What's the difference between the Fed and a traditional counterfeiter?

Since we have agreed that government action is simply an action organized by the government and backed by force. What argument can be made for the government printing money that can't be made for an every-day normal guy printing money? (this question is especially for GT)

I will reword: Why is it good for government to print money without any sort of backing? As far as I can tell, all of those same arguments can be made for private citizens doing the same thing. For one, people often argue that it increases consumer spending. Well, so does counterfeiting privately. Many people say that it prevents what they classify as deflation (they really mean lower prices). So let's hear it. What makes gov't counterfeiting any different than sophisticated privately counterfeiting?

Enron wrote:Since we have agreed that government action is simply an action organized by the government and backed by force. What argument can be made for the government printing money that can't be made for an every-day normal guy printing money? (this question is especially for GT)

I will reword: Why is it good for government to print money without any sort of backing? As far as I can tell, all of those same arguments can be made for private citizens doing the same thing. For one, people often argue that it increases consumer spending. Well, so does counterfeiting privately. Many people say that it prevents what they classify as deflation (they really mean lower prices). So let's hear it. What makes gov't counterfeiting any different than sophisticated privately counterfeiting?

Why is this question directed at me? Do you think I'm in favor of this?

Just because I would start from where we are at, and you would start over with some sweep of a magic wand that doesn't exist (since you've said that you would not try to overthrow the government as our founding fathers did), does not mean that I'm in favor of deficit spending.

Goldwing Tom wrote:

Enron wrote:Since we have agreed that government action is simply an action organized by the government and backed by force. What argument can be made for the government printing money that can't be made for an every-day normal guy printing money? (this question is especially for GT)

I will reword: Why is it good for government to print money without any sort of backing? As far as I can tell, all of those same arguments can be made for private citizens doing the same thing. For one, people often argue that it increases consumer spending. Well, so does counterfeiting privately. Many people say that it prevents what they classify as deflation (they really mean lower prices). So let's hear it. What makes gov't counterfeiting any different than sophisticated privately counterfeiting?

Why is this question directed at me? Do you think I'm in favor of this?

Just because I would start from where we are at, and you would start over with some sweep of a magic wand that doesn't exist (since you've said that you would not try to overthrow the government as our founding fathers did), does not mean that I'm in favor of deficit spending.

GT, I was actually just interested in your take. You have suggested that we can't cut things like unemployment benefits or other publicly paid social programs. Those programs are funded by created dollars. Yes, some are partially covered by taxes, but the majority are funded by newly appropriated of printed funds.

If you believe what Keynes stood for, you would believe in deficit spending during recessions.

I am glad to hear that you don't think that deficit spending is appropriate or helpful. Unfortunately, this will require spending cuts.

Really, that was not where I wanted to take any of this. Where I was wanting to go with this was just to show the actions of the Federal Reserve with a transparency that is not often found. Really, the question is for everyone, but I was particularly interested in GT's thoughts. Why is the Fed printing money essentially different than a counterfeiting racket? It is a semi-rhetorical question, but I was interested in seeing if anyone believed this to be justifiable.

I would say that the essential difference between the two is that counterfeiting is extralegal, whereas the Federal Reserve printing money is within the law. That's like asking what the difference is between my detaining someone for stealing from me and the police detaining someone for stealing from me. They are essentially the same thing, except one has public sanction and the other one doesn't.

B-Ran wrote:I would say that the essential difference between the two is that counterfeiting is extralegal, whereas the Federal Reserve printing money is within the law. That's like asking what the difference is between my detaining someone for stealing from me and the police detaining someone for stealing from me. They are essentially the same thing, except one has public sanction and the other one doesn't.

Exactly.

Note that the reasons that people justify printing of money: Increased "demand", encourages spending which helps people sell more things, which helps the economy start moving, etc. The same effects caused by the Fed printing money will be had by Luigi printing money.

It could be argued, however, that Fed-printed money is more reliable than Luigi-printed money, since someone is in control of the supply of Fed-printed money.

Not that I would make that argument, but I can imagine that argument being made.

B-Ran wrote:It could be argued, however, that Fed-printed money is more reliable than Luigi-printed money, since someone is in control of the supply of Fed-printed money.

Not that I would make that argument, but I can imagine that argument being made.

Yeah, I could see someone making that argument too. The thing is (not that I have to convince you), trusting psuedo-government officials with our money supply is just about as dumb, as illustrated by the massive monetary expansion over the past four of five decades.

I tried to sit down with Friedman's A Monetray History... today and try and gather some salient points.

That was a mistake. That book is unreadably hyper-technical. However, what little I did gather made me very curious about the monetarist position.

Yeah, it would make for good discussion.

Enron wrote:

Goldwing Tom wrote:

Enron wrote:Since we have agreed that government action is simply an action organized by the government and backed by force. What argument can be made for the government printing money that can't be made for an every-day normal guy printing money? (this question is especially for GT)

I will reword: Why is it good for government to print money without any sort of backing? As far as I can tell, all of those same arguments can be made for private citizens doing the same thing. For one, people often argue that it increases consumer spending. Well, so does counterfeiting privately. Many people say that it prevents what they classify as deflation (they really mean lower prices). So let's hear it. What makes gov't counterfeiting any different than sophisticated privately counterfeiting?

Why is this question directed at me? Do you think I'm in favor of this?

Just because I would start from where we are at, and you would start over with some sweep of a magic wand that doesn't exist (since you've said that you would not try to overthrow the government as our founding fathers did), does not mean that I'm in favor of deficit spending.

GT, I was actually just interested in your take. You have suggested that we can't cut things like unemployment benefits or other publicly paid social programs. Those programs are funded by created dollars. Yes, some are partially covered by taxes, but the majority are funded by newly appropriated of printed funds.

If you believe what Keynes stood for, you would believe in deficit spending during recessions.

I am glad to hear that you don't think that deficit spending is appropriate or helpful. Unfortunately, this will require spending cuts.

Really, that was not where I wanted to take any of this. Where I was wanting to go with this was just to show the actions of the Federal Reserve with a transparency that is not often found. Really, the question is for everyone, but I was particularly interested in GT's thoughts. Why is the Fed printing money essentially different than a counterfeiting racket? It is a semi-rhetorical question, but I was interested in seeing if anyone believed this to be justifiable.

I do not believe it is justifiable, but it is reality. When I was eligible for unemployment compensation, I refused to apply for it. However, I am as much an exception in that as I was in voting for Ron Paul last November. I do not believe that people will vote away what they believe to be their entitlement, even if it is not really an entitlement nor even productive.

At the risk of using a physical dynamics term that doesn't really apply to economics, I would use leverage (though not literally a lever and pivot) to reduce demand on unemployment compensation and increase tax revenue, since I believe that might have a chance of succeeding with the thoughts of voters. If the thought waves of enough voters amassed sufficiently to become less socialistic from the reduced perceived need for socialistic policies through increased employment, and the numbers of transactions increased sufficiently to increase revenues, we might actually begin a trend back to personal responsibility.

My feelings are similar on the bailout money. I am against it, but it is reality. Since it is reality, I would prefer to see it spent to help homeowners retain their homes than to see it handed to banks to offset losses incurred as a result of writing off foreclosure losses.

Goldwing Tom wrote:I do not believe it is justifiable, but it is reality. When I was eligible for unemployment compensation, I refused to apply for it. However, I am as much an exception in that as I was in voting for Ron Paul last November. I do not believe that people will vote away what they believe to be their entitlement, even if it is not really an entitlement nor even productive.

I am actually in favor of people taking the handouts that are offered by government. If the government offers me free money, I would surely take it.

Goldwing Tom wrote:At the risk of using a physical dynamics term that doesn't really apply to economics, I would use leverage (though not literally a lever and pivot) to reduce demand on unemployment compensation and increase tax revenue, since I believe that might have a chance of succeeding with the thoughts of voters. If the thought waves of enough voters amassed sufficiently to become less socialistic from the reduced perceived need for socialistic policies through increased employment, and the numbers of transactions increased sufficiently to increase revenues, we might actually begin a trend back to personal responsibility.

I hope so.

Goldwing Tom wrote:My feelings are similar on the bailout money. I am against it, but it is reality. Since it is reality, I would prefer to see it spent to help homeowners retain their homes than to see it handed to banks to offset losses incurred as a result of writing off foreclosure losses.

Yes, I think you are write to a certain point. I think the important thing is to articulate what you just said to other people too. If we do not tell people that bailouts aren't necessary and are actually harmful, they might just believe the mainstream media that says that these sort of bailouts must happen.

I am actually in favor of people taking the handouts that are offered by government. If the government offers me free money, I would surely take it.

I told you natures were stronger than principles. There is no such thing as free money. It comes at the expense of diminishing the value of money to others.

Yes, I think you are write to a certain point. I think the important thing is to articulate what you just said to other people too. If we do not tell people that bailouts aren't necessary and are actually harmful, they might just believe the mainstream media that says that these sort of bailouts must happen.

Most people will not believe me over the media. I believe it is better to convince the masses that having the money paid on loans owed by those who were taken in the scandal also offsets bank losses, but, perhaps, with those who are on the fringe being able to retain their homes. I think money is more apt to start flowing again if banks are not rewarded for suffering losses they caused at the expense of those they lured into thinking they could live the good life by paying 21.9% APR interest and valuing $100,000 homes at $175,000 so they could close a deal.

If it does, then the bailouts become unnecessary, and banks and consumers become more responsible, as consequences rather than through some derived plan in which poor people simply don't eat.

Goldwing Tom wrote:

I am actually in favor of people taking the handouts that are offered by government. If the government offers me free money, I would surely take it.

I told you natures were stronger than principles. There is no such thing as free money. It comes at the expense of diminishing the value of money to others.

Yes, I think you are write to a certain point. I think the important thing is to articulate what you just said to other people too. If we do not tell people that bailouts aren't necessary and are actually harmful, they might just believe the mainstream media that says that these sort of bailouts must happen.

Most people will not believe me over the media. I believe it is better to convince the masses that having the money paid on loans owed by those who were taken in the scandal also offsets bank losses, but, perhaps, with those who are on the fringe being able to retain their homes. I think money is more apt to start flowing again if banks are not rewarded for suffering losses they caused at the expense of those they lured into thinking they could live the good life by paying 21.9% APR interest and valuing $100,000 homes at $175,000 so they could close a deal.

If it does, then the bailouts become unnecessary, and banks and consumers become more responsible, as consequences rather than through some derived plan in which poor people simply don't eat.

I have an objection to the system that takes from one and gives to another. I have a problem with a stimulus package that creates inflation to mail out checks to the public. This doesn't mean that I have a problem with someone that does what is most in their advantage and cashes their stimulus check. Does this mean my nature is stronger than my principles? No, because in this case, they line up just fine.

You said: "Most people will not believe me over the media. I believe it is better to convince the masses that having the money paid on loans owed by those who were taken in the scandal also offsets bank losses, but, perhaps, with those who are on the fringe being able to retain their homes. I think money is more apt to start flowing again if banks are not rewarded for suffering losses they caused at the expense of those they lured into thinking they could live the good life by paying 21.9% APR interest and valuing $100,000 homes at $175,000 so they could close a deal."

The housing bubble's root cause was monetary expansion. Easy money, forced lax lending standards, and implicit gov't backing of mortgage backed securities made way for a scenario in which the incentives of all parties involved in the housing market were distorted. For example, lenders did not have to hold their loans like they did before. Now there was basically a government clearinghouse for loans which was regulated by the federal government. This created incentive to become wholesale lenders or mortgage brokers. As a wholesale lender or a martgage broker, there were loans that were made everyday that would never be approved had Fannie Mae or Freddie Mac not guaranteed the purchase of such a loan. The artificially low interest rates (controlled by the fed and by Freddie and Fannie) created an environment that would naturally kick housing prices into new highs each month. With housing prices skyrocketing, building houses, selling houses, buying houses, originating home loans, appraising homes, inspecting homes, etc. all suddenly demanded more resources. People began to jump into those businesses because there was instant profit to be made. That was the basics of the creation of the housing bubble. The consumer is not to blame. The broker is not ultimately to blame either. When you have a government that is creating those types of distortions in the market, someone will always take the profits in the meantime. If nature wins out over principle, then we should realize that distortion of the market creates a situation where people will act according to those distorted market signals. The only way to prevent mistakes like this, is to get the government out of the economy.