How many people agree with MR/MT theory described on the forum

[Kshartle]

There is just that part of me that sees what happens when a wave of debt defaults begin to occur followed by a collapse in demand, followed by a reluctance of banks to loan money, followed by an increase in unemployment, followed by entrepreneurs putting new projects and hiring on hold...

Defaults are vital. They are vital if the world is to improve for humans man. Defualts say...."hey I had a shitty idea, it failed because people don't like it". That is so crucial. They didn't fail for a lack of money. They never ever fail for that. They fail becuase people think it sucks #$it!!!!!!! If they don't fail and they suck it's becuase they are government. They exist because to not use them is to be put in a mother FU@#$ing cage. That is pure realithy.


The government is force so it will ALWAYS be what we DONT want. ALWAYS. Every dollar they spend hurts us. They are so big now they swallow all growth. They are past the breaking point. I think they are lying about growth. Our economy is shrinking in the face of their growth.

There's no stopping it.The road to total serfdrom is paved.

Try and protect yourself at this point.

You guys are smart you know this. Good luck.

[Pointedstick]

You might wanna sober up before continuing, Kshartle. 

[Kshartle]

Think about it.....Human print peices of paper and GUNS assign them value. This is pure theft. Theft CANNOT be what we want.

But what if it is? What if deep in the human breast lies the desire to take from others what is theirs, to burn their homes, to cleave their heads and stamp on their smashed bodies? What if our inherent flaws lead us to create institutions that embody our worst traits, and that we cannot conceive of destroying these institutions so long as we still harbor the spark of violence, of greed, of hate?

No this is false. It is a self-contadicting statement. "They forced me to buy what I was going to buy." It's nonsense and it's the best that the masters have to offer. It's a lie.

Humans do not want destruction. To benefit others is to benefit yourself. this is true for 99%. 99% want to benefit themselves by benefitting others through thier talents.

The use of force makes this natural process dangerous because it makes the offenders vulnerable to the state. This is either unnatural or a relic of the past that we need to emotionarily or evolutionarily disregard.

[Gumby]

Btw, even Wikipedia understands how QE works:

Quantitative easing has been nicknamed "printing money" by some members of the media, central bankers, and financial analysts. However, central banks state that the use of the newly created money is different in QE. With QE, the newly created money is used to buy government bonds or other financial assets, whereas the term printing money usually implies that the newly minted money is used to directly finance government deficits or pay off government debt (also known as monetizing the government debt).

It is also noted that the increase in the money base produced by QE does not necessarily increase the aggregated money supply because banks can keep cash provided by central banks in their liquidity reserves. In other words, QE can only change the structure of the money supply, decreasing the share of money that has been already "printed" by fractional reserve banks; this is a way to tie existing bank accounts and deposits back to real cash without increasing the amount of money.

Source: http://en.wikipedia.org/wiki/Quantitative_easing

For what it's worth, I like PointedStick's explanation better

[Kshartle]

You might wanna sober up before continuing, Kshartle. 

Impossible!

Yes I just read what I wrote. Mistakes abound.

Permite moi to correct.

[Mdraf]

Btw, even Wikipedia understands how QE works:

Quantitative easing has been nicknamed "printing money" by some members of the media, central bankers, and financial analysts. However, central banks state that the use of the newly created money is different in QE. With QE, the newly created money is used to buy government bonds or other financial assets, whereas the term printing money usually implies that the newly minted money is used to directly finance government deficits or pay off government debt (also known as monetizing the government debt).

It is also noted that the increase in the money base produced by QE does not necessarily increase the aggregated money supply because banks can keep cash provided by central banks in their liquidity reserves. In other words, QE can only change the structure of the money supply, decreasing the share of money that has been already "printed" by fractional reserve banks; this is a way to tie existing bank accounts and deposits back to real cash without increasing the amount of money.

Source: http://en.wikipedia.org/wiki/Quantitative_easing

For what it's worth, I like PointedStick's explanation better

Ahem...the very same entry also says

"Risks include the policy being more effective than intended in acting against deflation (leading to higher inflation in the longer term, due to increased money supply),"

[Kshartle]

Let's not derail the momentum and get caught up in unimportant details. Economics is all about human behavior. The rest is numbers. There is no private sector or government sector this is nonsense.

What are the humans going to produce and offer?!?!?! The more they produce the less I have to offer. They produce more when they can keep more profit and are more free to produce. This is simple.

QE hurts this.

Gubmit hurts this.

We give our....tacit agreement to this theft knowing full well the consequences (unless we CHOOSE to blind ourselves).

You don't have to rage against the machine to speak the truth these are not the same.

You can try to live free but be still be honest.

Let yourself see the obvious guys. It is obvious. All the money masters are lying to you and would be the masters of your entire life.

You own your life not them.

If you can have but one thing they don't own, make it your own reason and sense.

[Gumby]

"Risks include the policy being more effective than intended in acting against deflation (leading to higher inflation in the longer term, due to increased money supply),"

Since when has any government policy ever been "more effective than intended"?

In all honesty, it's a weakly explained "risk". The cited article just says it's a risk without explaining any details. And the available data we have on every execution of QE in every country shows that risk never comes to fruition.

[moda0306]

Think about it.....Human print peices of paper and GUNS assign them value. This is pure theft. Theft CANNOT be what we want.

But what if it is? What if deep in the human breast lies the desire to take from others what is theirs, to burn their homes, to cleave their heads and stamp on their smashed bodies? What if our inherent flaws lead us to create institutions that embody our worst traits, and that we cannot conceive of destroying these institutions so long as we still harbor the spark of violence, of greed, of hate?

Which is an outstanding argument for doing as Harry Browne suggested and rather than spending your energy trying to change the system, instead spend your energy trying to build a life as insulated from the effects of the system as you can.

+1,000

[Mdraf]

This video may be of help to the 14 people who voted I agree

[whatchamacallit]

This video may be of help to the 14 people who voted I agree

Thanks. Good video.
Cullen Roche actually refers to Ray Dalio's machine in a radio interview:

http://www.youtube.com/watch?v=f8Zm16lwlvs&t=16m45s

[Gumby]

This video may be of help to the 14 people who voted I agree

Thanks. Good video.
Cullen Roche actually refers to Ray Dalio's machine in a radio interview:

http://www.youtube.com/watch?v=f8Zm16lwlvs&t=16m45s

Not only that, but Cullen recommends that video on his blog...

http://pragcap.com/how-the-economic-mac ... -ray-dalio

Dalio believes that "credit is the most important part of the economy — and probably the least understood". It's exactly what we've been saying all this time.

[align=center][/align]

A Central Bank...controls the amount of money and credit in the economy. It does this by influencing interest rates and printing new money. For these reasons, as we'll see, the Central Bank is an important player in the flow of CREDIT. I want you to pay attention to credit. Credit is the most important part of the economy — and probably the least understood. It's the most important part because it's the biggest and most volatile part...When a borrower receives credit, he's able to increase his spending. And remember, spending drives the economy. This is because one person's spending is another person's income.

Source: http://youtu.be/PHe0bXAIuk0

Well, we couldn't agree more. All this time we've been talking about the importance of the $56 Trillion credit market and all you guys wanted to focus on is the minuscule $3 Trillion in base money.

Dalio agrees with that too...

[align=center][/align]

The reality is that most of what people call money is actually credit. The total amount of credit in the United States is about $50 trillion. And the total amount of money is only $3 trillion.

Source: http://youtu.be/PHe0bXAIuk0

Thanks so much for providing that video, Mdraf. You've proven our point for us!

[moda0306]

The video is pretty awesome with a couple mistakes...

- We can't as a whole "live beyond our means."  We produce what we consume.  It can be no other way.  Now one could argue that what we produce/consume is a bad move for future productivity, but that's a value judgement.  What is consumed is always produced and usually vice versa.

- the video talked about productivity being a constant.  It is not.  Productivity depends on demand and supply equilibrium. Or at least some of it or the expectation of some of it. If the economy is suddenly starved of fiat paper, demand will fall, as will productivity, and therefore investment, even though the economy is perfectly capable of producing what is desired, and those that desire those things are perfectly capable of producing value in the economy. It's an economic Mexican Standoff caused by the fragility induced by use of a single currency. (We have some structural issues as well, but there are a lot of perfectly capable workers out there out of work unwillingly).

- They make the acquisition and delveraging of the macro economy out to be similar to that of a household.  There are times for economic adjustments, but macro-deleveraging is NOT the same as a guy paying down his debt as he approaches retirement.

- Our money is similar to debt in that it is a liability of our government and an asset of our private sector.  It's all essentially credit backed by the real productivity of the US economy.

- The main method the fed uses to lower/raise interest rates is "printing money" to buy (mostly) treasury securities. The video makes them sound like two different processes. It's extremely, extremely important to understand that when they "print money" they're taking govt financial assets out of the private sector as part of the process.

- I found the end of the video to be excessively vague about their proposed solution.

[Gumby]

The video is pretty awesome with a couple mistakes...

The video is excellent. We agree with nearly all of it.

I seriously don't how anyone watches that video and then believes that the government "printing money" is bad during a deleveraging cycle. Dalio supports it! He explains why the Central Bank cannot do helicopter drops (he says it can only buy financial assets), so Congress must pass its own spending policies to actually get money into people's pockets, raise their incomes, and get them to start spending again. He was very clear on that. This is what we've been saying all along.

He describes a "Beautiful Deleveraging" when the government prints the right amount of money that balances out the private sector's deleveraging. He compares this to Weimar Germany — an example of a "bad" deleveraging. (Weimar had to print a ridiculous amount to offset foreign-denominated debts). Again, this is what we've been saying all along.

Thank you again, Mdraf, for linking to this video that explains our position fairly well.

[Kshartle]

If people don't produce something it's because they can't do it profitably. Printing money can't change this, it just hands the loss to the taxpayers. There is no magical way to print prosperity anymore than there is away to spin staw into gold.

If people have decided to save it's because they are broke and need to save for a rainy day. Having the government take out loans in their name and blow the cash on splurges just spreads the losses out.

This all messes up the economy and makes us poorer than we otherwise would be. It destroys productive capacity or at least prevents new productive capacity from expanding.

Printing slips of paper to induce people to do things they don't want to do otherwise cannot increase wealth. This is pure fantasy guys. You can see this in Japan, Europe, the US and every other place it's tried.

If a country's economy actually improved in a sustainable way post printing and stimulus it has to be due to something else.

You can't get something for nothing. Printing paper and thinking we'll be richer because of it is thinking you can get something for nothing. It is worse than belief in magic because magic has a greater possiblity of existing.

[Gumby]

If people don't produce something it's because they can't do it profitably. Printing money can't change this, it just hands the loss to the taxpayers. There is no magical way to print prosperity anymore than there is away to spin staw into gold.

If people have decided to save it's because they are broke and need to save for a rainy day. Having the government take out loans in their name and blow the cash on splurges just spreads the losses out.

This all messes up the economy and makes us poorer than we otherwise would be. It destroys productive capacity or at least prevents new productive capacity from expanding.

Printing slips of paper to induce people to do things they don't want to do otherwise cannot increase wealth. This is pure fantasy guys. You can see this in Japan, Europe, the US and every other place it's tried.

If a country's economy actually improved in a sustainable way post printing and stimulus it has to be due to something else.

You can't get something for nothing. Printing paper and thinking we'll be richer because of it is thinking you can get something for nothing. It is worse than belief in magic because magic has a greater possiblity of existing.

Maybe you need to watch the video.

[Kshartle]

Maybe you need to watch the video.

I'll watch it when I leave work. YouTube is blocked here.

[Gumby]

Maybe you need to watch the video.

I'll watch it when I leave work. YouTube is blocked here.

Cool, because I think Dalio does a very good job of explaining these concepts in a way that we all can mostly agree on.

For instance, I believe Dalio would say that you are describing an economy where credit does not exist. However, as Dalio explained in the video, not only does credit exist in our economy, but "credit is the most important part of the economy". Everything the government does during a deleveraging cycle is targeted at fixing private credit (what we've been saying all along).

Dalio explains...

As mentioned, credit is the promise to deliver money, and credit spends just like money. While credit and money spend just as easily, when you pay with money the transaction is settled; but if you pay with credit, the payment has yet to be made.

There are two ways demand can increase: with credit or without it. Of course, it's far easier to stimulate demand with credit than without it. For example, in an economy in which there is no credit, if I want to buy a good or service I would have to exchange it for a comparably valued good or service of my own. Therefore, the only way I can increase what I own and the economy as a whole can grow is through increased production. As a result, in an economy without credit, the growth in demand is constrained by the growth in production. This tends to reduce the occurrence of boom-bust cycles, but it also reduces both the efficiency that leads to high prosperity and severe deleveraging, i.e., it tends to produce lower swings around the productivity growth trend line of about 2%.

By contrast, in an economy in which credit is readily available, I can acquire goods and services without giving up any of my own. A bank will lend the money on my pledge to repay, secured by my existing assets and future earnings. For these reasons credit and spending can grow faster than money and income...

...In such an economy, demand is constrained only by the willingness of creditors and debtors to extend and receive credit. When credit is easy and cheap, borrowing and spending will occur; and when it is scarce and expensive, borrowing and spending will be less. In the “business cycle,”? the central bank will control the supply of money and influence the amount of credit that the private sector creates by influencing the cost of credit (i.e., interest rates). Changes in private sector credit drive the cycle. Over the long term, typically decades, debt burdens rise. This obviously cannot continue forever. When it can’t continue a deleveraging occurs.

Source: http://www.bwater.com/Uploads/FileManag ... ewater.pdf

Watching the video, in its entirety, will bring this all into context.

[Kshartle]

...In such an economy, demand is constrained only by the willingness of creditors and debtors to extend and receive credit. When credit is easy and cheap, borrowing and spending will occur; and when it is scarce and expensive, borrowing and spending will be less.

Why would someone not want to extend credit? Is it because they are meanies?

Why would someone not borrow? Do they hate having stuff?

When lenders don't want to lend it's because they fear not getting paid back. The government can supply the credit but the government is horrible at pricing risk. It's horrible because it's not on the hook for the losses. The taxpayers are. Supplying credit for people to buy stuff they don't need and can't pay back or for losing business ventures wastes resources and now we are all poorer in total because of it.

When people don't want to borrow it's because they don't want debt. They want to be debt-free and build savings. Having the government take out debt and hand them the bill through taxes or inflation is not just sick and immoral, it's destructive to the economy.

This is all Keynesian nonsense and can be dispelled with minimum thought on the subject.

[moda0306]

If people don't produce something it's because they can't do it profitably. Printing money can't change this, it just hands the loss to the taxpayers. There is no magical way to print prosperity anymore than there is away to spin staw into gold.

If people have decided to save it's because they are broke and need to save for a rainy day. Having the government take out loans in their name and blow the cash on splurges just spreads the losses out.

This all messes up the economy and makes us poorer than we otherwise would be. It destroys productive capacity or at least prevents new productive capacity from expanding.

Printing slips of paper to induce people to do things they don't want to do otherwise cannot increase wealth. This is pure fantasy guys. You can see this in Japan, Europe, the US and every other place it's tried.

If a country's economy actually improved in a sustainable way post printing and stimulus it has to be due to something else.

You can't get something for nothing. Printing paper and thinking we'll be richer because of it is thinking you can get something for nothing. It is worse than belief in magic because magic has a greater possiblity of existing.

Kshartle,

1) If we can't get richer by printing pieces of paper, how can we get poorer by doing so, especially if we rip up just as many pieces of paper after printing some?

If printing CAN'T under any circumstances bring us any prosperity, are you asserting that we could "unprint" 10 trillion dollars out of the economy and there would be no negative effect? 

My observation/opinion is that if we're going to have a fiat currency, we need a certain amount of "clearing assets" (base money or treasury securities) per unit of GDP to maintain a healthy mix of productive potential, and claims on productive potential... and we also need to be aware of foreign demand for our money as a reserve currency issuer (this makes things even more complex).

2) Don't you find there to be something odd and unfortunate about a full-on national depression?  You'll have a skilled plumber who wants a deck built, an accountant who needs a bathroom re-plumbed, and a construction worker who needs his taxes done, but none of them "can afford" the other's work because they don't have enough and are un/under-employed.  So they spend their Saturday royally f*cking up a task they don't know how to do.

In a barter economy, this wouldn't occur, because the market infrastructure is such that people are wired to trade products/services for services/products, and even debts could be paid via performance of X or Y.  "Bad investments" could be cleared by simply working harder than you otherwise had planned. This can't be done in a monetized economy in depression.  These adjustments are very long and painful, and involve an interesting phenomenon called "unemployment."  This, like inflation, is a market distortion that can occur once an economy desides to attach itself to a single currency, which is mostly (if history is any indicator) a product of the state, anyway, even if it's a chunk of gold with a king's head stamped to it.

[Gumby]

Honestly, I wish Mdraf had mentioned Dalio earlier. Would have saved us a lot of time...

The Federal Reserve has chosen to define “money”? in terms of aggregates (i.e., currency plus various forms of credit - M1, M2, etc.), but this is misleading. Virtually all of what they call money is credit (i.e., promises to deliver money) rather than money itself. The total amount of debt in the U.S. is about $50 trillion and the total amount of money (i.e., currency and reserves) in existence is about $3 trillion. So, if we were to use these numbers as a guide, the amount of promises to deliver money (i.e., debt) is roughly 15 times the amount of money there is to deliver. The main point is that most people buy things with credit and don’t pay much attention to what they are promising to deliver and where they are going to get it from, so there is much less money than obligations to deliver it.

Source: http://www.bwater.com/Uploads/FileManag ... ewater.pdf

Beautiful. Credit is where the overwhelming majority of our purchasing power comes from. Stop focussing on the $3 trillion that is used to settle transactions and start focussing on the $50 trillion in private credit. Private credit is the most important part of the economy.

[Kshartle]

1) If we can't get richer by printing pieces of paper, how can we get poorer by doing so, especially if we rip up just as many pieces of paper after printing some?

I've answered this 100 times already and many others have.

[Kshartle]

2) Don't you find there to be something odd and unfortunate about a full-on national depression?  You'll have a skilled plumber who wants a deck built, an accountant who needs a bathroom re-plumbed, and a construction worker who needs his taxes done, but none of them "can afford" the other's work because they don't have enough and are un/under-employed.  So they spend their Saturday royally f*cking up a task they don't know how to do.

They can't afford it because they are broke. Having the goverment borrow money and put them on the hook will make them more broke. Having the government print slips of paper and hand them out to everyone just makes prices go up.

The more the government borrows and spends the more broke we get.

[Gumby]

Why would someone not want to extend credit? Is it because they are meanies?

Why would someone not borrow? Do they hate having stuff?

When lenders don't want to lend it's because they fear not getting paid back. The government can supply the credit but the government is horrible at pricing risk. It's horrible because it's not on the hook for the losses. The taxpayers are. Supplying credit for people to buy stuff they don't need and can't pay back or for losing business ventures wastes resources and now we are all poorer in total because of it.

When people don't want to borrow it's because they don't want debt. They want to be debt-free and build savings. Having the government take out debt and hand them the bill through taxes or inflation is not just sick and immoral, it's destructive to the economy.

This is all Keynesian nonsense and can be dispelled with minimum thought on the subject.

It's all explained in the video. Watch it later. No sense in arguing until you've watched it.

Btw, that wasn't my quote you quoted — it was Ray Dalio's.

[Kshartle]

Btw, that wasn't my quote you quoted — it was Ray Dalio's.

I know I'm not good at grabbing the quotes. I didn't mean to imply that you said it although it makes no difference to me. I think Ray needs an econ lesson. Who is he?