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There is no free market on the price of money. This is exactly central planning.

beat 8y ago
Then central planning is a Good Thing.
AmericanChopper 8y ago
A centrally planned economy is where a single central authority determines how investment and capital will be allocated. Controlling the supply of money is not capital allocation, and it is not central planning. Central planning is not simply any time a central authority does anything at all.
- mifreewil 8y ago
  > A centrally planned economy is where a single central authority determines how investment and capital will be allocated. I think you might be getting too semantic here. If you looked up the definition of a centrally-planned economy in an academic economics book, that might be what you get. When the Fed or any central bank lets one institution fail, saves another, buys more or less government debt, purchases mortgage-backed securities, or any other security, I don't see how you could not call that central planning, investment, or capital allocation.
  - AmericanChopper 8y ago
    Because in this case no central authority has a monopoly on resource allocation, or even anything that comes close to a meanful level of control over resource allocation. Central planning is a very well defined system of economics, and involves an authority taking almost complete control of the supply side. The federal reserve system does not resemble this in any way. The Fed isn’t particularly interested in how resources are allocated, and generally only concerns itself with the supply of money, and maintaining stability in the market. It has no opinion on what goods and services should be supplied. The existence of a central bank does not equate to a planned economy.
    - bachbach 8y ago
      Can you outline a scenario in which there exists no central bank? While everything you have said is true, I feel as though there exist giant icebergs gliding silently past your watertight steel hull.
      - AmericanChopper 8y ago
        A central banks job is really only to control the flow of money. There’s a few decentralized alternative models out there. That’s what bitcoin and all other cryptocurrencies are. I really don’t know what the second part of your comment is getting at though...
        bachbach 8y ago
        Cryptocurrencies are not used directly in the purchase of stock, real estate or consumer transactions - this isn't an attack on them - just an observation that private banks used to issue money before central banks existed - and those monies would have been used for those sorts of purchases. Presently cryptocurrencies in use look more similar to those tokens/vouchers companies offer except with a secondary market, esp. the ICO model. I was pondering at the idea that central banking or any regulation of capital flow in society is a strange topic. Central banks are these organizations - people dressed in suits, they have office chairs and receptionists - but this window dressing as corporation or government office distracts us from what is a very strange topic. You have this complex network represented by a number. What is being said by this? That the Federal Reverse is economic homeostasis and the interest rate represents the equilibrium? Half the time I think central banks make sense and the other half of it I think everybody must be insane. Seems like we could use the rationale for central banking to perform other activities, like population control. Nobody makes the case for something like that but how is it crazier? They're different forms of capital, right?
        AmericanChopper 8y ago
        Perhaps your error is thinking of currency as a part of the natural world, rather than what it really is, an invented medium of exchange. In order for it to work in its intended fashion, it must have some scarcity. It can’t be so scarce that it hinders growth, and it can’t be so abundant that it causes too much inflation. It’s not the only means of exchange, it’s simply the most efficient one, and the role of the central bank is primarily to maintain appropriate balance between the forces that push and pull on the money supply.

beat 8y ago

Then central planning is a Good Thing.

A centrally planned economy is where a single central authority determines how investment and capital will be allocated. Controlling the supply of money is not capital allocation, and it is not central planning. Central planning is not simply any time a central authority does anything at all.

mifreewil 8y ago
> A centrally planned economy is where a single central authority determines how investment and capital will be allocated. I think you might be getting too semantic here. If you looked up the definition of a centrally-planned economy in an academic economics book, that might be what you get. When the Fed or any central bank lets one institution fail, saves another, buys more or less government debt, purchases mortgage-backed securities, or any other security, I don't see how you could not call that central planning, investment, or capital allocation.
- AmericanChopper 8y ago
  Because in this case no central authority has a monopoly on resource allocation, or even anything that comes close to a meanful level of control over resource allocation. Central planning is a very well defined system of economics, and involves an authority taking almost complete control of the supply side. The federal reserve system does not resemble this in any way. The Fed isn’t particularly interested in how resources are allocated, and generally only concerns itself with the supply of money, and maintaining stability in the market. It has no opinion on what goods and services should be supplied. The existence of a central bank does not equate to a planned economy.
  - bachbach 8y ago
    Can you outline a scenario in which there exists no central bank? While everything you have said is true, I feel as though there exist giant icebergs gliding silently past your watertight steel hull.
    - AmericanChopper 8y ago
      A central banks job is really only to control the flow of money. There’s a few decentralized alternative models out there. That’s what bitcoin and all other cryptocurrencies are. I really don’t know what the second part of your comment is getting at though...
      - bachbach 8y ago
        Cryptocurrencies are not used directly in the purchase of stock, real estate or consumer transactions - this isn't an attack on them - just an observation that private banks used to issue money before central banks existed - and those monies would have been used for those sorts of purchases. Presently cryptocurrencies in use look more similar to those tokens/vouchers companies offer except with a secondary market, esp. the ICO model. I was pondering at the idea that central banking or any regulation of capital flow in society is a strange topic. Central banks are these organizations - people dressed in suits, they have office chairs and receptionists - but this window dressing as corporation or government office distracts us from what is a very strange topic. You have this complex network represented by a number. What is being said by this? That the Federal Reverse is economic homeostasis and the interest rate represents the equilibrium? Half the time I think central banks make sense and the other half of it I think everybody must be insane. Seems like we could use the rationale for central banking to perform other activities, like population control. Nobody makes the case for something like that but how is it crazier? They're different forms of capital, right?
        AmericanChopper 8y ago
        Perhaps your error is thinking of currency as a part of the natural world, rather than what it really is, an invented medium of exchange. In order for it to work in its intended fashion, it must have some scarcity. It can’t be so scarce that it hinders growth, and it can’t be so abundant that it causes too much inflation. It’s not the only means of exchange, it’s simply the most efficient one, and the role of the central bank is primarily to maintain appropriate balance between the forces that push and pull on the money supply.