4 ms·

After a Century of the Fed, It's Time to Return to Constitutional Money (2014)

17 points by miles 7y ago

chrisco255 7y ago
Let's just use ETH or BTC and call it a day. A gold standard would be nice, but even if we got on it, how long before governments withdrew from it again? Only a matter of time. I think it's time for a separation of money and state.
- mardifoufs 7y ago
  Actually this crisis is exactly why we don't need that separation. We need a government that can actually respond to crisis. And even if we truly needed a new monetary system, crypto is just not the answer. Crypto has always and will always be useless as a currency and even as a store of value. Blockchains sound amazing to some but they are useless in the real world. It's been 12 years, every single use case, speculation aside, has been tried and failed miserably. The ship has sailed
  - phyalow 7y ago
    I agree with your points, however its worth pointing out the dollar is also a bad store of value too!
    - gumby 7y ago
      But a good signalling and liquidity mechanism, and the very nature you decry (poor store of value) is an incentive to invest in productive assets.
    - JamesBarney 7y ago
      Bit coin is a terrible store of value compared to the dollar. Say I have a bank account with $10,000 in it, that buys me approximately 3 months of living expenses. But if instead I had a bitcoin it would be 3 months expenses, no wait a year's worth, nevermind actually week of expenses.
  - chrisco255 7y ago
    Your assessment is outdated. You have not been following what has been going on in ETH. There's trustless banks running on collateralized stable coins, paying interest, there's decentralized real estate trusts paying out income on rent producing real estate on a daily basis, thanks to rollups and zksnarks, decentralized exchanges are processing transactions at more than 2000 per second, car loans are being funded and backed by liens all recorded on the ETH blockchain, I mean I can go on and on but ultimately you need to catch up on a very fast moving industry. The government can respond to a crisis without printing money. It's called fiscal responsibility. This money printing is going to cause a deep depression and a crash in the monetary system. It's no joke what's going on right now. And when you're reeling and looking around for someone to blame...look no further than the Fed.
    - jki275 7y ago
      You are claiming mostly things people claim eth is going to do someday. Most of those will never happen, at least not on eth. The primary use case for eth was scamcoin ICOs in 2017. No amount of twitter posturing by people trying to pretend it’s useful for more than that changes anything.
aplummer 7y ago
What a bizarrely naive article to completely fail to appreciate the many historical economic benefits from central bank market interventions and investments that wouldn’t be possible with the gold standard...
- ur-whale 7y ago
  Krugman, leave that body !
blackrock 7y ago
Hold on to your butts! By the time this coronavirus crisis is over, the stock market is going to accelerate into overdrive. Infinite QE, will push stock prices higher and higher. Trump is going to give $4 Trillion dollars away, to corporate America. That’s with a T. These are going to be in loans, that can be forgiven. Housing will likely double in 10 years. If you thought a $700,000 house is expensive now, then in 10 years, this will look like a bargain. That same junk house will go for a cool $1.4 million. Everything will cost more. Groceries, gasoline, cars. But your salary will remain the same. I hope you can afford a 60 year mortgage, because that is what you’ll need to get. Welcome to the next stage in America. The rich oligarchs got their way, and will now begin to enslave your children.
- JamesBarney 7y ago
  I'd immediately quit my job and get into the house building game. I don't really know what I'm doing but if labor costs halve relative to the price of a home, I'd be rolling in it.
  - thulecitizen 7y ago
    It will be so fun if we turn real life into the game of Monopoly. Oh wait...
    - JamesBarney 7y ago
      The point is the cost of everything can't double while labor costs stay the same because labor makes up so much of the cost of the all the goods we consume.
- Der_Einzige 7y ago
  Monetary and fiscal policy won't solve the viruses exponentially deleterious impacts. They will mitigate them at best. Your scenario is in fantasy land. You're welcome to lose money by betting on the stock market going up in 6 to 12 months though!
  - 7y ago
smitty1e 7y ago
The thing that grieves me is the pretense that monetary policy occurs in some apolitical realm. The spirit of the 1787 Constitution is that people wielding vast power stand for election. The Supreme Court does not. If the argument is that the Federal Reserve resembles SCOTUS, fine. But an outfit tantamount in power to a fourth branch of government ought not to have been rushed through legislatively at the end of 1913. Reform, make transparent, and amend the Constitution to legitimize this entity, say I.
- Fjolsvith 7y ago
  > Reform, make transparent, and amend the Constitution to legitimize this entity, say I. Dismantle this entity, say I.
  - smitty1e 7y ago
    I'm not rejecting that completely, but there needs to be some healthy dialogue. By which I do NOT mean our cancel culture hogwash where anyone disagreeing with the globalist orthodoxy is an -ist -ite -ism of the worst sort.
Fjolsvith 7y ago
“The Fed will finance a special purpose vehicle (SPV) for each acronym to conduct these operations. The Treasury, using the Exchange Stabilization Fund, will make an equity investment in each SPV and be in a “first loss” position. What does this mean? In essence, the Treasury, not the Fed, is buying all these securities and backstopping of loans; the Fed is acting as banker and providing financing. The Fed hired BlackRock Inc. to purchase these securities and handle the administration of the SPVs on behalf of the owner, the Treasury. In other words, the federal government is nationalizing large swaths of the financial markets. The Fed is providing the money to do it. BlackRock will be doing the trades. This scheme essentially merges the Fed and Treasury into one organization. So, meet your new Fed chairman, Donald J. Trump.” https://www.bloomberg.com/opinion/articles/2020-03-27/federal-reserve-s-financial-cure-risks-being-worse-than-disease https://www.bloomberg.com/opinion/articles/2020-03-27/federa...
dvasdekis 7y ago
Folks who believe that tying the value of money to the gold standard would ensure stability should instead look at how the price of shares has changed against the price of gold historically.[1] If we priced shares in gold terms, historic sharemarket swings would be even more volatile than what we see at present. Instead of considering the USD price of something as the 'value' of an asset, a better stance is to say that all assets can only be priced against each other. E.g. shares have decreased in value relative to cash and gold this quarter, but are potentially stable against real estate. From this lens, an individual interested in capital preservation should instead own a bit of everything, instead of a pile of cash/gold. Lastly, for people who want to maintain the gold standard for their personal cash stores, they can enter into futures contracts at extremely low overhead, which will link their cash stores to the price of gold ongoing. If you're keen on gold, why not? 1: https://www.businessinsider.com.au/sp-500-priced-in-gold-2015-7?nojs=1 https://www.businessinsider.com.au/sp-500-priced-in-gold-201... (I wish I had an updated version)
- cpr 7y ago
  You do understand that gold values have been wildly manipulated for decades by the central banks, right? They've been depressing them in the past decade with futures shenanigans, all the while buying up gold like mad. (Those are of course related.)

17 points by miles 7y ago

Let's just use ETH or BTC and call it a day. A gold standard would be nice, but even if we got on it, how long before governments withdrew from it again? Only a matter of time. I think it's time for a separation of money and state.

mardifoufs 7y ago
Actually this crisis is exactly why we don't need that separation. We need a government that can actually respond to crisis. And even if we truly needed a new monetary system, crypto is just not the answer. Crypto has always and will always be useless as a currency and even as a store of value. Blockchains sound amazing to some but they are useless in the real world. It's been 12 years, every single use case, speculation aside, has been tried and failed miserably. The ship has sailed
- phyalow 7y ago
  I agree with your points, however its worth pointing out the dollar is also a bad store of value too!
  - gumby 7y ago
    But a good signalling and liquidity mechanism, and the very nature you decry (poor store of value) is an incentive to invest in productive assets.
  - JamesBarney 7y ago
    Bit coin is a terrible store of value compared to the dollar. Say I have a bank account with $10,000 in it, that buys me approximately 3 months of living expenses. But if instead I had a bitcoin it would be 3 months expenses, no wait a year's worth, nevermind actually week of expenses.
- chrisco255 7y ago
  Your assessment is outdated. You have not been following what has been going on in ETH. There's trustless banks running on collateralized stable coins, paying interest, there's decentralized real estate trusts paying out income on rent producing real estate on a daily basis, thanks to rollups and zksnarks, decentralized exchanges are processing transactions at more than 2000 per second, car loans are being funded and backed by liens all recorded on the ETH blockchain, I mean I can go on and on but ultimately you need to catch up on a very fast moving industry. The government can respond to a crisis without printing money. It's called fiscal responsibility. This money printing is going to cause a deep depression and a crash in the monetary system. It's no joke what's going on right now. And when you're reeling and looking around for someone to blame...look no further than the Fed.
  - jki275 7y ago
    You are claiming mostly things people claim eth is going to do someday. Most of those will never happen, at least not on eth. The primary use case for eth was scamcoin ICOs in 2017. No amount of twitter posturing by people trying to pretend it’s useful for more than that changes anything.

aplummer 7y ago

What a bizarrely naive article to completely fail to appreciate the many historical economic benefits from central bank market interventions and investments that wouldn’t be possible with the gold standard...

ur-whale 7y ago
Krugman, leave that body !

blackrock 7y ago

Hold on to your butts! By the time this coronavirus crisis is over, the stock market is going to accelerate into overdrive. Infinite QE, will push stock prices higher and higher. Trump is going to give $4 Trillion dollars away, to corporate America. That’s with a T. These are going to be in loans, that can be forgiven. Housing will likely double in 10 years. If you thought a $700,000 house is expensive now, then in 10 years, this will look like a bargain. That same junk house will go for a cool $1.4 million. Everything will cost more. Groceries, gasoline, cars. But your salary will remain the same. I hope you can afford a 60 year mortgage, because that is what you’ll need to get. Welcome to the next stage in America. The rich oligarchs got their way, and will now begin to enslave your children.

JamesBarney 7y ago
I'd immediately quit my job and get into the house building game. I don't really know what I'm doing but if labor costs halve relative to the price of a home, I'd be rolling in it.
- thulecitizen 7y ago
  It will be so fun if we turn real life into the game of Monopoly. Oh wait...
  - JamesBarney 7y ago
    The point is the cost of everything can't double while labor costs stay the same because labor makes up so much of the cost of the all the goods we consume.
Der_Einzige 7y ago
Monetary and fiscal policy won't solve the viruses exponentially deleterious impacts. They will mitigate them at best. Your scenario is in fantasy land. You're welcome to lose money by betting on the stock market going up in 6 to 12 months though!
- 7y ago

smitty1e 7y ago

The thing that grieves me is the pretense that monetary policy occurs in some apolitical realm. The spirit of the 1787 Constitution is that people wielding vast power stand for election. The Supreme Court does not. If the argument is that the Federal Reserve resembles SCOTUS, fine. But an outfit tantamount in power to a fourth branch of government ought not to have been rushed through legislatively at the end of 1913. Reform, make transparent, and amend the Constitution to legitimize this entity, say I.

Fjolsvith 7y ago
> Reform, make transparent, and amend the Constitution to legitimize this entity, say I. Dismantle this entity, say I.
- smitty1e 7y ago
  I'm not rejecting that completely, but there needs to be some healthy dialogue. By which I do NOT mean our cancel culture hogwash where anyone disagreeing with the globalist orthodoxy is an -ist -ite -ism of the worst sort.

Fjolsvith 7y ago

“The Fed will finance a special purpose vehicle (SPV) for each acronym to conduct these operations. The Treasury, using the Exchange Stabilization Fund, will make an equity investment in each SPV and be in a “first loss” position. What does this mean? In essence, the Treasury, not the Fed, is buying all these securities and backstopping of loans; the Fed is acting as banker and providing financing. The Fed hired BlackRock Inc. to purchase these securities and handle the administration of the SPVs on behalf of the owner, the Treasury. In other words, the federal government is nationalizing large swaths of the financial markets. The Fed is providing the money to do it. BlackRock will be doing the trades. This scheme essentially merges the Fed and Treasury into one organization. So, meet your new Fed chairman, Donald J. Trump.” https://www.bloomberg.com/opinion/articles/2020-03-27/federal-reserve-s-financial-cure-risks-being-worse-than-disease https://www.bloomberg.com/opinion/articles/2020-03-27/federa...

dvasdekis 7y ago

Folks who believe that tying the value of money to the gold standard would ensure stability should instead look at how the price of shares has changed against the price of gold historically.[1] If we priced shares in gold terms, historic sharemarket swings would be even more volatile than what we see at present. Instead of considering the USD price of something as the 'value' of an asset, a better stance is to say that all assets can only be priced against each other. E.g. shares have decreased in value relative to cash and gold this quarter, but are potentially stable against real estate. From this lens, an individual interested in capital preservation should instead own a bit of everything, instead of a pile of cash/gold. Lastly, for people who want to maintain the gold standard for their personal cash stores, they can enter into futures contracts at extremely low overhead, which will link their cash stores to the price of gold ongoing. If you're keen on gold, why not? 1: https://www.businessinsider.com.au/sp-500-priced-in-gold-2015-7?nojs=1 https://www.businessinsider.com.au/sp-500-priced-in-gold-201... (I wish I had an updated version)

cpr 7y ago
You do understand that gold values have been wildly manipulated for decades by the central banks, right? They've been depressing them in the past decade with futures shenanigans, all the while buying up gold like mad. (Those are of course related.)