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| Thread: The Federal Reserve |  This thread is pages long: 1 2 3 4 5 6 · NEXT» |
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mvassilev
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posted November 16, 2008 06:55 AM |
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The Federal Reserve
There will be no conspiracy talk in this thread. As Stephen Hawking said, "I am discounting reports of UFOs. Why would they appear only to cranks and weirdos?" Same with the Federal Reserve; why do most people who claim that the Federal Reserve is some sort of shadowy conspiracy also subscribe to other fringe views? But that's beside the point.
For those who claim that I am a rabid laissez-faire advocate, you are mistaken. A central bank is one of the legitimate and useful government interventions into the economy.
Under a fiat money system, money comes out of nothing. This must be made very clear. Money is not backed by gold or silver or any promises made by the government. Money doesn't come from debt, either. (Whose debt? Where would it come from?) But that does not mean that the money is worthless. It is backed by confidence - that is, by the fact that everybody else accepts it. To understand, consider the situation in New Delhi. The Central Bank of India says that a torn or soiled rupee is still valid currency as long as the serial number is visible, and are willing to exchange any such rupee note for a crisp new one. Yet hardly anybody accepts soiled rupees. Why? Because nobody else does. Money that hardly anybody accepts is not very useful, so others start to not accept it either, and this phenomenon spreads more and more, until the only use for a soiled rupee is to exchange it for a clean one - a process that takes a bit of time (taking time out to drive to the bank, waiting, etc), and that would just be a waste of time.
Thus, it is clear that fiat money is backed by confidence - much like any other money system, such as the gold standard. Briefly consider that if no one accepted gold, then there would be no gold standard since gold would not be able to be used as money.
Incidentally, why not use the gold standard? It seems like a fine system, one that's worked for many years, right? Wrong. But first let us explore what qualities money must have, and see what fits under the category. For example, let us take leaves, cows, gold, jewels, and paper money.
1. Imperishability. Leaf - no. Cow - no. Gold - yes. Jewel - yes. Paper money - yes.
2. Easy subdivision. Leaf - sometimes. Cow - no. Gold - kind of. Jewel - no. Paper money - yes.
3. Relative scarcity. Leaf - no. Cow - yes. Gold - yes. Jewel - yes. Paper money - yes.
4. Low cost of use/introduction. Leaf - yes. Cow - no (since it has to be raised, and fed, etc). Gold - no (since it has to be dug up, and large quantities of it are heavy [which spawns other problems]). Jewel - no (see Gold). Paper money - yes.
Since it may not be practical to carry large amounts of gold around, and even a relatively small amount may attract thieves, banks may then issue promissory notes: "I swear on demand to present the bearer x amount of gold." Such notes are more easily transportable, but present their own problem: the bank has the gold, and knows that it is unlikely that all of its depositors would come and claim their reserves at once, so it begins to lend out more notes than it has, which creates inflation and the danger of a bank collapse. This practice is known as fractional-reserve banking. It can either be regulated or outlawed, but both require government intervention, which is hardly free. Gold advocates seem to think that the gold standard worked pretty well. People who lived under it may disagree: discontent with it lead to William Jennings Bryan's candidacy and his famous "Cross of Gold" speech.
Also, as I have mentioned earlier, inflation is also created, because the money supply is increasing. Inflation is not always bad, and moderate rates of inflation may be good. Certainly a given percent inflation is always better than the same percent deflation. Yet inflation has obvious problems, and, with fractional-reserve banking, it can cause malinvestment (because there is too much credit to go around) and an eventual crash. This is what started the Great Depression.
Thus, since it is very difficult to halt fractional-reserve banking and hard to deal with the inflation that it causes, the gold standard was done away with completely, and the world switched to fiat money. The government - most often an independent central bank - would control the interest rates. This creates the additional benefit of creating the ability to counter the business cycle by reducing and weakening recessions.
Some claim that the Great Depression was caused by the Federal Reserve. This statement has an element of truth. Others claim that the Great Depression was caused by the Federal Reserve's inflationary policies. This statement also has an element of truth. But neither statement is exactly true. The downturn that caused the Great Depression was certainly caused by inflation, but it was not the Federal Reserve-caused inflation but the inflation created by fractional-reserve banking. The first statement is true inasmuch as the Federal Reserve's inaction was one of the reasons the Great Depression got as bad as it did.
What happened was that there was a downturn, and it developed into a recession, so the people started holding on to their money and putting it under their mattresses (and taking it out of the banks, causing many of them to collapse in the process). This caused deflation, because the active money supply was shrinking, and people saw that the money that they had under their mattresses was increasing in value, so they held back their spending even more, which further decreased the active money supply, and lead to a further deflationary spiral. What the Federal Reserve should've done is cut interest rates, thus increasing the money supply and countering the deflation. During times of growth, the Federal Reserve can raise interest rates again, both to prevent the economy from overheating (as it did in the late 70s stagflation) and to give it room from which to cut interest rates should another recession come.
It is important, though, not to cut the interest rate too soon, and to allow the sagging companies to fall, but then to cut interest rates so everything won't collapse around them.
The statement that the Federal Reserve caused the current crisis is somewhat true. The statement that Alan Greenspan cause this crisis, however, is incorrect. Greenspan was an excellent Fed, dealing with the 1987 downturn very adeptly, and with very good monetary policy through the rest of his tenure, causing tiny recessions once in a while so growth could continue and not collapse with a big recession. Bernanke, on the other hand, should've raised interest rates to keep the economy from overheating, which is essentially what happened.
I must briefly mention that a full-reserve gold standard has a problem beyond that of enforcing it: recessions would still happen, because inflation is only one cause of a recession. Technological shifts can also cause recession when the new technology is expected to bring greater returns than it actually does. (Dot-com bubble, for instance.) And, under a full-reserve gold standard, there is no one to counter the deflationary spiral.
The Federal Reserve is a useful thing. It is quite capable of mistakes, but is also capable of countering horrible depressions and keeping the economy from collapsing. We need a credit tap, and a skilled hand on it.
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blizzardboy
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Nerf Herder
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posted November 17, 2008 12:29 AM |
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Some quick comments:
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There will be no conspiracy talk in this thread. As Stephen Hawking said, "I am discounting reports of UFOs. Why would they appear only to cranks and weirdos?" Same with the Federal Reserve; why do most people who claim that the Federal Reserve is some sort of shadowy conspiracy also subscribe to other fringe views? But that's beside the point.For those who claim that I am a rabid laissez-fair advocate, you are mistaken. A central bank is one of the legitimate and useful government interventions into the economy.Under a fiat money system, money comes out of nothing. This must be made very clear. Money is not backed by gold or silver or any promises made by the government. Money doesn't come from debt, either. (Whose debt? Where would it come from?) But that does not mean that the money is worthless. It is backed by confidence - that is, by the fact that everybody else accepts it.
Everybody accepts it only because of legal tender laws.
With legal tender laws in place, Greshams law is at work and drives all the good money out of circulation, and we are stuck with the bad money.
Read up on Panama for example, legal tender laws drove the silver peso out of circulation in favor of the US dollar.
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Thus, it is clear that fiat money is backed by confidence - much like any other money system, such as the gold standard.
The 'confidence' in fiat money comes from legal tender laws only.
Briefly consider that if no one accepted gold, then there would be no gold standard since gold would not be able to be used as money.
Yes, so? Why should the government decide what to use as money as opposed to the market?
Gold hasn't been the only thing used as money in the past.
There has been silver, tobacco, sugar, salt, and things worked perfectly fine.
In fact if you read up American history, the government basically made banks stop specie payment, so all bank deposits were practically fiat money.
This didn't occur in California however, and no one would accept the fiat money until government forced them to with legal tender laws, and even though they had to accept the fiat money they blacklisted anyone who did so, preferring real money like gold and silver.
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Relative scarcity. Leaf - no. Cow - yes. Gold - yes. Jewel - yes. Paper money - yes.4. Low cost of use/introduction. Leaf - yes. Cow - no (since it has to be raised, and fed, etc). Gold - no (since it has to be dug up, and large quantities of it are heavy [which spawns other problems]). Jewel - no (see Gold). Paper money - yes.
Relative scarcity. Paper money - No.
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Since it may not be practical to carry large amounts of gold around, and even a relatively small amount may attract thieves, banks may then issue promissory notes: "I swear on demand to present the bearer x amount of gold." Such notes are more easily transportable, but present their own problem: the bank has the gold, and knows that it is unlikely that all of its depositors would come and claim their reserves at once, so it begins to lend out more notes than it has, which creates inflation and the danger of a bank collapse. This practice is known as fractional-reserve banking. It can either be regulated or outlawed, but both require government intervention, which is hardly free. Gold advocates seem to think that the gold standard worked pretty well. People who lived under it may disagree: discontent with it lead to William Jennings Bryan's candidacy and his famous "Cross of Gold" speech.
That isn't the gold standard.
And banks that tried that soon went out of business because as soon as it was known that they were giving out more demand deposits than gold they had people immediately try to cash them in, until they went bankrupt.
The US government tried to do that very thing, it created more demand deposits than it had gold, so gold started flowing out of their coffers, hence Bretton woods.
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Also, as I have mentioned earlier, inflation is also created, because the money supply is increasing. Inflation is not always bad, and moderate rates of inflation may be good. Certainly a given percent inflation is always better than the same percent deflation. Yet inflation has obvious problems, and, with fractional-reserve banking, it can cause malinvestment (because there is too much credit to go around) and an eventual crash. This is what started the Great Depression.
The crash was caused by the fed. In fact there have been no depressions when there has been no central banks or government involvement in the monetary system.
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Thus, since it is very difficult to halt fractional-reserve banking and hard to deal with the inflation that it causes, the gold standard was done away with completely, and the world switched to fiat money.
The gold standard was done away with because they couldn't print more money than they had gold backing it because it started to flow out of there coffers and into foreign hands who were wary of US dollar.
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The government - most often an independent central bank - would control the interest rates. This creates the additional benefit of creating the ability to counter the business cycle by reducing and weakening recessions.
Central banks cause recessions in the first place by reducing interest rates below the interest rates the market would normally charge.
Central planning doesn't work, whether its interest rates or commodities.
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Some claim that the Great Depression was caused by the Federal Reserve. This statement has an element of truth. Others claim that the Great Depression was caused by the Federal Reserve's inflationary policies. This statement also has an element of truth. But neither statement is exactly true. The downturn that caused the Great Depression was certainly caused by inflation, but it was not the Federal Reserve-caused inflation but the inflation created by fractional-reserve banking. The first statement is true inasmuch as the Federal Reserve's inaction was one of the reasons the Great Depression got as bad as it did.
Government allows fractional banking to happen. Without government involvement there is no way that a bank could survive for long with a 4% reserve rate. Other banks would quickly redeem any money they get from that bank and gold starts to flow out of the offending bank unless they bring their reserve rate back to 100% or find themselves bankrupt.
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What happened was that there was a downturn, and it developed into a recession, so the people started holding on to their money and putting it under their mattresses (and taking it out of the banks, causing many of them to collapse in the process). This caused deflation, because the active money supply was shrinking, and people saw that the money that they had under their mattresses was increasing in value, so they held back their spending even more, which further decreased the active money supply, and lead to a further deflationary spiral. What the Federal Reserve should've done is cut interest rates, thus increasing the money supply and countering the deflation.
Deflation is a good thing, it is bringing goods back to their real prices. Deflation is normally what happens in a free market as goods and services become steadily cheaper to produce as a result of capital accumulation.
If they had cut interest rates, it would have temporarily stopped the depression by creating another artificial boom and even more Mal-investment (this sounds familiar), that would have resulted in an even worse depression later on.
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During times of growth, the Federal Reserve can raise interest rates again, both to prevent the economy from overheating (as it did in the late 70s stagflation) and to give it room from which to cut interest rates should another recession come.It is important, though, not to cut the interest rate too soon, and to allow the sagging companies to fall, but then to cut interest rates so everything won't collapse around them.
Central planning doesn't work. Interest rates, like everything else, should be determined by the market.
Interest rates below the equilibrium rate causes mal-investment when people borrow money for a investment that seems profitable currently, but all this does is create price signals that distort the economy, and when inflation runs through the economy and all prices adjust, they realize it wasn't really profitable at all.
Interest rates should be based upon consumers time preference.
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The statement that the Federal Reserve caused the current crisis is somewhat true. The statement that Alan Greenspan cause this crisis, however, is incorrect. Greenspan was an excellent Fed, dealing with the 1987 downturn very adeptly, and with very good monetary policy through the rest of his tenure, causing tiny recessions once in a while so growth could continue and not collapse with a big recession. Bernanke, on the other hand, should've raised interest rates to keep the economy from overheating, which is essentially what happened.
'Overheating' is what happens when there is easy credit.
Central banks have no mechanism with which to know what the correct interest rate is. That is the weakness with all central planning.
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I must briefly mention that a full-reserve gold standard has a problem beyond that of enforcing it: recessions would still happen, because inflation is only one cause of a recession. Technological shifts can also cause recession when the new technology is expected to bring greater returns than it actually does. (Dot-com bubble, for instance.) And, under a full-reserve gold standard, there is no one to counter the deflationary spiral.
Technology doesn't cause recessions. The Dot-com bubble was caused by the fed lowering interest rates below market rates, so it appeared to entrepreneurs that investing in Dot-com ventures was profitable when it wasn't. Mal-investment.
And what is a 'deflationary spiral'? Things naturally fall in price over time as technology improves and there is capital accumulation.
Things can only rapidly deflate if they had been rapidly inflated in the first place.
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The Federal Reserve is a useful thing. It is quite capable of mistakes, but is also capable of countering horrible depressions and keeping the economy from collapsing. We need a credit tap, and a skilled hand on it.
It is useful for those in charge of the Federal reserve who want to tax anyone holding US dollars any time they want by stealing their purchasing power by printing more money.
You really should read up on Austrian economics, particularly the Austrian business cycle.
There has never been a fiat currency that has never been inflated into oblivion by corrupt governments. The Romans tried it, and over 200 years they inflated away 99% of their currency by issuing sestertii of less and less weight of silver and more base metals. Today, it gets done by printing more currency.
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"Folks, I don't trust children. They're here to replace us."
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mvassilev
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posted November 17, 2008 02:51 AM |
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Warning: quote wars ahead.
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Everybody accepts it only because of legal tender laws.
So are you saying that right before the Coinage Act of 1965 there were many places in the US that did not accept payment in dollars? I don't think so. And what I'm saying is that the money's value comes from the fact that everybody else accepts it.
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Why should the government decide what to use as money as opposed to the market?
Why? Because a multitude of privately issued currencies would be a nightmare to tax.
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Relative scarcity. Paper money - No.
Paper money is scarce enough to be used as money. (Except when there is hyperinflation, of course.)
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And banks that tried that soon went out of business because as soon as it was known that they were giving out more demand deposits than gold they had people immediately try to cash them in, until they went bankrupt.
Which is all well and good until we realize that people are losing the money that they put into the bank.
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The crash was caused by the fed. In fact there have been no depressions when there has been no central banks or government involvement in the monetary system.
Really? Would you like to tell all the people before 1913 that all the recessions and depressions that they lived through were purely figments of their imaginations? Was there no recession in the 1890s, for example?
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Central banks cause recessions in the first place by reducing interest rates below the interest rates the market would normally charge.
So, apparently the market can never ever fail... 
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Deflation is a good thing, it is bringing goods back to their real prices.
Except when it results in a deflationary spiral, which is when people start spending less and less money, and the money supply keeps decreasing and decreasing, and we get into a depression because of a decrease in the active money supply.
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If they had cut interest rates, it would have temporarily stopped the depression by creating another artificial boom and even more Mal-investment (this sounds familiar), that would have resulted in an even worse depression later on.
That depends on when and how it's done. Of course, if there's a huge interest rate cut as soon as there is a sign of a downturn, what you described certainly happens. On the other hand, if there are small rate cuts, with the Fed looking at how the economy is reacting to them, and they don't start immediately, letting the downturn weed out the sagging companies, then it won't - it'll dampen or stop the recession and allow real growth to start again. Because recessions frequently go too far.
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Central banks have no mechanism with which to know what the correct interest rate is.
If they are just guessing blindly, then tell me why Alan Greenspan was so successful.
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Technology doesn't cause recessions.
Not by itself. But investors may overestimate the ability of a technological innovation to bring in a large return, so they overinvest, and when it turns out to not be as profitable as it was expected to be, a recession could indeed happen.
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And what is a 'deflationary spiral'?
A deflationary spiral happens may happen when there is a decrease in the active money supply. People see that the money that they have rises in value, so some of them decide to keep it and stuff it under their mattresses, where it can serve no productive function. This further decreases the active money supply, causing money to go up in value even more, encouraging more people to cut back on spending, further decreasing the active money supply, and so on. Such deflationary spirals are very harmful.
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You really should read up on Austrian economics, particularly the Austrian business cycle.
You should read up on neoclassical economics. I am aware of Austrian theory, and of its flaws and benefits. It gets many things right. It gets a few things wrong. This is one place where it's wrong.
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Eccentric Opinion
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friendofgunnar
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posted November 17, 2008 09:55 AM |
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Really? Would you like to tell all the people before 1913 that all the recessions and depressions that they lived through were purely figments of their imaginations? Was there no recession in the 1890s, for example?
This is true, you can trace massive economic upswings and downswings in English history for at least 500 years.
On a seperate note, the gold standard has always seemed kind of strange in the first place. During the era of the conquistadors the meso-americans were surprised at how rapacious the europeans were for acquiring the shiny tinsel. Cacao beans were the currency there (you can actually do something with cacao beans, imagine that). It seems that human society will always find some arbitrary object around which to build a system of barter. Going off the gold standard was kind of a way of saying "from now on our arbitrary standard will be hard-to-counterfeit paper instead of gold".
Can you imagine what might have happened if the meso-americans had built a modern society before the europeans did? One day, perhaps after a continent-wide economic meltdown, the powers that be would have decided after much wrangling that they needed to get off the chocolate standard in order to put the economy back on its proper footing 
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TitaniumAlloy
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posted November 17, 2008 10:30 AM |
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Hey Mvass, I'll buy your bike for 100,000,000,000,000,000,000,000,000,000 granules of salt and some myrrh?
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mvassilev
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posted November 17, 2008 02:50 PM |
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TitaniumAlloy
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posted November 18, 2008 02:39 AM |
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I'll trade you some balloons as well but they are subject to inflation
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RedSoxFan3
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posted November 18, 2008 06:39 AM |
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Everyone so far has been way over my head. Then TA comes along and starts making some sense out of it.
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Moonlith
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posted November 19, 2008 01:47 PM |
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We need a credit tap, and a skilled hand on it.
Unfortunately you have a very corrupted hand on it, one that won't ever disappear untill the FED is abolished.
I loved the way Jacque Fresco put it: "You cannot expect decency or a sense of moral, or trust people, in a society based on making profits. You simply cannot afford to have ethics."
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mvassilev
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posted November 19, 2008 03:07 PM |
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What's wrong with the profit motive?
And if you abolish the Fed, then no one, corrupt or not, will have a hand on the credit tap.
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Moonlith
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posted November 23, 2008 03:17 AM |
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Edited by Moonlith at 03:20, 23 Nov 2008.
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Alright, I won't be able to explain this very expertly (my mind is rather chaotic and information is unorganized), but I'll try. I'll try to give you a few reasons why the ideal of profit = HOLYsnowDEVILSWORK.
1) Welfare > Wellbeing.
Personally, I think the wellbeing not only of human beings, but all life on this planet should be top-most priority. In a system where you can make profits, this is not the case. You ALWAYS see the wellbeing of animals, plants, and human beings is placed secondairy to making profits for big powerfull companies.
2) Lack of abundance.
Oxygen is available in such high abundance, that selling it would be pointless. Likewise, any product or material that is available in such high quantities, cannot be sold.
For the sake of wellbeing of all living beings, you WANT to have high abundance of primairily the basic primair life-requirements such as food, shelter, etc.
You do not make profits over abundance, you make profits because there is scarcity. Therefor, to those who make profits, it is NOT in their interest to create abundance: Rather, to maintain profits, you will want to maintain scarcity of goods.
3) Lack of efficiency.
People always say if people can make profits, they will make their goods of high quality so more people will buy it. While this is plausible in theory, it's not the reality. Products are of poor quality, ensuring people will need to have them repaired / bought anew.
Efficiency is an enemy of profits: If products were made with such efficiency that they wouldn't need to be replaced, a company would go out of business, and in effect, not make profits. Therefor efficiency is NOT something a company that wishes to remain in business, will aim for.
4) Corruption.
In fact, a company will aim for ways to reduce their costs. This is done in various ways, but in general, either humans or the environment suffers. Companies deliberately dump waste into the environment - poluting it, to cut costs and save profits.
Think about this: Wether it is dumping waste into the environment, Walmart moving into a small town and forcing local, small companies out of business, or a machine replacing a person in a factory, ALL are examples of corrupt behavior, merely at a different level. The motive is the same: Saving money.
5) Lack of Ethics, honesty, and decency.
If you were a decent person, and told your customer your products are nice, but the products of the store next door are better suitable for them, you wouldn't be in business for very long. Therefor you cannot expect honesty in a system where you make profits. If you want to stay in business and make profits, you CANNOT afford to be honest, or have ethics.
This basicly means dishonesty, a lack of ethics and corruptive behavior, in essence are not side effects of profits, but the very foundation of it.
6) Exploitation.
You cannot GAIN something without something else LOSING something. Small companies in poor countries cannot compete with big international corporations, and are forced out of business when large companies move into the area. Those put out of work can then work in sweatshops for less than a dollar a day.
This is not "helping the country", this is called exploitation, or modern slavery. Saying a person can choose between either working under VERY bad circumstances for VERY low income, or starving to death, is not a choice, its blackmail.
7) Lack of Progression / technologic development.
If you wish to remain in business and make profits, you will fight the existance of another product that would outrival yours. Clean electric cars have existed for quite a long time, but are not brought into circulation because certain companies (such as oilcompanies) would see their profits drop.
Everyone sees the necessity of cleaner and more efficient cars, for the environment and personal sake. However, it is not brought into existance, because oilcompanies fight its existance, and hold the patents to it.
This is merely an example. It applies to all fields. A company will fight ANY kind of technologic advancement or technologic efficiency that would put in danger its income of profits, regardless if it is better for the world. That is probably the final thing I blame the system of profits for: You cannot afford to have conscience if you wish to make profits.
In a way, you can see this as Spirituality VS Materialism. I favour wellbeing, high morals, conscience, honesty and a sense of ethics, over materialistic gain and profits.
You know why? The former makes you happy. The latter doesn't.
I probably messed up a thing or two, not explained something very well, or forgot one, not sure. If I remember, I will add it.
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mvassilev
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posted November 23, 2008 03:51 AM |
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1. The well-being of these powerful companies? These companies only exist to serve their shareholders. They have no individual "well-being", as such. And as long as they continue to make a profit, the shareholders continue to make a profit, then they have money. What are they going to do with that money? Eat it? Put it under their mattresses? No, of course not. They're going to spend it or invest it - which is beneficial for everybody.
2. Yes. That's the point. Of course things are scarce - and not just natural resources. And capitalism distributes scarcity based on the individual's productivity, not on some arbitrary measure, or by the disgusting principle of "from each according to his ability, to each according to his need".
And individual companies of course stand to gain from scarcity. But we don't live under one huge monopoly, do we? There's competition. If one company tries to keep things scarce, then another will come in and make things slightly cheaper and less scarce, and then the first company will have to compete in order to make a profit. The two companies will keep trying to get an advantage over each other, and, in the meantime, people are benefiting from their competition.
3. Quite obviously false. Look at cars, for example. They are infinitely more reliable today than they were a hundred years ago.
Same principle as I explained on 2.
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Wether it is dumping waste into the environment, Walmart moving into a small town and forcing local, small companies out of business, or a machine replacing a person in a factory, ALL are examples of corrupt behavior, merely at a different level. The motive is the same: Saving money.
While the first is an example of corrupt behavior, the second and third certainly aren't. But that's a different point. The main point here is that there is indeed room for government here: to keep companies from dumping waste everywhere. (On the other hand, consider that if there were no government at all, there would be nothing to corrupt. Just a thought.)
5. "I bought a DVD player from Samsung, and it broke the first time I used it! See if I ever buy a Samsung DVD player again! And I'll tell my friends not to buy from Samsung either!" So much for Samsung's profits.
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You cannot GAIN something without something else LOSING something.
And this misconception is, I believe, the root of the problem. Consider a society in which only two people exist: a farmer and a blacksmith. Initially, they don’t trade. The farmer both farms and blacksmiths for himself, though he is more productive when farming than when blacksmithing. The blacksmith also performs both tasks, but is more productive when blacksmithing than when farming.
Then, the farmer and the blacksmith decide to exchange the products of their labors. The farmer can now exclusively focus on farming, since that is what he does best. The blacksmith can do likewise for blacksmithing. They exchange their surplus, since each produces more than he can use by himself. Thus, they become more productive. They can use their excess productivity for some new aim. comparative advantage.
Does the farmer take from the blacksmith? No. But does the farmer GAIN? Yes, of course. Thus, your statement is false.
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Saying a person can choose between either working under VERY bad circumstances for VERY low income, or starving to death, is not a choice, its blackmail.
Not really. No one has the right to be fed. People should only be able to feed through self-sufficiency, exchange, or charity. I favor the second. People exchange their labors for money, which they can in turn exchange for food. It's better than getting something for nothing, because then somebody else ends up footing the bill. There's no such thing as a free lunch.
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Clean electric cars have existed for quite a long time, but are not brought into circulation because certain companies (such as oilcompanies) would see their profits drop.
Can we keep your conspiracies out of this?
And it doesn't matter. A company can't stop another company from doing something. If one company sees a potential drop in profits from an innovation, another company sees a rise in profits. So the second company pursues the innovation and reaches it.
By your logic, the car would have never been invented because the horse breeders would have prevented it.
I see this conflict as prosperous freedom vs. slavery and starvation. On one side, you have the freedom to sell your labor and buy whatever you want, and live for yourself. In the second, you must have the bread stolen out of your mouth and given to those who don't work.
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Moonlith
Bad-mannered
Supreme Hero
If all else fails, use Fiyah!
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posted November 23, 2008 04:27 AM |
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Edited by Moonlith at 04:30, 23 Nov 2008.
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1. The well-being of these powerful companies? These companies only exist to serve their shareholders. They have no individual "well-being", as such. And as long as they continue to make a profit, the shareholders continue to make a profit, then they have money. What are they going to do with that money? Eat it? Put it under their mattresses? No, of course not. They're going to spend it or invest it - which is beneficial for everybody.
So far I haven't seen any benefit in that. I see elites who wear big business suits, drive fancy cars, and own multiple villas, whereas their imployees settle for a small house with a small car, and just enough money to buy food and a ticket to a cinema now and then.
It's not beneficial for everybody. It's enough for the small man to keep him alive and working, and beneficial only for the elite.
You acknowledge the existance of diversity in wealth between people, but you are blind to the fact of how that diversity is created. It is NOT through fair and honest competition: You cannot afford to be fair.
You claim everyone benefits. This is not true. Keeping you in a position where you can go from one low-wage job to another is not beneficial.
It's a simple system of modern slavery.
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2. Yes. That's the point. Of course things are scarce - and not just natural resources. And capitalism distributes scarcity based on the individual's productivity, not on some arbitrary measure, or by the disgusting principle of "from each according to his ability, to each according to his need".
I rather believe capitalism CREATES and MAINTAINS scarcity rather than attempts to fix it.
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And individual companies of course stand to gain from scarcity. But we don't live under one huge monopoly, do we? There's competition. If one company tries to keep things scarce, then another will come in and make things slightly cheaper and less scarce, and then the first company will have to compete in order to make a profit. The two companies will keep trying to get an advantage over each other, and, in the meantime, people are benefiting from their competition.
I do believe we do. To the eye you see seperate companies. But I am not so sure what goes on behind closed doors. And neither I nor you have ANY reason to believe these guys would play fair and compete honestly, and EVERY reason to believe they would at least TRY to form cartels.
What you are spewing is the basic Capitalism propaganda. It seems logical in theory, but it is not the reality.
Companies would sooner make deals with one another to keep the prices artificially up, rather than to break each other down and let suckers benefit. You may say this is where governments need to interfere, but this is about capitalism. And capitalism produces monopolies without government intervention.
And even then, it is only a matter of time before corruption spreads into the government. Politicians that accept sponsorships and in turn sign policies made by the big corporations. Money buys power.
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3. Quite obviously false. Look at cars, for example. They are infinitely more reliable today than they were a hundred years ago.
Same principle as I explained on 2.
I never said there was NO progress. I am saying the progress could have been a lot better and more innovative. And even then you do understand, a company does not benefit from making their products 100% reliable.
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Wether it is dumping waste into the environment, Walmart moving into a small town and forcing local, small companies out of business, or a machine replacing a person in a factory, ALL are examples of corrupt behavior, merely at a different level. The motive is the same: Saving money.
While the first is an example of corrupt behavior, the second and third certainly aren't. But that's a different point. The main point here is that there is indeed room for government here: to keep companies from dumping waste everywhere. (On the other hand, consider that if there were no government at all, there would be nothing to corrupt. Just a thought.)
All three are examples of corruption, but on different levels. The former is obvious, the second is not so, and for the third, people tend to accept it as normal. Fact of the matter is, in all cases, either the environment or people SUFFER for the sake of profits. I call that corruption.
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5. "I bought a DVD player from Samsung, and it broke the first time I used it! See if I ever buy a Samsung DVD player again! And I'll tell my friends not to buy from Samsung either!" So much for Samsung's profits.
I am not sure I am getting your point?
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You cannot GAIN something without something else LOSING something.
And this misconception is, I believe, the root of the problem. Consider a society in which only two people exist: a farmer and a blacksmith. Initially, they don’t trade. The farmer both farms and blacksmiths for himself, though he is more productive when farming than when blacksmithing. The blacksmith also performs both tasks, but is more productive when blacksmithing than when farming.
Then, the farmer and the blacksmith decide to exchange the products of their labors. The farmer can now exclusively focus on farming, since that is what he does best. The blacksmith can do likewise for blacksmithing. They exchange their surplus, since each produces more than he can use by himself. Thus, they become more productive. They can use their excess productivity for some new aim. comparative advantage.
Does the farmer take from the blacksmith? No. But does the farmer GAIN? Yes, of course. Thus, your statement is false.
Your example is valid, but your conclusion is not. While it is true both the farmer and blacksmith gain, you left out the third party, that loses, where their gain COMES from: The environment. Both the farmer and blacksmith take recources from the environment.
This is not a world designed for human beings to exploit and deplete for their own gain. That is a self defeating system, and most people don't seem capable of realizing that, untill the moment they overpopulate and overly deplete the world's recources to the point that you will have mass death and suffering.
Human beings are part of the natural balance just like all living things and elements. If one element gains, another loses.
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Not really. No one has the right to be fed. People should only be able to feed through self-sufficiency, exchange, or charity. I favor the second. People exchange their labors for money, which they can in turn exchange for food. It's better than getting something for nothing, because then somebody else ends up footing the bill. There's no such thing as a free lunch.
Again in theory, nice. There is a difference to being given a fair amount of credit for your labor and being severely underpaid and exploited. Beaurocracy is a very nasty thing, btw.
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And it doesn't matter. A company can't stop another company from doing something. If one company sees a potential drop in profits from an innovation, another company sees a rise in profits. So the second company pursues the innovation and reaches it.
And the first company just sits there and allows it to happen because they are honest? Of course not. The first company instead tries to acquire the patents first and ensure they are not used. It's called beating out rivalry. As long as huge profits can still be made from oil, you won't see mass-produced fuel-efficient or electric cars on the general affordable market.
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By your logic, the car would have never been invented because the horse breeders would have prevented it.
You assume the horse breeders A) would have understood that loud rambling explosive machine would actually pose a threat to the horse market. and B) would have been so well informed about its progress as today.
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I see this conflict as prosperous freedom vs. slavery and starvation. On one side, you have the freedom to sell your labor and buy whatever you want, and live for yourself. In the second, you must have the bread stolen out of your mouth and given to those who don't work.
You seem to live in a very theoretic world. Capitalism is not as good as you think it is in theory, and Socialism is not as awefull as you think it is in theory.
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mvassilev
Responsible
Undefeatable Hero
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posted November 23, 2008 04:41 AM |
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Keeping you in a position where you can go from one low-wage job to another is not beneficial.
Without those "people in business suits", you wouldn't even have the low-wage jobs. You can kill the rich, but do you think that you'd be better off? If workers are all that matter, then theoretically they could go to an empty lot and perform all the same actions they do at work, and produce the same amount. Can they? Of course they can't.
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I do believe we do. To the eye you small companies. But I am not so sure what goes on behind closed doors.
Again, can we not have your constant conspiracy talk?
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Fact of the matter is, in all cases, either the environment or people SUFFER for the sake of profits. I call that corruption.
That's a pretty unusual definition of corruption.
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I am not sure I am getting your point?
My point is that if a company sells me unreliable goods, they're not going to get my business again. And other companies stand to gain from me buying their products, so they make them more reliable.
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This is not a world designed for human beings to exploit and deplete for their own gain.
"It is so. I know it is so. I have said so, therefore it is so." It is true that we can use the Earth more wisely, but we can and should use the Earth. If you see a fruit hanging from a tree, you eat it. On the other hand, you don't chop the tree down.
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There is a difference to being given a fair amount of credit for your labor and being severely underpaid and exploited.
Define "exploitation".
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And the first company just sits there and allows it to happen because they are honest? Of course not. The first company instead tries to acquire the patents first and ensure they are not used. It's called beating out rivalry.
Beating out rivalry? Have you ever played whack-a-mole? It's pretty hard, because you have to hit the moles, but they disappear quickly and there are a bunch of them. It's a similar situation here. Companies may try to preempt their competitors by acquiring the patents first, but there are so many different threats to the company's profits that it can only focus on a few at a time. And often it misses something and the hit in profits comes from a completely unexpected source. Moreover, in that case, it's wasted its money developing a "defensive" patent because it doesn't even protect the profits.
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You assume the horse breeders A) would have understood that loud rambling explosive machine would actually pose a threat to the horse market. and B) would have been so well informed about its progress as today.
Believe it or not, many threats to profits start out small, just as the "loud rambling explosive machines" did. For example, CBS could not have predicted the blow in profits it would get from CNN. TV companies couldn't have predicted how much profit they have lost from the invention of the Internet. CD player manufacturers couldn't have predicted the success of the iPod. And so on. You can't really predict the "next big thing". Neither can companies.
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Capitalism is not as good as you think it is in theory, and Socialism is not as awefull as you think it is in theory.
Yeah, the Holodomor and purges weren't as awful as I think, and the US isn't that much better than the USSR was. Sure.
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Eccentric Opinion
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Binabik
Responsible
Legendary Hero
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posted November 23, 2008 04:57 AM |
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Oxygen is available in such high abundance, that selling it would be pointless. Likewise, any product or material that is available in such high quantities, cannot be sold.
All the old-timers like me will remember when the idea of buying water seemed completely ludicrous. And yet now we have lots of shelf space at the grocery store dedicated to bottles of water. A buck for a half liter bottle of water???? I still shake my head at that and can't believe the number of people who actually pay it....
/insert rant
And for the record. I was in the process of writing a lengthy post for this thread. But, as seems typical these days, the thread has turned into a quote war argument with people whipping out posts in rapid fire succession. Can there truly be much thought put into those posts???
And as is also typical these days, I take a look at the thread and see that anything I may have been writing is now totally out of date. OMG, I actually took time to think about what I was writing while others were obviously typing just as fast as their little fingers can move.....
And IMO, THAT is one of the main reason the Other Side has been ruined. And also one of the main reason I rarely post any more. It just seems that every time I spend my time writing, it just gets the big red "No Longer Pertinent" stamped on it and ends up in the bit bucket.
Screw it, What's a couple hours of my time wasted anyway!!!
Oh well, have fun arguing guys.
/end rant
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mvassilev
Responsible
Undefeatable Hero
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posted November 23, 2008 05:08 AM |
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I like that the OSM moves more quickly now. But I often find myself responding to posts made 2 pages ago, but it doesn't bother me. As long as the point has not yet been adequately addressed, I have no qualms with responding to it.
Feel free to respond, Bik. It is rare for a post to be out of date.
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Eccentric Opinion
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executor
Famous Hero
Otherworldly Ambassador
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posted November 23, 2008 02:54 PM |
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Edited by executor at 16:49, 23 Nov 2008.
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I would like to comment on a few things.
First, abundance and scarcity.
Abundance is a state, in which, regardless of the amount of the consumption of a given thing, it requires no or almost no effort/input to obtain additional amount of that thing. Abundance is a state of the ecumene in which we live and our economy operates in, and as such cannot be artificially created.
Air, seawater, sunlight or sands of Sahara are abundant. Fresh water was once abundant, but no longer is due to population growth.
Therefore everything that requires capital or labour input to be produced, regardless of the economic system, is scarce.
However economy can create an illusion of abundance - for instance electricity seems to be abundant, if we want to turn something on, we just do it, but the simplest proof that it is scarce is that we pay for it.
It is usually possible to use scarce resources we have to produce beyond our needs (because only that would mean abundance), but it is irrational to do so.
Say in 2012 there are 7 bln people on Earth, and we find an idea of making food abundant a good one. Therefore we produce food for, say, 7,5 bln people. But if we do so, then the most rational outcome is for the population to increase to 7,5 bln, and abundance is gone. If it doesn't grow, then food for 0,5 bln people is wasted, as scarce resources, such as soil and water, committed to its production could be better used in another, more productive way.
It is optimal for population to grow up to environmental limits, as the more people it gives (as long as there are resources to support them), the more well-off everyone is. So it is suboptimal to artificially create abundance.
Secondly, well-being is well-being, and welfare policies are theft. At best(worst?) an insurance against violence of demanding mob inspired by socialist lunatics. It is no good-doing at all. Charity is good-doing, as it is genuine using your own property to make another's life a little less hard. And if someone calls himself a good-doer and then robs one people to give another, then I feel a need to question his good intentions. Why don't he use his own resources to help, and not decide on what other should do with theirs. If they decide not to help, let them. At least you know who is a good guy and who is not.
Thirdly, decency and ethics. As far as my opinion is concerned, if someone 'under profit system' does not behave decently, is dishonest and unethical, and is an angel otherwise, then I do question the quality of his ethics. Suffice to say, if benevolence is not genuine it is no benevolence at all. Why should I respect it or desire it?
And finally, if something is not good in theory, then it cannot be good in reality. Free market economy with perfect competition is an ideal situation, of course, but this means we should strive to approximate it, not surrender and reject it.
Besides, free market works ideally if people are decent and ethical, if they are not, then:
- do they deserve a better system?
- will that system be truly better, or even worse? I think the second.
Therefore we should concentrate ourselves on promoting decency, not attacking natural, free market economy.
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Understanding is a three-edged sword.
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TheDeath
Responsible
Undefeatable Hero
with serious business
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posted November 23, 2008 03:10 PM |
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Edited by TheDeath at 15:17, 23 Nov 2008.
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And if someone calls himself a good-doer and then robs one people to give another, then I feel a need to question his good intentions.
You question Robin Hood's goodness? (He was classified as "Chaotic Good", not all good people are "Neutral Good" or "Lawful Good" if you played some D&D that is )
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Thirdly, decency and ethics. As far as my opinion is concerned, if someone 'under profit system' does not behave decently, is dishonest and unethical, and is an angel otherwise, then I do question the quality of his ethics. Suffice to say, if benevolence is not genuine it is no benevolence at all. Why should I respect it or desire it?
Would you say the same about police? That they are not "genuine" because some big boss with lots of bodyguards might not want to pay taxes for it? What about poor people who can't afford any kind of defense and get robbed easily?
In your case, why should the big boss pay taxes for police right? Let the poor who can't afford any protection get robbed, raped and just about anything else. It makes me sick. Most of the time, rich people do NOT deserve as much as they have done. It is not "hard work". It's called "opportunity", which is NOT EQUAL to everyone no matter what. I think reality tells us that only a few percent can be millionaires. Millionaires LEECH on poorer people -- it is 'relative' in a way. Many people do not have opportunities. It's like there are 6 billion people, and only 1 million opportunities (or much less) -- no matter which one guy grabs an opportunity, it also "steals" it from someone who could get it otherwise (or let's say, "takes his/her place").
Besides, what people need is a CHANGE (or we wouldn't be having this discussion). Isn't that the whole point? Why people are complaining? Because a CHANGE is needed.
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The above post is subject to SIRIOUSness.
No jokes were harmed during the making of this signature.
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baklava
Honorable
Legendary Hero
Mostly harmless
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posted November 23, 2008 03:20 PM |
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There were purges in the USA too, MVass...
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"Let me tell you what the blues
is. When you ain't got no
money,
you got the blues."
Howlin Wolf
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executor
Famous Hero
Otherworldly Ambassador
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posted November 23, 2008 03:25 PM |
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Edited by executor at 15:39, 23 Nov 2008.
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If he robbed honest tradesmen, then I find no reason to call him a good guy of any sort, even CG. If that's what CGs are, then I find no reason to accept such people as 'good'.
If he did not, however, then he simply opposed an usurper, which is no less a lawful way of doing than a chaotic. If so, I would have classified him as NG.
And to you second point, apparently anarchocapitalism does reveal true motivations and shows everyone as they really are, but with an anarchy you won't achieve anything, so societies and systems are formed, with an agreement on some basic principles. Besides, any decent person, rich or poor, sees value in independent armed services and legal system. And those who do not cheat on taxes anyway .
If someone takes an opportunity, and uses it to the benefit of all, then he is entitled to do do with its fruits as he pleases, as long as he doesn't directly and/or intentionally harm anyone. It does require skills to use opportunities properly. And we should rather encourage people to grab opportunities at hand, rather than make them feel guilty for benefiting everyone. I do not really care if the gap between the rich and the poor widens, as log as everyone is better off for that. And socialism makes almost everyone worse off.
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Understanding is a three-edged sword.
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