That's idle capacity. Someone want to buy more at a higher price but you can't sell because you are selling everything at a lower cost and don't want to waste idle time? Too bad, you are losing money.

The guy who wrote this have no idea how real world works and what kind of risk an entity (person or company) can take and not take.

Quote:
The goal was to push interest rates low.


That is true.

Quote:
QE had a deflationary impact by removing interest income out of the economy. Commodities rose to bubble proportions on the mistaken belief that the Fed was printing money via QE. So economic growth and the money supply cannot keep pace with rising commodity prices.


But low interest rate encourage more loan and therefore more economic activities, and the risk that these activities are invested but return not generated, hence increased bad loans, and inflation (because of the economic activities and increased productivity). There needs to be a balance to keep things in moderation (bad loans, good productivity, good return, etc).

Like all economic decision, the debate is lost when self serving advocates with no math background are involved, and only try to argue toward their own ideologies.

 

[buster]

Correction: The money supply quote was wrong and not from that link. Continue discussion.

 

[buster]

Panda, these two interviews should clear up the confusion:

http://moslereconomics.com/2011/05/12/mosler-interview-on-insider-today/

 

[fdcg27]

The Fed is somewhat guided by the Employment Act of 1946, although monetary policy is never mentioned in the Act, nor is any fiscal policy the government should undertake.
The Fed is independant within the government, not of it.
Currency is no more nor less than a medium of exchange.
A weak currency and weak economy benefit no one, despite what the conspiracy theorists may say.
Let's worry more about returning our economy to full output and low unemployment, and less about enslavement.
Nobody needs to decide what wasted labor (the unemployed) should be doing.
The market can be trusted to take care of that, at least.
Buster, I am glad to see that at least you are posting economic ideas not involving some world-wide conspiracy to destroy the American middle class.

 

[Vikas]

Can you provide the link to the document from which the graph was taken from? I would like to understand the story behind it.

- Vikas

 

[rshaw125]

The Fed is an independent corporation incorporated in Delaware.

 

[Tempest]

Quote:
We're willingly and intentionally let over 10% of our real labor remain idle because we don't understand what money is. We're willingly allowing human spirits to be crushed, years of life to be wasted, current production for future use, new ideas, new technologies, go unproduced because we think it's all about the pieces of paper we created in the first place in order to facilitate the creation of all this real output"

Mosler advocates a job guarantee program in which the government pays people $8 an hour to work at "private corporations" in order to reduce unemployment, and act as a "bridge" to private sector employment later. I asked him exactly what all of these people would be doing exactly and got no response. But lets look at how that would work.

A given corporation would be getting free labor, paid for by the government. Why would they bother to hire new people on their own dime? What incentive would the company have to invest money in productivity gains when they have access to free labor?

Such a program competes with private sector employment and all the incentives point to reducing private sector jobs, and reducing productivity (typical of government programs). And who is deciding what companies get this free labor and in what industries? Politicians? Unelected regulators? What are their incentives to make good economic decisions?

Simply generating new pieces of paper called money does not necessarily create a good, efficient economy. Allocation of resources does, something demand siders have little interest in talking about.

 

[Spyder7]

Originally Posted By: Tempest

Simply generating new pieces of paper called money does not necessarily create a good, efficient economy. Allocation of resources does, something demand siders have little interest in talking about.


In more clearly worded English please (and without quoting something from another site or pasting a link from it).

I'd like you to write, in your own words, something more comprehensible and fledged out than a two line sentences that leaves me wondering exactly what point you're trying to make, and YOUR OWN reasoning behind that point.

Otherwise, you're right: I have no interest in discussing it with you. The interest is absent because I don't rely on one liners and Google to say what I want to say, or illustrate my reasoning behind it.

You are free to disagree with anything I say, but I can at least fully explain my point of view and do it in my own words, with no assistance needed from Google.

I save that for when I wish to learn about something I'm interested in but don't know enough about to discuss it. Whether intended or not, your posts come across as though you've just punched a few words into Google, skimmed a few sentences to make sure the hit makes the point you want to make - but are too intellectually lazy to do, or simply lacking the requisite understanding to be able to explain it yourself - and then posting a sentence or two along with the link to the source.

Case in point was when you posted a link to demonstrate how McDonald's were using waivers to counter a point made by Shannow. JHZR caught you out on that one when he read and de-constructed the article to show it said something very different from what you were trying to imply.

If this bugs you - I don't care. It bugs me when I essentially put thought and reasoning into writing an essay of my own, in my own words, and then watch you dismiss it with a one line reply and a link to some ideological based article.

Seems to me more like you trickle down guys have little interest in actually talking about how your beloved Reaganomics is supposed to work - and I infer from that, that its because you don't even understand how its supposed to work. You just like to believe that it does and flippantly dismiss anything that doesn't conform to it.

-Spyder

 

[buster]

Tempest, I'm skeptical of a job guarantee program. I prefer substantial tax cuts to allow markets to do their thing. However, the market has never been able to provide full employment. That leaves the governme to fill that void if the nation calls for it. Those are political decisions.

I'm working off my iPhone here so I'll respond more to this later.

 

[Tempest]

Quote:
but I can at least fully explain my point of view and do it in my own words, with no assistance needed from Google.

Funny that you post that and at the same time ignore the bulk of my post which did not rely on any links, yet you say I can't explain myself and complain about links?

My post clearly shows why government spending and allocation of resources creates massive problems in an economy, yet it is ignored?

And as far as links go, I post them because it saves typing and allows people that wish to read more to do so. They also bring in facts to an argument. Otherwise, arguments are in a straw man vacuum with no pining to reality. Any information source should contain foot notes or information sources to back up their case. That is all I am doing. Having gone through formal schooling, I figured you could appreciate that. I guess I was wrong.

I encourage people to post links for the reasons I give here, you rarely do, and straw men are your best friends.
Quote:
that its because you don't even understand how its supposed to work.

People have an idea. They start selling. If people want to buy it for the price offered, they buy it. If it is popular enough, they will need to hire other people to make more of it. The more they sell, the richer everyone gets.

The more government gets involved, both from taxes and regulation, the higher prices get. This makes people poorer, which leaves less money to spend and invest on new business opportunities.

Is it really that hard to understand?

 

[SteveSRT8]

Some of us don't have the time to argue. Or the interest. But the facts remain the facts. Reagans ideas did work.

But I do enjoy reading, so type away!

 

[Tempest]

Originally Posted By: buster
Tempest, I'm skeptical of a job guarantee program. I prefer substantial tax cuts to allow markets to do their thing. However, the market has never been able to provide full employment. That leaves the governme to fill that void if the nation calls for it. Those are political decisions.

Who says that "full employment" (whatever that means to the person using it) is a sound goal? If you mean 100% employment of "non-retired, able workers" (however that is defined), then you will build in a lot rigidity to the economy and make it far less nimble and innovative. Anytime you have people on the government dole, you remove market forces, and therefore incentive to improve.

All of these things that these self proclaimed economists profess have been tried before, without success. Including trying to achieve 100% employment.

 

[buster]

And why did Reagan's ideas work? Because he cut taxes and increased spending at record levels. It was Volcker that did the most damage.

Tempest do yourself a favor. Look up Richard Koo and balance sheet recessions.

 

[Spyder7]

Originally Posted By: Tempest

I encourage people to post links for the reasons I give here, you rarely do, and straw men are your best friends.


Equivocating the absence of links to a straw man just illustrates that you don't understand what a straw man is. I'll leave it to you to Google the term - I already know what it means.

As far as posting links and formal education go, I don't post links because I reply to a post using the same method I used in the classroom to write a response to an essay question. When the essay format answer contains its own internal, reasoned logic, then its complete in itself - or it should be. No links are required.

Thesis statement -> argument -> conclusion.

Term papers were different, but I don't put the level of thought into a forum post that I put back then into a term paper. Nor the time and required research. The footnotes at the end of the paper were to cite the sources I used to research the information, not substitute for them.

Maybe yours is the modern method and I'm a dinosaur behind the times.

-Spyder

 

[Spyder7]

Originally Posted By: Tempest

My post clearly shows why government spending and allocation of resources creates massive problems in an economy, yet it is ignored?


If that was what was intended, you missed the mark by a wide margin. So I therefore dismissed it because it didn't actually show anything.

-Spyder

 

[Tempest]

Originally Posted By: buster
And why did Reagan's ideas work? Because he cut taxes and increased spending at record levels. It was Volcker that did the most damage.

Tempest do yourself a favor. Look up Richard Koo and balance sheet recessions.

I've seen the vid. How did the private sector debt crisis begin? He didn't address that. And the "solution" left them with debt at 200% of GDP, and about 20 years of little growth.

They pumped a bunch of money into the system to maintain GDP but so what? What was that money doing? If it was being productive it wouldn't have taken 20 years to end their financial problems.

 

[Tempest]

Originally Posted By: Spyder7

If that was what was intended, you missed the mark by a wide margin. So I therefore dismissed it because it didn't actually show anything.

-Spyder

Perhaps you could post how you see a mixed economy "working"? Links strictly optional.

 

[Spyder7]

Originally Posted By: Tempest
Originally Posted By: Spyder7

If that was what was intended, you missed the mark by a wide margin. So I therefore dismissed it because it didn't actually show anything.

-Spyder

Perhaps you could post how you see a mixed economy "working"? Links strictly optional.


I have already. In several posts in different topics in this forum. Try using the search feature.

-Spyder