Not one word about the Fed being a private bank as well as the IMF, we the people not being able to audit the Fed. historical green backs not mentioned, so much more to be understood about this corrupt privately owned institution. For a true discoarse one needs to watch 'Money as Debt 1 & 2' and the 'Money Masters'
@robertk1968. Since the internet is awash with the ideas in Money as Debt I was aiming to bring out some less discussed aspects of the Fed in this video. Do you have any actual comments about the ideas in this video?
Love your vids by the way. But I can't help coming to the understanding that your critique is talking about the fed as a machine that has got out of control because of the capitalist system. However because the fed will not allow us to see what is really going on via an audit, I feel therefore that all discussions/critiques on the functions of the fed are mere speculation and until this is uncovered the exercise should be on what the role of a central bank should be, if any.
@kaleo183rd Don't forget that Ma, and Pa bicycle shops, hardware stores, restaurants are all examples of Capitalism. Some Corporatism/Crony Capitalism examples would be GE, Halliburton, KBR, Blackwater, MS, etc. These corporations lobby government for favorable laws, government contracts, and to keep competition out i.e. virtual monopoly. Lobbying for these corporations= private government, massive profits...we call that Corporatism/Crony Capitalism. Real Capitalism would incite competition.
@EndTheFedRes Where do Ma and Pa shops get their money to buy their store fronts? From banks. All those small businesses that the right champions are just part of much larger systems of exploitation. They are, in effect, just middle-level managers for global capital. There is no such thing as the independent entrepreneur. And, contrary to libertarian propaganda, monopoly is not just the result of state regulation. It's the natural result of the process of competition! In competition people win!
@brendanmcooney Not sure where you are going with "From banks". Unless you are referring to fractional reserve and the banks making a sh!@#$ of money off of the non existent funny money.
I do agree that regulations (lobbying) lead to monopoly, but that would be called Corporatism, not Capitalism. I completely agree with the "competition" statement.
@EndTheFedRes No. Read slower. Regulations are not the only cause of the centralization of capital. Centralization (ie fewer and bigger firms) is a natural result OF COMPETITION. The winners buy up the losers and industries consolidate.
Re "from banks" I am referring to the fantasy of the small businessman. In reality small businesses are all tied into the web of global capital thru the financial system. This has nothing to do with uneducated conspiracy theories about the Federal Reserve.
@brendanmcooney I see what you are saying, but don't we have ample competition in electronics? (tv's, phones, cmptrs) Yet we have competitors "consolidating". Now lets take health insurance, not nearly enough competition due to Corporatism. What about government contractors, Halliburton, KBR, Blackwater. Clearly regulations are keeping out competition. Clearly this is Corporatism/Crony Capitalism.
Re "from banks"...What are you getting at? and what conspiracy theories?
@EndTheFedRes I don't think there is some pure capitalism to juxtapose w/ "crony capitalism". If the natural tendency of competition is centralization then of course the biggest firms will dominate the markets and sometime use the state to help them in this. But the state isn't the initiator or the last word in this centralization. And the problems with capitalism do not come from centralization but instead from social antagonisms inherent in wage-labor and commodity exchange.
@EndTheFedRes re banks: I'm getting at your juxtaposition of "ma and pa" shops with "crony capitalism" and I'm saying this is a false dichotomy because capital is an international web of exploitation and there is no such thing as the quaint, norman-rockwellesque, small business owner. Most of the time that small business owner is just a mediary for an international banking system.
Re. conspiracy, I mean the fantasies of ron paul, zeitgiest, murray rothbard, and all the end-the-fed nonsense.
FIVE governors are government appointed for 14 years. (it "should" be seven total). The chairman and vice chairman are chosen from the appointed governors.
However, the government appointees are NOT the majority of the FR Open Market Committee.
Five Appointees of 2000 FRS Brd of Govs total employees is not "quasi government." An ZERO appointees of the 12 FRBs is even further from quasi-government.
The FRS is made of 12 Federal Reserve Banks (FRBs) , those 12 banks are NOT-FOR PROFIT CORPORATIONS and have NO GOVERNMENT OFFICIALS OR APPOINTEES.
the 12 FRBs are owned by the commerical banks they lend to (correct), also called MEMBER BANKS. Member banks own the 12 FRBs.
the 12 FRBs used to select the BOARD OF DIRECTORS of the whole FRS, like any other corp. After 1935, SEVERAL appointees (a minority)to the new BOARD OF GOVERNORS are "government." The Rest Aren't.
no currencies are backed by gold anymore, since the 70's. Instead currencies are pegged to the dollar. But how do we know how much the dollar is worth...? This is the big theoretical question.
I just found this quotation from Marx, from his journalism, which sums up perfectly how wrong the quantity theory of money is: "Taken all-in-all, Sir Robert Peels much vaunted Bank Law does not act at all in common times; adds in difficult times a monetary panic created by law to the monetary panic resulting from the commercial crisis; and at the very moment when, according to its principles, its beneficial effects should set in, it must be suspended by Government interference."
Not only that. but central banks have been pumping vast quantities of money into the financial system recently, only for most of it to remain overnight with central banks. When banks buy assets, they are now mainly only purchasing other banks' assets or government debt: the "new money" is just being recycled through the financial system. Bank lending to non-financials has slowed even further then ever.
In fact, the formula for capital and for the labour process are different. Simply put: capital starts as money (M) is converted into commodities (C) and transformed back into money (M).
M-C-M
Labour, otoh, is a commodity (C) that must be sold for money (M) in order to purchase commodities (C) in order to live.
C-M-C
But the point of the capital process is more money (M'), thus it should be M-C-M', it increases. The formula for labour stops with the purchase and consumption of commodities.
well you're not distinguishing between labor and capital, you merely take labor and consider it a form of capital. Production earns interest and profit, or what you would consider M', not just capital. I guess, this is the problem when discussing different economic theories...
not at all. Labour-power is bought and sold as if it were a commodity, but its (re)production is unlike other commodities (for obvious reasons). The use-value of LP is that it produces value, but because it comes in the form of a living person there is a huge conflict between buyer and seller. The worker produces products that he has no control over, which when sold realise profits. Plus LP is capable of producing more than it needs to reproduce itself. Hence "surplus value".
The worker does have control over the products, in the form of wages. The reason why the capitalists are able to sell their products above the marginal cost level, and pay their workers less then the total revenue is because of interest (time preference), and returns on entrepreneurship.
How does being paid a wage give you control over the product? Does a worker leave the factory at the end of the day with a pile of products the created?
And what's the point of just stating that tired-old time-preference theory? Just parroting Austrian rhetoric doesn't prove a point. It just makes you sound like a robot. Marx incorporates turnaround time into his theory of profit. But this only effects amount of surplus value that can be made in a year. It doesn't create surplus value in itself.
variable capital refers to the _costs_ of hiring LP. It's called variable because its value changes through the prod process itself: it creates something at the end worth more than the beginning.
A business certainly sees LP as capital, eg "Human resources", "human capital" and also wage costs form separate entries to overheads and fixed capital on a business's accounts. (Though of course there's a massive contradiction!)
I've read up on the crises which occurred in England during the middle part of the 19th century. The supposed "failure" of the currency school vs the banking school. The problem is that the previous fractional reserve banking methods inflated the money supply for so many years, and continuously suppressed the market rate of interest below the natural rate. This caused an artificial demand for loans, through the employment of credit, which was not justified by the actual economic condition.
fractional reserve banking is basically an accounting method for bank deposits and I cannot understand why Austrian laissez-faire capitalists get so wound up about it: after all, it springs up naturally out of the credit system. It's the free mkt inaction!
Again,. it ignores money as capital and the Banking School's law of reflux. Bank deposits are not inflationary.
Its nothing more then embezzlement, fraud. The creation of fiduciary media presupposes a drop in the market rate of interest, since the creation of inflation, ie more money, creates the illusion of a condition which seems appropriate for a more roundabout method of production. But the time preferences have not truly changed, the people have not actually forgone consumption (saving), to warrant business ventures at that rate of interest. This leads to an unsustainable boom, and eventually bust.
then you must be against insurance, because it works on the same principle: that at any one time only a certain number of claims will be made on a fund of money. Forcibly abolish FRB and the result would be outright sluggishness of growth.
Austrians are a puzzling breed. Their emphasis on homesteading, saving and individual trade harks back to pre-capitalist social relations.
Well no, insurance is not used as money, and people understand the nature of insurance. You see, the banks don't tell the people: "we're going to use your money for a bunch of shit, and if too many people demand their money back, we're going to default. Technically speaking, the only thing I'm really interested in is it's effects on the loan/capital market.
and if there are too many claims on a fund owing to a natural disaster, etc., it cannot meet its commitments ... Besides deposits are guaranteed by governments, lenders of last resort, meaning bank runs don't need to arise. Again FRB is natural in a credit system. Abolish it and you abolish banking as such. There's no such thing as a natural rate of interest - such a concept of equilibrium in savings/credit is absurd.
"Besides deposits are guaranteed by governments, lenders of last resort."
That's all an illusion, the FDIC, the government, can never truly repay the people back their savings, at least not in real terms. Sure, they could print trillions of dollars, but they might as well make monopoly money legal tender. FRB isn't natural, banking did not always act so fraudulently. Bad bankers were subsidized by the government, and these so-called "lenders of last resort."
Furthermore, the creation of fiduciary media (money substitutes not backed entirely or partly by money) necessarily creates the demand for further money expansion. It is true when the banking school says it's elastic, but this elasticity expands the demand, not the other way around. And this is necessarily the case, as the suppression of the interest rates are the only way these money substitutes are desired. Meaning they demand to engage in investments not warranted by the economic condition.
Banking has existed for thousands of years without FRB, the Medici's did just fine. Banking makes money on arbitrage and on dues payed for deposits. Sure, we would have less billionaire bankers, but sowhat
Believing in the free market does not mean favoring fraud and embezzlement. FRB is nothing more than lies, theft. How can you deny that now? The FED expanded it's balance sheet by trillions in order to make the banks "more liquid." There should be a run on the banks so they don't do it again.
The way we define banking is different. The banking we have today is not banking, it's pure fraud and embezzlement. These banks should be allowed to fail, but of course, no one wants to deal with such ramifications. So the Austrians merely want legislation which would prevent fraudulent activities. Or atleast give disclaimers about their activities. Something like "we're going to take your money and do a lot of crap with it, so there might come a day when you want your money and we dont have it"
"The way we define banking is different." Yes, and unlike any bank that exists under capitalism.
I'm not sure what relevance for capitalism your theories have when you say that banks should not act like capitalists and money should not act like money.
Unlike any bank that exists now, in a pseudo-capitalistic frame work. Like I said, the Medici's did just fine. I'm personally for having free banking, and allowing for the bankers to realize it's not possible to pursue FRB and keep your bank operating. But many want legislation which gets right to the point.
Here's what Mises says: "Capital goods or production goods derive their value from the value of their prospective products; nevertheless, their value never reaches the full value of these prospective products, but as a rule remains somewhat below it. The margin by which the value of capital goods falls short of that of their expected products constitutes interest; its origin lies in the natural difference of value between present goods and future goods."
Not that I know of. I know that there were problems with their London branches due to wars and such. Eventually they collapsed, but I don't know why. But I do know they were extremely successful without FRB.
Also, Marx has more in common with Mises/Menger/Bohm-bawerk, then he does with Keynes, Samuelson, Friedman, from a purely technical standpoint. If only Marx was born later, he may have been the Ultimate Austrian, due to the emergence of marginal utility.
Well from what I know, which is not much, I must admit. Marx seems to understand that money naturally emerges from voluntary exchange through social relations and the division of labor, which is more than I can say for the acatalactic views of the economists today. But yeah, that statement is probably wrong, lol.
yes but Marx would never think that you could resolve the contradiction of exchange society through changes in the money system. As you admit, the money system came out of the system of commodity production.
I think an Austrian would say that's because Marx didn't understand interest. But again, I'm just getting into capital theory. I know the ramifications of capital theory, but don't understand capital theory itself, at least enough to defend the Austrian view. From what I know, interest is what regulates production the same way commodity prices regulate consumption.
I think I'm starting to understand Marx's positions a little more. Because Marx doesn't understand or consider the role of interest in the regulation of production, he assumes that the producers MUST produce a a surplus of commodities which lowers their market exchange value. And because he's operating with the LTV, he naturally assumes that the only way the capitalist can continuously make profits is by exploiting his worker, that is, constantly reducing his wages. That makes sense.
Interest-bearing capital collects hoards of money from different circuits and channels it into industrial capital to make it productive capital. Interest-bearing capital doesn't produce SV itself, but it is a claim on the pool of future profits. However, the mass of interest cannot be bigger than the total profits.
You can increase wages and also increase exploitation at the same time by raising productivity, which has the effect of cheapening commodities.
Because all this occurs at the level of total social capital, we see a tendency for all rates of profit of merchants' capital, interest-bearing capital and industrial capital - all these rates tend to equalise. Without merchant or interest capital, industrial capital would not be anywhere near as productive, so they represent part of the costs of circulation, if you like, of capital, all the pofits of which arise from production.
Interest rates regulate production, it's the right side of the invisible hand. If interest rates were set at zero, producers would never stop producing, leading to malinvestments and the consumption of capital. Prices rise for a good (due to increased demand not inflation), producers enter the market, the increased demand for investment increases the interest rate, until the natural rate is found. At this point, the would be producers are told that "we have enough producing this commodity."
No, Marx (and me!) says that it is the supply and demand for credit which largely determines the rate of interest. It is endogenous to the production process, though there is some leeway in the way it works, not that it always does. I mean, money is cheap (3m Libor is 1.1124%) and governments are underwriting plenty of transactions, but corporate borrowing is way down because there is a crisis in profits. Production is being scaled back.
Yeah, but the demand for credit will naturally increase when the rate of interest is brought down, even in relative terms; which would occur by expanding the supply of credit. Now the Austrians say that even if the introduction of new credit equals the demand for it, the demand has naturally increased, but the supply of actual differed consumption hasn't. Creating a disproportionality between the market rate and natural rate, ie inflation. This would be demonstrated by the quantity theory.
to reiterate: "it is the supply and demand for credit which largely determines the rate of interest."
the whole point of credit is to reduce turnaround time so that production does not have to depend on "deferred consumption", ie make markets more efficient.
You assume that 100% reserves would cause market equilibrium, that is, that there would never be crises, that all goods could be sold and that use-values and exchange-values match up, but this could only arise in planned production.
"It is the supply and demand for credit which largely determines the rate of interest"
What I'm saying is that the issuing more credit, by lowering the rate of interest, would naturally increase the demand for it. This would allow for capital investment in businesses that shouldn't exist. Or bubble investments, such as starbucks every 10 feet, coldstone every 5 feet, entire cities built in the middle of the desert. And this naturally draws fops away from real activities.
speculation arises out of the capitalist system itself: trying to make money from money is capital at it's most basic process.
The idea that under capitalism you can avoid bubbles depends on the matching up of supply and demand, ie an economy of pure use-values, otherwise known as ...
If the interest rates are suppressed below this rate, there would be a surplus of apples (enter Marx). But inflation would keep the prices of apples high, and the companies who entered, who would not have entered if the interest rate was higher, would be drawing labor and capital away from other sectors. This would increase wage prices as demand for labor is artificially increased. And the lengthening of the production process is extended for too long.
if there were a glut of apples, what would happen to their price? it would fall. this has little to do with the costs of credit.
if labour were drawn from other secotrs, ceteris paribus, then the number of wage workers remains the same therefore you cannot claim that this would raise the wage rate.
credit shortens turnover time of production, thereby making it more efficient.
Well this would be where inflation comes in. Their wages would be nominally increasing, bidding them up on the labor market. The price of apples would fall in real terms, but not in nominal terms, conflating profits. Distorting the entire price system, altering the mechanism. During inflation, there may be products whose prices fall both in real and nominal terms. It all depends on the extent of the inflation, and on who receives the inflation first. Arbitrary inflation, is the great distorter.
Wage rigidity would set these inflated wages above to a high nominal level. But when the deflation, that is, the correction occurs, these wages must fall. If they don't, there will be massive unemployment. The workers get the inflation last, so their purchasing power continuously falls, even if their nominal incomes increase. But people don't think in terms of nominal or real. And the CPI doesn't tell us shit.
I do agree, certainly, that high inflation is an attack on the wages of workers by reducing their spending power. Deflation is worse for workers because their debts increase when their wages fall. From a capitalist point of view a modest bit of inflation is good because it discourages hoarding.
But in all, if the values of commodities rise relative to the fall in the value of money (and vice versa), the total value in the economy remains the same.
Inflation presupposes an arbitrary fall in the market/money rate of interest. I can't exactly tell you why, since I don't really understand the nature of fractional reserve banking. But they go hand in hand.
But the people have not warranted such capital investment, and consumption and production are in a conflict. Up until the interest rates rise back up to their actual level, that is when the inflation has reached a point where it must eventually stop. The producers then realize that they have made an error, and they halt their investments before they come to fruition. Destroying their capital.
If the inflation continues, complete demonetization must occur. Inflation also creates artificial profits, at first. The bubble businesses depend on perpetual inflation in order to survive. Mises regression theorem states that those who get the inflation first see their purchasing power increase, relative to those who see it later. But the banks continuously de-leverage themselves during this process. And must eventually pull back; bringing the market rate of interest back to the natural rate.
If you don't depend on deferred consumption, that is savings, then how do you know when to produce or when not to produce? It would be a complete stab in the dark. Prices are a real time set of facts. When the time preferences are high, there are big revenues, for any given industry; this would draw a surplus of would-be investors. If interest rates don't regulate this surplus, then bubbles are the inevitable result. Like when prices are set below the market rate, shortages.
"If you don't depend on deferred consumption, that is savings, then how do you know when to produce or when not to produce?"
the market determines, surely? If I sell all my products, I want to make more. I if think I can sell even more I will borrow to expand and so on. Plus I have competitors: I need to reduce the costs of my commodities to stay profitable so I must constantly revolutionise production processes. It's market forces: there's no mystery!
But again, that's a complete stab in the dark. If society x decides they want more apples, they begin to buy more apples, and the price of apples increases. Now would-be producers see the price of apples increasing and want to produce apples. They go to the loan market and demand a loan; this bids the interest rate up. This process would continue up until the point where the interest is so high that producing apples is no longer profitable. ie, when the people decided, "we have enough apples."
by arguing that a society collectively plans its production in this way you are inadvertently arguing for socialism.
also, you are arguing that money and interest-bearing capital does not have a price before demand is registered for it or before it plays a role in the market.
Well yeah, this is the nature of the invisible hand. That when an individual pursues his own interest, he must necessarily help those around him. And that only the society can truly plan their economy, since they know what they want. When a centralized body attempts to plan the economy, they are confronted with the issue of trying to predict the wants and needs of millions.
Your second point. The causal relationship is the issue at hand. I must admit, I don't know enough to continue this convo
But thanks for the conversation; I have a lot more reading to do. This has been by far the best conversation I have had on the internet. I'm no ideologue; if I'm wrong, I will surely find out. If Marx is right he's right, but the failure of central planning, historically speaking, is hard to reconcile. The Austrians have a pretty logical explanation.
Here's a question since you seem to understand the nature of banking better than me. How does the bank expand the elasticity of credit? I understand they just open demand deposits, but how do the capitalists use the demand deposits when issuing loans if there's no actual money in the demand deposits.
it refers to the velocity of circulation. A sum of money can play the role of a bigger amount.
Also, a bank loan is an asset for the bank: you have to pay it back. It's an expectation of future value. Thus they don't "just open" new accounts or there'd never be debt crises because banks could just issue new loans to cover old losses.
Deposits are liabilities: that's money the bank owes.
Banks can only lend out what is deposited in them.
Well capital theory is unfinished. But theoretically, saying it's "absurd" completely denies time-preferences. The natural rate is merely the real time preference of society, not manipulated by the purchasing power fluctuations of money. The loanable funds market merely represents/demonstrates this. One thing the neo-classical's and Marxian's never understand, namely the fact that a person never values an apple one year from now, or 100 years from now, the same he would an apple right now.
there is no one natural rate. There would have to be a permanent balance between savings and loans. How could there be? There are different goods and different industries. The money rate would have to be equal to all of these a the same time!
Thus the idea that there is one rate for money depends on the notion that money is neutral, that its effects on production were as if it didn't exist at all.
Yeah, there are many natural rates. The Austrians are against all aggregated data. There would be industry specific money rates and natural rates. For each industry the increased investment demand would increase the natural rate of interest until it is no longer profitable to enter that industry. Again, capital theory is unfinished, and I have not read enough to really answer these technical questions. If you read Bohm-Bawerk and Hayek's work on capital, and disproved it, you'd get a nobel prize
I just looked back over this. I was right but my wording was off a bit. According to Hayek there are many rates, but the point is that it becomes meaningless when applied to money: how would it be workable to borrow money at different rates for different industries? I would simply borrow at the steel rate and transfer my money to crop production.
Also, it ignores the money market rate: who and how are these rates decided? What is to stop someone from transferring money through a business?
so therefore we'd arrive at a situation where there were many different rates but the one commodity, money, would have to be equal to them all. Thus money is not the universal equivalent of all commodities, thus it is not a "neutral medium of exchange",. thus money is not money.
also, as I wrote before, profits tend, on average, to equalise across industries anyway, meaning that the profits for interest-bearing capital will also tend towards this rate too, on average. Thus Hayek's coneptualisation is not only inconsistent, it is also unnecessary.
And another thing: the only way to prevent swaps of money at different industry interest rates (and that reminds me ... derivatives) would be a centralised authority checking all economic transactions for industry-specific rates. Thus I would not be free to do as I please with my money.
The Austrian free-market sounds decidedly ... Stalinist.
And finally, if an industry were very successful, producing lots of widgets that all got sold at their values (or above) banks would lower their rates to these borrowers, not raise them. If lots of steel producers were making big profits, in the real world, banks (which compete with each other) would be falling over themselves to lend. But, this is endogenous: it depends on actual profits being made first of all.
Naturally, not amount of monetary fiddling eliminates boom &bust.
This is what I was getting at before when I said Marx had more in common with the austrians. Marx believed in an objective calculation of value, and thus thought he could plan the economy using this universal principle. But Marx was wrong, individuals have their own value-scales, and thus can only plan for them selves. When they plan for themselves, that is, without intervention distorting their planning, price mechanisms will bring the economy into harmony.
You have to apply Capital theory into the mix, which mainstream economists are entirely unfamiliar with. Interest is a natural market phenomena, it stems from time preferences. And like the other price mechanisms, it must reflect the true market conditions. The Austrians then go into the social ramifications of central planning, and how it must inevitably lead to tyranny. Something I'm sure you don't want to hear about. But the Austrians predicted the collapse of central planning b4 it occurred
See Kaldor's various critiques of Hayek's theories.
Interest-bearing capital tends towards the same rate of profit as other forms of capital precisely because it does operate in a market.
Austrian business cycle theory depends on such a strict control of money that it is inconsistent with their free market beliefs and stops money acting as money as we know it.
I don't know what else to say! Even Milton Friedman admitted money supply is NOT exogenously determined by central banks.
Yeah, that was my point lol. It would be like a 20th century student trying to teach Newton relativity, when that student didn't fully understand it himself.
but if my business were a success I could go to different banks and get a better rate. Banks compete to lend, except in the Austrian conception where banks don't behave as banks! Also, I would just borrow at a different commodity rate, or get another business to borrow on my behalf at a cheaper rate.
In that way, a shadow banking industry would arise because it would be impossible to calculate the rate to borrow money as pure money.
The banks would be constrained by the actual supply of savings. The industry would see an influx of would be investors seeking to meet the increased demand for that commodity, but each additional investor would bid up the rate of interest; since the supply of loans, at least in the short run, is fixed, but the demand isn't. But again, I don't want to get into a technical discussion until I read Bohm-Bawerk's "theory of positive capital," and Hayek's "pure theory of capital."
the rate of interest would rise most when it mattered most: at a time of crisis, ie when everyone is clamouring for credit!
Hayek's solution would be only for us to save to put the economy back on its feet, but this puts us in the odd situation in which me going out to buy a coat increases unemployment!
Also, Hayek's economic theory posits disequilibria everywhere ... except in the credit markets, which is dependent on an equilibrium re:savings/loans!
All of the problems people associate with "capitalism" (thanks Marx), are just problems they have with inflation. On the one hand, they love inflation in the early stages, it props up businesses, wages, and the government's ability to buy them off. On the other hand, it causes income disparity, arbitrary re-distributions of wealth, and the boom-bust cycle (as apposed to Marx's constant bust cycle/the end of civilization).
The inflationary policies were reduced by the bank act, but the unsustainable investment demand wasn't. This wasn't a crises, it was a correction, a correction the English people didn't want.
erm, inflation actually went up: 1844 it was -0.1%, in 1845 4.9%, 1846 4.0%, and in 1847 12.0%. After the Act was suspended, inflation dropped to -12.1%. In other words an increase in BoE notes led to deflation.
The Act was terrible legislation because if banks one after the other had gone bankrupt, soon enough the BoE would itself have collapsed - almost certainly a "correction" the British people would not have wanted!
The fundamental problem with the currency school is that they did not consider, or they overlooked the fact that even convertible banknotes remain permanently in circulation and can then bring about a glut of fiduciary media the consequences which resemble those of an increase in the quantity of money in circulation. that the currency schools greatest folly was that they failed to recognize the essential similarity of bank notes and bank deposits.
Well during the run, there is most certainly a difference. But during the inflationary propelled boom, cash and deposits are basically the same. The deposits circulate as if they were money. When the panic comes, the whole scheme is destroyed.
the "inflation" as you call it (ie increase in M1 money supply) does not create the boom: rather the need for increases in money is endogenous to the production and circulation of commodities, ie the needs of capital. Otherwise the money would not be lent out: when times are bad it's harder to find creditworthy businesses.
Deposits are records of a bank's liabilities and no-one thinks that they don't circulate "as if" they were currency (M0).
M1, M2, MZM are all worthless, they are all over the place, and they don't truly represent the amount of fiduciary media put into circulation.
But at first you're right, the money supply expands as there is an increased demand for money, that is, for liquid capital. But this demand for capital investment, meaning the business ventures they want to pursue, are not wanted by the actual economy. The people have not deferred consumption (save) as to warrant such activities.
Under capitalism labour-power is a commodity bought and sold on the market. Marxists call it variable capital (v), to distinguish it from constant capital (c), ie machinery, plant, raw materials, etc.
So capital (C) that enters the production process can be described as C = c + v
Also, capital as money forms an accumulative process all its own, seemingly (but not actually) independent from the process of productive capital accumulation - it depends on the appropriation of surplus value through interest - and it is this that forms the basis of financial crises.
But capital is not money. Money is solely a media of exchange; while capital is defined as higher order goods, or production goods. The value of money depends on the subjective valuations, of individuals, on the current economic condition, namely their desire for goods and services.
Capital is a process between money and commodities to increase value. All those goods you call capital at some point have to be turned into money to enable a business to turn a profit, to reinvest back into production and to accumulate and grow in an endless cycle of production and circulation. The process depends on capital changing from a money-form to a commodity-form and back again, increased in size. You cannot produce capital, therefore, without money.
"You cannot produce capital, therefore, without money."
Well yes, without money you cannot produce capital; since the formation of money presupposes a division of labor, and therefore the possibility of capital creation and accumulation (advanced capital). But capital is not the sole determinant of production, labor must be included since they are co-dependent factors. If we follow your reasoning, capital AND labor would be a process between money and commodities in order to increase value.
Again. how can you be so ridiculously smug and arrogant in your comments when you clearly don't even understand the definitions of the terms you are arguing against. Yes bourgeois and marxist theories define capital differently. But you obviously don't even understand the way capital is defined by marx. How can you have an honest dialogue with someone when you've already made up your mind about a topic before you understand it?
that's the Misean theory of praxeology for you, Brendan. Mises derives his theories as deduced from a priori assumptions. It's not only a pre-scientific method and has a lot in common with medieval scholasticism, but it also means that Misean theory is basically unfalsifiable (cont'd)
"If a contradiction appears between a theory and experience, we must always assume that a condition pre-supposed by the theory was not present, or else there is some error in our observation. The disagreement between the theory and the facts of experience frequently forces us to think through the problems of the theory again. But so long as a rethinking of the theory uncovers no errors in our thinking, we are not entitled to doubt its truth" - LvM, Epistemological Problems of Economics.
"New experience can force us to discard or modify inferences we have drawn from previous experience. But no kind of experience can ever force us to discard or modify a priori theorems." LvM, Epsitemological probelms of Economics.
in other words, if reality conflicts with our a priori assumptions, reality must be wrong!
The bank of international settlements is the central bank of central banks. The world economy will probably lead towards SDR's (special drawing rights) but this will create the same trade imbalances as the dollar standard. An international gold standard, and a 100% gold reserve rate for banks, is the only thing that can cause long term economic stability. You also misrepresent the libertarian position.
A 100% gold reserve rate would be disastrous. it would make almost every bank bankrupt overnight. Not only that it would drive up the costs of credit enormously. See Marx's comments on the 1844 Bank Act in Capital Vol III. Further, a global gold-backed currency would require an end to international competition - just how likely is that under capitalism?
well, in it he goes through a Parliamentary report from 1857 into the 1844 Bank Act. It forced the Bank of England to issue new notes backed 100% by gold. It was a complete disaster. It meant that the Bank could not issue enough notes when trade demanded it. It became the world's biggest hoarder, taking out millions of pounds from circulation, only to benefit bankers by making credit more expensive.
I haven't read up on it, but I'm positive you're wrong. The emergence of money can only occur through free market exchange, were direct exchange is replaced by indirect, and indirect by money. If banks are allowed to expand the money supply, due to the fungibility of money, there will be inevitable booms and busts. International trade, and the balance of payments, were carried out through gold. The world was on an international gold standard; so I don't know what you're talking about.
crises in the 1840s and 1850s forced the suspension of the Act, because there weren't enough notes circulating for cash payment. The quantity theory of money is wrong: money is not only currency - it is also capital. Loanable capital returns to banks as increased deposits. It's not inflationary. But if the amount of money is fixed it only serves to increase the interest rates at which money is lent., thereby causing a credit crisis.
of course for Marx, the contradiction lies between money as currency and money as capital and no amount of fiddling undoes the tendency of capital towards crises. Still, during a credit crunch it is sensible for a central bank to expand money supply to avoid a common ruin of all industry.
This is the one thing you Marxists fail to understand: The price mechanisms serve purposes, they are real time facts for both producers and consumers. Without them, people would be acting blindly. The interest rate is also a price mechanism, and it must accurately reflect the economic condition.
Ok. just to intervene here, To say that marxists don't realize that price serves purposes of allocation shows that you don't know anything at all about marxist theory save for what strawman arguments you read on some libertard website. If you don't understand that the LTV is based on an analysis of the process by which social labor takes the form of value in market exchange then maybe you shouldn't be leaving smug comments everywhere all over my videos.
Don't get angry at me buddy; it's not my fault your hero Marx was wrong about everything. Prices may only emerge from voluntary exchange, through MARKETS, due to individual PREFERENCES. And you're right, I don't understand Marx's theory of capital, since in reality, it isn't a theory at all. Where are all of the factories void of any and all human labor? This isn't Russia buddy, you can't throw me into a Gulag because you don't like facts.
Marx would not disagree that formally individual decisions about purchases and sales in markets, in voluntary exchange, are a requirement for price formation. So, again, your attempt to critique Marx shows that you know nothing about what Marx actually said.
I don't understand your statement about factories. I suppose it is related to some other misunderstanding about marx. Do you think Marx predicted total automation of all factories?
You're not understanding. I'm not saying that voluntary exchange is a "requirement" for price formation; I'm saying voluntary exchange (markets) is the ONLY thing responsible for price formation. There is no "proper price," Marx confused value with prices, and prices with numbers. The term "surplus value" is a paradox, a contradiction. I'm not here to debate Marxian theory with you, there you clearly know more than me. But your videos don't specifically say Marx's interpretation of "x"
And of course, a fixed supply of money does not mean a fixed supply of loanable funds, if people decide to save more, the loanable funds market will see a shift to the right (in supply). I just wanted to clarify this point.
RE fixed quantity: the amount of cash required to circulate commodities will rise with econ growth (which is the whole point of capital accumulation) but if this is quantity fixed then commodities will fail to find buyers and money will flow from the capital markets to function as means of payment. Interest rates will rise drastically, causing a panic. Money plays different, contradictory but necessary roles in the capitalist process as a whole.
"RE fixed quantity: the amount of cash required to circulate commodities will rise with econ growth"
No, you're misunderstanding the role/nature of money. Money merely represents the amount of commodities in the economy at any given point in time. If Q increases, there must be a corresponding fall in prices. The amount of money is inconsequential, as long as it's value represents the current economic condition.
The quantity theory is not wrong, in fact, Marx was a quantity theorist. If the supply of money is fixed, it may mean higher interest rates, but it may also mean lower interest rates; it all depends on the demand of investment for any given sector, at any given time. Interest rates serve a purpose, if they are accurate, they tell the producers how much to produce, and when to produce. The crises was caused by the misallocation of capital/labor. Inflating will only continue this distortion.
"The law, that the quantity of the circulating medium is determined by the sum of the prices of the commodities circulating, and the average increasing more rapidly, than prices velocity of currency may also be stated as follows: given the sum of the values of commodities, and the average rapidity of their metamorphoses, the quantity of precious metal current as money depends on the value of that precious metal. ... contd.
"The erroneous opinion that it is, on the contrary, prices that are determined by the quantity of the circulating medium, and that the latter depends on the quantity of the precious metals in a country this opinion was based by those who first held it, on the absurd hypothesis that commodities are without a price, and money without a value, when they first enter into circulation ... cont'd
" ... and that, once in the circulation, an aliquot part of the medley of commodities is exchanged for an aliquot part of the heap of precious metals."
Furthermore, the 1844 bank act allowed only the British central bank to print the notes, and still allowed for the creation of bank deposits. That act was a disaster from the start since it didn't eliminate the use of fiduciary media, nor did it remove the central bank. The Austrians propose a system where only private banks exist, where there is no fractional banking, and where the supply of money cannot be inflated past the gold supply. This is the 100% gold reserve system.
the solution is a global currency to supplement our globalized world economy.....right????? OR, we should rethink globalization and keep it somewhat segmented so that bank/currency failures wont mess everone up simultaneously
i think the solution doesn't primarily lie in changing the global monetary system. rather it lies in changing the character of the world economy as a private capitalist economy. ^^
We are on a de facto oil standard due to the fact that world wide oil must be traded in Federal Reserve Notes. Those countries which have threatened to leave the Fed Note are in fact the same ones US foreign policy is directed against. This is known as the Petro-Dollar cycle. But other strategic resources follow this same pattern.
Brendan, I would love to hear your thoughts on Fractional Reserve. While I agree that the Federal Reserve is a problem, Fractional Reserve is a much bigger problem. Fractional Reserve is one of the biggest tools of financial capitalist exploitation in existence.
Well, I'm no fan of any capitalist, be they productive or financial. But I think that banking and credit are essential to capitalism. What would happen if we couldn't extend credit to capitalists? There would be no way of dealing with the day-to-day imbalances in production. Fractional reserve is just part of the larger way in which financial institutions create credit.
this is where the Austrian perspective is valuable. credit doesn't disappear with the end of fractional reserve. loans can be made with existing capital. however without fractional reserve, the falling rate of profit happens much quicker. profit margins would shrink FASTER than wages, and thus demand. i think the transition to a post-capitalistic economy would be much smoother without fractional reserve.
How can loans made with existing capital a)keep up with the expansion of value inherent in capitalism, and b) create credit money ahead of the creation of value in order to facilitate large investments?
Yes I agree that without a credit system capitalism would have to face its inherent crisis tendencies much sooner. Of course the Austrian perspective argues the opposite- that w/o central banks or state regulation capitalism would be in perfect equilibrium.
"What would happen if we couldn't extend credit to capitalists?"
The capitalists would be required to burrow only from the actual supply of savings, thus their production would be accurately regulated by interest rates. As you well know, interest rates are supposed to keep prices and production in equilibrium, but with over-extensions of credit these rates are constantly facing downward pressure. The investment function, when including the structure of production, demonstrates this point.
the dollar will remain strong for at least a few more years. right now capitalists (and consumers) are scrambling to pay down debts, while at the same time receiving fewer dollars in terms of profits or wages. but debts need to be paid in dollars! this creates an exceptional demand for dollars. the same thing is playing out in every country on the planet. since the majority of the debt on the planet is in dollars, demand for dollars is very high, so the value of the dollar will also be high.
once the "deleveraging" ends and capitalists/consumers have paid back a sufficient amount of their debts, or defaulted altogether, then a fall in the dollar will be much more likely. however it probably won't fall drastically relative to other currencies, because other currencies are in the same boat. right now, the dollar is falling relative to the monetary commodity of gold. 2-5 years from now the dollar will fall relative to non-monetary commodities.
I agree. This system is imploding - NWO or not...It is outdated - and ripe to fall. All nations will have to replace it - it is up to each one of us what we want in its place. No need to sit an wait for magical politicians to solve it for us...Thanks for the intelligent argument!
I understand the role of debt money, its a scam for international bankers to steal all the property. Thomas Jefferson warned of it.
If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.
I'm shocked to hear this and realize that I already had a decent understanding of it.
So many people who talk about the current free market models these days fail to explain the basic concepts. This is a really clearly spoken explanation that I'm going to recommend to friends.
BRILLIANT a great Erudition of the nature of Capitalism always bearing the seeds of its own destruction. Any system based on the greed and corruption of those in power. Will always fail society as a whole.These brilliant presentations need to be given due applause to the amazing author of these awesome vids on Capitalism.
Not one word about the Fed being a private bank as well as the IMF, we the people not being able to audit the Fed. historical green backs not mentioned, so much more to be understood about this corrupt privately owned institution. For a true discoarse one needs to watch 'Money as Debt 1 & 2' and the 'Money Masters'
robertk1968 1 year ago
@robertk1968. Since the internet is awash with the ideas in Money as Debt I was aiming to bring out some less discussed aspects of the Fed in this video. Do you have any actual comments about the ideas in this video?
brendanmcooney 1 year ago
Love your vids by the way. But I can't help coming to the understanding that your critique is talking about the fed as a machine that has got out of control because of the capitalist system. However because the fed will not allow us to see what is really going on via an audit, I feel therefore that all discussions/critiques on the functions of the fed are mere speculation and until this is uncovered the exercise should be on what the role of a central bank should be, if any.
robertk1968 1 year ago
@brendanmcooney I liked it, but I think the title should read "The Fed has already eatn' you".
btw the crisis is not a result of Capitalism, it is a result of Corporatism/Crony Capitalism.
EndTheFedRes 4 months ago
@EndTheFedRes nah its capitalism, based on infinite growth, monopoly is only inevitable,
kaleo183rd 4 months ago
@kaleo183rd Don't forget that Ma, and Pa bicycle shops, hardware stores, restaurants are all examples of Capitalism. Some Corporatism/Crony Capitalism examples would be GE, Halliburton, KBR, Blackwater, MS, etc. These corporations lobby government for favorable laws, government contracts, and to keep competition out i.e. virtual monopoly. Lobbying for these corporations= private government, massive profits...we call that Corporatism/Crony Capitalism. Real Capitalism would incite competition.
EndTheFedRes 4 months ago
@EndTheFedRes Where do Ma and Pa shops get their money to buy their store fronts? From banks. All those small businesses that the right champions are just part of much larger systems of exploitation. They are, in effect, just middle-level managers for global capital. There is no such thing as the independent entrepreneur. And, contrary to libertarian propaganda, monopoly is not just the result of state regulation. It's the natural result of the process of competition! In competition people win!
brendanmcooney 4 months ago
@brendanmcooney Not sure where you are going with "From banks". Unless you are referring to fractional reserve and the banks making a sh!@#$ of money off of the non existent funny money.
I do agree that regulations (lobbying) lead to monopoly, but that would be called Corporatism, not Capitalism. I completely agree with the "competition" statement.
EndTheFedRes 4 months ago
@EndTheFedRes No. Read slower. Regulations are not the only cause of the centralization of capital. Centralization (ie fewer and bigger firms) is a natural result OF COMPETITION. The winners buy up the losers and industries consolidate.
Re "from banks" I am referring to the fantasy of the small businessman. In reality small businesses are all tied into the web of global capital thru the financial system. This has nothing to do with uneducated conspiracy theories about the Federal Reserve.
brendanmcooney 4 months ago
@brendanmcooney I see what you are saying, but don't we have ample competition in electronics? (tv's, phones, cmptrs) Yet we have competitors "consolidating". Now lets take health insurance, not nearly enough competition due to Corporatism. What about government contractors, Halliburton, KBR, Blackwater. Clearly regulations are keeping out competition. Clearly this is Corporatism/Crony Capitalism.
Re "from banks"...What are you getting at? and what conspiracy theories?
EndTheFedRes 4 months ago
@EndTheFedRes I don't think there is some pure capitalism to juxtapose w/ "crony capitalism". If the natural tendency of competition is centralization then of course the biggest firms will dominate the markets and sometime use the state to help them in this. But the state isn't the initiator or the last word in this centralization. And the problems with capitalism do not come from centralization but instead from social antagonisms inherent in wage-labor and commodity exchange.
brendanmcooney 4 months ago
@brendanmcooney Are you on vacation?
EndTheFedRes 4 months ago
@EndTheFedRes re banks: I'm getting at your juxtaposition of "ma and pa" shops with "crony capitalism" and I'm saying this is a false dichotomy because capital is an international web of exploitation and there is no such thing as the quaint, norman-rockwellesque, small business owner. Most of the time that small business owner is just a mediary for an international banking system.
Re. conspiracy, I mean the fantasies of ron paul, zeitgiest, murray rothbard, and all the end-the-fed nonsense.
brendanmcooney 4 months ago
@brendanmcooney By "international web of exploitation" are you referring to the banks, fiat money, and fractional reserve participation? Rothschilds?
If I remember correctly I liked what Zeitgiest stated about banks and fractional reserve...I also liked Zeitgiest debunked.
In ref to your statement. Can you give me fantasies of Ron Paul and Murry?
Haven't yet picked a school of economic theory but would certainly believe the Austrians long before the Keynesians. Who have you chosen, and why?
EndTheFedRes 4 months ago
Isn't the FRS owned by a buncha commercial banks that borrow "money" from it?
bergweg 2 years ago
It is a quasi-governmental organization, owned privately, yet its leaders are government appointed.
brendanmcooney 2 years ago
..government is directly or indirectly appointed by the private owners.
bergweg 2 years ago
????
brendanmcooney 2 years ago
@brendanmcooney
FIVE governors are government appointed for 14 years. (it "should" be seven total). The chairman and vice chairman are chosen from the appointed governors.
However, the government appointees are NOT the majority of the FR Open Market Committee.
Five Appointees of 2000 FRS Brd of Govs total employees is not "quasi government." An ZERO appointees of the 12 FRBs is even further from quasi-government.
It's CORPORATE with a government's facade.
FALSE PUBLIC FACE
tuberesponder 2 years ago
@bergweg six months later
The FRS is made of 12 Federal Reserve Banks (FRBs) , those 12 banks are NOT-FOR PROFIT CORPORATIONS and have NO GOVERNMENT OFFICIALS OR APPOINTEES.
the 12 FRBs are owned by the commerical banks they lend to (correct), also called MEMBER BANKS. Member banks own the 12 FRBs.
the 12 FRBs used to select the BOARD OF DIRECTORS of the whole FRS, like any other corp. After 1935, SEVERAL appointees (a minority)to the new BOARD OF GOVERNORS are "government." The Rest Aren't.
tuberesponder 2 years ago
are all forms of currency throughout the world backed by gold? I researched a little online but didn't find anything specific.
LovexandxRage 2 years ago
no currencies are backed by gold anymore, since the 70's. Instead currencies are pegged to the dollar. But how do we know how much the dollar is worth...? This is the big theoretical question.
brendanmcooney 2 years ago
I just found this quotation from Marx, from his journalism, which sums up perfectly how wrong the quantity theory of money is: "Taken all-in-all, Sir Robert Peels much vaunted Bank Law does not act at all in common times; adds in difficult times a monetary panic created by law to the monetary panic resulting from the commercial crisis; and at the very moment when, according to its principles, its beneficial effects should set in, it must be suspended by Government interference."
barrymarshall 2 years ago
Not only that. but central banks have been pumping vast quantities of money into the financial system recently, only for most of it to remain overnight with central banks. When banks buy assets, they are now mainly only purchasing other banks' assets or government debt: the "new money" is just being recycled through the financial system. Bank lending to non-financials has slowed even further then ever.
barrymarshall 2 years ago
In fact, the formula for capital and for the labour process are different. Simply put: capital starts as money (M) is converted into commodities (C) and transformed back into money (M).
M-C-M
Labour, otoh, is a commodity (C) that must be sold for money (M) in order to purchase commodities (C) in order to live.
C-M-C
But the point of the capital process is more money (M'), thus it should be M-C-M', it increases. The formula for labour stops with the purchase and consumption of commodities.
barrymarshall 2 years ago
well you're not distinguishing between labor and capital, you merely take labor and consider it a form of capital. Production earns interest and profit, or what you would consider M', not just capital. I guess, this is the problem when discussing different economic theories...
Questfortruth86 2 years ago
not at all. Labour-power is bought and sold as if it were a commodity, but its (re)production is unlike other commodities (for obvious reasons). The use-value of LP is that it produces value, but because it comes in the form of a living person there is a huge conflict between buyer and seller. The worker produces products that he has no control over, which when sold realise profits. Plus LP is capable of producing more than it needs to reproduce itself. Hence "surplus value".
barrymarshall 2 years ago
The worker does have control over the products, in the form of wages. The reason why the capitalists are able to sell their products above the marginal cost level, and pay their workers less then the total revenue is because of interest (time preference), and returns on entrepreneurship.
Questfortruth86 2 years ago
How does being paid a wage give you control over the product? Does a worker leave the factory at the end of the day with a pile of products the created?
And what's the point of just stating that tired-old time-preference theory? Just parroting Austrian rhetoric doesn't prove a point. It just makes you sound like a robot. Marx incorporates turnaround time into his theory of profit. But this only effects amount of surplus value that can be made in a year. It doesn't create surplus value in itself.
brendanmcooney 2 years ago
M-C-M more fully becomes
M-C ... P ... C'-M' (where P = prod process)
It expands further, but TBH comment boxes on Youtube aren't the best place to explain all this
:-)
barrymarshall 2 years ago
variable capital refers to the _costs_ of hiring LP. It's called variable because its value changes through the prod process itself: it creates something at the end worth more than the beginning.
A business certainly sees LP as capital, eg "Human resources", "human capital" and also wage costs form separate entries to overheads and fixed capital on a business's accounts. (Though of course there's a massive contradiction!)
barrymarshall 2 years ago
I've read up on the crises which occurred in England during the middle part of the 19th century. The supposed "failure" of the currency school vs the banking school. The problem is that the previous fractional reserve banking methods inflated the money supply for so many years, and continuously suppressed the market rate of interest below the natural rate. This caused an artificial demand for loans, through the employment of credit, which was not justified by the actual economic condition.
Questfortruth86 2 years ago
fractional reserve banking is basically an accounting method for bank deposits and I cannot understand why Austrian laissez-faire capitalists get so wound up about it: after all, it springs up naturally out of the credit system. It's the free mkt inaction!
Again,. it ignores money as capital and the Banking School's law of reflux. Bank deposits are not inflationary.
barrymarshall 2 years ago
Its nothing more then embezzlement, fraud. The creation of fiduciary media presupposes a drop in the market rate of interest, since the creation of inflation, ie more money, creates the illusion of a condition which seems appropriate for a more roundabout method of production. But the time preferences have not truly changed, the people have not actually forgone consumption (saving), to warrant business ventures at that rate of interest. This leads to an unsustainable boom, and eventually bust.
Questfortruth86 2 years ago
then you must be against insurance, because it works on the same principle: that at any one time only a certain number of claims will be made on a fund of money. Forcibly abolish FRB and the result would be outright sluggishness of growth.
Austrians are a puzzling breed. Their emphasis on homesteading, saving and individual trade harks back to pre-capitalist social relations.
barrymarshall 2 years ago
Well no, insurance is not used as money, and people understand the nature of insurance. You see, the banks don't tell the people: "we're going to use your money for a bunch of shit, and if too many people demand their money back, we're going to default. Technically speaking, the only thing I'm really interested in is it's effects on the loan/capital market.
Questfortruth86 2 years ago
and if there are too many claims on a fund owing to a natural disaster, etc., it cannot meet its commitments ... Besides deposits are guaranteed by governments, lenders of last resort, meaning bank runs don't need to arise. Again FRB is natural in a credit system. Abolish it and you abolish banking as such. There's no such thing as a natural rate of interest - such a concept of equilibrium in savings/credit is absurd.
barrymarshall 2 years ago
"Besides deposits are guaranteed by governments, lenders of last resort."
That's all an illusion, the FDIC, the government, can never truly repay the people back their savings, at least not in real terms. Sure, they could print trillions of dollars, but they might as well make monopoly money legal tender. FRB isn't natural, banking did not always act so fraudulently. Bad bankers were subsidized by the government, and these so-called "lenders of last resort."
Questfortruth86 2 years ago
you would destroy banks as such, because they wouldn't really ever be able to lend out money. That is after all their line of business.
Again, odd for laissez-faire ideologists to be so completely interventionist in the markets.
the guarantee is there to maintain confidence and thus prevent a panic. Your measures would actually increase the likelihood of panics.
barrymarshall 2 years ago
Furthermore, the creation of fiduciary media (money substitutes not backed entirely or partly by money) necessarily creates the demand for further money expansion. It is true when the banking school says it's elastic, but this elasticity expands the demand, not the other way around. And this is necessarily the case, as the suppression of the interest rates are the only way these money substitutes are desired. Meaning they demand to engage in investments not warranted by the economic condition.
Questfortruth86 2 years ago
Banking has existed for thousands of years without FRB, the Medici's did just fine. Banking makes money on arbitrage and on dues payed for deposits. Sure, we would have less billionaire bankers, but sowhat
Believing in the free market does not mean favoring fraud and embezzlement. FRB is nothing more than lies, theft. How can you deny that now? The FED expanded it's balance sheet by trillions in order to make the banks "more liquid." There should be a run on the banks so they don't do it again.
Questfortruth86 2 years ago
and if you don't think that banks should act like banks, why do you believe in capitalism?
barrymarshall 2 years ago
The way we define banking is different. The banking we have today is not banking, it's pure fraud and embezzlement. These banks should be allowed to fail, but of course, no one wants to deal with such ramifications. So the Austrians merely want legislation which would prevent fraudulent activities. Or atleast give disclaimers about their activities. Something like "we're going to take your money and do a lot of crap with it, so there might come a day when you want your money and we dont have it"
Questfortruth86 2 years ago
"The way we define banking is different." Yes, and unlike any bank that exists under capitalism.
I'm not sure what relevance for capitalism your theories have when you say that banks should not act like capitalists and money should not act like money.
barrymarshall 2 years ago
Unlike any bank that exists now, in a pseudo-capitalistic frame work. Like I said, the Medici's did just fine. I'm personally for having free banking, and allowing for the bankers to realize it's not possible to pursue FRB and keep your bank operating. But many want legislation which gets right to the point.
Questfortruth86 2 years ago
Now, my Italian Renaissance history is admittedly poor, but I thought Medici Bank did collapse because of credit expansion and a bank run?
Also, I remember reading that the practice of fractional reserve banking originated in thirteenth century Mediterranean Europe.
barrymarshall 2 years ago
Here's what Mises says: "Capital goods or production goods derive their value from the value of their prospective products; nevertheless, their value never reaches the full value of these prospective products, but as a rule remains somewhat below it. The margin by which the value of capital goods falls short of that of their expected products constitutes interest; its origin lies in the natural difference of value between present goods and future goods."
Questfortruth86 2 years ago
Not that I know of. I know that there were problems with their London branches due to wars and such. Eventually they collapsed, but I don't know why. But I do know they were extremely successful without FRB.
Questfortruth86 2 years ago
Also, Marx has more in common with Mises/Menger/Bohm-bawerk, then he does with Keynes, Samuelson, Friedman, from a purely technical standpoint. If only Marx was born later, he may have been the Ultimate Austrian, due to the emergence of marginal utility.
Questfortruth86 2 years ago
"Marx has more in common with Mises/Menger/Bohm-bawerk, then he does with Keynes, Samuelson, Friedman"
now I know you've actually never read Marx ...
barrymarshall 2 years ago
Well from what I know, which is not much, I must admit. Marx seems to understand that money naturally emerges from voluntary exchange through social relations and the division of labor, which is more than I can say for the acatalactic views of the economists today. But yeah, that statement is probably wrong, lol.
Questfortruth86 2 years ago
yes but Marx would never think that you could resolve the contradiction of exchange society through changes in the money system. As you admit, the money system came out of the system of commodity production.
barrymarshall 2 years ago
I think an Austrian would say that's because Marx didn't understand interest. But again, I'm just getting into capital theory. I know the ramifications of capital theory, but don't understand capital theory itself, at least enough to defend the Austrian view. From what I know, interest is what regulates production the same way commodity prices regulate consumption.
Questfortruth86 2 years ago
Comment removed
Questfortruth86 2 years ago
I think I'm starting to understand Marx's positions a little more. Because Marx doesn't understand or consider the role of interest in the regulation of production, he assumes that the producers MUST produce a a surplus of commodities which lowers their market exchange value. And because he's operating with the LTV, he naturally assumes that the only way the capitalist can continuously make profits is by exploiting his worker, that is, constantly reducing his wages. That makes sense.
Questfortruth86 2 years ago
Interest-bearing capital collects hoards of money from different circuits and channels it into industrial capital to make it productive capital. Interest-bearing capital doesn't produce SV itself, but it is a claim on the pool of future profits. However, the mass of interest cannot be bigger than the total profits.
You can increase wages and also increase exploitation at the same time by raising productivity, which has the effect of cheapening commodities.
barrymarshall 2 years ago
Because all this occurs at the level of total social capital, we see a tendency for all rates of profit of merchants' capital, interest-bearing capital and industrial capital - all these rates tend to equalise. Without merchant or interest capital, industrial capital would not be anywhere near as productive, so they represent part of the costs of circulation, if you like, of capital, all the pofits of which arise from production.
barrymarshall 2 years ago
Interest rates regulate production, it's the right side of the invisible hand. If interest rates were set at zero, producers would never stop producing, leading to malinvestments and the consumption of capital. Prices rise for a good (due to increased demand not inflation), producers enter the market, the increased demand for investment increases the interest rate, until the natural rate is found. At this point, the would be producers are told that "we have enough producing this commodity."
Questfortruth86 2 years ago
No, Marx (and me!) says that it is the supply and demand for credit which largely determines the rate of interest. It is endogenous to the production process, though there is some leeway in the way it works, not that it always does. I mean, money is cheap (3m Libor is 1.1124%) and governments are underwriting plenty of transactions, but corporate borrowing is way down because there is a crisis in profits. Production is being scaled back.
barrymarshall 2 years ago
Yeah, but the demand for credit will naturally increase when the rate of interest is brought down, even in relative terms; which would occur by expanding the supply of credit. Now the Austrians say that even if the introduction of new credit equals the demand for it, the demand has naturally increased, but the supply of actual differed consumption hasn't. Creating a disproportionality between the market rate and natural rate, ie inflation. This would be demonstrated by the quantity theory.
Questfortruth86 2 years ago
to reiterate: "it is the supply and demand for credit which largely determines the rate of interest."
the whole point of credit is to reduce turnaround time so that production does not have to depend on "deferred consumption", ie make markets more efficient.
You assume that 100% reserves would cause market equilibrium, that is, that there would never be crises, that all goods could be sold and that use-values and exchange-values match up, but this could only arise in planned production.
barrymarshall 2 years ago
"It is the supply and demand for credit which largely determines the rate of interest"
What I'm saying is that the issuing more credit, by lowering the rate of interest, would naturally increase the demand for it. This would allow for capital investment in businesses that shouldn't exist. Or bubble investments, such as starbucks every 10 feet, coldstone every 5 feet, entire cities built in the middle of the desert. And this naturally draws fops away from real activities.
Questfortruth86 2 years ago
speculation arises out of the capitalist system itself: trying to make money from money is capital at it's most basic process.
The idea that under capitalism you can avoid bubbles depends on the matching up of supply and demand, ie an economy of pure use-values, otherwise known as ...
... socialism
barrymarshall 2 years ago
If the interest rates are suppressed below this rate, there would be a surplus of apples (enter Marx). But inflation would keep the prices of apples high, and the companies who entered, who would not have entered if the interest rate was higher, would be drawing labor and capital away from other sectors. This would increase wage prices as demand for labor is artificially increased. And the lengthening of the production process is extended for too long.
Questfortruth86 2 years ago
if there were a glut of apples, what would happen to their price? it would fall. this has little to do with the costs of credit.
if labour were drawn from other secotrs, ceteris paribus, then the number of wage workers remains the same therefore you cannot claim that this would raise the wage rate.
credit shortens turnover time of production, thereby making it more efficient.
barrymarshall 2 years ago
Well this would be where inflation comes in. Their wages would be nominally increasing, bidding them up on the labor market. The price of apples would fall in real terms, but not in nominal terms, conflating profits. Distorting the entire price system, altering the mechanism. During inflation, there may be products whose prices fall both in real and nominal terms. It all depends on the extent of the inflation, and on who receives the inflation first. Arbitrary inflation, is the great distorter.
Questfortruth86 2 years ago
Wage rigidity would set these inflated wages above to a high nominal level. But when the deflation, that is, the correction occurs, these wages must fall. If they don't, there will be massive unemployment. The workers get the inflation last, so their purchasing power continuously falls, even if their nominal incomes increase. But people don't think in terms of nominal or real. And the CPI doesn't tell us shit.
Questfortruth86 2 years ago
I do agree, certainly, that high inflation is an attack on the wages of workers by reducing their spending power. Deflation is worse for workers because their debts increase when their wages fall. From a capitalist point of view a modest bit of inflation is good because it discourages hoarding.
But in all, if the values of commodities rise relative to the fall in the value of money (and vice versa), the total value in the economy remains the same.
barrymarshall 2 years ago
Inflation presupposes an arbitrary fall in the market/money rate of interest. I can't exactly tell you why, since I don't really understand the nature of fractional reserve banking. But they go hand in hand.
Questfortruth86 2 years ago
But the people have not warranted such capital investment, and consumption and production are in a conflict. Up until the interest rates rise back up to their actual level, that is when the inflation has reached a point where it must eventually stop. The producers then realize that they have made an error, and they halt their investments before they come to fruition. Destroying their capital.
Questfortruth86 2 years ago
If the inflation continues, complete demonetization must occur. Inflation also creates artificial profits, at first. The bubble businesses depend on perpetual inflation in order to survive. Mises regression theorem states that those who get the inflation first see their purchasing power increase, relative to those who see it later. But the banks continuously de-leverage themselves during this process. And must eventually pull back; bringing the market rate of interest back to the natural rate.
Questfortruth86 2 years ago
If you don't depend on deferred consumption, that is savings, then how do you know when to produce or when not to produce? It would be a complete stab in the dark. Prices are a real time set of facts. When the time preferences are high, there are big revenues, for any given industry; this would draw a surplus of would-be investors. If interest rates don't regulate this surplus, then bubbles are the inevitable result. Like when prices are set below the market rate, shortages.
Questfortruth86 2 years ago
"If you don't depend on deferred consumption, that is savings, then how do you know when to produce or when not to produce?"
the market determines, surely? If I sell all my products, I want to make more. I if think I can sell even more I will borrow to expand and so on. Plus I have competitors: I need to reduce the costs of my commodities to stay profitable so I must constantly revolutionise production processes. It's market forces: there's no mystery!
barrymarshall 2 years ago
But again, that's a complete stab in the dark. If society x decides they want more apples, they begin to buy more apples, and the price of apples increases. Now would-be producers see the price of apples increasing and want to produce apples. They go to the loan market and demand a loan; this bids the interest rate up. This process would continue up until the point where the interest is so high that producing apples is no longer profitable. ie, when the people decided, "we have enough apples."
Questfortruth86 2 years ago
by arguing that a society collectively plans its production in this way you are inadvertently arguing for socialism.
also, you are arguing that money and interest-bearing capital does not have a price before demand is registered for it or before it plays a role in the market.
barrymarshall 2 years ago
Well yeah, this is the nature of the invisible hand. That when an individual pursues his own interest, he must necessarily help those around him. And that only the society can truly plan their economy, since they know what they want. When a centralized body attempts to plan the economy, they are confronted with the issue of trying to predict the wants and needs of millions.
Your second point. The causal relationship is the issue at hand. I must admit, I don't know enough to continue this convo
Questfortruth86 2 years ago
But thanks for the conversation; I have a lot more reading to do. This has been by far the best conversation I have had on the internet. I'm no ideologue; if I'm wrong, I will surely find out. If Marx is right he's right, but the failure of central planning, historically speaking, is hard to reconcile. The Austrians have a pretty logical explanation.
Questfortruth86 2 years ago
yeah thanks!
take care
barry
barrymarshall 2 years ago
Here's a question since you seem to understand the nature of banking better than me. How does the bank expand the elasticity of credit? I understand they just open demand deposits, but how do the capitalists use the demand deposits when issuing loans if there's no actual money in the demand deposits.
Questfortruth86 2 years ago
it refers to the velocity of circulation. A sum of money can play the role of a bigger amount.
Also, a bank loan is an asset for the bank: you have to pay it back. It's an expectation of future value. Thus they don't "just open" new accounts or there'd never be debt crises because banks could just issue new loans to cover old losses.
Deposits are liabilities: that's money the bank owes.
Banks can only lend out what is deposited in them.
barrymarshall 2 years ago
Well capital theory is unfinished. But theoretically, saying it's "absurd" completely denies time-preferences. The natural rate is merely the real time preference of society, not manipulated by the purchasing power fluctuations of money. The loanable funds market merely represents/demonstrates this. One thing the neo-classical's and Marxian's never understand, namely the fact that a person never values an apple one year from now, or 100 years from now, the same he would an apple right now.
Questfortruth86 2 years ago
there is no one natural rate. There would have to be a permanent balance between savings and loans. How could there be? There are different goods and different industries. The money rate would have to be equal to all of these a the same time!
Thus the idea that there is one rate for money depends on the notion that money is neutral, that its effects on production were as if it didn't exist at all.
barrymarshall 2 years ago
Yeah, there are many natural rates. The Austrians are against all aggregated data. There would be industry specific money rates and natural rates. For each industry the increased investment demand would increase the natural rate of interest until it is no longer profitable to enter that industry. Again, capital theory is unfinished, and I have not read enough to really answer these technical questions. If you read Bohm-Bawerk and Hayek's work on capital, and disproved it, you'd get a nobel prize
Questfortruth86 2 years ago
I just looked back over this. I was right but my wording was off a bit. According to Hayek there are many rates, but the point is that it becomes meaningless when applied to money: how would it be workable to borrow money at different rates for different industries? I would simply borrow at the steel rate and transfer my money to crop production.
Also, it ignores the money market rate: who and how are these rates decided? What is to stop someone from transferring money through a business?
barrymarshall 2 years ago
so therefore we'd arrive at a situation where there were many different rates but the one commodity, money, would have to be equal to them all. Thus money is not the universal equivalent of all commodities, thus it is not a "neutral medium of exchange",. thus money is not money.
barrymarshall 2 years ago
also, as I wrote before, profits tend, on average, to equalise across industries anyway, meaning that the profits for interest-bearing capital will also tend towards this rate too, on average. Thus Hayek's coneptualisation is not only inconsistent, it is also unnecessary.
barrymarshall 2 years ago
And another thing: the only way to prevent swaps of money at different industry interest rates (and that reminds me ... derivatives) would be a centralised authority checking all economic transactions for industry-specific rates. Thus I would not be free to do as I please with my money.
The Austrian free-market sounds decidedly ... Stalinist.
barrymarshall 2 years ago
And finally, if an industry were very successful, producing lots of widgets that all got sold at their values (or above) banks would lower their rates to these borrowers, not raise them. If lots of steel producers were making big profits, in the real world, banks (which compete with each other) would be falling over themselves to lend. But, this is endogenous: it depends on actual profits being made first of all.
Naturally, not amount of monetary fiddling eliminates boom &bust.
barrymarshall 2 years ago
This is what I was getting at before when I said Marx had more in common with the austrians. Marx believed in an objective calculation of value, and thus thought he could plan the economy using this universal principle. But Marx was wrong, individuals have their own value-scales, and thus can only plan for them selves. When they plan for themselves, that is, without intervention distorting their planning, price mechanisms will bring the economy into harmony.
Questfortruth86 2 years ago
You have to apply Capital theory into the mix, which mainstream economists are entirely unfamiliar with. Interest is a natural market phenomena, it stems from time preferences. And like the other price mechanisms, it must reflect the true market conditions. The Austrians then go into the social ramifications of central planning, and how it must inevitably lead to tyranny. Something I'm sure you don't want to hear about. But the Austrians predicted the collapse of central planning b4 it occurred
Questfortruth86 2 years ago
See Kaldor's various critiques of Hayek's theories.
Interest-bearing capital tends towards the same rate of profit as other forms of capital precisely because it does operate in a market.
Austrian business cycle theory depends on such a strict control of money that it is inconsistent with their free market beliefs and stops money acting as money as we know it.
I don't know what else to say! Even Milton Friedman admitted money supply is NOT exogenously determined by central banks.
barrymarshall 2 years ago
Like I said, I don't know enough about capital theory to defend it. It would be like me trying to defend/explain the theory of relativity to Newton.
Questfortruth86 2 years ago
theory of relativity = Einstein ;-)
barrymarshall 2 years ago
"theory of relativity=Einstein."
Yeah, that was my point lol. It would be like a 20th century student trying to teach Newton relativity, when that student didn't fully understand it himself.
Questfortruth86 2 years ago
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Questfortruth86 2 years ago
but if my business were a success I could go to different banks and get a better rate. Banks compete to lend, except in the Austrian conception where banks don't behave as banks! Also, I would just borrow at a different commodity rate, or get another business to borrow on my behalf at a cheaper rate.
In that way, a shadow banking industry would arise because it would be impossible to calculate the rate to borrow money as pure money.
barrymarshall 2 years ago
The banks would be constrained by the actual supply of savings. The industry would see an influx of would be investors seeking to meet the increased demand for that commodity, but each additional investor would bid up the rate of interest; since the supply of loans, at least in the short run, is fixed, but the demand isn't. But again, I don't want to get into a technical discussion until I read Bohm-Bawerk's "theory of positive capital," and Hayek's "pure theory of capital."
Questfortruth86 2 years ago
the rate of interest would rise most when it mattered most: at a time of crisis, ie when everyone is clamouring for credit!
Hayek's solution would be only for us to save to put the economy back on its feet, but this puts us in the odd situation in which me going out to buy a coat increases unemployment!
Also, Hayek's economic theory posits disequilibria everywhere ... except in the credit markets, which is dependent on an equilibrium re:savings/loans!
barrymarshall 2 years ago
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Questfortruth86 2 years ago
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Questfortruth86 2 years ago
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Questfortruth86 2 years ago
I'm going to send you a better response, it's getting annoying here.
Questfortruth86 2 years ago
All of the problems people associate with "capitalism" (thanks Marx), are just problems they have with inflation. On the one hand, they love inflation in the early stages, it props up businesses, wages, and the government's ability to buy them off. On the other hand, it causes income disparity, arbitrary re-distributions of wealth, and the boom-bust cycle (as apposed to Marx's constant bust cycle/the end of civilization).
Questfortruth86 2 years ago
The inflationary policies were reduced by the bank act, but the unsustainable investment demand wasn't. This wasn't a crises, it was a correction, a correction the English people didn't want.
Questfortruth86 2 years ago
erm, inflation actually went up: 1844 it was -0.1%, in 1845 4.9%, 1846 4.0%, and in 1847 12.0%. After the Act was suspended, inflation dropped to -12.1%. In other words an increase in BoE notes led to deflation.
The Act was terrible legislation because if banks one after the other had gone bankrupt, soon enough the BoE would itself have collapsed - almost certainly a "correction" the British people would not have wanted!
barrymarshall 2 years ago
The fundamental problem with the currency school is that they did not consider, or they overlooked the fact that even convertible banknotes remain permanently in circulation and can then bring about a glut of fiduciary media the consequences which resemble those of an increase in the quantity of money in circulation. that the currency schools greatest folly was that they failed to recognize the essential similarity of bank notes and bank deposits.
Questfortruth86 2 years ago
No difference between deposits and cash? When there's a crisis or a bank run, what would you rather have, a £1000 bank deposit or £1000 in cash?
barrymarshall 2 years ago
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Questfortruth86 2 years ago
Well during the run, there is most certainly a difference. But during the inflationary propelled boom, cash and deposits are basically the same. The deposits circulate as if they were money. When the panic comes, the whole scheme is destroyed.
Questfortruth86 2 years ago
the "inflation" as you call it (ie increase in M1 money supply) does not create the boom: rather the need for increases in money is endogenous to the production and circulation of commodities, ie the needs of capital. Otherwise the money would not be lent out: when times are bad it's harder to find creditworthy businesses.
Deposits are records of a bank's liabilities and no-one thinks that they don't circulate "as if" they were currency (M0).
barrymarshall 2 years ago
M1, M2, MZM are all worthless, they are all over the place, and they don't truly represent the amount of fiduciary media put into circulation.
But at first you're right, the money supply expands as there is an increased demand for money, that is, for liquid capital. But this demand for capital investment, meaning the business ventures they want to pursue, are not wanted by the actual economy. The people have not deferred consumption (save) as to warrant such activities.
Questfortruth86 2 years ago
Under capitalism labour-power is a commodity bought and sold on the market. Marxists call it variable capital (v), to distinguish it from constant capital (c), ie machinery, plant, raw materials, etc.
So capital (C) that enters the production process can be described as C = c + v
barrymarshall 2 years ago
Also, capital as money forms an accumulative process all its own, seemingly (but not actually) independent from the process of productive capital accumulation - it depends on the appropriation of surplus value through interest - and it is this that forms the basis of financial crises.
barrymarshall 2 years ago
But capital is not money. Money is solely a media of exchange; while capital is defined as higher order goods, or production goods. The value of money depends on the subjective valuations, of individuals, on the current economic condition, namely their desire for goods and services.
Questfortruth86 2 years ago
Capital is a process between money and commodities to increase value. All those goods you call capital at some point have to be turned into money to enable a business to turn a profit, to reinvest back into production and to accumulate and grow in an endless cycle of production and circulation. The process depends on capital changing from a money-form to a commodity-form and back again, increased in size. You cannot produce capital, therefore, without money.
barrymarshall 2 years ago
"You cannot produce capital, therefore, without money."
Well yes, without money you cannot produce capital; since the formation of money presupposes a division of labor, and therefore the possibility of capital creation and accumulation (advanced capital). But capital is not the sole determinant of production, labor must be included since they are co-dependent factors. If we follow your reasoning, capital AND labor would be a process between money and commodities in order to increase value.
Questfortruth86 2 years ago
Again. how can you be so ridiculously smug and arrogant in your comments when you clearly don't even understand the definitions of the terms you are arguing against. Yes bourgeois and marxist theories define capital differently. But you obviously don't even understand the way capital is defined by marx. How can you have an honest dialogue with someone when you've already made up your mind about a topic before you understand it?
brendanmcooney 2 years ago
that's the Misean theory of praxeology for you, Brendan. Mises derives his theories as deduced from a priori assumptions. It's not only a pre-scientific method and has a lot in common with medieval scholasticism, but it also means that Misean theory is basically unfalsifiable (cont'd)
barrymarshall 2 years ago
"If a contradiction appears between a theory and experience, we must always assume that a condition pre-supposed by the theory was not present, or else there is some error in our observation. The disagreement between the theory and the facts of experience frequently forces us to think through the problems of the theory again. But so long as a rethinking of the theory uncovers no errors in our thinking, we are not entitled to doubt its truth" - LvM, Epistemological Problems of Economics.
barrymarshall 2 years ago
"New experience can force us to discard or modify inferences we have drawn from previous experience. But no kind of experience can ever force us to discard or modify a priori theorems." LvM, Epsitemological probelms of Economics.
in other words, if reality conflicts with our a priori assumptions, reality must be wrong!
barrymarshall 2 years ago
The bank of international settlements is the central bank of central banks. The world economy will probably lead towards SDR's (special drawing rights) but this will create the same trade imbalances as the dollar standard. An international gold standard, and a 100% gold reserve rate for banks, is the only thing that can cause long term economic stability. You also misrepresent the libertarian position.
Questfortruth86 2 years ago
A 100% gold reserve rate would be disastrous. it would make almost every bank bankrupt overnight. Not only that it would drive up the costs of credit enormously. See Marx's comments on the 1844 Bank Act in Capital Vol III. Further, a global gold-backed currency would require an end to international competition - just how likely is that under capitalism?
barrymarshall 2 years ago
"See Marx's comments on the 1844 Bank Act in Capital"
No thanks, I'm not a big fan of sociology.
Questfortruth86 2 years ago
well, in it he goes through a Parliamentary report from 1857 into the 1844 Bank Act. It forced the Bank of England to issue new notes backed 100% by gold. It was a complete disaster. It meant that the Bank could not issue enough notes when trade demanded it. It became the world's biggest hoarder, taking out millions of pounds from circulation, only to benefit bankers by making credit more expensive.
barrymarshall 2 years ago
I haven't read up on it, but I'm positive you're wrong. The emergence of money can only occur through free market exchange, were direct exchange is replaced by indirect, and indirect by money. If banks are allowed to expand the money supply, due to the fungibility of money, there will be inevitable booms and busts. International trade, and the balance of payments, were carried out through gold. The world was on an international gold standard; so I don't know what you're talking about.
Questfortruth86 2 years ago
crises in the 1840s and 1850s forced the suspension of the Act, because there weren't enough notes circulating for cash payment. The quantity theory of money is wrong: money is not only currency - it is also capital. Loanable capital returns to banks as increased deposits. It's not inflationary. But if the amount of money is fixed it only serves to increase the interest rates at which money is lent., thereby causing a credit crisis.
barrymarshall 2 years ago
of course for Marx, the contradiction lies between money as currency and money as capital and no amount of fiddling undoes the tendency of capital towards crises. Still, during a credit crunch it is sensible for a central bank to expand money supply to avoid a common ruin of all industry.
barrymarshall 2 years ago
This is the one thing you Marxists fail to understand: The price mechanisms serve purposes, they are real time facts for both producers and consumers. Without them, people would be acting blindly. The interest rate is also a price mechanism, and it must accurately reflect the economic condition.
Questfortruth86 2 years ago
Ok. just to intervene here, To say that marxists don't realize that price serves purposes of allocation shows that you don't know anything at all about marxist theory save for what strawman arguments you read on some libertard website. If you don't understand that the LTV is based on an analysis of the process by which social labor takes the form of value in market exchange then maybe you shouldn't be leaving smug comments everywhere all over my videos.
brendanmcooney 2 years ago
Don't get angry at me buddy; it's not my fault your hero Marx was wrong about everything. Prices may only emerge from voluntary exchange, through MARKETS, due to individual PREFERENCES. And you're right, I don't understand Marx's theory of capital, since in reality, it isn't a theory at all. Where are all of the factories void of any and all human labor? This isn't Russia buddy, you can't throw me into a Gulag because you don't like facts.
Questfortruth86 2 years ago
Marx would not disagree that formally individual decisions about purchases and sales in markets, in voluntary exchange, are a requirement for price formation. So, again, your attempt to critique Marx shows that you know nothing about what Marx actually said.
I don't understand your statement about factories. I suppose it is related to some other misunderstanding about marx. Do you think Marx predicted total automation of all factories?
brendanmcooney 2 years ago
You're not understanding. I'm not saying that voluntary exchange is a "requirement" for price formation; I'm saying voluntary exchange (markets) is the ONLY thing responsible for price formation. There is no "proper price," Marx confused value with prices, and prices with numbers. The term "surplus value" is a paradox, a contradiction. I'm not here to debate Marxian theory with you, there you clearly know more than me. But your videos don't specifically say Marx's interpretation of "x"
Questfortruth86 2 years ago
And of course, a fixed supply of money does not mean a fixed supply of loanable funds, if people decide to save more, the loanable funds market will see a shift to the right (in supply). I just wanted to clarify this point.
Questfortruth86 2 years ago
RE fixed quantity: the amount of cash required to circulate commodities will rise with econ growth (which is the whole point of capital accumulation) but if this is quantity fixed then commodities will fail to find buyers and money will flow from the capital markets to function as means of payment. Interest rates will rise drastically, causing a panic. Money plays different, contradictory but necessary roles in the capitalist process as a whole.
barrymarshall 2 years ago
"RE fixed quantity: the amount of cash required to circulate commodities will rise with econ growth"
No, you're misunderstanding the role/nature of money. Money merely represents the amount of commodities in the economy at any given point in time. If Q increases, there must be a corresponding fall in prices. The amount of money is inconsequential, as long as it's value represents the current economic condition.
Questfortruth86 2 years ago
The quantity theory is not wrong, in fact, Marx was a quantity theorist. If the supply of money is fixed, it may mean higher interest rates, but it may also mean lower interest rates; it all depends on the demand of investment for any given sector, at any given time. Interest rates serve a purpose, if they are accurate, they tell the producers how much to produce, and when to produce. The crises was caused by the misallocation of capital/labor. Inflating will only continue this distortion.
Questfortruth86 2 years ago
Marx, a quantity theorist?!
"The law, that the quantity of the circulating medium is determined by the sum of the prices of the commodities circulating, and the average increasing more rapidly, than prices velocity of currency may also be stated as follows: given the sum of the values of commodities, and the average rapidity of their metamorphoses, the quantity of precious metal current as money depends on the value of that precious metal. ... contd.
barrymarshall 2 years ago
"The erroneous opinion that it is, on the contrary, prices that are determined by the quantity of the circulating medium, and that the latter depends on the quantity of the precious metals in a country this opinion was based by those who first held it, on the absurd hypothesis that commodities are without a price, and money without a value, when they first enter into circulation ... cont'd
barrymarshall 2 years ago
" ... and that, once in the circulation, an aliquot part of the medley of commodities is exchanged for an aliquot part of the heap of precious metals."
Capital Vol 1, pp219-220.
barrymarshall 2 years ago
I guess not. I heard Friedman say it in a debate with some Icelandic scholars.
Questfortruth86 2 years ago
Yeah, Friedman kept saying that for years. I read it in his Free to Choose, which is I guess where it came from
barrymarshall 2 years ago
Furthermore, the 1844 bank act allowed only the British central bank to print the notes, and still allowed for the creation of bank deposits. That act was a disaster from the start since it didn't eliminate the use of fiduciary media, nor did it remove the central bank. The Austrians propose a system where only private banks exist, where there is no fractional banking, and where the supply of money cannot be inflated past the gold supply. This is the 100% gold reserve system.
Questfortruth86 2 years ago
the solution is a global currency to supplement our globalized world economy.....right????? OR, we should rethink globalization and keep it somewhat segmented so that bank/currency failures wont mess everone up simultaneously
jusblaze99 3 years ago
i think the solution doesn't primarily lie in changing the global monetary system. rather it lies in changing the character of the world economy as a private capitalist economy. ^^
kummal 2 years ago
intresting. good.
but what about the reptilians?
:-)
not to mention the jews
erbuaku 3 years ago
We are on a de facto oil standard due to the fact that world wide oil must be traded in Federal Reserve Notes. Those countries which have threatened to leave the Fed Note are in fact the same ones US foreign policy is directed against. This is known as the Petro-Dollar cycle. But other strategic resources follow this same pattern.
jroubidoux 3 years ago
Brendan, I would love to hear your thoughts on Fractional Reserve. While I agree that the Federal Reserve is a problem, Fractional Reserve is a much bigger problem. Fractional Reserve is one of the biggest tools of financial capitalist exploitation in existence.
binjahmon 3 years ago
Well, I'm no fan of any capitalist, be they productive or financial. But I think that banking and credit are essential to capitalism. What would happen if we couldn't extend credit to capitalists? There would be no way of dealing with the day-to-day imbalances in production. Fractional reserve is just part of the larger way in which financial institutions create credit.
brendanmcooney 3 years ago
this is where the Austrian perspective is valuable. credit doesn't disappear with the end of fractional reserve. loans can be made with existing capital. however without fractional reserve, the falling rate of profit happens much quicker. profit margins would shrink FASTER than wages, and thus demand. i think the transition to a post-capitalistic economy would be much smoother without fractional reserve.
binjahmon 3 years ago
How can loans made with existing capital a)keep up with the expansion of value inherent in capitalism, and b) create credit money ahead of the creation of value in order to facilitate large investments?
Yes I agree that without a credit system capitalism would have to face its inherent crisis tendencies much sooner. Of course the Austrian perspective argues the opposite- that w/o central banks or state regulation capitalism would be in perfect equilibrium.
brendanmcooney 3 years ago
"What would happen if we couldn't extend credit to capitalists?"
The capitalists would be required to burrow only from the actual supply of savings, thus their production would be accurately regulated by interest rates. As you well know, interest rates are supposed to keep prices and production in equilibrium, but with over-extensions of credit these rates are constantly facing downward pressure. The investment function, when including the structure of production, demonstrates this point.
Questfortruth86 2 years ago
I second this motion unless you are currently working on the current series.
jroubidoux 3 years ago
the dollar will remain strong for at least a few more years. right now capitalists (and consumers) are scrambling to pay down debts, while at the same time receiving fewer dollars in terms of profits or wages. but debts need to be paid in dollars! this creates an exceptional demand for dollars. the same thing is playing out in every country on the planet. since the majority of the debt on the planet is in dollars, demand for dollars is very high, so the value of the dollar will also be high.
binjahmon 3 years ago
once the "deleveraging" ends and capitalists/consumers have paid back a sufficient amount of their debts, or defaulted altogether, then a fall in the dollar will be much more likely. however it probably won't fall drastically relative to other currencies, because other currencies are in the same boat. right now, the dollar is falling relative to the monetary commodity of gold. 2-5 years from now the dollar will fall relative to non-monetary commodities.
binjahmon 3 years ago
I agree. This system is imploding - NWO or not...It is outdated - and ripe to fall. All nations will have to replace it - it is up to each one of us what we want in its place. No need to sit an wait for magical politicians to solve it for us...Thanks for the intelligent argument!
gyongyhajulany 3 years ago
Free market capitalism is as flawed as socialism. Both value capital over labor.
Capital must serve labor and the widest distribution of ownership is required to achieve a just society. Work is for man - not man for work.
jbryant13 3 years ago
I understand the role of debt money, its a scam for international bankers to steal all the property. Thomas Jefferson warned of it.
If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.
12643 3 years ago
yes, quote random historical figures (heard in conspiracy documentaries) instead of engaging in real economic analysis.
brendanmcooney 3 years ago
Great videos!
I'm shocked to hear this and realize that I already had a decent understanding of it.
So many people who talk about the current free market models these days fail to explain the basic concepts. This is a really clearly spoken explanation that I'm going to recommend to friends.
inthefade 3 years ago
BRILLIANT a great Erudition of the nature of Capitalism always bearing the seeds of its own destruction. Any system based on the greed and corruption of those in power. Will always fail society as a whole.These brilliant presentations need to be given due applause to the amazing author of these awesome vids on Capitalism.
nbm34 3 years ago
Thanks for the vid, your videos are well structured, well articulated, informative and insightful...is a mystery why you don't have more subscribers!
LordImmolation 3 years ago
lol @ music atmosphere
seigneurvoland666 3 years ago