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Originally Posted by artillery77 Actually, before the Fed there were Panics, which the Fed has largely been successful in mitigating. Recession is the normal business cycle. A Panic is when something like Credit Suisse goes down....and then anyone that had Credit Suisse related bonds as part of their collateral goes down....in turn dragging behind banks that eventually had nothing to do with the original Credit Suisse. You'd have massive implosions of the bank industry....and they'd happen every few years. As you can imagine, even if you had money in the bank and then went to go pay payroll and your bank had gone bust overnight....that could be disastrous to main street.
I wish someone responded to the post I made, a few pages back in this thread, about what our economy was even like back then. A panic you say or is it more like trumped up caricatures for campaigns and domestic propaganda for special interest groups to get what they wanted? Propaganda and special interest groups did exist even back in the 1800s.
Who bought bonds back then anyways besides the wealthy? There was no internet. You literally had to go to a place, and get a piece of paper. How anyone know the paper is not forgeries? The anti-counterfeiting tech was not exactly on par. How many people actually had bank accounts? It probably be extremely inconvenient to have to use a bank. You'd have to get on your mule and ride like 30 miles into town constantly. If you owned a store, you probably lived above it. You basically served as your own security guard. Couldnt you just guard your own money. In fact a lot of general stores did in fact loan money. I alluded to all this in my previous post.
Even into the early days of the Fed, there was not enough currency in the country. Currency was linked to gold and places, especially not near a mint, had a hard time getting enough actual cash. So a National Bank, which had verified capital of so much could issue its own money. However, in order to issue money (which was filled out from Treasury purchased stock printed earlier) they needed to have:
1. The equivalent amount of money in gold in their vaults
2. 5% of the total invested into Treasury bonds.
In this manner the bank currency almost acted as a personal check from the banker themselves....only it wasn't used once and went away....it stayed in circulation. After all, there was a money shortage. So if I'm bank of Artillery and I get a note from the Bank of New Jersey....I know the bank of New Jersey must have an equivalent amount of gold in order to issue this note....as I have claim to this gold via the note I hold.....I have that claim to that gold and I can issue my own note.
Of course....if I utilitize that Bank of New Jersey note for value....and it does anything EXCEPT acquire gold to bring to my bank, I will have rendered myself insolvent. This is how you can start to see the seeds of periodic panics starting. People would get confused. When am I actually going to get to New Jersey? I have no computer to tell me what I issued against or didn't specifically. Worse, what if notes from New Jersey suddenly become worthless? Well, now my notes have insufficient collateral as well.
That's just how the system worked. The bad/unfortunate actions of one bank would ripple ruin through otherwise good banks until the ripple hit extremely well capitalized banks that had to absorb the combined failures of any notes they had from Bank of New Jersey and Bank of Artillery. For the strong to survive, they had to underloan.....or be able to call in their loans. Neither was great for the economy as a whole.
Panics were very different from today's recessions. Your money was just suddenly gone. It was a Lehman moment every five years or so. That's why the Fed was brought into play. A giant bank that could stop panics from getting out of hand by lending on an emergency basis to banks that were in trouble. This has allowed credit markets to deepen and get cheaper tremendously...even as the currency value has fallen to crap. The deeper the credit markets, the more individual punters can afford to borrow to pay for the same item....allowing for inflation.
Continuous inflation is really....a 20th century and on thing. So is economic growth in mature areas.
Even into the early days of the Fed, there was not enough currency in the country. Currency was linked to gold and places, especially not near a mint, had a hard time getting enough actual cash.
WTF?
There's so much wrong with that it's not even funny. Being near a mint or a gold mine has nothing to do with anything.
The price of Gold was regulated and it was $18.35/ounce from 1795 to 1833.
It was reset to $18.93/ounce in 1833 due to the number of panics and recessions the US had earlier.
For the next 80 years, Gold was never less than $18.90/ounce and never more than $18.97/ounce.
Banks issued their own currencies. Yeah, plural.
If you were knowledgeable in the subject matter you would know that the proprietor of any establishment would leaf through a dozen magazines with lithographs of all the bank notes issued by banks in the US, because your $1 bank note issued by Bob's Bank probably isn't equivalent in value to the $1 bank noted issued by Fred's bank that the proprietor uses.
Relative to the $1 bank note issued by Fred's bank, your $1 bank note issued by Bob's bank might only be worth $0.85 or it might be worth $1.20.
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Originally Posted by artillery77
Continuous inflation is really....a 20th century and on thing. So is economic growth in mature areas.
Wrong. The five different forms of Inflation have existed since time immemorial.
The Black Death and other plagues resulted in rampant Wage Inflation.
In the run up to the Civil War, during the war and for about a decade afterward there was rampant Monetary Inflation running at 100% at times and rampant Demand-pull Inflation running 10% to 150% on top of the Monetary Inflation depending on the particular item sought and so together they were 110% to 250% and in the South even higher.
For 80 years the price of Gold never increased more than $0.04 but wages and prices doubled, tripled, quadrupled, quintupled and even sextupled and septupled.
Average wages in 1870 were $400/year but by 1919 it was $3,700/year. That's a nine-fold increase and it was mostly Wage Inflation and not Monetary Inflation.
Each new skill-set introduced to an economy decreases the number of workers in existing skill-sets.
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,075 posts, read 7,515,583 times
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JMO,
The FED reActs to National Debt, Government Spending, and Trade. It rather not interfere, but National Politics makes big changes in taxes, debt, employment, where upon the Fed tries to moderate the affects but only after the act. The 2017 Tax Cut and 2020 pre-refunding of taxes, wildly overheated the equality and housing markets. We are seeing inflation due to a factors other than fiscal Political policy and lack of, ie climate change, Russia-Ukraine, China with it's problems, US's Trumpism, and wealth gaps.
YMMV
There's so much wrong with that it's not even funny. Being near a mint or a gold mine has nothing to do with anything.
Yeah....ok.
Here's a shorter version for you to follow. The rest is merely detail which is only important if you want to understand how panics actually occurred....via bank failure. Take an economic history book if you'd like to learn how things have changed from there.
The number of surviving banks from the start and end of the timeframe below is shockingly low.
During the period from 1863 to 1929, the Government again permitted thousands of banks to issue their own notes under the National Banks Acts of 1863 and 1864. These were called "national bank notes," but unlike the earlier "state bank notes," they were produced on paper authorized by the U.S. government and carried the same basic design.
Its a zero sum game, unless you playing a board game. We live on a finite planet with finite resources/assets.
Wealth creation by the govt can only be for benefitting society as a whole, and not propping up private individual's failed speculations. Govt/taxpayers should control money supply. Bankers do not need to be the middle man who decides who gets what and then charge everyone. You can just literally give it out like stimulus. The populace will spend it, save it, speculate where they want it.
Expansion of the economy? Expansion by just increasing the price of the same thing over and over again is just increasing the nominal denomination of the total currency floating around out there. There is no value/utility in it though.
This is why you will never be wealthy. Just because the physical resources are finite, doesn't mean the output is finite. If I find a way to use the same resources that you have, but can do 2x the work output per hour, I have increased the overall productivity in the system. It is NOT a zero sum game.
QE, Zirp bailouts or whatever its called is essentially UBI for the finance industry. The monikers for these financial "tools" seems to change constantly.
What I mean by the growing own food bit is more people should be farmers. And we once were mostly farmers. Do you really think we can base our economy on the FRIEND model (Finance, RE, Insurance, Entertainment, Networking, Debt). We hardly have any manufacturing anymore as well. You are right, we have crammed ourselves into condos with tiny porches in a few megalopolises. We work as babysitters (teachers), sports coaches, salesman, entertainers, line cooks and store clerks. Our doctors, and tech people are coming from overseas.
QE, ZIRP and the like have nothing to do with pensions run by government agencies and are not close to UBI.
Everyone growing food would not come close to providing - one farmer can feed hundreds but everyone growing their own would not come close to feeding themselves. What are you going to eat in the winter in snow belt or summer in the desert - really silly.
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Originally Posted by NJ Brazen_3133
Public sector plans are basically just private endeavors because that is HOW THEY ARE FUNDING IT. They work with private sector businesses and depend on them to raise the money. Essentially the money is pooled together and another Govt worker decides which of her private sector relatives gets to play around with it. Just because it is pooled together based on what Govt job you have, or which State's Govt you work for does not change that.
Ok so the Govt is guaranteeing it. But the Govt should not be lying to public's face. If the Govt employee pension only took money from taxpayers then I will say its not a private endeavor. But then there is no way the Govt will be able to afford the deals they made with the workers.
I believe I mentioned this before; why not just create the money and give it to the workers? Why need to middle men, or to "stabilize the market", before forking it over to the Govt workers?
Many public sector plans are funded by taxes, not the market. Much of the market funds are retirement investments like 401Ks and IRAs but that is not public pensions.
This is why you will never be wealthy. Just because the physical resources are finite, doesn't mean the output is finite. If I find a way to use the same resources that you have, but can do 2x the work output per hour, I have increased the overall productivity in the system. It is NOT a zero sum game.
And you have to exchange that 2x output/productivity with someone for something they have whether that be their share of the market, some inventory/asset, cash, or a future favor. Alternatively, that 2x output/productivity will take away someone else's bidding power.
You did not increase the "overall" productivity at all. You increase the rate at which you deplete the resources available.
All those people that are wealthy, should not be as wealthy as they are.
QE, ZIRP and the like have nothing to do with pensions run by government agencies and are not close to UBI.
Everyone growing food would not come close to providing - one farmer can feed hundreds but everyone growing their own would not come close to feeding themselves. What are you going to eat in the winter in snow belt or summer in the desert - really silly.
Many public sector plans are funded by taxes, not the market. Much of the market funds are retirement investments like 401Ks and IRAs but that is not public pensions.
I did not state those financial FED tools had anything to do with pensions. I was replying what you wrote. And yeh, its basically UBI for the Finance guys. Its practically just free stimulus, they can play around with.
I guess your second paragraph means we should all be starving now. How can even less people farming supply even more food then?
And this thread is about the FED. If I mention farming or food its in response to what someone replied to something I wrote. You, however dragged this further off-topic.
But as for growing food in the winter. People plant in the spring/summer, then harvest in fall in preparation for the winter.
And you have to exchange that 2x output/productivity with someone for something they have whether that be their share of the market, some inventory/asset, cash, or a future favor. Alternatively, that 2x output/productivity will take away someone else's bidding power.
You did not increase the "overall" productivity at all. You increase the rate at which you deplete the resources available.
All those people that are wealthy, should not be as wealthy as they are.
What are you talking about? If I have a farm on 100 acres that used to produce 1,000 bushels of corn per year, but with new technology can now produce 2,000 bushels of corn per year, I am not depleting the resources available.
The global economy is not zero sum. I'm sorry that you believe that to be true, but from an economics perspective it's just simply not the case and is a fallacy peddled by socialists and other charlatans.
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