John Lennon beat you to that particular line of thought though I must admit that unlike Elvis, John probably isn't here.

Jimbo

in theory. reality can be much more complicated though.


didnt you say if the fed liquidated or cancelled off their treasuries and repos the money base would be zero or less?

how does politics change economic laws of scarcity, marginal utility, exchange, Recardian law of association, etc.

i dont know how we're now talking about property rights, but you really have no clue where i stand on this and i cant defend whoever your accusing because those arent my beliefs. ive had a lot of discussions about this and would be happy to have another but theyd need to take place in politics forum.

uhhh you have no idea what you're talking about. if you think austrian economics is normative economics then you have less than no idea what youre talking about. you should have no business criticizing aspects of people's ideology and knowledge you dont understand.

i don't think it is worth going through your entire post if that statement is even POSSIBLY arrived at.

it is just so far from anything that i read up till there, intent on responding and then just stopped reading.

there are two issues:

1) economic "floor" effective for the decline of the USD. (this involves mostly private & individual institutions and companies)

2) foreign dollar holders' (chinese central bank, japan central bank, oil exporters etc.) actions with respect to the dollar.

those are separate and you mixed them in a very obviously incorrect manner. i made the logical leap that if you are unable to separate those issues that i simply laid out, it would be a waste of my energy to read the remainder of your long post. that issue is so central, and so simple in an economic sense that it is amazing to me that you could not state it regardless of what you thought i was responding to.

then yes, you wasted your breath...and lost the right imo to claim economics is even easy logically or intuitive anymore since the mistake you made, and continue to make apparantly, is so glaring as to baffle me.

Barron

Yes. Monetary base would go to zero, because the Fed would have all the money. This would not strictly be true if the Fed had negative equity. In theory things may work differently (obviously the process would change prices of everything), but this doesn't change the fact that at worst most of the money would disappear and you'd need a new currency. And this completely invaldiates your "what if the fed didn't intervene" theory.


Property rights was what we've been talking about the whole time, before you interjected with thoughts of your own that you now concede are irrelevant.


Then what on earth are you talking about? Aren't you saying some system you advocate >>> the current system? That's normative economics.

do you not understand that the monetary base is made up of more than just treasuries and repos?

ya obviously. you cant get rid of the fed and keep fed notes, duh

the fed could stop intervening further in any inflationary sense. this idea and liquidating the fed are two different possibilities that youre muddling together.

ill grant you this because i didnt read that much of the discussion. my bad

my posts have been going over the consequences of the current system, but they can be applied in any historical context since their principles are always relevant. i never interject value judgements either in BFI OPs like "therefore the fed should be abolished". i admited this is my view when you pick at me for it. even still though this isnt normative economics, in the way your accusing me (like economics based on what i feel or something). this is just my value judgement which is interpreted by the one and only economics. What you appear to be describing is the equivalent to saying something like normative physics. Economics has no root in normativeness. people can add value judgments but the economics dont change as a result.

Huh? The monetary base isn't at all made up of treasuries and repos. It's made up of outstanding federal reserve notes.


Again, doing anything is doing something. Yes, the fed can target something other than interest rates, for instance fixed monetary base or fixed growth in monetary base or something entirely different. But all of those activities amount to intervening. They can't just not intervene, when they can literally choose exactly what monetary base can be at any given point. It's like asking what the price MacBooks will be if Apple didn't intervene. There's no such thing as a natural price for something, when you control the supply.


Agreed. You'd note that's been my entire point in this thread.

Heavyweight Championship Semi-Finals on Saturday March 29th

Zygote at 256lbs vs. Phone Booth at 247lbs

Dcfirths at 263lbs vs. ALawPoker at 258 lbs

FINALS to be announced next week

its made of outstanding federal reserve notes and reserves

your taking this too literally and i dont think the analogy really works either. Regardless, lets just say im indifferent to whether or not they're intervening, and im only saying they should stop inflating.

i had to rub the smudge of my screen to make sure i wasnt seeing things but unless im still hallucinating, im glad to see some ground has been made.

Hahahaha - I thought we lost you a while ago.

Wait, I'm the lightweight?

Bank reserves are considered to be outstanding from the standpoint of the federal reserve, since they don't own it.

What are you talking about?

Yes, the "floor" concept (which the majority of my post responds to) and "foreign dollar holders' interest" are two separate things. I realize that. Which is why, like I said, I responded to the points separately. I didn't think I needed to announce that I realized they were different concepts.

Should I have included in my post "OK, this paragraph here relates to a different concept"?

I think some of the stuff you were saying earlier in your post (i.e. referring to something as "worth X" when it is trading at something different) was strange. And now I think maybe you realize it. Go ahead and ignore the first half of my post if you want, but I'm curious in your response to it, and if you don't offer one I'll just assume you don't have one.

I took the time to respond to you (twice actually, because my power went out). I didn't particularly want to, but I told you I would and you kept asking, so I took the time. I'll refrain from bothering in the future.

What issue are you talking about? Sorry, but this sentence is very unclear to me.

You mean the "mistake" you refuse to address?

Are we still talking about that paragraph you quoted in your last post? What mistake did I make other than summarize *one part* of your post in a way that apparently was not accurate? It's funny, because the reason I wrote that paragraph was because yours was very unclear to me, and I wanted to make sure I was reading you right.

Communication is a two way street. Just because you understand this stuff in more depth than me does not mean that everything you say is perfectly expressed, or that I never have a fair response. You said yourself that you were tired and didn't re-read your post. If I screwed up what you were trying to say (and I'm still not sure what exactly you're referring to, or why you think I didn't realize these were 2 different concepts), why not just explain what you really meant? That would probably take very little time.

If you want to just assume that misunderstanding one thing you said means that I've intertwined two totally unrelated concepts (I still have no idea how you made that leap), then have fun with that. I'll take this post of yours to mean that you don't like to eat pastrami sandwiches. Seems about equally random lol.

ummmm, are you calling me fat?

Barron

Booth and Dcfir will always be my horses. Fair odds for them in any argument is like 1:3.

I want to see Booth and Dcfir battle John Kane and Stockmarket FTW is an economic debate.

lol Stephen... also FYP

LOL..........I actaully closed my eyes and picked the weights out of a hat,as I figured this would probably cause more trouble than that silly GOLD thread I started

all depends on the body fat % being low or high. either way youd have big titties and i guess so would i

normative judgments are irrelevant therefor central planning is efficient. how did you conclusion follow from the premises?


i agree choosing to live capitalistically is a value judgement. If no value judgements are imposed though then people are left to live freely so we do have a free market under such conditions. in free market, people can reject capitalism and choose to not increase capital, or whatever. i surely dont deny this or think its "bad" beyond the fact that i wouldnt advise it.

The latter statement isn't that central planning is efficient, but rather that efficiency is a meaningless concept (it's an ordering and we've established that there is no good ordering). The two statements follow from the premises, not the latter from the former.

i meant to say inefficient but a better word is invalid.

also, when i was referring to your conclusion, i meant the one about capitalism being inefficient. i didnt see how you got there

i misspoke here.

i said "something is trading at half its value."

i mean "something has LOST half its value (i.e. $100 something now trading at $50).

your concept of value i think is mistaken. i think you are imagining one guy or one company looking over some companies in the US and saying that "well, i see no value there so i'm not buying."

what you are missing, and what i am baffled about is that you seem to be absolutely incapable of thinking in the aggregate. specifically, i think you have problems taking a concrete simple example, and applying it to a broader un-identical situation.

the example in barronland wasn't mean to show that one dude or company will buy something that has lost half its value because it is trading at slightly more attractive terms due to currency appreciation.

instead, it was to impact the CONCEPT so that you could apply it to the AGGREGATE. more on this exact thing later

again, this is an individual example that doesn't apply. not all houses are catching fire, not all companies in the US will be bad, some will make a ton, and that proportion is far higher than you likely think it is. another aggregation fallacy.

how do you know this? the TIC data certainly do not support your position. look at this data:

http://www.treas.gov/tic/exhibitsc&d.pdf

the table demonstrates that as the value of the US dollar has fallen, the demand for US long term assets (bonds stocks, etc. ) has increased. this provides a feedback look where significant falls in the dollar result in an AGGREGATE increase in demand for US companies, securities, long term assets in general.

at any time t, there is some foreign demand for US assets, D. further, at any time t, there is some supply of US assets, S.

Demand is a function of price changes. D(t+1) = D(t)*-(1+p)

Demand for securities is far more fluid than supply. so assume supply S is constant.

p=price change in dollars.

D(t+1) = D(t)*-(1+p(t+1 -t))

the issue w/ japan is FAR more related to the work force and political system. the US can (barely) function politically. the japanese diet wasn't even constructed to take into account the POSSIBILITY that the upper house would be controlled by a different party than the lower house. that is currently the situation now and forced the resignation of the previous PM shinzo abe in disgrace.

further, the japanese labor force issues are quite large (unfluid, company loyalty based) and the corporate culture is a huge dampener on the Nikkei, the Yen, and the economy in general.

i agree.

of course that is logical given your example.

this is simply an example of a concept. i should have stated that the example is easiest to imagine on the margin since there is virtually no feedback loop in that case.

if a company in the US is trading at $100 and the euro is at 1:1 w/ the dollar then it is safe to say that there is no excess demand for the company and that the fundamentals are consistent with the price at that time.

let's imagine that this company produces a staple that is basically inelastic and has its operations spread around the US and the world.

if the price of the dollar falls, say 5% to .95:1 EUR/USD, then it takes 5% fewer EURs to buy that $100 company. the value of the company has not changed by 5% in this instance.

THIS IS AN EXPLANATION OF A CONCEPT.

the market determines the given value at any given point.

if the money supply doubles randomly, nothing changes. consumers are no more disadvantaged than anybody else. stores markup their prices, wages double, prices double. output stays constant etc. everybody who has $5mil net worth, now has $10mil net worth. similarly, anybody who has $50k net worth now has $100k net worth yet they can both still purchase the same goods.

it gets complicated with wages since they are stickier and the expectations of wage increases drives demand for goods. if the expectation of wage hikes is low in the face of inflation, the prices of goods will not double by the increase in money since the demand for those goods will not double due to reduced expected near term future disposable income.


please explain how, given an immediate one time increase in the money supply, the mall has lost relative value.

i don't care about politics so much in this thread.

this is very wrong as noted earlier.

that foreigners can more readily afford our assets does mean that the assets will be in higher demand from them in aggregate. this is economic fact. all the data point to its truth, all the analysis i've doen confirms it. there is no question that this concept is true in my mind.

i forget what this is in response to. china massages all numbers it puts out. the US reports 4% inflation and is probably off by a few %points (i'd think it may be 5-6% overall but not 100% sure). if you think money supply changes= price changes, you are wrong.

the issue here is the following:

1) economic floor: my contention is simply that for given price changes in the USD relative to foreign currencies, foreign demand for US assets will adjust to those changes. price decreases in euro terms increases euro demand for US L-T assets. the data support this contention. the extension of this contention si that the fall of the dollar will increase foreign demand for US assets providing a dynamic "economic floor" so to speak. it isn't a hard floor at all, but it reduces the probability of a sick crash greatly.

2) sovereign demand for US securities/assets. these countries (china, SA etc.) have over 1trillion USD denominated assets. they have lost value and will likely continue to lose value. my contention is that instead of SELLING THE ASSETS THEY DO HAVE which would spark a further fall and destabilizing effect, those countries will SIMPLY USE NEW DOLLARS TO BUY OTHER ASSETS. they are not propping up anything in the sense that they keep pouring money into the US as you imply. instead, they prevent a sharp fall by holding onto most already purchased USD denominated assets and using new flows to buy other assets. you contended that the "importers of US inflation will realize they are holding worthless assets and sell them." i am saying they will not sell the ones they have for faer of losing more than they would otherwise and instead buy other new assets with new flows to diversify their holdings. again, the data support my contention. in this case, look at the examples of china and other sovereign wealth funds w/ tons of USD. instead of selling their current holdings, they are using new flows to buy companies, assets etc. in europe, africa, south america, canada etc. the US would be getting more flows (Unoco or Unocal or whatever that company was called) if the US govt didn't intervene to prevent the sale of the US oil company to china for "national security" reasons.

Barron

missed this post. security reserves are considered as fed assets so im missing your point here. in, fact, they are the fed's primary asset. further, they are part of the money base.

im not reffering to bank deposits, if thats what you're referring to.

Bump for andrew (alawpoker)

Barron

I have no idea what you're talking about. First, "security reserves" isn't a standard term, I'm assuming you mean the bank reserves (what banks keep as deposit with the fed to meet reserve requirements) and they are not a fed asset - they are a fed liability and they are part of the monetary base, but they are also outstanding federal reserve notes (they are kept by the fed but banks have claim on them). Another way to look at is that the monetary base is the sum of all immediately redeemable cash claims against the federal reserve (plus coins). This includes cash and all accounts at the fed.

I'm talking about the securities they hold outright. like the 650 billion dollars of treasuries, for example.

im not talking about what banks deposit for reserve requirements, as indicated before.

The bell sounds....DING DING DING.....and they come out jabbing early Monday morning with both fighters looking incredibly rested