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View Poll Results: What should Jaran do with the $40?
play nanolimit NL until up to $100 and cash out 4 28.57%
Sit at a 1/2 table until doubled up or broke 3 21.43%
Blow it all on a MTT 6 42.86%
Who cares? It's not my money 1 7.14%
Voters: 14. You may not vote on this poll

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  #11  
Old 08-10-2007, 04:00 PM
Zygote Zygote is offline
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Default Re: The Federal Reserve: Love it or Hate it

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It might be a little results oriented, but I like the Fed because it has been successful. Since the Depression, there has not been a severe economic downturn (defined by joblessness and GNP) or unmanageable inflation. The economy has functioned particulary well over the last 20 years.

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Sorry iron this is silly reasoning. The Fed has been around since 1913.

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their whole empirical reasoning is silly. Unless they want to show why the fed was responsible for American prosperity i don't see what the point is. Correlation does not imply causation. American prosperity would be greater had the fed not intervened and future tax payers and credit community in America are going to pay a large part of the price for current prosperity.

Also they have yet to respond to any criticism against the fed's record or theoretical design rather than continue to tote "look, we have computers today, we didnt have that in 19th century therefore the fed is good and deserves credit for all of it."
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  #12  
Old 08-10-2007, 04:01 PM
ianlippert ianlippert is offline
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Default Re: The Federal Reserve: Love it or Hate it

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'.
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  #13  
Old 08-10-2007, 04:10 PM
tolbiny tolbiny is offline
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Default Re: The Federal Reserve: Love it or Hate it

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defined by joblessness and GNP

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This is a very poor way to determine how severe an economic downturn is. The flaws of GDP and GNP have been discussed to death so I'll skip those, but unemployment numbers can mean two totally different things during an economic downturn, depending on the conditions prior to the downturn. Lets take the example of savings rates.

1. You have $1,000 worth of savings when you lose your job. You have to start looking for a new one right away and you won't be able to turn down more than one or two opportunities before your forced to take whatever offers around subsistence wage.

2. You have 10,000 saved. You have a lot more options, you can pass on several jobs and probably live for 2-3 months before getting job is a necessity.

3. You are in debt. You have no choice but to take the first offer that comes along or face bankruptcy.

If the average person is in situation 2 then unemployment will be higher during a downturn than if the average person is in situation 3, despite the fact that people are in much more favorable conditions your metric would suppose that situation 2 is a worse down turn than situation 3.

How does this apply with the Fed around? Inflationary tactics like the ones the fed uses favors debt over savings and thus you would expect many more people to be forced into taking the first job that comes to them rather than having time to weigh options and figure out a long term path.

Re Mr mon-
I have to get some books out on the post reconstruction period that you mentioned a few weeks ago as being recession ridden- my knowledge of that time period needs to be fleshed out before it can even be called skimpy.
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  #14  
Old 08-10-2007, 04:12 PM
Zygote Zygote is offline
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Default Re: The Federal Reserve: Love it or Hate it

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The only beneficiaries are minorities who exploit the privileges granted by the fed and those that take advantage of the non-uniform dispersion of liquidity.


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Yes, and we all know who THEY are.

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-business who get bail outs.
-early spenders of dollars.
-those paying employees on long term fixed contracts.
speculative businesses that can't survive long given the level of societal resources, but persist due to malinvestment
-those borrowing at long term fixed rates
-current tax payers who outlive the seignorage realization and inflation adjustment
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  #15  
Old 08-10-2007, 04:13 PM
DcifrThs DcifrThs is offline
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Default Re: The Federal Reserve: Love it or Hate it

[ QUOTE ]
[ QUOTE ]
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.


[/ QUOTE ]

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'.

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not at all what i meant.

business cycles come from an inability to manage perfectly. when demand has been higher than previous periods, we order more (typically far more) on the assumption that the next period will have more of the same. it takes a realization of the decreased demand to reduce orders for the next period (again by too much). humans over-react and no matter what you do (as has been studied in oprations research), that extrapolation is unavoidable and thus business cycles will always be around regardless of whether we have a fed or not.

by the way, just to be clear, that is the reasoning behind why a business cycle exists. it is when that reasoning occurs in the demand for money and other less immediately fixable quantities that the business cycle occurs.

the fed tries to massage those issues, but even if it did it perfectly, we'd still have a business cycle.

that is what i mean by humans are irrational and thus a business cycle will arise.

Barron
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  #16  
Old 08-10-2007, 04:16 PM
iron81 iron81 is offline
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Default Re: The Federal Reserve: Love it or Hate it

For the austrians here, what statistics should we be using to measure the health of an economy?
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  #17  
Old 08-10-2007, 04:18 PM
Zygote Zygote is offline
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Default Re: The Federal Reserve: Love it or Hate it

[ QUOTE ]
that extrapolation is unavoidable and thus business cycles will always be around regardless of whether we have a fed or not.

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have been cycles gotten larger or smaller since the creation of the fed?
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  #18  
Old 08-10-2007, 04:19 PM
iron81 iron81 is offline
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Default Re: The Federal Reserve: Love it or Hate it

[ QUOTE ]
[ QUOTE ]
that extrapolation is unavoidable and thus business cycles will always be around regardless of whether we have a fed or not.

[/ QUOTE ]

have been cycles gotten larger or smaller since the creation of the fed?

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Much, much smaller in proportion to GDP.
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  #19  
Old 08-10-2007, 04:21 PM
DcifrThs DcifrThs is offline
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Default Re: The Federal Reserve: Love it or Hate it

[ QUOTE ]
[ QUOTE ]
It might be a little results oriented, but I like the Fed because it has been successful. Since the Depression, there has not been a severe economic downturn (defined by joblessness and GNP) or unmanageable inflation. The economy has functioned particulary well over the last 20 years.

[/ QUOTE ]

Sorry iron this is silly reasoning. The Fed has been around since 1913.

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yes, but the fed only really began operating as it currently does far later in its existance.

and to those who say the fed is theoretically flawed, what is the theoretically correct system? no intervention at all? that would create other problems and distortions that would take a long time to correct with each passing cycle and would always swing far from "equilibrium."

there are costs to a centrally controlled monetary system (many have been mentioned), but i don't think they are massive enough to warrant the costs of a totally free economy where human irrationality causes swings that would widely distort the system and affect everyday life of those in the system.

Barron
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  #20  
Old 08-10-2007, 04:27 PM
DcifrThs DcifrThs is offline
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Default Re: The Federal Reserve: Love it or Hate it

[ QUOTE ]
[ QUOTE ]
that extrapolation is unavoidable and thus business cycles will always be around regardless of whether we have a fed or not.

[/ QUOTE ]

have been cycles gotten larger or smaller since the creation of the fed?

[/ QUOTE ]

much smaller. at least since the introduction of the current day management system.

there was a brief period of increased amplitude due to massive global shocks to the system (bretton woods collapsing). but other than that, no matter what measure of cyclicality you use, the amplitude has decreased significantly.

Barron
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