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The federal reserve admitted that their policies prolonged the great depression. People will buy the things that they need, resources will follow those needs b

The federal reserve admitted that their policies prolonged the great depression. People will buy the things that they need, resources will follow those needs because thats what people are actually buying. Some things might die, that is a reflection of society not actually caring very much about it, otherwise they would be buying it. This is in fact an attempt to re-organize the economy around specific things that wouldnt otherwise be supported by the market, with some crumbs left to curate votes. When people save, interest rates go up, freeing the capital goods needed for ventures that the market actually has a revealed preference for.

gruez 3y ago
> The federal reserve admitted that their policies prolonged the great depression. their policies of what? Not engaging in stimulus? >People will buy the things that they need People buying the bare minimum also means there's little investment going on, which needless to say is bad for economic growth. >When people save, interest rates go up Why would that be the case? Interest rates are a reflection of the cost of money. When there's more money floating around, the cost of borrowing becomes cheaper, not more expensive. Or to put it another way: for every saver, there has to be a borrower. If there's more savers than borrowers, then the savers will have to compete with each other on price (ie. the interest rate they charge), driving them down.
- logicchains 3y ago
  >People buying the bare minimum also means there's little investment going on, which needless to say is bad for economic growth. Not spending money indirectly contributes to investment. If you imagine 50% of the population suddenly decided to not spend any money for 10 years, and they hold 50% of all the money in circulation, in the short term this is essentially equivalent to burning 50% of the money supply, in that the reduction of the supply of money in the market leads to an increase in the value of money, which allows the people spending money at that time (including people making investments) to obtain more goods and services for their money.
  - gruez 3y ago
    But if the economy is going to shit, who are the people that are sticking their necks out by borrowing money to invest, rather than accumulating savings to weather the downturn?
    - logicchains 3y ago
      >who are the people that are sticking their necks out by borrowing money to invest, rather than accumulating savings to weather the downturn Normal people aren't, but rich people (who don't face any real risk to their standard of living from a crash) are incentivised to "buy the low" while everything is cheap. And they can buy more thanks to the purchasing power that other currency holders temporarily forfeited by pulling their money out of circulation.
      - gruez 3y ago
        You claimed a few comments up that printing money would cause people "to spend or invest in often unproductive ventures", but based on what you're saying now, it would have the same effect? ie. more savings = more investments are needed to balance them out = more questionable ventures being funded as savers chase ever more questionable ventures for yields.
        logicchains 3y ago
        >more questionable ventures being funded as savers chase ever more questionable ventures for yields The difference is that for private investment there's a process of natural selection: bad investors lose money to good investors, and over time the people with a record of better investment end up with more money, and overall better investments are made. Whereas the US government can keep spending money on economically unproductive things like the war in Afghanistan indefinitely without any feedback loop to stop it.
        gruez 3y ago
        I agree that if government was somehow involved in the lending (ie. choosing which companies to bail out), there would be a risk of picking winners/losers and creating zombie firms, but it's unclear how it's an issue exclusive to fiat currency. After all, governments can still take on debt even while on the gold standard, and can still engage in bailouts.
- Geisterde 3y ago
  >their policies of what? This was answered by the other poster >People buying the bare minimum also means there's little investment going on, which needless to say is bad for economic growth. Growth for who? There is little investment going on, that is the point, ventures that cant profit die, freeing their resources up for more productive ventures. >Why would that be the case? In this paragraph you moreso identify the market forces that eventually cause rates to come down. Eventually there is enough savings, and when companies come forward demonstrating their ability to create value, competition between savers pushes rates back down. This comes after the period of everyone stuffing their money under the mattresses. You are confusing saving and lending, there is a creditor (buyer) for every lender, not every saver. -------------- Lets summarize. I hope you find the following to at least engage you and make you question your prior understanding of the issue at hand. You are concerned that companies will own everything, but are not concerned with the 7% YOY (its not 2-3%) growth in the money supply, and how all interest on money that was printed into existence. The principle of that money will eventually be taken back out of circulation, leaving interest that remains to be paid. If you bought a house, but only paid back the principle, the bank is still going to repo your house, they own it afterall; there isnt enough money in the economy to repay the principle, meaning either mega-default across basically all industries, or we have to take on more debt to repay the interest on the last debt; since we are dealing with precentages and compounding interest, a greater and greater sum of resources go explicity to repaying debt. If you wanted your repo-men world where everyone is enslaved to debt and private companies, thats all you need, just let it play itself out. If you really wanted to take it up a notch though, theres more we could do to confuse and repress the poor. Print lots of money, it doesnt matter how you justify it, forever wars, bank bailouts, socialized healthcare and welfare, it doesnt matter! When this money is printed, it will accelerate the process by rapidly growing the total amount of interest owed, and you will of course have your pockets open to receiving these streams of cash. Why do you think politicians have been getting so rich off the stock market? Do you think its because these people are world class investors? All of them? They are invested in the same companies that they regulate, and by that I mean they protect those companys against competition, and provide stimulus when possible. For the average person? The time-price of everything this money touches goes up, thats how many hours the median american has to work to aquire a good. Housing, healthcare, education, defense, everything that is paid for with money being printed into existence, is going up in price dramatically. Things like, tvs, computers, they become more accessible every year.

gruez 3y ago

> The federal reserve admitted that their policies prolonged the great depression. their policies of what? Not engaging in stimulus? >People will buy the things that they need People buying the bare minimum also means there's little investment going on, which needless to say is bad for economic growth. >When people save, interest rates go up Why would that be the case? Interest rates are a reflection of the cost of money. When there's more money floating around, the cost of borrowing becomes cheaper, not more expensive. Or to put it another way: for every saver, there has to be a borrower. If there's more savers than borrowers, then the savers will have to compete with each other on price (ie. the interest rate they charge), driving them down.

logicchains 3y ago
>People buying the bare minimum also means there's little investment going on, which needless to say is bad for economic growth. Not spending money indirectly contributes to investment. If you imagine 50% of the population suddenly decided to not spend any money for 10 years, and they hold 50% of all the money in circulation, in the short term this is essentially equivalent to burning 50% of the money supply, in that the reduction of the supply of money in the market leads to an increase in the value of money, which allows the people spending money at that time (including people making investments) to obtain more goods and services for their money.
- gruez 3y ago
  But if the economy is going to shit, who are the people that are sticking their necks out by borrowing money to invest, rather than accumulating savings to weather the downturn?
  - logicchains 3y ago
    >who are the people that are sticking their necks out by borrowing money to invest, rather than accumulating savings to weather the downturn Normal people aren't, but rich people (who don't face any real risk to their standard of living from a crash) are incentivised to "buy the low" while everything is cheap. And they can buy more thanks to the purchasing power that other currency holders temporarily forfeited by pulling their money out of circulation.
    - gruez 3y ago
      You claimed a few comments up that printing money would cause people "to spend or invest in often unproductive ventures", but based on what you're saying now, it would have the same effect? ie. more savings = more investments are needed to balance them out = more questionable ventures being funded as savers chase ever more questionable ventures for yields.
      - logicchains 3y ago
        >more questionable ventures being funded as savers chase ever more questionable ventures for yields The difference is that for private investment there's a process of natural selection: bad investors lose money to good investors, and over time the people with a record of better investment end up with more money, and overall better investments are made. Whereas the US government can keep spending money on economically unproductive things like the war in Afghanistan indefinitely without any feedback loop to stop it.
        gruez 3y ago
        I agree that if government was somehow involved in the lending (ie. choosing which companies to bail out), there would be a risk of picking winners/losers and creating zombie firms, but it's unclear how it's an issue exclusive to fiat currency. After all, governments can still take on debt even while on the gold standard, and can still engage in bailouts.
Geisterde 3y ago
>their policies of what? This was answered by the other poster >People buying the bare minimum also means there's little investment going on, which needless to say is bad for economic growth. Growth for who? There is little investment going on, that is the point, ventures that cant profit die, freeing their resources up for more productive ventures. >Why would that be the case? In this paragraph you moreso identify the market forces that eventually cause rates to come down. Eventually there is enough savings, and when companies come forward demonstrating their ability to create value, competition between savers pushes rates back down. This comes after the period of everyone stuffing their money under the mattresses. You are confusing saving and lending, there is a creditor (buyer) for every lender, not every saver. -------------- Lets summarize. I hope you find the following to at least engage you and make you question your prior understanding of the issue at hand. You are concerned that companies will own everything, but are not concerned with the 7% YOY (its not 2-3%) growth in the money supply, and how all interest on money that was printed into existence. The principle of that money will eventually be taken back out of circulation, leaving interest that remains to be paid. If you bought a house, but only paid back the principle, the bank is still going to repo your house, they own it afterall; there isnt enough money in the economy to repay the principle, meaning either mega-default across basically all industries, or we have to take on more debt to repay the interest on the last debt; since we are dealing with precentages and compounding interest, a greater and greater sum of resources go explicity to repaying debt. If you wanted your repo-men world where everyone is enslaved to debt and private companies, thats all you need, just let it play itself out. If you really wanted to take it up a notch though, theres more we could do to confuse and repress the poor. Print lots of money, it doesnt matter how you justify it, forever wars, bank bailouts, socialized healthcare and welfare, it doesnt matter! When this money is printed, it will accelerate the process by rapidly growing the total amount of interest owed, and you will of course have your pockets open to receiving these streams of cash. Why do you think politicians have been getting so rich off the stock market? Do you think its because these people are world class investors? All of them? They are invested in the same companies that they regulate, and by that I mean they protect those companys against competition, and provide stimulus when possible. For the average person? The time-price of everything this money touches goes up, thats how many hours the median american has to work to aquire a good. Housing, healthcare, education, defense, everything that is paid for with money being printed into existence, is going up in price dramatically. Things like, tvs, computers, they become more accessible every year.