You can determine the price of an ounce of gold in ounces of silver. What causes that number to change day to day?

The very small differences are arbitraged out very quickly. The forex market is the largest in the world.

What exactly do you want here? If you want a totally risk free store of value without paying a cost....I'm not sure that can exist outside of very unfree markets. And gold (including gold backed currency) of course also carries much risk.....so it seems like you are making a complaint about fiat that is true for any asset.


You can just as easily ask "what happens to low wage workers when the market starts valuing their skills less and less (cashiers that are replaced by self scan etc)". These people have to find some way to generate more income or are forced to accept a lower standard of living. The effect on inflation on the poor doesn't seem anymore odious than all the "free market" effects that we are willing to live with.

And really, the complaints about the effects of inflation on the poor are basically the same arguments used to justify minimum wage (inability of low wage workers to negotiate "fair" rates for labor, wage stickiness etc) which I'm sure you're against.

Fiat currency is prone to manipulation and corruption via human nature. It is much harder to "mess" with currency that is commodity-based. It's not a matter of something like gold being greater than paper, but rather the supply of money.

Right now, one central bank (that is not audited) unilaterally makes a decision on monetary policy that has widespread effects both domestically and worldwide. Manipulation of the money supply on a small scale probably won't have a very large effect on greater society. However, what happens when the money supply is doubled, or tripled over a short time frame (5-10 years)?

In the current FED-run fiat system, certain business are hand-picked for the receipt of these "stimulus" funds. Is that situation not ripe for corruption? How come Bank X gets bailed out but not Bank Y, even if both are in similar dire economic stress? The people (the market) are not making this decision - a small group of bankers are.


Re: effects of inflation on the poor/minimum wage

Minimum wage sounds like a great idea. I used to be all for it, but have recently flipped my stance after being exposed to Friedman. The market should determine wages. There is supply and demand in employment. If a hotel chain is only offering to pay their maids $5/hour...then only those who are willing to work for $5/hour will apply. If no one is interested in doing this, the hotel will have to raise the income of this position to make it attractive enough for quality employees to become interested. They need productive employees to keep their hotel open and to make money. No one coerces people into working for crappy wages - everyone has the right to say no and look for other opportunities.

Minimum wage is often cited as a protection for the worker. However, it prices some prospective employees out of the market (those with no skills or experience). How do those with no skills or experience acquire these traits? Is a 'guaranteed' $7-8/hour wage really protection for the worker? Is working for $4/hour in a society with no unemployment or other social benefits worse than not working and collecting a government paycheck for unemployment or welfare (paid for by other citizens)?

Here is a question for the "hard currency" folks. Why do you think fiat not only got adopted but is so soundly regarded the nearly all economists experts in the field dont back "hard currency"?

Because experts think they can control the system. And they do.

Uh yes working for $4 is worse than unemployment and no benefits. I would rather loaf around all day.

And you and others need to understand that unemployed people getting paid unemployment aren't leaching off other citizens. That's an outright slanderous lie for the most part. Unemployed people have to have worked. They paid into unemployment. More often than not they are collecting back less than paid into anyhow.

Try picking up a macroeconomics book rather than being convinced by Milton Friedman. Sure, the guy was right about some things. But the sum totality of what he preaching didn't pan out now did it?

+1

http://online.wsj.com/article/SB1000...567479764.html

One more QE should do the trick...right?

*cough* Rupert Murdoch newspaper *cough*

It is not an outright slanderous lie - please explain how unemployment payments are not from other citizens? Where does the government get the money to pay unemployment?

There is no doubt that the Fed is running out of bullets to get the economy kick started.

This is a report on the minutes of a Fed meeting from 3 weeks ago.

From the article...

"Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery," according to the minutes, released after the customary three-week lag.

Are you disagreeing with this report?

In some sense it is an insurance program. If you are in a car wreck and submit a claim would you consider that to be payments from other car owners or money that you are owed buy paying your premium?

Lets say you collect $600 for 6 months. $3600. Right? You would have had to work x-amount of time. That is calced by the unemployment agency. You worked 10 years. You paid way more than you took out in that 6 months. So it is a bunch of slanderous propaganda by right-wing folks to claim people that collect unemployment are leaching off the system.

It is similar in structure, however insurance is entered into voluntarily - there may be a requirement to get car insurance (bogus imo), but you have the option to choose which policy and the type of coverage you receive.

There is no choice with a federal unemployment program - you MUST pay. There is no choice to opt out.

Imagine a world where you never had to pay into the slush fund of unemployment in the first place - you would have all of that money that you would have paid into the system in your bank account instead. If you are saying you get less than you pay in anyways, this seems like a bad deal for everyone involved?

I get your point that it government mandated insurance and that strikes some people as an overreach of government. I don't share this point of view because as a people we are not heartless enough to let people starve for making a bad decision (not buying insurance). The government is left picking up the tab in these cases.
Not sure why you called it a slush fund but whatever.

That works out only if everyone is gaining middle class salaries and wages. If you have an under class that gets laid off all at once in a system where no one ever pays taxes than you will have a bunch of people who won't enough money saved up to subsist if they do not find jobs within a timeframe.

The problem with unemployment is when the public and private sectors start cutting jobs like what has happened in the course of the past four years without replenishing them accordingly and you get higher volumes of people collecting. Since it drains funds all at once.

I agree that people are not heartless enough to let people who maybe made imprudent decisions starve, suffer, etc.

However, is having government pick up the tab the best solution? I would argue that blindly giving $$$ to try and alleviate social problems is counter-productive and acts as a perpetuating agent instead of a catalyst for change. Take welfare for example - how is giving money to someone with no to little schooling, no to little work experience, etc. going to help them improve their situation? Money doesn't teach skills. Poverty levels are approximately the same since the creation of the welfare state in the US in the 1960s. Those who are receiving aid (as a whole group) are generally not improving their situations while $ is slowly siphoned from the rest of the population. It's not as if 100% of the money makes its way from the taxpayers to the beneficiaries...there are "overhead" costs of government.


I use the term slush fund because there is nothing truly designating your tax money to go to "insert cause here". Ex. Social Security has a designated tax % and there theoretically should exist $X in the SS pool to pay everyone out. However, there is not $X in the pool to pay everyone out...the government has dipped into and taken funds from the SS tax and used it for other purposes. Think of this as similar to the Full Tilt situation - collecting deposits but not maintaining seperate accounts for designated funds.

A government operating with a $15 trillion budget deficit does not have $X earmarked for SS sitting around in an account somewhere.

As someone on the left wing, I partially agree with welfare dependency when right-wing bring up that issue. And would much rather government programs for job training (which my state has been doing more of) and greater assistance to college students (you can construe that as me self-interest motivated since I am back in college... though it is not.. college educated people in general are more productive). Money does teach skills though. Loans are helping me pay my way through school. Otherwise I would probably be in a blue collar job forever in a day.

I think the idea is make good investments for future productivity. And I do agree with Republicans and others that funds have been misallocated and the welfare state that has been created is a misguided one.

When has an "under class" as you call it ever been completely laid off? I'm trying to figure out if you are arguing the taxes are better than no taxes because they provide security in situations where people need $$ to survive. Something like this can be accomplished by the private sector much more efficiently than through a public government. An insurance company could offer unemployment insurance and those who were interested could pay into the system on their own terms.

Adding public jobs adds public cost - how are public jobs paid for?

I am a buyer of private disability insurance and in general favor of private market solutions because in my mind they are a more efficient use of capital and more efficiently run. Not sure if I buy the full tilt analogy though. If the US goverment folds like full tilt then it is unlikey that private banks/insurers can survive.

I have a problem with federal funds being used for student loans - I could probably write a paper on that subject, but will summarize by saying that the cost of education is so ridiculously high in the US because of federal loans. I can expand further if necessary. The concept of loans for education is fine, and every person should have the ability to go to college if they desire, even if they can't pay for it upfront. Having a pseudo-bank/government institution with an unlimited bankroll and no risk making the loans is a huge problem.

The money supply allocated to student loans has vastly increased the last few decades...so has the price of education - perhaps these are connected?

I'm also not a Rep. f the GOP

It won't completely fold because unlike private businesses, the US government has lots of guns and claim ultimate authority over their land/economy, etc. - rules that private businesses cannot play by. The government can make their own rules.

Everyone was laid off during the Great Depression. The recent recession has had mixtures of income brackets receiving the axe. My good friend was laid off from a $50,000 job, and another friend from a $20,000 (I consider below 30k and below as being underclass. But that opinion is arguable so 20,000 and below is where I set the bar at).

Private sectors are fickle. They are dependent on consumer confidence levels in various sectors. So if people are scared buyers then the private sector becomes inefficient.

Public sector jobs add cost. But you also need to factor in rewards. More teachers and professors are consumers too, and increase productivity of future labour.

Everyone was not laid off during the Great Depresison - unemployment levels got as high as 25%, which is extremely high, but far from "everyone."

The crux of private vs. public is the idea that the people (the market) know best, or the government knows best. (US politics are not government by the people, even with elected leaders - there are only a few people that really get to make policy decisions in the public sector.) If the market shys away from a particular sector, this isn't inefficiency, but rather how a free market works - the people pick the winners. If anything, the public sector is inefficient as it props up businesses that would not otherwise make money with subsidies and "stimulus" money. Public spending is also not equal across the board - how come some industries get support and assistance and others don't? Why did Car Company A receive aid but Company B did not?

If people don't like GM cars because they suck, why should public money be used to keep the company running?

Everyone as in people from all over the income bracket were laid off in the GD. Not literally everyone. Sorry for not being so clear.

I think private sector is better. However, public sector has a role. Privatizing prisons is not something I think should be on the plate. Private interests there seems farfetched to me. Feel free to disagree with me. We will never agree on the subject.


And, personally, besides saving jobs at GM, I am not one to outline any great reasons for GM's bailout. AIG was a better bailout imo. Those were high risk deals.

I guess the totality of the logic is that if all the banks, auto companies, and whatever else were allowed to sink under it would have been provocation for another depression.