Posted on 02/10/2016 2:18:46 PM PST by Biggirl
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“Conservatism is the antidote to tyranny precisely because its principles are the founding principles.” --Mark Levin in Liberty and Tyranny
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All this talk of Milton Friedman, is interesting because FR’s very own LS once had a enjoyable, debate with him.
Been a loyal listener for years and Levin made me tune out.
Just say you’re for Cruz already.
Saying Trump is just like Bernie is idiotic, irrational, and intellectually dishonest.
He’s speaking from anger, his guy didnt do so well and now he’s up against in South Carolina.
The academic stuff is over my head, but LS is right down my alley!
I wouldn’t say I won, but I will say, Ol Miltie didn’t have a very sound defense of the Federal Reserve system.
Was that just the positions, y’all were given in the Debate or was Friedman really a supporter, of the Federal reserve system?
It wasn’t a formal debate. We were just talking. No, Friedman believed in the Fed. It was strange, but he thought the Fed was necessary.
I have always advocated at minimum a return to “free banking” where individual banks can print their own money backed by gold. My real position is more radical: they should print money backed by whatever they want. The market will sort it out very quickly.
We’ll have to agree to agree, that both your viewpoint and mine were contributing factors.
Yeah you’ve told me your radical, position a few times. I think it’s a very interesting idea. But I didn’t know that about Friedman, Thank you for the information.
Based on what i have heard in his lectures, he considered a fiat money to be a mistake, but that now that the money was disconnected from gold, it would be impossible to return to it.
The Red Eye guys make a good argument for fiat money. My personal opinion is that our nation’s people need a good education on what money is.
That is, money is the numerical representation of our labor and commodities that is easier and effient for the labor and commodities we need. By allowing the Fed to print money without a tangible backing, it allows the fed to devalue our labor and commodities that we have already exchanged for money. We saw that in the past few year with quantitative sleazing.
The major effect of fiat money is immediate spending of the money, and discourages saving, which prevents collective investment into new production and innovation that requires large amounts of money...more than the average individual can provide.
Bank promissory notes would stagnate the economy and develop into segregation of communities.
“Yes, inaction by the Fed, whose responsibility was to provide liquidity to banks in times of economic recession. They did the opposite at the outset of the Great Depression and shrunk the money supply by 30%. The Fed caused the bank failures most have heard about from the GD.”
You have the inaction part right, but the Fed didn’t actually do anything to cause the bank failures and the 30% collapse of the money supply. The collapse was a vicious spiral set in motion by bank runs, the absence of deposit insurance to protect customers, and the peculiarity of American branch banking law.
It’s likely that the bank runs began when the unfortunately named ‘Bank of United States’ failed in 1931. Americans feared that their own savings would vanish and they pulled their money out of banks which in turn made those banks weaker, and the process fed on itself.
Due to the nature of fractional reserves and no FDIC, when banks failed a portion of the money supply simply evaporated. Rural American banks were especially at risk and they failed by the thousands. Canada didn’t have this problem because their branch banking laws were different.
Had the Fed known what to do they should have bought up the assets of banks under pressure much like what Bernanke did in 2008. He was a student of Friedman and Schwartz and undoubtedly was familiar with their chapter The Great Contraction which you can sometimes find online.
“The bank issue was the government not taking the promised action they wrote into law and forced the banks to sign on to it. That is government interference, not inaction.”
It was inaction. Deer in the headlights.
The dominant figure at the Federal Reserve from the time of its founding was Benjamin Strong, the Governor of the Federal Reserve Bank of New York.
It was the Fed’s bad luck that Benjamin Strong died in 1928 on the eve of the Depression, leaving the Fed without a strong leader. They didn’t have someone equal to replace him as the Depression began unfolding and they did what a lot of committees do when faced by a crisis, nothing.
“I have always advocated at minimum a return to ‘free banking’ where individual banks can print their own money backed by gold. My real position is more radical: they should print money backed by whatever they want. The market will sort it out very quickly.”
Read James Grant’s book on banking, I believe it’s called Money of the Mind. Prior to 1913 banks printed their own currency (a boon to counterfeiters). The currencies of various banks were valued differently in the market and traded like foreign currencies.
Of course this was known as “bank money” or “credit money” during the gold standard era. Banks by their very nature engage in fractional reserves, there never was a gold dollar backing every bill that they printed.
Actually, it did just the opposite. Money began to circulate widely, pretty much at par. I even found one GA bank note that circulated as far as Europe, more or less at par. A LOT were in Chicago issued from Atlanta, all at par.
But the problem was-—which Friedman could never answer-—who gets to determine what money is and what its value is? His response was the Fed. Mine is, the market.
Not true. ONLY National banks could print money after 1863, and then only by purchasing US government bonds as a backing kept by the comptroller, but convertible into gold.
True “free banking” disappeared with the National Bank and Currency Acts of 1863-64.
Absolutely untrue that the currencies were counterfeited a lot. In fact, of all my studies of antebellum banks and reading dozens of ledgers, bank books, diaries of bankers, NOT ONE ever complained about his bank’s money being counterfeited.
True that there was never a gold dollar backing every paper dollar. So what? There didn’t need to be. There only needed to be convertability, which there was. Solid banks only had to keep a very, very low ratio of gold on hand (6%), while banks with worse reputations had to keep upwards of 10 even 20%. You might want to look at my studies: “Banking in the American South from the Age of Jackson to Reconstruction,” “Banking in the American West from the Gold Rush to Deregulation,” and THE best book on bank failures out there, Charles Calomiris, “Fragile by Design”
“Not true. ONLY National banks could print money after 1863, and then only by purchasing US government bonds as a backing kept by the comptroller, but convertible into gold.”
..which I’m familiar with but has absolutely nothing to do with what I posted.
There was a banking regulation that made printing currency preferable to ledger entry checking accounts, so banks printed their own currency to make loans.
And those currencies were not valued equally in the marketplace.
A dollar from the august firm of JP Morgan would trade at par, whereas a dollar issued by some non-money center bank either wouldn’t be accepted or would be taken at a discount to face value.
James Grant named his “Interest Rate Observer” after a daily sheet from that time, the Banknote Observer, that published the market value of various bank currencies.
“NOT ONE ever complained about his banks money being counterfeited.”
It was hardly in the interest of those bankers to complain that their currency was subject to counterfeiting. And counterfeiting was easier in an era where there were competing currencies in circulation. Banks run on confidence and the quickest way to kill that is to let it be known that your currency has a good chance of being fake.
It is no different than today with corporations that have major problems with information security. You won’t know that from reading their statements. But you can find out from security professionals who clean up the mess.
Friedman put a lot of value in the Quantity Theory of Money. A monetarist. He supposedly encouraged Nixon to abandon the dollar’s last link to gold, on the theory that this would make it easier to restrict the growth of the money supply. It didn’t take long for that idea to get scrapped.
Here’s another take on Friedman:
http://www.professorfekete.com/articles%5CAEFWhereFriedmanWentWrong.pdf
Still no. The bank note reporters universally reflected merely the cost of collecting the national banks’ dollars and retuning them to their region.
BTW, I have never seen a “National Bank of JP Morgan” have you?
And no, there is no archival eprecord anywhere, even private diaries, of any banker (outside the Confederacy) concerned about counterfeiting. Niw, it’s not sufficient to say, “see there is no evidence of concern so that proves that were concerned.” It’s your job to supply proof, which you have yet to do on any point. Keep trying.
“And no, there is no archival record anywhere, even private diaries, of any banker (outside the Confederacy) concerned about counterfeiting. “
Maybe you’re just not that good at research.
“The Vermont State Archives has an abundance of resources documenting the long history of forgery and counterfeiting in Vermont. During the American Revolution, Vermont issued bills that could be redeemed for silver, Spanish dollars, or gold. Given their importance to the wartime economy, counterfeiting those specific bills called for the death penalty: the bills themselves were printed with the motto “death to counterfeit.”
Counterfeiting unrelated to the wartime economy still called for extreme punishment. Penalties for counterfeiting included having the perpetrator’s right ear cut off and being branded with the letter “C” prior to being sent to the local jail for life. Counterfeiters who ran away, he could be returned and whipped upon their return.
The Vermont State Prison in Windsor was founded in 1809. This image is from around 1920. When the prison opened more than half of the 24 convicts were counterfeiters. They helped build the prison that would confine them.
In 1850, Vermonters eagerly followed a true-crime story happening right in their home state. The story was reported as far away as Chicago. A big-city criminal named William Warburton, best known as “Bristol Bill,” centered his criminal enterprise in Groton, Vermont. Although Warburton’s gang committed acts of burglary and other crimes, their focus was on counterfeiting.
At that time there were no federal bank bills; the government only minted coins, so banks all over the country would create their own bills of credit. No standard banknote meant that counterfeiting was rampant, with an estimated ten percent of bank bills counterfeit. Given the destabilizing effect on the economy, the penalties were still very steep if a counterfeiter was caught.”
...and apparently the US Government didn’t get your memo about the lack of counterfeiting seeing as the Secret Service was founded to :
“In 1865 United States Secret Service was founded to suppress counterfeiting of currency. Counterfeiting was now prosecuted as a federal offense, so most of the county court cases after that year were forgery-related. Some of those cases included forgery and “defrauding by the use of false tokens, meaning the use of objects in the fraud, typically checks.”
“With a reported one third of the currency in circulation being counterfeit at the time, the Secret Service was created on July 5, 1865 in Washington, D.C., to suppress counterfeit currency. Chief William P. Wood was sworn in by Secretary of the Treasury Hugh McCulloch. It was commissioned in Washington, D.C. as the “Secret Service Division” of the Department of the Treasury with the mission of suppressing counterfeiting. The legislation creating the agency was on Abraham Lincoln’s desk the night he was assassinated. At the time, the only other federal law enforcement agencies were the United States Park Police, the U.S. Post Office Department’s Office of Instructions and Mail Depredations (now known as the United States Postal Inspection Service), and the U.S. Marshals Service”
https://en.wikipedia.org/wiki/United_States_Secret_Service#History
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