Re: the panic of 1857

orangatang1@xxxxxxxxxxxxxx wrote:
On 8 May, 18:26, Les Cargill <lcarg...@xxxxxxxxxx> wrote:
orangata...@xxxxxxxxxxxxxx wrote:

<snip>



That is, to employ a system of full reserve banking.
I've never seen this explain how it would improve on
existing fiat systems for accommodating growth in GDP.

I have seen people talk about "separating credit from
money", which seems a wonderful, then an impossible
thing. I am not sure it's not simply a euphemism
for 100% reserve banking.

Aristotle believed that charging interest *itself* was
immoral, since money is but a medium of exchange. The
immorality was the reifying of an abstract thing into
something that was traded for its own sake. But I note
that the farther we get from Aristotle on this point,
the more prosperous we appear to be.

But our ability to produce would have confounded Aristotle.

--
Les Cargill


In a fiat currency the treasury could issue new treasury notes in
proportion to gdp growth. This would keep the ratio of gdp to money
supply roughly constant. The benifit of this is that we would no
longer be slaves of the banks. As Josiah Stamp, directot of the bank
of england, explained in 1940 -

"Bankers own the earth; take it away from them but leave them with the
power to create credit; and, with a flick of a pen, they will create
enough money to buy it back again. Take this power away from them and
all great fortunes like mine will disappear, and they ought to
disappear, for then this world would be a happier and better world to
live in. But if you want to be slaves of bankers and pay the cost of
your own slavery, then let the bankers control money and control
credit."


There are two cases. Either the players in the fiat money creation
game are ... "lying", or they are not.

If they are lying, then your analysis holds. I don't think they are
I think that Bernanke has been pretty forthcoming and transparent
about why the Fed does what it does. It just has classic
Unintended Consequences effects. In order for the least of us to have
a decent life, we put up with a banking uberclass.

You have to look at how all this is measured, in my opinion,
to determine how the players think about it. It's measured by
unemployment rate. This goes back to Nixon and before. It sets the
tone for Reagan.

Undoing all this would require going back to a very large
drawing board. And I think they *do* try to model GDP, or have
until recently. The problem is that GDP will depend on what
they do.

Another way to control fluctuations in the money supply is to use the
bimetallic standard. New metals are mined each year. When the US was
on the bimetallic standard people could have their silver minted into
coins free of charge, helping to control deflation. If the value of
silver rose against the value of currency coins would be sold for
their metal vaule, helping to control inflation.


Here is an excerpt from "Commanding Heights" on why Nixon took
us off the gold standard:

"So the central economic issue became how to manage the inflation-unemployment trade-offs in a way that was not politically self-destructive; in other words, how to bring down inflation without slowing the economy and raising unemployment."

http://www.pbs.org/wgbh/commandingheights/shared/minitext/ess_nixongold.html

Remember that Nixon was still fundamentally a Quaker, as he
was raised. He believed strongly in "as you do for the least of
you, you do for me" from the New Testament.

Please note that there was inflation *while we were on the gold
standard*. If the value of silver rose, people would hoard it
(expecting it to rise further) as witnessed during the
depression.

--
Les Cargill
.

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