From: "Ed Weick" <[EMAIL PROTECTED]> To: "Harry Pollard" <[EMAIL PROTECTED]> Cc: "futurework" <[EMAIL PROTECTED]> Subject: Re: Pushing on string Date: Sun, 18 Nov 2001 17:20:40 -0500 Sender: [EMAIL PROTECTED]
Ed "G" interjected to both thus:*** > Ed, > Couple of things. > You said: > ED : "There is plenty of liquidity (money) in the economy, but people prefer to hold (or "hoard") it rather than invest or spend it. I'm not quite sure of why they behave this way, but it may be because, under conditions of considerable uncertainty, they see the potential return on their investment or expenditure as being negative - i.e., under the circumstances, they are being "rational maximizers" by holding onto their money." *** Depends on what is the definition of liquidity? Whe discussing money definitions are paramount. Point (1) All "money" is borrowed into existance from chartered banks and is therefore "credit money" Excepting a negligable (3% in most OECD countries) amount that is in the form of Gov. legal tender currency and coin and is used mostly by "poor" people whio have no credibility and are therefore denied the use of credit money. Point (2) Anyone who has what they think is money converatable into cash is deluding themselves. > HARRY :What do they do "with their money"? Put it under the mattress, where it still loses value, but without any interest to offset the loss? ***There is hardly any to put under the matress see above (3% of the total money supply) Ed "W" >They keep it where they think it's safe. Mine is in a mix of bonds, mutual funds and safe stocks which are easily convertable to cash, and I'm leaving it right there for the time being instead of spending it or investing it in something new or different. Some people may indeed stuff it under their mattrasses. ***Ed, if you think that people with "money" in stocks, bond, etc will be able to convetrt their holdings into cash, try converting $100 Billion in credit money into $3 Billion in currency and coin. The "credit money" takes many forms of "negotiable credt 'securities' and does not include stocks. Stocks are not money. They are only a percentage of the equity value of a company whose value is subject to the vagaries of the market, supply and demand. If every $1.00 in stocks attempted to convert into cash the result ing payoff would be 3 cents. Harry? > The present campaign, asking us to spend our way out of recession is nothing short of ludicrous - unless your controlled economy is coming apart at the seams and you'll try anything - absolutely anything. ***I agree. The lower interest is to allow the comapanies to "roll over" their bank debt without declaring bankruptcy. "If" the recovery is to be engineered by the consumer, why not reduce the interest rate on credit cards. US consumers are "maxed out". Ed "W" >Why is it ludicrous? Roosevelt tried it during the 1930s. Wartime spending ended the Great Depression. ***Yes, it was money that was spent through wages that did not produce consumer goods. People do not generally consume bombs. (well, the enemy does) The wages were spent on the "over production" (underconsumption, take your opick) financesd by the banks creating inordinate amounts of money to finance production, (note the "roaring 20's, roaring 50's) world wide, same as happened post 1975. Ed W continued: Post-war spending on reconstruction accounted for the boom that lasted into the 1970s. *** The overproduction post WWII, was absorbed by the working people by debt financing through consumer credit on the one hand and the implimentation of the welfare system on the other. Ed W continues: The economy was pretty active during the recent fibre optic and dot.com run-up. When money circulates, goods move and production and employment rise. ***The reason the economy was so activce was the deregulation of the banking industry (Read credit money creating industry) The deregulation allowerd banks to monetise (create credtit money) on the basis of "anticipated market value" rather than as previously "real value" The creteria changed, therefore the amount the banks could create. > Harry continued: > > ED : "My general point is that, under > conditions of instability, governments will do what they believe they have > to do whether a currency is pegged to a commodity or not. Potentially, > everything is in flux." ***The Gov and the people and the corporations are so dependant on the Banks that they can hold any or all of the above to ransom any time they like. Harry continues > And the first thing they do is divorce their bits of paper from the > commodity. If your piece of paper promises to pay an ounce of gold, that's > what must be delivered. So, divorce is immediate. ***Good point! I agree. Instead of "ouce of gold" read "anything of really useful value". Harry continues Sorry, but I prefer a stable, well managed currency to an ounce of gold. My point is that anything can be well managed when social and economic conditions are stable, as they were for a time during the gold standard. However, stability is rarily the prevailing human condition. You inadvertently make my point. I too prefer a stable well managed (by the government, my representatives) currency to credit money that is privately created and placed where it will make the maximum profit for those who create it, the chartered banks. > Harry added: > > >ED said : "Nothing ever stands for all time." > (addressing Harry), Hasn't gold been around - as a measure of value - for umpteen > millennia? Yes, the problem is that there is a disconnect between the value of what modern technology can produce and the amount of available gold that measure it with any kind of stability. The Nixonian disconnection from the international gold standard that followed most countries (Swiss excepted) disconnecting their economies from gold proves the point. Gold can be remarkably streached, but it boggles the mind to spend 1/1000ths of an ounce to buy a house. What do we use for razor blades? Ed W said I recall that back in the 1970s, the price of gold was about three or fourtimes its current price. ***My above point confirmed. > Certainly modern currencies stay around for intervals too short to measure. > (Yesterday's dollar is not the same as today's dollar.) ***The above point confirmed again. The CB's are creating money without oversight or control. Ed W said I'm trying very hard to recall what I learned about the gold standard many years ago. What I seem to remember, a little vaguely I must admit, is that it was not so much about maintaining price stability in one country as about fixing the international value of currencies and the settlement of international payments. You could still have inflation and deflation in a given country, and it would seem that the gold standard could be instrumental in this. ***You are thinking about the use of gold as an international accounting system to balance international trade through the IMF and the WBank. I expect you are not aware that the formula that was to be used was abandoned by IMF and WB countries because the dominant shareholders ) $1.00 = 1 vote) discovered that when the balancve of disparity between debtor and creditor countries exceeded 25% that BOTH countries were brought into balance with revaluations of their currerncies. The crditor countries were forced to increase the value off their currencies and the debtor countries increased the value of their currencied. The resultant effects on imports and exports mad exports to debtor countrirees more expensive and vic versy. This encouraged industrial, development in the debtor country. ***Sorry, that excellent Keynesian solution was abandoned in favour of a system that allowed creditor countries to re-collonize debtor countries through unrepayable debt. Ed W continued Under a strict interpretation of the gold standard which, I believe, would have viewed gold as the real currency of a country with paper as its derivative, a country in deficit on its balance of payments would make restitution by shipping out gold, thereby contracting its money supply and deflating prices. When it had a surplus, it would receive gold, thereby increasing its money supply and inflating prices. However, I suppose that under a less strict interpretation a country could still manage its currency and not expand or contract its money supply regardless of how much gold it held, but it would have to redeem money for a fixed amount of gold on demand. I believe that is how the gold exchange standard worked. ***Ed, I think I anticipated you above paragraphs and said the same thing in my own words. What happened was that some countries were 'technoloy wise' more advanced and the gold was needed to expand the internal money supply to finance what it could do, industry wise. ***Had the Bretton Woods fomula held, then there would not be today's disparity between developed and underdeveloped countries. > Krugman's remark must have been said with tongue firmly planted in cheek. Ed W said: I read it somewhere. It may not have been Krugman. However, under desperate conditions, it would be a way of making people part with their cash. ***People will always part with their cash for food, shelter (in northern zones) and clothing. Taxation is another means of having people part with their cash. Debtors prison is another way of getting relatives to part with theirs. Regards Ed G
