Topic: Why does anyone pay attention to people that study "economics"? - page 2. (Read 9560 times)

I thought that's what I was explaining.  Only commercial banks have a deposit account at the Fed.  No individuals so if you borrow money from JP Morgan and deposit into your Citi account.  The Fed just change their ledger to reflect this.  So the only way for the money to get into the economy is for banks to lend it out.

It's a common misunderstanding that money is not created from commercial banks.  They create it in the form of credit.  It's called endogenous money.  Most of the mainstream economists get this wrong

Here's a paper the Bank of England put out on this issue

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

The quantity theory of money relies on an exogenous view of money, which we know is not true by the paper from BoE.  So I don't subscribe to this view

The RBD seems more reflective the realities of banking to me.  My criticism of RBD is that it doesn't emcompass current technological state of finance and financial instruments like derivatives and securitiaztion of debt.  And it doesn't address the rise of shadow banks.  So RBD in itself is not a safeguard for something like 08 GFC because a lot of assets maybe speculative in nature.

Thanks, but that is after the money creation. What I want to understand is the ownership change during the money creation by FED

I don't think commercial banks create money, they only register a loan in their database, similar to some exchanges do with your bitcoins on their platform, no real money/bitcoin is involved, only numbers in their database, and bank's ability to generate check book numbers are limited by the reserve requirement. They can not loan out money that they don't have (even they have the asset), but they can loan out the same money again and again to generate large balance numbers in their database


I have not thought about forex, I just mean the value of the money domestically

To be more precise, there are two different theories: One is Real Bills Doctrine, which states the money's value depends on the value of the asset that back them, so more money = more wealth (since every dollar is backed by assets of corresponding value). And the quantity theory of money: MV=PQ, where money's value is subject to change depends on the money supply, flow speed, and productivity of the country

There's no inflation is because what people call "money printing" is a swap of assets between the Fed's balance sheet and the banks balance sheet.  That money is reserves not cash.  It doesn't enter the economy until the bank lends it out

1.  Whoever borrows that money gets (temporary) ownership until they pay it back.  Its logged as a liability on your balance sheet, but an asset on your deposit account.  After you deposit the money you can spend it as if it was yours.  But you still owe the lender.

2.  Exchange rate between currency pairs like USD/JPY are determined by supply & demand.  But the price is correlated with fundamentals (GDP, Interest rates, etc..)

Entrepreneur, having my own business, I earn money by delivering value. I assume you work in the public sector since you seem to have too much time in your hands.
I live in France, there is some migration from the east of poor people we call "The roms", they mostly live by stealing and they begging.
But you know the person they will never steal and will treat with uttermost respect and loyalty ? The one that give them a job. (but yes, it is illegal to do so)
You want to give pride to the beggar ? don't give him your money, give him a purpose.
I have no problem with my neighbours and business partners and never had. I don't force them to follow my rules, not feeling obliged to follow theirs. We work by mutual consent, nor by duty and obligations.
Apathy and libertarian are two different concepts.
What I own is by my own work as will attests my business partners, not because of "society" (which equals to ownership thanks to subsidies and favors).
Not to say I would not profit from subsidies and favors from our government when I can... but would not feel any gratitude for it, since the one that create value is me, my employees and partners, not their money.
I am thankful to my business partners though.

Austrian don't have the hubris to think they know the metrics they need to maximize to create a better society. You can use all the math you want, if the metrics you are maximizing are broken, manipulated, or plain irrelevant, it means nothing.

Austrian and libertarian are different, I won't repeat what I said earlier to point you the difference.

One reminder :

Austrian think that if I exchange on my free will your Pen against my Gold, then we are both richer.

A Keynesian, would just point out that Gold is worth less on the market than the Pen and thus I am loosing.
Since they don't want people to loose, they will either manipulate the price of the Pen and the price of Gold to make it "equitable".
Or they will just outlaw such exchange.

Replace "pen" with "water", knowing that I am dying in the desert, you would likely point out : "you were right about exchanging your gold !"...
Well, the Keynesian will never admit such a thing, because it does not show up in macro data, and will tax or outlaw the immoral seller of water "For public good" and consequently, provoke shortage and death of travellers.
And then happily point out : look in the stats ! less people are loosing money on water. True but is it relevant now that the travelers are dead ?

And this is a simple example, without pointing out that "data acquisition" can be manipulated, "metrics" (GDP, Inflation on "basket of product") can also be.
By carefully selecting the determinants of your index, you can justify anything.
Examples among others : http://www.forbes.com/sites/timworstall/2014/05/31/adding-5-billion-to-uk-gdp-for-prostitution/ and http://www.globalresearch.ca/the-corrupt-practices-of-financial-manipulation-the-meaning-of-the-greek-economic-crisis/18467

Also, I am not even talking about the government official that have invested into "water" because he knew that his policy will provoke a shortage and rise its price.
Replace "gold" with "fiat", and then we can even talk about the central banker telling his friend what the rate or WATER/FIAT will be tomorrow. See http://www.zerohedge.com/news/2015-01-23/how-swiss-national-bank-almost-crushed-george-soros and http://www.zerohedge.com/news/2015-01-23/our-money-guy

But these guys are working for the public good, and are backed by math... right ? http://www.amazon.com/How-Lie-Statistics-Darrell-Huff/dp/0393310728

If they were really honest they wouldn't be mooching off of the collectivists. They would move to a free place and use their own rules-free Internet, drink their own unregulated water and send their children to their own schools free from oppression.

The honest truth is all the libertarian attempts at independent social organization invariably fail either:

1) because they are compulsive tightwads, skinflints, scrooges and grinches who rather die than contribute to a common good. Those are either eaten by the wild animals or easily subjugated by the organized crime gangs.

2) fall prey to the internal criminal abuse from the members who simply pretended to subscribe to their ideals but in reality ripped the rest off in a confidence game.

The only way the libertarians survive is similar to Roma/Gypsy people: a periphery of the stabler societies with more reliable means of production.

You want to think you are different and unique. But no, you are just a basket case of young high-earning programmer who just moved out of the parents home. Your basket stands right next to the basket with very young very-high-earning models who just moved out of their parents home.
Hell is paved with good intentions. Your sincere promise of taking care of your future children is worthless to the society. Beggars (both old folks and children) are considered eyesore by the society and the current solution is to forcibly tax everyone so they can be rounded out of the streets when old/infirm or forcibly schooled/housed when their freedom-loving parents won't care for them.

If you actually had a backing to your promise, like a ownership of land or other means of production, you wouldn't be spouting out the transparently naive individualism. Your parents would have successfully enculturated you into some respect to the neighbors, business partners and you would've clearly shown better understanding of why&how the society creates and maintains its rules.
The hard-core Austrian economics are inseparably mixed with the hard-core libertarianism: by the personalities of the leading thinkers and proponents, by their avoidance of mathematics, statistics and other tools of science. Also there's simply lot of correlation/overlap in the social groups where they gain their supporters. You can't escape that.

 Interesting Correlation: Want to guess who the BTC miners of the future are going to be based on 1-5 above?

Sure. One of my duties is being a liaison with employees (programming & technical support) who have freedom to work out of home, if they so desire and if we have a slow season. So I'm wrong both ways:

1) I'm too nosy when I'm explicitly admonishing them to abstain from using unregulated substances (that they have bought in a person-to-person transactions that the government should have no business regulating) in their own free time. I'm also too nosy when I admonish those peeps to be less egocentric and have a real support network of family and friends (not net-friends).

2) I'm not nosy enough when they die alone and stink up the neighborhood as a result of inhaling those substances (or playing with the guns they purchased with their own money). I'm not nosy enough even if I recognized that they have no real social contact besides coworkers and should have been visiting them at home.

Of the two accusations above I choose being accused of (1), because it gives me some opportunity to warn people in advance, not just react quicker to a problematic situation.

That is a good point. In fact Real Bills Doctrine explains much better why FED had printed 6x more money and there is still no big change in dollars value: These dollars are all backed by assets of similar value, thus people's trust in dollar's value has not changed

You two might have missed my questions before, I write them here again:

1. Who get the ownership of every newly created fiat money?

2. Is money's value decided by supply and demand?

Please share your thoughts

Too many Gordon Geckos in this thread 

No they don't.  The mainstream economics is neoclassical or neoclassical synthesis.  Have you ever taken any University level econ classes? 

Is he a central banker?  As far as I know the BoJ was the first central bank to enact such policies

It has nothing to do with barbarism.  In fact, it is what Adam Smith already discovered: a bunch of individuals (each taking care of his own interest) can work together through that link of mutual self-interest to build up quite something.  Nothing barbarism.

The illusion resides in thinking that giving people power over others will make them reduce their desire for self-interest.  You simply have to have a system that is well-adapted to individuals (that is, independent conscious entities that have their own interests).  That excludes the idea that giving power to some people will make those people decide in the interest of others.

Now, I agree with you that there are people that do (seem to) show interest in other people's advantages over their own.  However, these are not the people that climb up to positions where they get the power to decide over other people's matters.  Because those positions are so much looked-for by people who want the power (for themselves) that people having genuine interest in other people's advantages never get there. 

On the other hand, that doesn't mean that someone in power will NEVER take a decision that is in fact "in other people's interest".  After all, sometimes the situation can be such that serving best his own interest colludes (more or less by coincidence, or for reasons of communication, or whatever) with other people's interest.  But it is by far not the rule.

In fact, the idea, by itself, that thinking that people are too egoistic and selfish to be able to live freely together, and then find as a solution to give power to SOME of these people to decide over others, is totally ridiculous if you think about it.

In order to protect rabbits from snakes, the idea would be to give power over rabbits by a snake ?

To finish your quote: "create too much of it until it loses all its value and then dump all remaining valueless fiat into a new system that your people (mainstream) is so desperately trying to adopt for its own reasons (get rich)."

Ride the horse until it dies; then just get a new horse.

The people (us) need to take back BTC and develop it for OUR benefit. Not the benefit of those who rule us. This is the greatest problem with Bitcoin today. Too many are indoctrinated (with classical economic ideologies) about what BTC is. We need to stop drawing parallels and making comparisons with historical economic thinking.

QE is a variation of what all governements have done with their fiat currency : create too much of it until it loses all its value.

Bahaha omg yes, this is awesome.

The problem with that is that "society" is not a conscious being that can take decisions.  It are only individuals that take decisions.  Those individuals just take decisions in their *own* interest, whether they are vested with powers to decide "in the name of the general well-being" or not.  In other words, from the moment that an individual decides "in the name of society", he's *actually* not deciding in the name of society (whatever that might mean), but in his own name, and then just has to lie and manipulate enough to make people believe that he did that "for the general good".
When a politician takes a decision, he does this for his own advantage (electoral, financial,...).  He will make it sound as if it is "according to his views for the general good", but that is never the case.  When a central banker takes a decision, he does that in his own advantage (political nomination, having his favourite politicians win elections, having friends and family members make money from the pre-knowledge, ....) and not for some or other macro-economic reason, although he will pretend to do so.

In other words, giving other individuals *power* to decide "in the name of society" is always going to lead to total corruption, because everybody always takes all of his decisions in the name of his personal advantage. Having other individuals decide over aspects of *your* life from the viewpoint of *their* personal advantage is not something that I would think is positive for anyone, except for the powerful deciders.
The difference between libertarians and collectivists is that libertarians are honest about that, that's all.

The discussion is not whether "a state that would try to achieve the general good" is a good idea, the discussion is whether such a state (made up of individuals) could even exist.  In my opinion, it can't, because individuals always decide first in their own advantage.

You are stereotyping and just wrong about that. Not giving something worthwhile to the discussion.
But yes, I am not one of those that think my child should not pay for my retirement, and that parent's duty is to make his child stands by his own feets. It is not egocentrical, it is what independence means and the only way to live as a free individual.
Again, this has nothing to do with austrian economics.

For the keynesian, you can always try to model something and prove that from stats, your model maximize some metrics.
But if we don't agree with the metric you are maximizing, then the reasoning that led you to the conclusion no matter how coherent and mathematical it is, won't make it legitimate.

BTW, as far as I know, QE is nothing else but a variant on what John Law already invented in the beginning of the 18th century, no ?

People studying economics at the university study keynesian economics so they are not learning real economics.