What can be done to realistically make the FED vanish?

I am not "dumbing" anything down. I am using primary sources to convey BASIC economic principles to you. It's called a supply and demand curve and it's a ubiquitous tool used in economic analysis.

 

What about it?

I disagree with your opinion. Wealth disparity is a very valid method for measuring the result of wealth being transferred from lower income groups to higher income groups.

We've seen an average of about a 23 cent yearly inflation increase on the dollar since the Fed was created. It wouldn't be efficient to force employers to adjust the payrates of their workers up a penny every two or three weeks. You'd certainly be causing higher unemployment...even higher than what MW already causes.

But even then, that doesn't address folks who are on a fixed income or unemployed.

It harms them because it prevents their wage to price ratio from being as high as it could be. In the absence of inflation, real prices would be moving downwards while real wages would be moving up at at least the same rate they are under our current system.

 

No it wasn't. The dollar was still redeemable in gold, which radically put a limit on how much money could be created by the Fed.

Looks like the wealth gap decreased on average in the prior two decades to me.

Straw man. Nobody is disputing the ineffectiveness of Keynesian "voodoo" economics perpetuated by the Reagan administration.

 

See it. I addresses your statement.

That wasn't my opinion. My opinion is that you chart, with its weak correlation between wealth discrepency and monetary system or inflation, is weak evidence of assertion that "
Inflation does tend to harm the poor more than it harms the wealthier."

What is "23 cent yearly inflation?" Did you mean 23%?

That is true.

You are making the fallacious assumption that their wage and income would go up the same about without inflation.

 

OK. The Gold was devalued by the money system was still pegged to it.

Between 1950 and 1980 it stayed in a range of 40, +/- 2 points. From 1980 to 1990 it icreased 5 points.

Straw man. No one made any claim about the effectiveness of Reagan policies.

 

Are you talking about post 193?

We can plainly see the results of 40 years worth of fiat currency. The Gini Index moving from an all time low of about 39 in 1969 (2 years before the gold standard was eliminated) to it's present day high of about 47. The last 5 years have seen their highest GINI index since WW2 when the US was exiting the Great Depression.

Which was also caused by the Fed.

No, I mean the dollar has seen an average of about a 3.3% yearly inflation rate per year since the Fed was created, which is about $0.23 increase on every dollar every year.

($23.24-$1)/98.5 years = $0.226/year ~= $0.23/year

So you agree that those on minimum wage, fixed incomes, and unemployed are disproportionately harmed by inflation?

Why wouldn't they? Inflation doesn't have an affect on real wages.

 

So what? It wasn't a fiat currency. Which derails your claim that taking the dollar off the gold standard decreased the wealth gap.

The wealth gap was steadily increasing for almost 20 years until the late 80s when the spike you're referring to from the "Reagan Revolution" occured. Massive government debt spending with the aid of money created by the Fed (which Reagan did), amounted to inflation, which contributed to the wealth disparity we see. The Reagan Revolution could not have occured if it were not for fiat currency.

At least we can both agree that it didn't work.

 

No, my post above, regarding the chart.

We can plainly see that the range took off when the Reagan Revolution tinkle down policies were enacted. As you would expect.

Prove it.

Skewed a little high from the high inflation we had in the 70s, but otherwise right about where is should be.

No, yes, no. On the other hand, it helps those with fixed obligations, like mortgages.

I didn't say it does. It does have an effect on actual wages. Thus, it is wrong to assume that wages would have increased the same amount absent inflation. They would have increased by the same amount in real terms, but then they'd be no better off.

 

Obviously something happened that cause the disparaty to start dropping radically in 1934. Since you are arguing it is monetary policy, that change must have caused income disparaty to fall too, right?

How did the wealth disparaty get so high before 1934?

It wasn't steadily increasing at all. It spiked in the 1980s when Reagan passed tax cuts for the rich and gutted unions. And there was hardly an inflation at all.

If inflation was the big cause of wealth disparaty as you are trying to claim, we would have seen wealth disparaty at its highest fromt he mid 60s to the early 80s, and then drop down from the mid 80s till today.

There is no corrolation between wealth disparaty and inflation at all.

Next theory.

They worked great to increase wealth disparaty.

 

There wasn't any major change in monetary policy around that time compared to the change that occured in 1971. The dollar was still on a fractional reserve standard.

http://en.wikipedia.org/wiki/The_great_depression

Absolute nonsense. From 1969 to 1980, we see an increase of about 2 points. From 1980 to 1991, we see an increase of less than 2.5 points. Hardly a "spike" during the Reagan Revolution.

I never once claimed that the there is a correlation between the instantaneous inflation rate and instantaneous wealth disparity. Straw man.

The instantaneous rate of inflation for a few years had little to do with the value of the dollar over the course of almost half a century. The results of 40 years of fiat currency are plain to see. Not only has wealth disparity gone up to levels not seen since the tail end of the Great Depression, but the rate of economic growth per capita is almost half of what it was before we went to a fiat currency.

I agree that massive devaluation of the dollar like what occured during the Reagan Revolution contributes to increased wealth disparity in the long run by transferring wealth from the bottom upwards.

 

Already addressed.

It didn't "take off". See my previous post.

Bernanke agreed with Milton Friedman's analysis on the Fed being directly responsible for the Great Depression.

Which would amount to increasing worker's payrates by a penny every 2 or 3 weeks on average. That policy would be inefficient and certainly would cause higher unemployment...even higher than what MW already causes.

You changed your intial position. You already admitted that those on minimum wage and those who are unemployed are harmed by inflation.

I agree that inflation benefits some individuals at the expense of others. In this case, individuals who rent are harmed (by having to pay higher prices) at the expense of landowners or landlords (who benefit from higher inflation rates on nonadjustable mortgages). Which also disproportionately harms lower class that doesn't own land.

They would have increased more, because the rate of economic growth per capita would be higher in the absence of a fiat currency.

 

It clearly did. See my previous post.

Case in point. The Fed was trying to maintain the gold standard, which caused them to tighten the money supply right at the worst time. That is the gist of their point. The Fed should have been expanding the money supply, but could not because of the gold standard they were trying to maintain.

Well golly, lets do it every year or 6 months. That was a tought one.

I admitted no such think. Please directly quote my words if you cannot characterize my positions honestly.

Non-inflation benefits some individuals at the expense of others.

False. Baseless premise leading to false conclusion.

In fact, as Erthreal and I established in the other thread, GDP per capita rose twice as fast in the 98 years after the Fed was created than the 98 before.

 

If a less than 2.5 point increase over 11 years amounts to "taking off", then surely a 2 point increase over 11 years amounts to "taking off" as well. Which means it started taking off in 1969, not in the 80s as you claimed.

The dollar was never on a receipt gold standard. It was on a fractional reserve standard.

I agree that the Federal Reserve's artificial control over the money supply caused the Great Depression. Its just another one of the endless examples of the failures of central economic planning.

Then when you have a 14+% monthly inflation rate like we did in the early 80s, there's not a whole lot you can do about it when you're trying to support a family.

Not a viable solution.

You admitted that minimum wage workers and others on fixed incomes lose purchasing power due to inflation.

Please explain how the unemployed with no income are not harmed by rising prices.

Depends on what you mean by "non-inflation".

It's already been proven to you that real private GDP per capita was increasing at about double the rate before 1971 as it did after 1971.

I'm not disputing that real GDP per capita increased far more after the Fed was created. I'm claiming that the rate of growth of real private GDP per capita slowed down to about half the rate after the move to a fiat currency.

 

That would be a good point, but it increased 5 points from 1980 to 1993

And so?

Good for you. It is another of the endless examples of the failure of a commodity based standard.

You mean annual?

Please directly quote my words if you cannot characterize my positions honestly.

Rising unemployment benefits.

Causal fallacy. After 1971 we had the Reagan revolution and Bush administration, oil price shocks and a host of other factors.

So the Fed is fine, but you want a gold standard, even though the sources you cited pointed out that the Fed trying to maintain the gold standard is a direct cause of the Great Depression.

Doesn't make sense to me.

 

What does the spike in 1992 have to do with the Reagan Revolution?

I agree that fractional reserve standards always fail. Fortunately there isn't a single example in recorded history of something like the Great Depression occuring on a receipt gold standard.

Yes.

And in post 208, you answered "yes" when asked if you believe those on fixed incomes are disproportionately harmed by inflation.

Not everybody who is unemployed gets benefits.

Casual fallacy. None of those factors have been constant since 1971. One thing that has is an inflating fiat currency.

Wrong. The Fed needs to go because it has proven many times that it is incapable of acheving and maintaining its stated goals.

You are blurring the distinction between a receipt gold standard and a fractional reserve standard.

Two radically different systems.

 

How was the "Reagan Revolution" until 1992? He wasn't in office from most of 1989 to 1992.

Prove that he raised taxes on the poor.
And he couldn't have done any of it without the help of a Democratic majority Congress.

Please explain how gutting unions raises wealth disparity.

Fractional reserve standards have always historically degenerated into pure fiat. Fiat currencies have always historically failed.

And your solution to raise MW "accordingly" isn't viable.

And most who are receiving benefits don't see them rise to keep up with inflation.

Average rate of inflation 1913-1971: ~2.46%
Average rate of inflation 1971-2012: ~4.35%

The average inflation rate almost doubled after we moved to a fiat currency.

That does not prove that the Fed was responsible for the growth. But it is easily demonstratable that the Fed has failed in acheving and maintaining its stated goals.

You are interchangeably referring to a receipt gold standard and a fractional reserve standard as "the gold standard". They are not the same thing.

 

Bush1 continued his policies.

Reagan called for, and received, Social Security tax increases of $165 billion over seven years.

http://mises.org/freemarket_detail.aspx?control=488

Sure he could. He did lots of things, including tax cuts and big military spending, with Republican minority and a gaggle of conservative Democratic "boll weevils" who voted with them on fiscal matters.

Without the leverage of grouped representation to negotiate, worker incomes fall.

Funny, so have gold backed currencies.

Sure it is. You just link it to the CPI or wages like SS benefits and other things are.

Depends. In 1996-1997 for example, the MW went up 21%, far greater than inflation in that time period.

Take out the period 1968-1982 and they are about the same.

Well it sure proves growth wasn't slower under the Fed.

I'm sorry, where did I do that?

 

Return to potential output is a long-run change. In the short-run, a leftward shift in aggregate demand leads to decreasing price level and output. Once nominal wages decrease, short-run aggregate supply increases, a rightward shift. Output returns to long-run macroeconomic equilibrium, but at a lower price level. The best historical example of such market self-correction is the Depression of 1920-21. Government policy did little to stabilize the economy. The free market, adhering to the above principles, would do so.

 

I agree that social security taxes disproportionately harm the poor. Which is why the system should be made optional so that the youngest generation of workers aren't turned into slaves.

Unions aren't concerned about the well-being of "workers", they're only worried about the well-being of their members. Unions cause their member's payrates to increase, but it also drives up unemployment.

Compulsory union membership also takes away the worker's freedom to negotiate payrate with his employer.

False. The Byzantine Empire never once devalued its currency and it flourished as the center of world commerce for almost a millennium.

Then when you have a 14+% annual inflation rate like we did in the early 80s, there's not a whole lot you can do about it when you're trying to support a family. You'll just have to rough it out for a year until your employer is forced to raise your payrate. Or maybe he will just fire you because he can't afford to pay you more.

Not a viable solution.

What does that have to do with unemployment benefits?

Too bad you can't just erase a 15 year period of time because the data is inconvenient...especially one that was rampant with massive amounts of central economic planning.

That's true. But it does prove that when the Fed has had total control over the money supply, growth was about half of what it was compared to when the Fed was restricted by a fractional reserve standard.

You said:

"So the Fed is fine, but you want a gold standard, even though the sources you cited pointed out that the Fed trying to maintain the gold standard is a direct cause of the Great Depression.

Doesn't make sense to me."

The first time you used the term "gold standard", it was in reference to a receipt standard. The second time you used the phrase "gold standard", it was in reference to a fractional reserve standard.

 

What do you do with the hordes of aged who don't have social security?

It drives up middle class incomes, which spend more, reducing unemployment.

And the employer's ability to pay lower wages by piecemeal negotiation.

LMAO! Back to Byzantian argument. Feel free to prove that with Byzantine economic records.

Who said we should have 14% inflation? Straw man.

We were talking about the MW.

You can certainly look at the data outside that 15 year period.

And without the Fed, per capita GDP growth was about half.

So if they are differnt, why do you lumpt them together? That is cherry picking.

 

Continue to send them their checks.

Feel free to prove that.

Why is it a union or government's business if the employer and employee agree on a payrate that is lower than what the union or government deem appropriate?

Nobody did. Straw man.

Not in the context of the point you were addressing.

You could also eliminate post WW2 inflation. In the end, the fact remains that growth has slowed down under a fiat currency.

That's because the free market provided opportunity for advancements in technology and productivity. The Fed had nothing to do with it.

I didn't lump them together. You did.

 

What checks if they opt out of SS?

Compare middle class incomes as a percent of total income with the decline of union membership.

It is a unions business because they represent the employees.

Then why are you talking about it? Straw man.

I thought so.

The fact is, growth has doubled under the Fed.

Of course. It's only the Fed's fault when bad things happen to that partisan.

You did by including them in the same data.

 

This must be the biggest Dumb Arse Topic and thread posted for some while .
The Secretary of your National Treasury -- a certain Mister Timothy Geitner --- quite explicitly agreed to the specific Bejing proposal last month to develop a new world reserve currency .
Many countries are already trading between themselves in the Yuan and refusing to use the $US .
The days of the Fed as the last lender are all but gone .
It has been exposed for what it is , and the rest of the world are judging it as not fit for purpose .

It's therefore ludicrous to discuss how to get rid of the present format Fed . It is effectively dead already and only burial details are the item on the agenda everywhere .

 

If Madoff had issued his own currency, his firm would have received a great deal more scrutiny from those interested in using the currency than it ever did from our Great & Benevolent Protectors in the SEC.