Libertarianism

**Ferion** · 2012-07-12 12:13

Originally Posted by hey

Except interest rates account for inflation. Though of course sudden deflation would still be really bad for the poor/midle class.

I'm not really sure what point you're trying to make. He's talking about unexpected inflation. If the Fed doubled the money supply then the interest rates would be near zero in the short-run, which would further his point that it helps people paying back debt.

**Cadsuane** · 2012-07-12 12:20

Originally Posted by Ferion

I'm not really sure what point you're trying to make. He's talking about unexpected inflation. If the Fed doubled the money supply then the interest rates would be near zero in the short-run, which would further his point that it helps people paying back debt.

Mmm... only in an exogenous sense, since the interest rate increases with respect to increased money supply in the medium to long run. I think what you're trying to say is that the central bank tends to lower the overnight rate in a recession as a part of its stabilization policy.

Regardless you're right, since it's unexpected inflation which redistributes wealth to borrowers and away from lenders, because the real value of existing bonds and loans are lowered. Expected inflation doesn't really do anything until somebody tries to change it, which I guess is what Hey is point out. Nobody really belabours this point in Economics.

**hey** · 2012-07-12 12:30

Originally Posted by Ferion

He's talking about unexpected inflation.

That does not seem to be entirely the case.

**Dimmauk** · 2012-07-12 12:31

Minimum wage is $14.4k a year. Just saying.

**Ferion** · 2012-07-12 12:31

Originally Posted by Cadsuane

Mmm... only in an exogenous sense, since the interest rate increases with respect to increased money supply in the medium to long run. I think what you're trying to say is that the central bank tends to lower the overnight rate in a recession as a part of its stabilization policy.

Yeah exactly. I understand that in the long-run nominal interest rates will increase due to inflation, but I was thinking of this example in the short-run since he was suggesting an unexpected increase in the money supply by the central bank.

That does not seem to be entirely the case.

Just based on the wording of the article it suggests he's talking about unexpected inflation. If you read the comments he also explicitly states that he was talking about "surprise inflation" because he didn't want to bring expectations into his example.

**hey** · 2012-07-12 12:39

Originally Posted by Ferion

Just based on the wording of the article it suggests he's talking about unexpected inflation. If you read the comments he also explicitly states that he was talking about "surprise inflation" because he didn't want to bring expectations into his example.

I apoligize then. If that's the case, then yeah, everything said is accurate.

Demosthenes11 · 2012-07-12 12:39

Originally Posted by test123

Give me an example where a Libertarian free market has "done any wrong".

oooo oooo i know this one.

slavery

**test123** · 2012-07-12 12:48

The banks account for inflation, that is why the interest rate is always higher then it normally would be if there were no inflation. While you argue about salary and CPI something fishy is going on beyond view (https://www.popvox.com/bills/us/112/hr459)...

What really needs attention is who gets the spend the newly created money first. Say you play FFXI and a GM gives you 100 billion gil, you can empty all bazaars easily and not be affected by the hyper inflation that will hit the server once you hoarded all the kraken clubs and byne bills you can get hold of.
The same thing happens when the FED gives FREE money to banks which cleans out the market of anything of value, and you are the one who gets stuck with the bill.

**Moridam** · 2012-07-12 12:51

but if slavery can thrive in a free market economy, that means slavery is just and good. because as we all know, it's completely impossible for markets to produce adverse outcomes.

**Cadsuane** · 2012-07-12 12:57

Originally Posted by test123

What really needs attention is who gets the spend the newly created money first.

The central bank doles out newly printed money via several ways, and none of them are free. The first are government bonds, so the currency is issued as debt. The second is when the central bank provides overnight loans to private banks, so the currency is issued as debt. The third is when the central bank intervenes in foreign exchange markets to affect the exchange rate, trading new currency for foreign currency. Nobody ever gets fed dollars for free; they're always issued as loans or given in exchange for something.

You have no understanding of economics or finance whatsoever, by the way.

**test123** · 2012-07-12 13:03

Originally Posted by Cadsuane

Nobody ever gets fed dollars for free; they're always issued as loans or given in exchange for something.

You forget that the borrowing cycle is continuous and expanding. Allow me to explain, Day0 a Bank loans 1mill at 0.01% interest from the FED and the bank must repay within 10 days -> Day5 the Bank borrows 2 mill at 0.01% interest -> Day10 the Bank repay the 1mill + the interest = netting the bank 500k at any given time as free money. This free money is lended out at 10% interest, and the money multiplier through the fractional reserve banking system ups that to 4.5 mill money all lended out at 10%. netting the bank 450k income every 5 days..... FREE MONEY HURRAY BONUS FOR EVERYONE..

**Cadsuane** · 2012-07-12 13:10

Originally Posted by test123

You forget that the borrowing cycle is continuous and expanding. Allow me to explain, Day0 a Bank loans 1mill at 0.01% interest from the FED and the bank must repay within 10 days -> Day5 the Bank borrows 2 mill at 0.01% interest -> Day10 the Bank repay the 1mill + the interest = netting the bank 500k at any given time as free money. This free money is lended out at 10% interest, and the money multiplier through the fractional reserve banking system ups that to 4.5 mill money all lended out at 10%. netting the bank 450k income every 5 days..... FREE MONEY HURRAY BONUS FOR EVERYONE..

lol... no. Private banks loan against their deposits, not against their liabilities with the federal reserve. Loans taken out of the federal reserve by banks are overnight loans payable on the next business day, and they are only taken out to meet day to day cash on hand requirements.

**test123** · 2012-07-12 13:21

And those deposits are funneled through the government whenever Geithner "feels like it"

**aurik** · 2012-07-12 13:21

A+ would read again.

It's pretty awesome when the people who have no idea how economics work post.

**Cadsuane** · 2012-07-12 13:35

Originally Posted by test123

And those deposits are funneled through the government whenever Geithner "feels like it"

No. Deposits, as in, accounts, like your fucking chequing account. Good lord.

**BaneTheBrawler** · 2012-07-12 13:36

I always enjoy test's trolling. He's quite good at it.

**test123** · 2012-07-12 13:48

Treasury bonds -> Dollars -> A bank account

**Cadsuane** · 2012-07-12 13:52

Alright then. Cool story bro.

**archibaldcrane** · 2012-07-12 13:59

I just think it's funny that libtards keep harping on inflation, when we've only cracked 4% once in the past decade.

http://www.usinflationcalculator.com...flation-rates/

When will this monetary policy finally actually make things more expensive at a rapid pace, libertarian economic masters?

**test123** · 2012-07-12 14:13

Originally Posted by archibaldcrane

I just think it's funny that libtards keep harping on inflation, when we've only cracked 4% once in the past decade.

The American Institute for Economic Research says inflation, using their “everyday price index,” actually is 8%. People on fixed incomes, they’re really hurting. The middle class is really hurting because their inflation rate is very much higher than the government tries to tell them and that’s why they lose trust in government.

8% over 10 years devalues 100 dollars to 43 dollars equivalent.

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