The Federal Reserve Under Fire

Alan Grayson: It’s surprising to me that it has gotten essentially no mainstream media coverage at all because we’re talking about so much money.

William Greider: The Federal Reserve is the black hole in American democracy.

Ron Paul: All we have to say is, what do they have to hide?

Dennis Kucinich: The Federal Reserve had a responsibility to provide oversight for the conduct of banks. They didn’t do that.

Narrator: It’s known as the most powerful and secretive institutions in Washington and now, President Obama wants to hand the Federal Reserve even more power.

Barack Obama: I am proposing that the Federal Reserve be granted new authority and accountability for regulating bank holding companies and other large firms that pose a risk to the entire economy in the event of failure.

Narrator: The President’s plan to make the Fed the systemic risk regulator has raised eyebrows on Capitol Hill.

Darrell Issa: The President’s financial reform proposal has included broad and sweeping increases in Chairman Bernanke or his successor’s powers and if that power is used, what would be the oversight?

Paul Kanjorski: I believe that we have to adequately audit the Federal Reserve before any consideration is given to making the Federal Reserve the systemic risk regulator.

Narrator: A growing number in Congress are calling for the Federal Reserve to be fully audited for the first time in its history. It’s a movement that started with one Washington outsider whose ideas have largely been ignored by the mainstream of both political parties: Texas Congressman Ron Paul. He’s been trying to audit the Federal Reserve for years without success, but in the last few months, his bill to open up the Fed’s books has spawned a rare bipartisan coalition of more than 250 co-sponsors, a majority of the House of Representatives.

Ron Paul: The best answer I have about defending my bill is asking a question, why not?

Ben Bernanke: My concern about the legislation is that if the GAO is auditing not only the operational aspects of our programs and the details of the programs, but is making judgments about our policy decisions that would effectively be a takeover of monetary policy by the Congress, a repudiation of the independence of the Federal Reserve, which would be highly destructive to the stability of the financial system, the dollar, and our national economic situation.

Narrator: Despite these dire warnings against having an audit, Fed challengers in Congress aren’t flinching.

Alan Grayson: This is a situation where the Federal Reserve is out of control. Since September, it has been doing things that it never did before in its history.

Narrator: With the help of a rule from the days of Woodrow Wilson that gave the Federal Reserve vast authority to lend money during “unusual and exigent circumstances,” the Fed has doled out more than a trillion dollars to financial institutions without consulting Congress. When freshman Congressman Alan Grayson asked the Fed’s Inspector General how much of that money the Federal Reserve had lost since the crisis began, he was surprised to find out she didn’t know.

Alan Grayson: So are you telling me that nobody at the Federal Reserve is keeping track on a regular basis of the losses that it incurs on what is now a $2 trillion portfolio?

Elizabeth Coleman: Until we actually look at the program and have the information, we are not in a position to say whether there are losses or to respond in any other way…

Alan Grayson: And I think it was shocking to me and to other people to see that the Inspector General could not account for a trillion dollars of cash that had been handed out by the Federal Reserve in the course of just the past few months.

Narrator: So Grayson began rallying his fellow Democrats to support Ron Paul’s bill and call for more oversight of the Federal Reserve.

Nancy Pelosi: The fact is, is that the American people want to know more of the “secrets of the temple” as the book was before you were born. The Secrets of the Temple was required reading in my day.

William Greider: Nancy Pelosi said the public wants to know more about the secrets of the temple and my response to that is if the public does learn more, they will be outraged more.

Narrator: Journalist and author William Greider says the Fed’s darkest secrets are conflicts of interests stemming from its deep ties to the financial elite.

William Greider: The Federal Reserve, from its origins, is very, very close to the biggest banks and financial houses in the country. It always has been and always has governed with that in mind.

Narrator: The Fed has refused to release the names of all the banks that it has given money to, but some of the names that have leaked out have caused concern and stories emerged of how the banks got their money. Some are questioning the Fed’s close relationship with Wall Street.

William Greider: One example that I think is particularly dubious: Jamie Dimon, CEO of the JP Morgan Chase, is involved in the bailout of Bear Stearns. If that firm failed, one of the people who loses first is JP Morgan Chase, so he is also saved by the bailout of Bear Stearns. So he graciously agrees to take over Bear Stearns if the Federal Reserve will put up $30 billion to cover his losses.

What I find troubling is that Jamie Dimon sits at the Board of Directors of the New York Federal Reserve Bank. Tim Geithner who was then president of the New York Federal Reserve Bank and is now Treasury Secretary, was bargaining with his own board member on the terms of this deal, so I think what has happened in this crisis is that people all over the country have been able to see that there’s something illegitimate about this. They may not be able to put their finger on it, but this doesn’t feel right and some people are getting downright angry and that includes a lot of members of Congress.

Man in Congress: Do you solemnly swear to tell the truth, the whole…

Narrator: And now, one House committee is holding its own investigation into the controversial deal that the Fed brokered between Bank of America and the failing financial giant Merrill Lynch. According to documents acquired during the investigation, Fed Chairman Bernanke threatened to fire Bank of America’s CEO Ken Lewis when Lewis considered backing out of the deal.

Dennis Kucinich: The Fed’s decision-making process in the Bank of America and Merrill Lynch merger makes the case for a significant increase in accountability at the Fed.

Narrator: The next hurdle for the plan to audit the Fed is the House Financial Services Committee chaired by Barney Frank. Although Frank has praised the Fed’s work to keep credit flowing during the economic crisis, he has pledged to include a Fed audit in the major financial regulation bill he plans to finish this summer.

Barney Frank: There will be substantially increased auditing. We don’t want anything that would endanger the integrity of monetary policy, but in general, the operations of the Fed, the money they take in, all that would be very much subject to audit.

Narrator: Despite the momentum, the Fed is not quitting the fight. They just created a new position for Enron’s former head lobbyist Linda Robertson to push back against congressional critics.

Alan Grayson: I think it’s unfortunate that they’re struggling so hard to keep the secret. We need to know exactly who got the money, what the terms are, all the details of this, because this is democracy. We can’t hand out a trillion dollars of the people’s money and keep everyone in the dark about it. That’s ridiculous. Nobody has that kind of power in a democracy in a constitutional country.

  • christine

    Practice a Little Preventative Medicine …and Stop Our Government NOW.

    I know many of us are justifiably complaining about issues with our government. Some of us are feeling there is little that we can do to actually see an immediate change, some relief from so much negativity coming at us at once. We’re enduring financial hardships, joblessness, and seeing our liberties being taken away by the passing of each new law, our personal wealth stolen and our kids in debt before they have even been born.

    Well, I suggest to you now that each one of us has an opportunity right now, TODAY, to make a huge change in the course of history and help our nation avoid a lot more misery, pain and suffering.

    No one here doubts that much of our government is secretive and working against us. We are angry about the shadow government, the elite bankers and those within the FED, with Goldman Sachs and major corporations who are surrounding us like an army, taking our wealth and taking our country down. We have felt helpless. This all goes against what America is to us in our hearts was at its inception. It is land of a free people, not an oppressed people.

    http://www.theflucase.com/index.php?option=com_content&view=article&id=352%3Acomplaint-to-stop-enforced-vaccinations-in-washington-state&catid=1%3Alatest-news&lang=en

    I would like you to take a look at a complaint being filed in Washington State. The print is tiny (CTRL+ will give you larger print). Be sure to read through it all the way to the end. You will get an education! If you have anger towards any of the elite and secret groups, NOW IS YOUR CHANCE TO DO SOMETHING ABOUT THEM ! YOUR COMPLAINT CAN CAUSE AN INVESTIGATION AND CRIMINAL CHARGES TO BE LEVELED AGAINST THOSE WHO HAVE HARMED US AND CONTINUE TO HARM US. They won’t stop themselves, so we have to. We call it then end of tyranny. Let’s get back to living fully in freedom. We need to eradicate them from our financial and governmental system! This complaint summarizes one of the largest crimes planned against Americans and other people around the world, ever! This is global. It will start in a couple of months, mid-October, so we haven’t much time to act. Point by point, you will see that this fall our government with several other organizations listed in the complaint have actually planned to harm us in ways we could never have ever imagine. Obama has appeared on television telling us how he has encouraged several countries to be prepared to also force vaccinate its citizens. As he puts it “they are responsibly prepared”. Nice sounding, but far from nice.

    Names like Goldman Sachs, the elite bankers, criminal syndicate, the World Health Organization (WHO) and many others, several in Illinois, and drug executives who plan to make a lot of money from the sale of a vaccine for the H1N1 virus, but this vaccine is contaminated and lethal. A criminal indictment has firstly been filed against WHO and others by Jane Bergermeister.

    Charges Filed Against Baxter and Avir
    http://birdflu666.wordpress.com/2009/04/

    Help take down the criminals who have stolen so much from us already, and who now plan to systematically take our very lives, once again under the guise of helping us. No, they are not helping us, they are helping themselves to everything we own if we die from this vaccine! There is so much documentation. Get legal counsel if you need to. Talk it over with others, but please consider filing a complaint in your state. Who will stand up and put your anger to good use? As Ron Paul says, we need to convert that energy of anger into good use. Here’s your opportunity.

    A Guide to Filing for an Injunction in a State
    http://www.theflucase.com/index.php?option=com_content&view=article&id=351%3Aa-guide-to-filing-an-injunction-in-a-state&catid=1%3Alatest-news&lang=en

    You can also visit my website at http://livingquests.com for links to more interviews with Jane, videos and info. It’s not a fancy website, but it will do for now.

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  • christine

    I strongly suggest that everyone get educated and pay attention to what is happening concerning the upcoming government-controlled, mass, forced flu vaccination plan. We only have a couple of months before we will be hit with something larger than any other issue. This is designed to change our country, the world as we know it.

    Much has already been posted on the several “Health” sections of this forum. Please check out the information, especially more towards the bottom of the entries.

    For anyone who is working towards preserving our liberty, freedom from tyranny…check out the agenda (there’s always an agenda) from the Swine Flu Conference held in Washington D.C., especially #2 & #6

    http://www.lewrockwell.com/blog/lewrw/archives/32605.html
    http://www.new-fields.com/ISFC/brochure.pdf

    Jane Bergermeister has filed a criminal indictment against the World Health Organization (WHO) and Obama due to the evidence she has about contaminated flu vaccines being distributed for mass depopulation. Know her story, her case.

    Important Websites to Keep Informed
    http://birdflu666.wordpress.com
    http://theflucase.com

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  • http://deanscreditideasguide.blogspot.com/2009/08/fixing-your-credit-what-to-do-what-to.html Dean’s Credit Ideas Guide

    These replies have been an interesting read…

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  • http://noncredit-money.org stojan nenadovic

    Dear Nate Y, prices must be allowed but prices level must be constant without inflation.

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  • http://noncredit-money.org stojan nenadovic

    Formula is mathematics. It is truth. There is not demand for non-credit money. Non-credit money is gift which come from formula.
    Velocty of money circulation is not constant. Money circulation velocity retards permanently. Only prices must be constant. Without inflation.

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    • Nate Y

      Nothing is constant in Economics. Prices must be allowed to freely adjust to changing conditions if we are to achieve any type of economic harmony.

      At this point, I think it best for us not to carry on this convo any further. I very much doubt either one of us will convince the other.

      Cheers

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  • Nate Y

    Marc Faber is so damn cool.

    He mentions Krugman and his class of economists near the end of part 1

    http://www.youtube.com/watch?v=VAIn-8n-OMw

    And continues spreading the knowledge in part 2 (he also lights up a cig because he’s such a badass)

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    • longshotlouie

      First heard of Marc Faber from an economics professor at SMU in the ’70z. Good to see he can still lay down the facts.
      Sounds like Ron Paul with a different accent.

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  • http://noncredit-money.org stojan nenadovic

    Dear Nate Y, economics can be understood as physics. There is not problem.
    Hereve Gogain, I think the very same.

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  • http://noncredit-money.org stojan nenadovic

    Dear Nate Y, today, ther is not commodity used as money. Only all supply and all demand determine money.

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    • Nate Y

      Indeed, money today is not a commodity. That’s the problem.

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      • Herewe Goagain

        Agreed

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  • http://noncredit-money.org stojan nenadovic

    Dear Nate Y, all supply and all demand must be reduced to formula.

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    • Nate Y

      Again, all supply and all demand can’t be reduced to a formula because they are in a constant state of flux brought about by the actions of humans. Economics cannot be understood in the same manner as physics.

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      • Herewe Goagain

        Amounts of supply and demand do fluctuate, this is true.
        How does this mean that it cannot be reduced to a formula.
        ‘If’ we deduce that the formula is correct, are we not able to simply insert the correct numbers into the formula at any given time?
        Economics is science after all, but I see art in it’s implementation.

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        • Nate Y

          We can view ecnomics as a science. But it is a science of human action. That is the key distinction that separates it from physics, chemsitry, other natural sciences, and applied sciences (engineering). Physics has the comfort of constants. Economics does not. Economics has to reckon with the choices made and actions taken by human beings. Physics does not. Given these facts, economics cannot be understood in the same manner as physics.

          Let’s now focus on this proposed formula.

          You ask “‘If’ we deduce that the formula is correct, are we not able to simply insert the correct numbers into the formula at any given time?”

          Nope. Because even if the formula is correct, there is no way to know what the “correct numbers” are. The formula itself consists of variables derived from variables derived from variables derived from variables etc. It is quite easy to see how this type of calculation is problematic. If any one of the variables (or derived variables) is incorrect, the entire formula breaks down.

          It is impossible to properly measure and quantify the value judgements of billions of people. But that is exactly what the formula claims to do.

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          • Sean

            HAHA! Austrian Economics is the science of human behavior. That is why they can predict trends..

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          • Sean

            You can properly measure the amount of money, and the demand for money.

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          • Nate Y

            Yep. And because Austrians understand Economics to be a science of human action they were able to see the current crisis from a mile away. While Keynesians and those of other schools who think Economics can be understood in the same manner as Physics were blindsided by it and left staring at their precious formulas with befuddled looks on their faces.

            “You can properly measure the amount of money, and the demand for money.”

            This is a strawman and not worthy of a response.

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          • Sean

            Paul Krugman saw the crisis coming so your statement is false holds no value.

            And there are income based money demand modules. Our crisis wasn’t an issue of money or inflation anyways. It was an issue of malinvestment, sub prime loans, deregulated derivatives and credit swaps.

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          • Sean

            A typical money-demand function may be written as
            Md = P * L(R,Y)
            where Md is amount of money demanded, P is the price level, R is the nominal interest rate and Y is real output. An alternate name for a term such as L(R,Y) is the liquidity preference function.

            And you can determine the velocity of money and how many times it is turned over. During the recession, the velocity of money decreased 14%…

            The most basic “classical” transaction motive can be illustrated with reference to the Quantity Theory of Money. According to the equation of exchange MV = PY, where M is the stock of money, V is its velocity (how many times a unit of money turns over during a period of time), P is the price level and Y is real income. Consequently PY is nominal income or in other words the amount of transactions carried out in an economy during a period of time. Rearranging the above identity and giving it a behavioral interpretation as a demand for money we have

            or in terms of demand for real balances

            Hence in this simple formulation demand for money is a function of prices and income, as long as its velocity is constant.

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          • Sean

            Stojan has a very good point. The problem is demand cannot create enough money as Ben Bernanke and statistics have shown. If we don’t borrow money, than our whole economic system freezes. Because commercial real estate is down, we are going to have issues with our M1, or a lack of money in circulation.

            If we could put money into both the supply and demand side of the economy, than I believe it would be beneficial for all.

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          • Nate Y

            The expansion of the money supply (inflation) and the subsequent artifically low interest rates sowed the seeds for malinvestments, sub prime loans, deregulated derivatives and credit swaps.

            Also, it is true that Krugman eventually caught on to the problem in housing. Although he never properly identifies the culprit (The Fed). He also promoted the housing bubble in the first place after the bursting of the tech bubble…

            “Economic policy should encourage other spending to offset the temporary slump in business investment. Low interest rates, which promote spending on housing and other durable goods, are the main answer.”
            -Krugman, 2001

            Paul Krugman, being a proper Keynesian, doesn’t understand economics and merely prescribes bubble after bubble as the soulution to economic ills. He’s currently lamenting the stimulus because he thinks it is too small. For some odd reason, he wants a treasury/bond/dollar bubble. We need that like we need a hole in the head.

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          • Herewe Goagain

            From Mises’ last book

            “What is needed to prevent a scholar from garbling economic studies by resorting to the methods of mathematics, physics, biology, history or jurisprudence is not slighting and neglecting these sciences, but, on the contrary, trying to comprehend and to master them. He who wants to achieve anything in praxeology must be conversant with mathematics, physics, biology, history, and jurisprudence, lest he confuse the tasks and the methods of the theory of human action with the tasks and the methods of any of these other branches of knowledge.”

            I’m just sayin’.
            Theoretical formulas are starting points.
            The formula can stay the same. The numbers applied to each derivation can change.

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          • Sean

            Low interest rates did cause malinvestments, but not subprime loans, deregulations, or credit swaps.

            haha! Low interest rates obviously do encourage business investment. He straight out blamed Alan Greenspan and the fed for keeping them too low for too long bc it created a large bubble.

            Paul Krugman obviously does understand economics. He did map out the entire trade spectrum of the world and won the nobel prize for it. He has proved Austrians wrong many of times with detailed data but Austrians argue that data is irrelevant, which is totally stupid.

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          • Sean

            “On the other hand, the common claim that economists ignored the financial side and the risks of crisis seems not quite fair — at least from where I sit. In international macro, one of my two home fields, we’ve worried about and tried to analyze crises a lot. Especially after the Asian crisis of 1997-98, financial crises were very much on everyone’s mind. There was a substantial empirical literature from economists like Carmen Reinhart and Graciela Kaminsky (with Ken Rogoff joining in latterly); there was modeling from Guillermo Calvo, Jose Andres (grrr) Velasco, Nouriel Roubini, Paolo Pesenti, and others, including yours truly.

            Speaking for myself, I saw the housing bubble and expected the bust; but I hadn’t appreciated in advance either the vulnerability of the shadow banking system or the leverage of American consumers. Once the crisis was underway, however, I had a more or less ready-made intellectual framework to accommodate these revelations: at a meta level, this was very much the same kind of crisis as Indonesia 1998 or Argentina 2002.

            Domestic macro people may have been more astonished by what happened. But the prevailing trend now is to assert that there are more risks in the economy than were dreamed of in our philosophy; I don’t think that’s fair.”

            – Paul Krguman

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          • Herewe Goagain
          • Sean

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          • Herewe Goagain

            Thanks, but I think we have heard enough of the NWO Mouthpiece Krugman’s revisionist history to last a lifetime, and it probably will.

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          • Sean

            Awards:

            1991, American Economic Association, John Bates Clark Medal.[26] Since it was awarded to only one person, once every two years (prior to 2009), The Economist has described the Clark Medal as ‘slightly harder to get than a Nobel prize’.[27]

            1995, Adam Smith Award of the National Association for Business Economics

            2000, H.C. Recktenwald Prize in Economics, awarded by University of Erlangen-Nuremberg in Germany.

            2002, Editor and Publisher, Columnist of the Year.[28]

            2004, Fundación Príncipe de Asturias (Spain), Prince of Asturias Awards in Social Sciences.[29]

            2004, Doctor of Humane Letters honoris causa, Haverford College[1]

            2008, Nobel Memorial Prize in Economics, formally The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel – for his contributions to New Trade Theory.[30] He became the twelfth John Bates Clark Medal winner to be awarded the Nobel Memorial Prize.

            What have you ever won in your life time? Look, all these awards are 10 years after the fact.

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          • Herewe Goagain

            I know, that makes it an even bigger shame that he is so wrong so often.

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          • Herewe Goagain

            “haha! Low interest rates obviously do encourage business investment. He straight out blamed Alan Greenspan and the fed for keeping them too low for too long bc it created a large bubble.”

            I really should scroll slower. How did I miss this gem?

            Sean, have you ever heard of malinvestment?

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          • Herewe Goagain

            “In 1982 Krugman thought inflation was caused by the exchange rate of the U.S. dollar, the price of commodities, and the price of oil. But as anybody with a lick of common sense could tell him, he had it completely backward — these things are the effect of inflation, not the cause.”

            Did you feel that hammer, Sean?
            What someone else here called the symptoms are what this author calls effects. Not cause, but effect.

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          • Sean

            You really should scroll slower, i’ve talked about malinvestment several times in this thread, and I was refering to malinvestment in that statement you just quoted me on, “bubble.”

            That other comment you just made is a stupid ignorant word game. The exchange rate effects the price of commodities and goods which does cause inflation or rising prices.

            If you could actually read and understand what he is talking about, he says lowering interest rates(expansion of money supply) causes inflation. He says this on that website you posted. So shut your mouth.

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          • Sean

            hahahaha!

            “We believe that it is reasonable to expect a significant reacceleration of inflation in the near future. Much of the apparent progress against inflation has resulted from the temporary side effects of tight money and high real interest rates. These side effects must be expected to reverse themselves as real interest rates decline and the economy expands.” – Paul Krugman from that website you posted.

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          • Sean

            by the way, interest rates effect the money supply, or inflation.

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          • Matt

            Hmmm, I guess a lot of people were very wrong back in 1981-1982…

            “We probably will see widespread civil disorder in the 1980s, as a result of our faltering economic system.” – Ron Paul

            At least Krugman was ‘only’ hoping inflation wouldn’t return, while Ron Paul was predicting RIOTING IN THE STREETS! Looks like Ron Paul misidentified the Cause, and totally blew the Effect.

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          • longshotlouie

            Sean and Matt:

            Ladies,
            Every 28 days you recycle the same whines.

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          • Nate Y

            Here comes Matt trotting out his favorite quote. So I will reply with something similar to that I posted last time. Ron Paul was wrong about widespread civil disorder in the 80s. So what? It’s not his fault the American people couldn’t see or didn’t care to see how the government and banking system were confiscating and redistributing their wealth. Also, do you really expect anyone to have perfect forecasts? You pick on this one slip up and attempt to use it to cast suspicion on the Austrian school approach in general.

            I really do not understand why you post on this site. You claim to be open minded and seeking answers but it’s quite obvious your mind is made up. You know the Austrian answers and reject them. Do you do this in your real life? Do you seek out parties full of people who hold ideas you can’t stand? It’s like an atheist going to church every Sunday claiming he wants salvation but he constantly mocks what the Bible, the priest, and his fellow churchgoers have to say.

            Disclosure: I’m an atheist.

            Anyway, here’s Ron Paul calling the 1987 recession which the Fed successfully inflated away. And by “inflated away” I mean postponed, delayed, and made worse in the long run. They’re attempting to do the same thing this time around but many conditions have changed in 20+ years. I’m betting their Keynesian “money solves everthing” solution won’t work for much longer.

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  • http://noncredit-money.org stojan nenadovic

    Dear Nate Y, real money emerges from the market. Real non-credit money emerges from all spply and all demand. All Supply and all demand are the market too.

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    • Nate Y

      It’s impossible to quantify or understand “all supply and all demand” because they are in a constant state of flux. They cannot be reduced to formulas.

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  • http://noncredit-money.org stojan nenadovic

    Dear Nate Y, only formula can determine what money is.

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    • Nate Y

      Incorrect. People, through free exchange, determine what commodity is to be used as money.

      Your proposals sound very similar to the so-called “Greenback Solution” of Ellen Brown. They are incompatible with freedom and won’t work in the long run.

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  • Nate Y

    Real money emerges from the market. People should be free to determine what they want to use as money. No formula or legislative act can determine what money is.

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  • http://noncredit-money.org stojan nenadovic

    Non-credit money as real money is gift which come from formula:
    dM = kM ; k = (supply – demand)/demand ;
    Without inflation, without debt, without gold, without Federal Reserve.

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  • http://noncredit-money.org stojan nenadovic

    Dear Nate Y, we calculate that the growth rate of mankind progress is 3% and we calculate that it is necessary 3% of non-credt money. If inflation is zero, we are hit. If are not, inflation cannot be greater than 3%. Today, inflation is greater. We are yet better.

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  • Erika

    I understand what Sean is saying and to an extent, I agree with him.

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    • Nate Y

      Well then perhaps you could help explain his posts? Have at it.

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      • Herewe Goagain

        Hahahahaaaaaaaa

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        • Erika

          What are you laughing about, foreigner?

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          • longshotlouie

            You are on the world wide web, ma’am.
            There are no foriegners.

            Here We Go Again

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          • longshotlouie

            ouch, ‘foreigners’

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