That's not part of the monetary base.

i know this is from 1976 but this is the only source from the fed i could find that defined the monetary base

http://www.google.ca/url?sa=t&ct=res...8gMf6yCRFAVreA
"Government securities held by the central
bank, an item which affects the [monetary] base positively"

something more recent just got from google:

http://www.google.ca/url?sa=t&ct=res...FdPS_YLJXuf_yg

but which one will close the gap first? who will carry on with their trade? who will wear the gold medal?


comedic genius over here

This is because in order to buy government securites, the Fed has to issue currency. This doesn't mean the assets are part of the monetary base - that makes no sense - just think about the monetary base means. How would some private entity be able to buy things with securities that the Fed owns that no one else has any claim to?

ya ya... I have a couple things I need to do today, and I know if I start responding to that I'll get absorbed in 2+2 land and procrastinate. Gimme a little bit.

I haven't forgotten though.

they are the source of the money base. if they increase, the base will increase and so will broader measures.

the point is still just regarding what will happen should they liquidate or cancel these securities off.

one scheme for liquidating the fed would be to do just that and then revalue gold holdings to match the remaining fed liabilities and then allow transfers of bullion or minted coins to stakeholders.

Again, that the Fed has assets and liabilities that largely match each other does not mean assets are liabilities. If the fed didn't for instance, return its "profit" to the treasury, the Fed's assets over time would come to dwarf the monetary base. And the source of the monetary base is NOT the Fed's assets - it's the liability they issue for *any* reason, including the purchase of assets or lending.

There shouldn't be any remaining fed liabilities. We went over this - the fed has positive equity. Unless there's some massive market failure during this process, the monetary base would become zero. We're back to the government issuing money at this point.

right. they really have no legitimacy keeping them though. since i know you love my tidbits i thought id throw in some rothbard:

"And indeed, why in the world should
taxpayers be taxed by the U.S. Treasury in order to pay
interest and principal on bonds held by another arm of the
federal government—the Federal Reserve? The taxpayers
have to be sweated and looted, merely to preserve the ac-
counting fiction that the Fed is a corporation independent of
the federal government.
"

what is money and what is money substitutes can make this more complicated but there is not much to be gained from debating that stuff.

whatever terminology you want to use i dont mind. i see what you mean and i dont think of it any differently for the practical purpose of the discussion. the use of the word "source" is just what the paper i cited described

the money base is larger than the amount of securities the fed owns. i dont see how youve come to this conclusion

if all money and credit was called in the assets can't support all liabilities including fudiciary media. the banking system is insolvent.

This makes no sense - the taxpayers pay less in taxes than they would otherwise because the Fed is a profitable entity (granted, any entity with seigniorage would be automatically profitable) that gives back its profit to the Treasury.


None of this is relevant because what the Fed owns is not in circulation. If treasuries are considered money substitutes, for instance, the amount the Fed owns *subtracts* from the the supply of money substitues, rather than adding to it.


Once again, not true unless you exclude other Fed assets including repos.

http://www.federalreserve.gov/releas...Current/h3.htm

http://www.federalreserve.gov/releases/h41/Current/

I've only read parts of this thread, and I'm not really in the mood to debate, but it's pretty silly for you to say this:

Am I misinterpreting? What exactly are you saying with that bold part? It reads as if you're saying that the basis of capitalism is the aggregate utility of its society.

I guess I'm a gold bug and gold is down nicely today. Had gold for years. A Gold bug collects it and may hold it their whole life. As far as trading, bought IAU when gold was about $576.00 and am thinking support is around 850 so, have put a stop in.

1) If you can't compare aggregate utility, there's no point in saying one system is better than another - most systems are really equivalent under that view. This forces you to throw out basically all criticisms of non-capitalist systems.

2) Saying that capitalism is efficient is saying that it is an aggregate utility-maximizing system. To say that aggregate utility doesn't matter isn't far from saying that efficiency (which is the main basis of capitalism) doesn't matter. If you're trying to say that capitalism has other virtues than efficiency, none of those other virtues would have any sort of objective measures.

You may also be misinterpreting but I have no idea what you're thinking.

From Wiki:

None of that has to do with aggregate utility. Also, if aggregate utility were actually the basis for capitalism then everyone's goal would be to be the best martyr they could be lol. I can see why there are 230 posts in this thread because you seem to be using the opposite meaning of capitalism for its definition.

You're confusing the system and its effects.

For instance, if someone told you that communism is better than capitalism for the society, what would you say in defense of capitalism?

Btw, the absurdity of the above statement should be obvious to you by now. The whole point of capitalism is that aggregate utility is maximized by individuals pursuing their own interests. In practice, martyrdom has little utility for anyone.

That it isn't because it imposes on my liberty for the greater good whereas capitalism is based upon a society of individuals free to make the choices they want. That catering to the "greater good" (i.e. utility aggregation) is not always consistent with maximizing my own utility.

why do the taxpayers pay less than if the fed canceled off interest payments lets say or returned them in full?


exactly, you need to include other fed assets.

anyways, to not beat around the bush, with regards to liquidating the fed, id be curious to why you think this process untenable, or do you not?

So you're saying that a dictatorship where you're the dictator and can do whatever you want is a superior system to any other political system? One would think that's the system that maximizes your own utility.

Even after correcting for obvious flaws, your argument boils down to nothing other than, I like capitalism so it is good. There's nothing else in your argument that says why capitalism is any better than any other system. Why is freedom good? Why are choices good? Why is a system better off with individuals trying to maximize their own utility?

That's basically what they do. I don't know what else you think giving the profit to the treasury means. Most importantly, the government is best off with the Fed owning the treasuries, because if any other entity owned them, they'd owe real interest. This is another way of saying that the government doesn't pay interest on currency, so the larger the monetary base is, the more money the government is borrowing effectively without paying interest. All of these are entirely equivalent. Whoever you quoted doesn't know what he's talking about.

Uhm, that's the point - if the fed liquidates, all outstanding fed liabilities disappear. There's really no difference in this context between the fed owning treasuries or simply having lent money to banks. Assets are assets.

It's not untenable but it'd involve changing the currency. The reason why it was untenable in the context we were talking about was because you insisted on keeping the dollar as it is.

lol, if I was dictator yes (probably), but obviously my being a dictator, by definition, would impose on the individual liberties of others.

It's the only system which doesn't lead to a contradiction.

It's the reason using aggregate utility as a measure for a system whose basis is individual utility maximization leads to an individual whose achievement could be measured as a success even if they aren't maximizing their own utility (martyrdom).

This makes no sense. Lots of smaller organizations do not have a capitalist system. Most large corporations run, internally, as a command-driven economy (pricing, allocation of resources, etc, etc). And that's not to mention families. I don't know what sort of axiomatic framework you're using, but I find it amusing that you find what works in practice leads to a contradiction. On another note, it's interesting that almost everyone who tries to make purely logical arguments for a political system sounds like they failed logic.


That sentence barely parses and has no relevance to the question that was being asked. I mean, you make it sound like donating money to a charity would be a bad thing because they are not maximizing their own utility.

But to the extent that individual liberties of others have no bearing on your own utility maximization, how is this relevant? How is this idea of "liberty for for all" anything but some idea of "greater good" as you speak? Why should you sacrifice your own utility for the greater good, if you didn't have to?

It would be, if the individual didn't want to do it but was still forced to do so. If the feeling they get from donating (happiness, satisfaction, w/e) doesn't trump how they feel after parting with the money then it is a bad thing.

You can understand it just fine (perhaps take out the words "it's the reason"?). It is also very relevant because you're linking "aggregate utility" with the basis of capitalism. I'm saying it's not the basis of capitalism because it leads to a contradiction within the framework of capitalism.

1) I received an A in logic 2) You didn't point out any logical flaw 3) A+ for another useless snide remark

You shouldn't, and you wouldn't. I was pointing out that dictatorship isn't a part of the capitalistic framework and thus your question has no bearing.

Yes, centrally planned economies are flourishing.

Are you seriously using this analogy? Wow.

One is at the individual level and one is at the group level.

Why isn't it? For that matter, why can't you go around stealing from people? The question is what makes capitalism "good" - what makes capitalism better than a system where all individuals are truly free to maximize their own utility? Including hiring hitmen, buying the court system and colluding with competitors? If maximizing your own utility is what we're trying to accomplish here, why talk about any system at all? Do you not think that no matter what system you have, most individuals will strive to maximize their utility? How is that a basis for capitalism more so than it is a basis for any system? The point of capitalism is that this, with some limitations, does lead to efficiency, as Adam Smith has pointed out and as any sort of critical systematic analysis of modern economies would indicate.


I don't know where you learned your logic, but you're pretty badly out of depth here, if you think your "argument" supports capitalism on any sort of objective basis.


If you're trying to say centrally planned economies are not flourishing, what exactly do you mean by "not flourishing?"


It's not an analogy. A resource allocation system is a resource allocation system. Internal corporate resource allocations and pricing issues are well-known management problems.


This makes no sense - why is liberty for individuals a good thing at all, except as some sort of greater good? More specifically, what is your liberty worth to me and why?


And you're completely dodging the main point - you haven't shown exactly what comparative metric you would use to show that capitalism is better than any other system.

the quote is old for one so im not sure if they've always returned reasonable balances to the treasury but regardless they dont return all of it so there is some net liability of the public whatever way you slice it.

what if that entity was the public or what if the fed was obligated to forgive the government of that interest?

all of what are entirely equivalent. im totally missing your point about what error he presented?

i agree. some assets are more tangible though, like gold. the fact that if the fed liquidates everything, oustanding fed liabilities disappear, is the point. why would anyone imply liquidating the fed but not doing this. its the same as if you were to liquidate any business.

i didnt insist on it. it was an entirely separate point. again, on that separate point, there is no reason the fed and dollar cannot persist without further inflation. on the point discussed here, there is nothing that difficult about liquidating the fed either. the criticism is that proponents of these economic conditions are never thinking about how to get there from here. the reality is there are many easy solutions available that take no more than a little will to convert.

they are only unrealistic in the sense of peoples willingness to push hard enough, but there is nothing is systematically unreasonable.