Well I have my BA in Policy Studies and minored in Economics and I'd argue that there are economically literate people that don't share this view haha :).
Yeah, the fed can print money, but it doesn't really work that way. They don't just print more to make-up for lack of revenue or spending power. Places like Japan and China may print lots of money, but thats to devalue their currency and maintain their export industries, but it's very public. Quantitative easing is not common. Central banks simply try to maintain inflation at a reasonable level (there's a natural level). Look up the Phillips curve. Central banks are useful in maintaining the balance of inflation and unemployment when properly coordinated with the federal government. it was discredited in the 70s and 80s but thats only because the model couldnt account for exogenous shocks like OPEC cutting oil.
With respect to the economy, the fed will change the overnight lending rate in order to promote or discourage borrowing. A lowering of the interest rate by the fed would encourage borrowing because it's cheaper, and that acts as an injection into the economy. The previous system was gold-backed, but that lacked the economic tools that the fiat system has. Controlling the money supply is incredibly important.
I run into alot of people who share your views towards inflation and fiat currency, but I can assure you, things are not as nefarious as you may hear and inflation can actually be a useful factor. I encourage you to look into the 'Paradox of Thrift.' Also, inflation encourages borrowing which has a stimulative effect.
The beauty of crypto is that you can program control of the money supply. So many options, so much to comprehend! I think governments may adopt it eventually, but the current system is actually quite stable. We just need progressive policies that index wages to inflation until crypto can offer us a stable future!
-Brownz
I respect and appreciate that you have put the time into responding so eloquently! I understand that there are other economic schools of thought, however I find Keynesian economics to be completely asinine and believe a collapse is imminent and that the system is beyond repair. The federal reserve has a God complex if it thinks that it has a moral right to control money supply. Money supply can not be controlled, it is finite because there is only so much of it that can be mined out of the ground. Currency on the hand was designed to leach the wealth of the people. What right does the federal reserve have to print "value" from NOTHING and then expect your average person to toil over it. Each time the fed does this it buys the debt of the government in the form of bonds (effectively putting the nation into more debt,) it steals from both of our pockets in the form of reduced purchasing power for the same amount of work. Have you not noticed the national debt keep rising to stratospheric levels? How on earth is this a stable system? Our monetary system is a lie and is completely immoral. We must go back to sound and honest money principles. I believe wholeheartedly that JM Keynes was wrong and that they should be teaching a lot more Hayek and Mises in the Universities. Just my opinion. ~Hratch
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Thanks! Likewise!
Hey a Hayek guy! I respect that. We're not gunna find much common ground though hahaha.
Money supply can be controlled, that's what the feds for. See, I feel like your coming at this with emotion and see a conspiracy where there isnt. It was not "designed to leach wealth," nor is it acting morally superior. In comparison to the gold standard it is the stable, logical approach. Of course they will take measures that will occasionally lead to inflation, or increased interest rates that makes debt more expensive, but thats the price you pay for control, and that control, I believe, is key to stability and proper governance.
I'd rather have control of inflation than let jesus take the wheel ! The federal reserve isn't printing money for some spiteful reason, it's doing it for monetary stability.
Just so were clear im from Canada, but our central bank is the same in practice haha.
"Each time the fed does this it buys the debt of the government in the form of bonds (effectively putting the nation into more debt)) it steals from both of our pockets in the form of reduced purchasing power for the same amount of work" - I understand what you mean by a reduced purchasing power, but there is no increase in debt when doing this. Just increased money supply, leading to reduced purchasing power like you said.
The US national debt is simply a government issue, the only effect the fed would have on it would be through interest rates, and interest rates will only fluctuate according to the economy, not debt. It doesn't really matter too much though, your nation's debt seem huge in absolute terms, but in terms of debt to GDP ratio, you're not in horrible shape.
-Brownz
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I wonder what you have to say about this:
One-Percent Jokes and Plutocrats in Drag: What I Saw When I Crashed a Wall Street Secret Society
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