61. Why Markets Move Ahead of Interest Rate Announcements

[DayTradersWin]

I like your video - subscribe to my channel and friend to have day trade videos

[D4Shawn]

"And the Fed is in no way a Monopoly by definition."

Next, you're going to tell me that people pay taxes voluntarily because they love giving their money away.

Am I right?

[D4Shawn]

"there are way more complex things that work."

Certainly. When speaking of "economic forces", it's important to use the phrase "all things being equal" (in order to isolate factors).

However, as has been pointed out in this very video series, the Fed has ENORMOUS power (over the economy). It controls the currency (the backbone of the economy). As such, it should be no surprise that when it expands the money supply, it has an inflationary effect on the price of goods.

[D4Shawn]

"And the Fed is in no way a Monopoly by definition. "

Say what?

The Federal Reserve holds a government granted monopoly on the production of currency (legal tender).

If you think people use government fiat currency because they like it (as opposed to a commodity based currency), you are truly deluded. Sorry.

People don't use government money because they LIKE having their wealth redistributed by the government. No sir.

[D4Shawn]

It's probably worth noting, that whatever the Fed says it's going to do, will likely be the opposite of the truth, or have the opposite effect of what they say it will. This is also how you interpret the speeches of politicians. For example, if the president claims that the government is NOT going to monetize the debt, that means they ARE going to monetize the debt. If they say they are pursuing a "strong dollar policy", that means they are going to dramatically inflate the money supply.

[InformedTrades]

Hey D4Shawn, That is not necessarily true. This is why it is important to understand how things work within the government. Sometimes they do make a good faith effort and try to do one thing but economics is not a sceience so things don't always work out as there are outside variables.

-Brendan

[D4Shawn]

Well... Keynesianism might not be science... but then again, I wouldn't really consider it economics either. It's more of a religion/superstition... or maybe just a scam.

While I enjoy your videos immensely, and think you are very knowledgeable, I do think you've imbibed a little too much Federal Reserve Kool-Aid.

You're not still confused about what creates the business cycle are you?

[InformedTrades]

Hey D4Shawn, I can't speak for Dave, however I don't really view Keynesian Economics as a scam or religion/superstition. It's a pretty reliable methodology to economics which is not at all a subject that has one answer to any problem. Thanks for voicing your opinion.

-Brendan

[D4Shawn]

Here's my impression of a Keynesian economist (do indulge me):

"I don't see how expansion of the money supply could conceivable account for an increase in the average price level of goods. Why on Earth would prices go up just because there are more dollars competing for the same amount of goods? That's crazy! You don't REALLY believe in all that "supply and demand" nonsense do you? The Fed would never cause inflation... not that we know what causes inflation... because THAT is a mystery!"

[InformedTrades]

Hey D4Shawn, There are tons of different models that exist within Economics and I have studied Economics in quite some depth. Unfortunately it is difficult to explain all this without graphs and models especially in a comment box, but I will try and personally do some lessons on Economics and include some pretty interesting graphs and studies.

There is a mystery aspect to some things in Economics, but most have one or several fairly accurate explanations.

-Brendan

[D4Shawn]

You don't really need a graph to explain that if the supply of something increases, it's value decreases (all things being equal). And yet, this is the sort of basic economic law that representatives of and apologists for the Fed overlook or feign ignorance of.

It's no different than when a politician pretends there's no link between unemployment and minimum wage laws (even though it's a well understood and unavoidable economic law that a price floor will inevitably cause a surplus).

[D4Shawn]

The job of most mainstream economists appears to be to portray economics as a great mystery that nobody understands. In other words, most economists are paid to pretend they don't understand economics.

[D4Shawn]

Clearly, no self-respecting economists honestly believe that a monopoly is good for consumers (in terms of the price and quality of it's goods/services), and yet, most main stream economists support the Fed and it's monopoly on the production of currency. Nobody supports monopolies for economic reasons. Everybody knows that monopolies suck.