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Old 11-03-2018, 10:58 AM
PalmettoTree PalmettoTree is online now
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Originally Posted by SoJ_51 View Post

"...the Federal Reserve is an independent agency, and that means, basically, that there is no other agency of government which can overrule actions that we take. So long as that is in place and there is no evidence that the administration or the Congress or anybody else is requesting that we do things other than what we think is the appropriate thing, then what the relationships are don't, frankly, matter...."

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That is right Congress set up the Federal Reserve to be independent of political influence. Congress did so under the authority of the US Constitutions. Congress also give the Federal Reserve a charter by which it operates. Congress also has the authority to take that charter away. It could eliminate the Federal Reserve; it could use an legislative committee to act in this roll; what it cannot do is give up its Constitutional authority without amending the Constitution.

Congress and the US Treasury still retains other duties regarding money in Article I. Although it is often said FDR took us off the gold standard this is factually incorrect. It was Congress in a joint resolution that did so. Our non-commodity backed money is often called "fiat" money. Actually all money since the US Constitution was ratified has been "fiat money" since "fiat" means" "a formal authorization or proposition; a decree" by government.

When a man comes to think someone else has control over his life, he has voluntarily given up control of his life. He does this to relieve himself responsibility of what he does and the consequences. Such is the mentality of those that believe the mythical Rothschilds control the world. Some even believe they control the weather.

On a series of Saturdays in 1972, I purchased a car going $3000 in debt one Sat. I graduated college the next Sat. I got married the next Sat. taking on my wife's $2000 student loan debt. I reported to Fort Knox the next Sat. So we started our married life $5000 in the hole. Those, except my wife agreeing to marry me, were all my decisions. No one else has anything to do with my choices.

Rich people are nothing more than people that are rich. They control no one. Some choose to believe they control them but that is control given up by individuals not taken by the rich.

We all have God given free will and the ability to choose. The circumstances of life might limit those choices but we all have our freedom and our choices to make. One of which is to give up making choices and blame someone else.
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Old 11-03-2018, 11:46 AM
OldDesertrat OldDesertrat is online now
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There is strict dictionary meaning and there is popular usage. Not always the same. So, we have intrinsic-value money, such as gold and silver. In the vernacular, fiat money is paper money with no intrinsic value.

Similarly, for an economist, inflation means an increase in the money supply. In the vernacular of popular usage, inflation means an increase in the price of consumer products.

Seems to me that it's all about context and audience.
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Old 11-03-2018, 12:12 PM
PalmettoTree PalmettoTree is online now
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Originally Posted by OldDesertrat View Post
There is strict dictionary meaning and there is popular usage. Not always the same. So, we have intrinsic-value money, such as gold and silver. In the vernacular, fiat money is paper money with no intrinsic value.

Similarly, for an economist, inflation means an increase in the money supply. In the vernacular of popular usage, inflation means an increase in the price of consumer products.

Seems to me that it's all about context and audience.
I agree the term is misused and the commonly accepted meaning is like being gay. Gay means happy but now means male homosexual in the game way the term fiat money is misused.

You are incorrect on the meaning of inflation. Economic inflation is increasing of prices and or the falling value of money.

The money supply can be increased without increasing prices. If you have "x" demand for "y" amount of money and the "x" demand increases to "2x" then the "y" money supply can increase to "2Y" without triggering inflation.

This is why when other global central banks went to negative rates the demand globally for US Dollars increased. This forced the Fed to increase the money supply else the common man in the US would not have had money.

This would have caused stagflation. Stagnant economic activity with higher prices.

The Fed caused the global negative rates of other central banks by taking our rates to zero. It should have stopped at 2%. To compensate for the consequences of going to zero then increased the money supply. This kept our economy propped up during the Obama years thus keeping him propped up.

It is difficult for me to argue true economic facts without making it seem like I am approving of Fed mistakes or Obama policies. It is also true the economy did not expand under Obama but the demand for money via Obamacare, natonal debt, etc. did. So it was not just negative rates that were the problem. So the Fed kept us at zero and increased the money supply.

You choose give the Fed credit or blame. It is easy enough to do both.
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Old 11-03-2018, 07:30 PM
OldDesertrat OldDesertrat is online now
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PT, bunches of people who call themselves economists use my definitions.

Commonly, an increase in the money supply leads to consumer price inflation at a later date; commonly six months to a year before it becomes noticeable.
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Old 11-03-2018, 10:04 PM
PalmettoTree PalmettoTree is online now
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Originally Posted by OldDesertrat View Post
PT, bunches of people who call themselves economists use my definitions.

Commonly, an increase in the money supply leads to consumer price inflation at a later date; commonly six months to a year before it becomes noticeable.
Yes it commonly does like in Venezuela, or even the Roman Empire. This is because the money supply was increased not based on economic reasons but political reasons aka socialism.

Suppose there is an island completely isolated with zero foreign trade. It has as one of its commodities diamonds. So they decide through refinement of their barter system to use diamonds as their money. This works fine and as they progress people begin to live longer, people have more children and fewer children die before adulthood.

Everything works fine for a while because as the population grows and with that so does the amount of diamonds found. Then diamonds become harder to find so homes are moved from un-mined areas so diamonds can be searched for in every un-mined area on the island. A few more are found but finally year after year no new diamonds are found.

A few see this coming and begin to hoard their diamonds but mostly the common man continues to use diamonds as money. Now a man with a crop of corn must trade his crop for diamonds almost the size of dust. Diamond money becomes so valuable in terms of prices that the owners of very accurate scales charge a commission for transacting exchanges of diamond money for all commercial trade. This expense becomes a non-value added expense and prices increase.

It is not that the prices increase due to inflation but because there are so few diamonds to trade with. Some blackmarket bartering begins but this is very inefficient because two people must find each other with equal needs which almost never occurs. To make matters worse when people with very perishable products have a good year their products are worth little in diamonds and when they have a bad year they still must fight the urgency created by spoilage.

By the time the population doubled from the discovery of the last new diamond the entire civilized society has broken-down.

Money is the mode of exchange of good and services. The money supply must expand enough to service the demand (number of people using it).

If that supply is increased for no other reason than dictates of a socialist government confidence in it value will be lost and prices as a function of that socialist's government money will increase. The people of that country will begin to compete for other country's money. They will spend the worthless money as fast as possible because it is rapidly becoming worth less. They will turn to the money with the higher/highest level of confidence.

Commodity money cannot expand as necessary and the countries with the greatest un-mined reserves of that commodity will control all other countries and economic activity.

What we now call fiat money (money without intrinsic value) will only remain money as long as the common man generally accepts it as a mode of exchange for goods and services (one of these services being wages for labor).

It is no accident the USA has had its greatest economic growth since the US Dollar was no longer a commodity backed money. You are still free to use a US 90% silver dollar as a mode for buying something priced for a dollar.

Gresham's Law alway applies! https://www.investopedia.com/terms/g/greshams-law.asp
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