One has to understand what Central Banking and Policymaking is really FOR.

Answer: maximizing asset inflation, so as to benefit the banks and the financial elite, all the while paying lip service to low consumer goods inflation.

That is why the Central Bank never tries to deflate a bubble. It is quite simple, really.

Exogenous is a academic construct. I’m talking about reality.

Free people in the long run don’t gravitate to wildcat banking. They evolve rules to regulate the inherent dangers of fractional reserve banking. We were doing this over the period of 1865 to 1913, a period of unparalleled economic growth & little inflation. Unfortunately the evolution was killed off by Progressives with the Fed.

Without the Fed, the Depression would not have been Great, the Stagflation of the 70s wouldn’t have occurred, nor the Dotcom or Housing bubbles. For the 50 years before the Fed, the value of the $ was fairly stable. Since the Fed, the $ has lost ~98% of its 1913 value.

Free people interacting voluntariy produce good results. We don’t have free markets & look at the results.

If you got to Virginia and learn the history of the first settlers, you will discover that everything North Americans do has been unsustainable from the very beginning.

First of all, even the natives who lived in symbiosis with nature, could not practice a sustainable lifestyle. They would colonize an area for a hundred years (maybe more) then would have to move on to another area as the land became unproductive. I guess the speed of the process depended on the population growth.

Before the settlers arrived, there were no domesticable animals in NA, thus no horse power and not many fruit trees. Once you are made aware of this, it’s easy to understand why the natives never managed to get as “civilized” as the Europeans.

When the Europeans arrived, they razed the land and produced some of the most energy sucking crops you can think of: tobacco. It’s obvious that they needed more and more land. They introduced animals and horsepower by importing horses and animals from Europe. They also imported the honey bee from Europe, so I’m not surprised to hear that the bee colonies are disappearing! And I guess they also imported the fruit trees that the bees would pollinate.

From the very beginning, we jeopardized the entire environmental landscape of our continent and never thought ntwice about it. Our way of life is totally unsustainable and we’ve done so much damage, I don’t believe we can reverse it. We might be able to slow it down but it won’t be our efforts, it’ll be because we are forced to.

IMO Malthus was right, he just got the timing wrong.

The USA tried this, it is called “wildcat banking” and in effect what increases is fraud. A good argument can be made that in the past 10-15 years the USA has in effect reverted to wildcat banking as the effective abolition of reserve requirements and the creation of new unregulated financial instruments has allowed banks and other business to create their own money, of which curiously there seems to be always overproduction .

«interest rates naturally to choke off the developement of a bubble. It is unlikely that a bureaucracy like the Fed will ever be able to mimic a market interest rate.»

The problem is that interest rates really cannot determined by “the market”. They are exogenous. Unless one makes something else an exeogenous policy instrument.

The reason why there must be an exogenous instrument in the economy is that something must express a link between paste present and future.

The unwise people who argue for gold as currency are just arguing that the exogenous instrument should be the physical production of gold, and that is a rather arbitrary and bad link between present and future.

Hello all,

Well this view, as many others, is interesting. How about this. That may be just what is neccessary…. rather than creating false economies for people to exist within. Also, we could use the principle of population to explain where we are today. For example, as the Industrial Revolution allowed us to expand the production possibilities frontier….. the mass production and mass distribution system became larger and more efficient. In this, population would be allowed to increase from an increase in food production and distribution capability overall in an economy (whether you take a national or global perspective is irrelevant.) An example of this would be America with efficient production and distribution vs. Ethiopia (Had enough food however the means to distribute food were poor and thus starvation occured.) If the Rev. Malthus is correct, and a increasing food supply is not available through means of production then even the U.S. efficient distribution system would fail and population would suffer as a result. Perhaps we should be more cautious on how we construct a successful economy because if we create an artificial means (unsustainable debt (margin financing) or (leverage)) of supporting an increase in population (jobs, businesses, lives, homes, etc.) that cannot be sustained then the population that exists within will suffer until the level of sustainability would be reached. Essentially, you could look at us (humans) in Malthus’s perspective and see stages. Stage I: pre-agriculture, Stage II: agriculture (with horse and plow), Stage III: industrial agriculture (which might be unsustainable unless a technological breakthrough can take us to Stage IV ??????). Apply this methodology…… if you have eyes you will see that balance and harmony must be achieved rather than false pursuits. True sustainability is 1=1 or for every input there is one output. Extrapolate that.

On the lighter side of things, I am stiil going to public school. (When are people going to realize that these Harvard, Yale, and Chicago grads with their orthodox thought process is not an education?) Heterodox is where its at. LOL. Anyway, I start this term Tuesday. I am still studying Business, Finance, and Political Economy (Why? I don’t know….it is not like there are many jobs in this deflationary spiral.) There are some great thinkers on this blog. I love the excellent commentary.

Thanks all,

Economics 101