Topic: Is it true that the Fed is privately owned - page 2. (Read 9405 times)

I am not sure I understanding you correctly?
I agree that is the crux of the matter, however I don't understand your qualifier "Some regulations do not create this issue"
I question your assumption and would say that regulating the money supply and creating inflation, and providing solvency stimulus to keep inefficient oversized corporations viable is prissily the issue created by regulation of the money supply.

"If goods don t cross borders, armies will." - Frédéric Bastiat

Property rights are required for capitalism to function. How can someone agree to trade something that isn't his?

Well, they could, but if you look at what caused them to lose that market share, you'll see that it's not very likely that they would. Every time Standard Oil failed to capitalize on new technology, a competitor did, and so snagged a little bit more of their market share. The large company was simply too inflexible, and couldn't keep up with the more "nimble" smaller competitors. Then you have to look at what got them the 88% in the first place. They competed on quality (thus the name, even, selected because it indicate that their oil was all standardized, and of the same quality), before Standard, heating oil was basically a crapshoot. the refining was shoddy, and the quality of the product highly variable. There were fires, even explosions, resulting from varying, and thus unpredictable, quality of oil. Standard fixed that, and then all the other companies (the 12%) met their quality standards, and the competitive advantage that Standard had was gone. Then they had to compete on price. In fact, refined oil prices "fell from over 30 cents per gallon in 1869, to 10 cents in 1874, to 8 cents in 1885, and to 5.9 cents in 1897." So you can hardly say it was bad for the consumer.


They are (well, at east some of them are), in that their per-unit cost of production is higher than it absolutely needs to be. In a free market, a competitor could take advantage of that, and snag some of their market share from them. The bigger company would then be forced to "trim the fat," and get costs down. You can visualize this by looking at the graph I posted, and imagining that the bottom axis is "% of market served." If a company pushes past the bottom of that curve, in an attempt to serve more of the market, that opens up an opportunity for a competitor (Imagine a line coming in from the other side of the graph) to undercut them and make a profit, pushing them back to the bottom of the curve. Now, CEOs know this, and they also know that if they can secure 100% of the market, it doesn't matter what their costs are, because they can charge whatever they want. But as the graph shows, at 100% of the market, the cost would be very nearly prohibitive, so the only way they can keep a competitor from undercutting them is to prevent the competitor from competing in the first place. (Again, this is somewhat simplified, in the real world, that curve changes drastically for production of each item, changing shape, and moving around, and for some, the bottom of the curve does lie at 100%.)

As for proof of this, you need only look at Amazon. Until recently, they have been vehemently against making internet sellers collect sales tax on the items they sell. They are forced to collect taxes on items they sell in states where they have physical presence, however, and so as they move into more states to supply their same-day-delivery service, their per-unit cost is rising due to tax. A competitor could take advantage of that, by servicing same-day delivery to states that Amazon hasn't reached yet, and only having to collect taxes on those few states, thus keeping their costs low. So to prevent that, they now have switched sides. The marginal cost of collecting all the taxes, not just the ones in states where they have physical presence is minor, now, compared to what they already pay. But, by forcing that smaller competitor to collect all those other taxes, and thus suffer the same costs as they do, they can keep the competitor out of their hair. The marginal cost for the competitor of these new regulations is much higher than that of Amazon, possibly removing the ability of the smaller company to compete at all.

It doesn't get more textbook than that.

Meteorology is a science, and the system that it models is chaotic, and hard to predict. The weather man is never 100% correct. Does this mean that meteorology is not a science, or that it is merely an inexact one?

You judge a model in an inexact science, such as meteorology or economics by how well it predicts the behavior of the system it models. And Austrian economics has been vindicated time and again by correctly predicting market behavior. Keynesian economics, on the other hand, fails miserably. So, which model do you think we should adopt?

"The significant problems we face can not be solved at the same level of thinking we were at when we created them." - Albert Einstein

Alpaca John, if I were to Critique as objectivity as possible the outcomes of modern economic theory coming out of the dark ages it would be:

Experiments:
Capitalism born out of Feudalism (the principal of free market provides greatest benefits)
Capitalism failed to deliver (catalyzed by resorting to force in WWI)
Socialism was born (catalyzed by the end of WWII )
Communism born alongside Socialism. (Abandoning free market)
Communism failed (lack of free market benefits)

We have tested combinations of socialism and all hybrids variations are about to fail.

Yet critics blame Capitalism (free market principles) as the problem while objectivity it is the the glue in every  marginally successful system tested.

They look at the exploitation of human and natural capital that happened during the industrial revolution and blame human nature.  When in fact the issue is a combination of memes not human nature. The most perverse being the concept of property rights, being a human right.

So through my Bitcoin inspired education I would like to add / amended your statement.
Keynesianism died in 1971 with the abolishing of the gold standard, Neo-Keynesian economics died with the Monetarists during the Reagan and Thatcher revolution.  It is during this revolution that Hayek's, Austria free market ideals are perverted by  Milton Friedman who leads the creation of the Monetarism model we have today.

In my view the very worst of the negative side effects of central planning materializing the very worse possible outcome of the free market serving the needs of humanity.

The result is a separation of a sustainable system into to mutually apposed conflicting systems. Ecosystem and Economic system.

This is a problem. Assertions become adopted because they support a desired action and become accepted fact. Then even when better, more descriptive theories come along, the old ideas are impossible to budge. In the case of real science, look how quickly the luminous aether, Newtonion mechanics and other outdated models were replaced (even in the face of strong opposition often). For comparison, Keynesianism is stubbornly holding on in the face of almost overwhelming circumstantial evidence of its abysmal failure. 

Yes, that is what I meant.


This is your assumption, and I disagree because I have yet to see solid proof of this hypothesis.

Edit: wait, sorry, I'm not 100% sure whether I'm understanding you correctly. How are any of these corporations not suffering from diseconomies of scale exactly? Or are you suggesting that they are?


Economy is a social science, not an exact science, like many people seem to think. And since it is a social science, you should wonder whether we should call it 'science' at all. The father of modern science (=scientific method) will explain to you why this is the case, if you really care: http://en.wikipedia.org/wiki/Karl_Popper#Philosophy_of_science.

As opposed to a growing number of scholars, I don't think economic 'science' is totally useless myself. But you need to apply it in a very different way than you do exact sciences. If you drop a ball in an enclosed environment, you will be able to measure the velocity it falls with, how long it will take to hit the ground, etc. Do it again, and the outcome will be exactly the same. This is one of the main reasons the result will be scientific.

However, if you start a business, or fuel the economy of a country in some way, or anything like this, and it turns out to be a succes, that does not mean you can just do it again. There are way to many factors involved to be able to point out what caused the succes with certainty. Maybe it was a specific aspect of the policy. Maybe it was some other aspect of the policy. Maybe it was the weather, maybe it was dumb luck. You can not know this for sure, and you can not repeat the experiment since the conditions will not be exactly the same.

The usefulness of social sciences (including economics) lies in the discussion itself. Someone will pose a hypothesis, and that hypothesis should be studied. On what basis did he/she draw these conclusions? What other possible causes may have influenced the result? Etc. On basis of this discussion, everybody should make up their own mind. Nobody can prove anything in any scientific way, however.

I am willing to examine an other point of view. I have just done so yesterday, although I must admit I have not put hours and hours in it because it seems to be a waste of time. This is because your point of view seems extremely one sided; your argumentation is weak and relies on a handful of very shaky sources and cherry-picked data.

This right here is the crux of the problem with many regulations.  Some regulations do not create this issue though.

You didn't read, did you? They didn't have 88% of the drilling. they had 88% of refining. That means the people who found new oil came to them to refine it. (I misremembered, btw, it was actually 64%, not 61% when the regulation came through.)
As for the source, here you go: http://wiki.mises.org/wiki/Standard_Oil
You can track down the references yourself, if you have a mind to.

Uh... what? I take this to mean that you assume that they could have gone from 64% back up to 88% or more?

Well, they have government to regulate their industry, and keep competition from horning in on their business, don't they? They still suffer from diseconomies of scale, but with the competition kept out of the market, their inefficiency doesn't limit their size. If not for the regulations raising the barriers to entry, they could never expand beyond their "ideal" size.

Your personal incredulity of the science of economics does not mean that I am failing to debunk your fallacies, or even doing a poor job of it. It just indicates that you are unwilling to examine any other point of view.

I don't know whether this is true, since you didn't provide any source, but even if it is - and it might very well be - I don't think this example says anything. People are still discovering new oil today, so the market was not saturated yet, like it was in my corn fields example. I'm guessing this was the case in your example. Somebody just found new oil. At one point the market would be saturated though.

And even if this was not the case, a monopoly or cartel might have still been the end result. It wasn't exactly the end of history, was it? Bitcoin dropped 10% today. Given your flawless logic I assume you've sold all of it, and are not gonna buy back in, right? Surely the trend could never reverse again.

Also, it's astonishing how the biggest corporations on planet earth seem to have no problems with these economies of scale you are mentioning, isn't it? Even though that flawless theory is based on such elaborate research:

• Kelly Essentials, DIT Publishing, Perth 1999
• Blodget, Henry (2002-01-02). "excerpt". The Wall Street Self-Defense Manual. Atlas Books / Slate. Retrieved 2002-01-03.
• Wherry, Rob (2006-09-27). "The Harder They Fall". SmartMoney.

I'm sorry about the sarcasm, but you're argumentation is a joke. You cherry pick your sources with the sole intention of reaffirming your own preconceptions, and are not really interested in any other point of view except for debunking it (and doing a bad job at doing so). And the worst part is that you have a very supercilious way of doing it.

I see this fallacy all the time. People see economies of scale, and because they increase efficiency to a point, assume that they continue to increase efficiency indefinitely. The natural result of that train of thought is that economies of scale, left alone, will result in monopolies for everything. Yet, we don't see evidence for this in the real world. Standard Oil, the poster child for this kind of thinking, had, at it's peak, only 88% of the refining market. By the time the regulation came through, they were down to 61%. How to explain this?

Well, the simple answer is that this line of thought is wrong. A slightly more detailed answer would be:




Very few things result in this natural monopoly, because the markets are so large. Notice, as well, that the curve turns up at some point. This is due to diseconomies of scale. The market doesn't need your regulations. It's self-regulating.

Ok, instead of replying and rebutting everything that was said, let me try to explain this as simple as I can.

1) Take a finite resource. A scarce resource. For this example, I will use corn fields. I could have also gone with oil(fields) or some type of metal or farmland in general or street corners or anything else that is finite. But I'll go with corn fields for this example.

2) In order to keep this simple, let's say that the entire planet holds a maximum of 1000 equally sized corn fields, all of them owned by individual farmers. These farmers are competing with each other in order to sell their corn.

3) At some point, a couple of things will happen.

Some farmers will realize that cooperating with their neighbors gives them an advantage over all other farmers. They can - for instance - share tractors and other equipment, hence lowering the production cost per square mile. This will enable them to sell their product cheaper than the competition can. Hence, they decide to merge their farms/corn fields.

Other farmers will probably innovate in some other way. This will enable them to lower production costs, which will help them out-compete their neighbors. At some point, the neighbors just can't compete anymore, and they will go out of business. The innovating farmers will have made a lot of money though, so if they're smart - and they are - they will buy up their neighbor's land.

Either way, after a while, every farm will have to merge in order to remain able to compete with all the others. Hence, after a while, the initial 1000 corn fields will have merged into 500 bigger corn fields.

4) Because scaling up will always enable the farmers to out-compete the competition, step three will repeat itself over and over again. Until, at some point, there will be only a handful of huge multinationals holding all of the corn fields in the world.

This is not necessarily a problem yet, I think, but...

5) At this point, the multinationals would be foolish to compete against each other. People need corn, so they could just collude and ask whatever they please instead. They could fix the prices into oblivion, and there would be nothing anyone could do about that. Nobody can start a new farm to undercut the prices, provide better service, or innovate in any way, because all of the corn fields are already taken.

The multinationals could even merge into one even bigger multinational, but like I said,  it doesn't really matter at this point. Monopoly or cartel; same difference.

Now, you could argue: "People could switch to grain, hence there would still be competition between the corn multinational(s) and the grain multinational(s)." That would obviously be a false argument, because the corn multinational(s) and the grain multinational(s) could collude with each other just as well, or even merge to form an even bigger bigger multinational.

Bottomline: when scarcity is an issue, an unregulated free market will inevitably lead to a lack of competition, and thus price fixing.

This is where the types of monopolies start to make things complex. Sort of like the "capitalism" confusion, the various meanings attached to the word cause this sort of confusion. A natural monopoly is not prevented, nor specifically allowed for, in any law.
A coercive monopoly, on the other hand, is explicitly outlawed, unless you have specific permission and charter from the big coercive monopoly itself. And like I said, you can't call it a monopoly, you have to say "government contract"

Is it cheaper after 33% of your workers are shot dead and one of your buildings is burned to the ground? Not to mention risk to yourself. Wars are expensive. Sensible people try to avoid them.

Also, legal remedies are typically only taken when there is an abuse of a monopoly. It's not illegal to have a monopoly, it's illegal to use it in ways that gain you an unfair position that you wouldn't otherwise have. Of course, I agree that problematic monopolies typically only arise due to government interference. But the solution to problems created by government being more government is nothing new.

If I am the only maker of gerbil hearses in the market, I have the monopoly. Legally, that doesn't mean anything needs to be done about it unless I use my monopoly position to lock out new entrants or to destroy competitors to my small-mammal-vehicle tire division.

Buying up competition just provides incentive for new competition to spring up... specifically to be bought out. Rinse, repeat.
Could you do me a favor and explain exactly how my explanation of why infighting ("stealing" customers) is the rational thing to do is an explanation of why it's not?

That's not in the least what you said.

You're telling the capitalist he doesn't understand scarcity? You must have access to the good shit. I told you it was a simplified example. If you don't like that, look up arbitration on the Googles.

People will certainly try. If not prevented, they may even succeed. And set up another State. Which is why I prefer AnCap over the alternative.

People still go to BP.


I would say so, yes. Ignoring the drug-cartel example I can't think of any way to prove this in any way, so I'll just say it's my opinion, for now. Maybe I can come up with something better if I think a bit more about it. (Or maybe I'll find that I'm wrong.) But for now, I'm gonna go ahead and say that it is probably much cheaper.


What's the point of having a contract if there is no state? (Or: what is the point of having a state if it can't enforce it's law?)


Oh? Sorry, that's what I thought. My bad, I guess.


I think it's both. The regulation made them rich enough to defy the state, resulting in a failure of the state (absence of state power and thus regulation), leading to cartels. 

If I'd have a monopoly and any of the above would happen, I'd just buy them up and have all of that annoying 'competition' over with it. Either that or I'd buy up their suppliers.

This actually happens all the time.


That is what I said.



It does get the gist across. You don't seem to properly understand scarcity. You can't just make up a new street corner and have a happy end. What if all the corners are taken? Like they probably would be in real life?

Also, what if the dude with the two strong henchman decides that he'd rather not have a competitor across the street at all, and tells you to fuck of?



Right, so you agree that somebody will use force to establish power even in the absence of a state then? In that case we agree.

That is why I prefer a state over the alternative.

Uhm. No. There, you're wrong. Somalia is post-state, and if it's a bad place to live, that's mostly because of how awful the State was before it collapsed. They have a functioning polycentric law system, which pre-existed the state, and picked up right where the state left off when it collapsed, and life has greatly improved since the collapse of the State.
https://en.wikipedia.org/wiki/Xeer

...same as ripple of opencoin !

watch out!