• This is a political forum that is non-biased/non-partisan and treats every person's position on topics equally. This debate forum is not aligned to any political party. In today's politics, many ideas are split between and even within all the political parties. Often we find ourselves agreeing on one platform but some topics break our mold. We are here to discuss them in a civil political debate. If this is your first visit to our political forums, be sure to check out the RULES. Registering for debate politics is necessary before posting. Register today to participate - it's free!

Does anyone still deny the causes of the Great Depression...

Goldenboy219 said:
Image: My point is to get over the notion that the Fed creates money, when all they can legally do is increase the monetary base which allows banks to lend. Whether you agree or not, lending is the mechanism for monetary creation.
Click to expand...


But the Fed does create money. Yes, when the fed lends to the treasury it increases our money supply.
 
imagep said:
But the Fed does create money. Yes, when the fed lends to the treasury it increases our money supply.
Click to expand...

The Fed does not purchase treasury securities directly from the treasury; they purchase treasuries as a means to increase the monetary base, for which banks can use the newly created funds to issue loans.
 
Goldenboy219 said:
There are far too many information problems to allow a truly free banking system to operate. As stands, the Fed is the most effective institution to conduct monetary policy under the objective of price stability and full employment.



I am the kind of libertarian that believes in individual freedoms, yet still respects the existence of democracy. I believe government should act on behalf of its citizens if other peoples actions begin to spill over into the lives of us all.

There is much to learn from every school of economic thoug
Click to expand...

I just have two points to raise
1) Isn't a policy objective of full employment unrealistic? We have NEVER had full, 100% employment (perhaps once ever in our history when we were starved for labor in the beginning). And the government attempts to do so many things to increase employment while hurting the general economy. Are you really happy with all of these "stimulus" plans to create jobs? In my observation, the Fed can only hurt real job growth by taking away resources from one area and distributing them elsewhere. Shouldn't this matter be reserved for the private sector?
2) I have trouble with your reasoning that we need big brother because there are "too many information problems." I think this concept of "information problems" can be attributed to virtually every aspect of life. Shall a government bureaucrat be paid to stand over the shoulder of every homebuyer as he or she is signing the loan contract? Shall a government bureaucrat be paid to inspect every single car that you buy? What about used cars? The responsibility is largely up to you in finding out the information you need to purchase a reasonable car. Yet, it's not like the only good cars in the world are owned by mechanics and car engineers. I believe the governmet should encourage the market to allow the information to be readily available. And I'm not completely against letting the government provide the information in certain areas. But we've gotten to the point where we don't know a thing until the government tells us. Is this toy safe, this seat belt, this apple, these jeans? Should I eat more meat? More veggies? More pasta?
 
The Fed pub to which donsutherland1 links is a good one, but it is pretty long and covers a lot of ground that isn't central to the question posed. To put it quickly and simply, in carrying out monetary policy, the Fed transacts business with the group of gov't securities dealers referred to as "primary dealers." (A list of the primary dealers is here.) In return for making a market (i.e., standing ready to buy or sell) in each and every bond, bill or note issued by the U.S. Treasury, the Fed, when initiating an open market operation, calls on this group of dealers seeking bids or offers on the securities in which they are interested. This is sometimes referred as a "go-round."

At its simplest, when the Fed buys securities from a primary dealer, that dealer's bank account is credited with the purchase price. When the Fed sells securities to a primary dealer, that dealer's bank account is debited. Along with targeting the funds rate, this is one of the basic steps in the execution of monetary policy. Note, however, that not every purchase or sale is a change in monetary policy: on occasion, reserves are permanently drained from the system (via particularly large coupon payments, for example). These reserve draw-downs have to be replenished if the current policy stance is to be maintained. To do so, the Fed will purchase an equivalent amount of securities in the open market.

Hope this greatly-simplified explanantion helps.
 
ElijahgGalt said:
In my observation, the Fed can only hurt real job growth by taking away resources from one area and distributing them elsewhere.
Click to expand...

Monetary policy is incapable of re-destributing resources. Only fiscal policy can do that.
 
Monetary policy definitely can re-distribute resources as it concentrates money in one area by decreasing the value of money in general. Your savings shrinks while the counterfeiter gets those resources. If monetary policy wasn't capable of redistributing resources then counterfeiting wouldn't be illegal.
 
imagep said:
Loans are transactions that tend to be mutually agreeable between to parties. Yes, there may be a certain amount of risk, that is why we have interest, interest helps to "insure" the risks. Certainly you don't believe that borrowing or loaning money is a bad thing? It's kinda what makes our econonomy vibrant and strong.
Click to expand...

I don't think that loaning is bad, but I think the corrupt system we have of central banking which allows lending far below reserve ratios of 100 per cent leads to economic instability.
 
Goldenboy219 said:
Image: My point is to get over the notion that the Fed creates money, when all they can legally do is increase the monetary base which allows banks to lend. Whether you agree or not, lending is the mechanism for monetary creation.
Click to expand...

And there is an effective difference?
 
phattonez said:
Monetary policy definitely can re-distribute resources as it concentrates money in one area by decreasing the value of money in general.
Click to expand...

Nope! For this statement to reflect any bit of reality, we would have to distingish some sort of a price effect.

Your savings shrinks while the counterfeiter gets those resources. If monetary policy wasn't capable of redistributing resources then counterfeiting wouldn't be illegal.
Click to expand...

Can you identifiy any price effects from the recent bouts of quantitative easing?
 
phattonez said:
Want to get back to me on this Goldenboy? Doesn't this mean that the Long Depression was at least not a boom period?
Click to expand...

Already addressed this in my comment about the steady state.
 
phattonez said:
I don't think that loaning is bad, but I think the corrupt system we have of central banking which allows lending far below reserve ratios of 100 per cent leads to economic instability.
Click to expand...

I seem to be missing somthing. If banks were required to have reserve ratio of 100%, they wouldn't be able to lend any money would they?
 
phattonez said:
And there is an effective difference?
Click to expand...

If you are familiar with how the financial system operates, then yes it is "effectively" different.
 
Goldenboy219 said:
Nope! For this statement to reflect any bit of reality, we would have to distingish some sort of a price effect.



Can you identifiy any price effects from the recent bouts of quantitative easing?
Click to expand...

No, you would not. This is only true if you're working under the assumption that the price level would be steady without any monetary manipulation. This is actually far from the case because we would expect to see a general drop in prices over time (the stock of goods being equal). Adding money into circulation has the effect of causing all other bills in circulation to have less value than it would have had without the extra money being added.
 
phattonez said:
No, you would not. This is only true if you're working under the assumption that the price level would be steady without any monetary manipulation. This is actually far from the case because we would expect to see a general drop in prices over time (the stock of goods being equal). Adding money into circulation has the effect of causing all other bills in circulation to have less value than it would have had without the extra money being added.
Click to expand...

You can only measure value using relative price differentials. And they are????? That's right; insignificant!
 
Goldenboy219 said:
Already addressed this in my comment about the steady state.
Click to expand...

You brought up population growth. I provided you with the statistic that the economy was growing despite the population increase. As I have shown, things did get better during the time period significantly. This is all I really can show since I don't know how to find statistics about growth before and after the time periood. I've shown growth, all you've shown is an attempt to discredit by mentioning the steady state. I can't find those stats, but if you can that would be great. As for now though, it seems that the Long Depression was a period of growth.
 
Goldenboy219 said:
You can only measure value using relative price differentials. And they are????? That's right; insignificant!
Click to expand...

Oh boy, this is such a tough economic concept. Increase supply and the average value of each good decreases. Money is not exempt from this rule.
 
Goldenboy219 said:
If you are familiar with how the financial system operates, then yes it is "effectively" different.
Click to expand...

The only difference is in how the money would get used. There is absolutely no difference though when just considering the effect that it has on the average value of money.
 
imagep said:
I seem to be missing somthing. If banks were required to have reserve ratio of 100%, they wouldn't be able to lend any money would they?
Click to expand...

Here's the real kicker: under a free banking system, depository instutions would not be required to keep any reserves. Toney is most likely not an advocate of free banking.
 
Goldenboy219 said:
Here's the real kicker: under a free banking system, depository instutions would not be required to keep any reserves. Toney is most likely not an advocate of free banking.
Click to expand...

My name is Tony, not Toney. But more importantly, such an institution would get shut down for fraud or go out of business during a bank run. Either way. the system would liquidate banks that keep low reserve ratios.
 
phattonez said:
Oh boy, this is such a tough economic concept. Increase supply and the average value of each good decreases. Money is not exempt from this rule.
Click to expand...

In the long run, inflation is a monetary phenomenon. In the short run, inflation is determined by demand.
 
You're talking about inflation as measured by CPI. All I'm talking about is the value of money. There is no way around the fact that the more of it that there is then the lower value it has than it otherwise could have had without the increase in supply.
 
You must log in or register to reply here.
Back
Top Bottom