[ianlippert]

I voted for hate it, but I have a very shakey understanding of how the current system works. I hear people talking about how the fed is great but I just dont understand how printing off a bunch of paper is good for the economy. My gut tells me that someone somewhere is getting screwed, but Ive only taken 1 macro class and am looking forward to taking more as I complete my major in economics.

My fundamental arguement against would look something like this:

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Money is just another good. There is no "right" amount of money in the market just like there is no "right" amount of wheat grown, oil pumped out of the ground, or toothpaste put into tubes. Central planning in the supply of money will ultimately fail just as central planning in any other good would.

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And I certainly dont believe in a gold standard as I find pro fed people use this as a strawman arguement. I believe in free banking and if fiat money is so great it will out compete a gold standard on a free market, I really dont understand how this would not be possible. I have yet to see an arguement that fiat money must have a monopoly to be effective.

I also have a general distrust of the effectiveness of governments. As with debt, its only going to take one bad politician to put us in the hole. One guy can come in (bush?) run a huge debt inflate the money supply like crazy and destroy the economy. How many years of good moral politicians do we have to hope for to reverse the damage? Its not a power I feel comfortable giving to the government.

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human being are irrational in many instances and their irrationality are the causes for business cycles (they 'we' extrapolate recent past trends into the future). unchecked, these mistakes pile up and lead to massive swings in economic indicators and economies in general.


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I'd really like you to expand on what you mean about the irrationality of people? How exactly does this cause business cycles? The great thing I have found about the market is that when individuals act irrationally it only means that there are opportunities to be made by those individuals who act rationally to make profit.

If by irrationality you mean irrational drops in the stock market like the great depression, then I am extremely skeptical. There is a natural mechanism in the free market to prevent stock markets from making big drops. When there is a huge crash I am led to believe that it only occurs because it is rational. I might be running up the wrong tree but this is always the arguement I hear, mabey you have something else in mind besides 'animal spirits'.