I thought I better post this because austrian economics is so popular

[hofficita]

Quote from Specterx:

Ayn Rand's stuff is unrealistic.

Have you or RC ever even read Rand? What exactly did she write that is unrealistic?

The individual entrepreneur is the driver of human progress.

Freedom is better than slavery.

The world is filled with moochers who would rather take from others than earn for themselves.

Government interference in private transactions between free people is an impediment to human prosperity.

ect....

 

[Specterx]

Quote from Martinghoul:

I agree with RC on most of the points he made previously.

As to banning fractional-reserve banking, that's yet another completely unrealistic idea. As I mentioned in another post, the reason we have fractional-reserve lending is because people want to earn interest. Unless you somehow ban all yielding instruments, you're gonna have fractional-reserve banking (look at the origins of the system; it coming into existence is not a random coincidence). Moreover, even systems that ban interest (islamic banking) have found it virtually impossible to ban fractional-reserve lending in a capitalist system. It's just basic human greed and any hopes to eradicate it are completely misguided. Best you can hope for is regulate it to prevent "bi-polar" excesses.

Why on earth would you have to ban interest? If people want to earn interest they can invest in bonds, CDs or similar instruments that don't involve arbitrarily conjuring money into existence. Needless to say, if you wanted your money out immediately you'd have to hit the bond market's bid - but interest ain't just free money, it's compensation for risk.

Somebody mentioned MBS and CDOs... ultimately the RE market crashed (along with the value of those bonds) because of - wait for it - massive speculation fueled by cheap money. Probably a good deal of fraud there too. But when the system isn't built on leverage upon more leverage you wouldn't have a cataclysmic cascade of destruction, rather the people who made bad investments would just eat their losses and move on.

Demand accounts - checking and savings - would always be 100% available on demand, and banks would charge a small fee to "warehouse" such deposits. People would use such accounts for the security and convenience.

 

[Daal]

Quote from Specterx:

Ayn Rand's stuff is unrealistic. No doubt about it. But IMO there are still some features of Austrian economics that can and should be implemented - namely removing the government's control over interest rates, banning fractional-reserve banking, and fixing (as nearly as possible) the quantity of money in circulation.

Inflation is a result of money supply, velocity and output. If you fix the money supply then inflation will fluctuate mainly with velocity, which in times like these will lead to severe deflation and negative feedback loops

 

[makloda]

Quote from Daal:The reason objectivism and austrian economics are popular, specially with young people, is because they promise a lot, objectivists think they know everything so do austrians regarding economics.

Good point.

Look at YouTube, there are thousands of channels filled with "Bernanke is a Thief", "The Jewish Money Conspiracy" and "Ron Paul Currency Revolution" videos.

Thousands of comments from what appears to be largely broke college kids who sound like they found a new religion. 19 year olds taping videos of themselves in their mom's basement preaching about impending doom and how an economic cleansing is about to sweep through the USA like a firestorm.

The 70s had Woodstock, the 80s the Anti-War/Nuclear buffoons, the 90s had the UFO conspiracists and the 2000s has self-proclaimed underground and underage economic investigators delivering the "real" truth about gold, money and the economy. It has become a pop phenomenon.

 

[hofficita]

Quote from Daal:

Inflation is a result of money supply, velocity and output. If you fix the money supply then inflation will fluctuate mainly with velocity, which in times like these will lead to severe deflation and negative feedback loops

The point is that you only have times like this because of the previous monetary expansion, which produced the positive feedback loop.

 

[Specterx]

Quote from hofficita:

Have you or RC ever even read Rand? What exactly did she write that is unrealistic?

The individual entrepreneur is the driver of human progress.

Freedom is better than slavery.

The world is filled with moochers who would rather take from others than earn for themselves.

Government interference in private transactions between free people is an impediment to human prosperity.

ect....

Rand's world is predicated on the existence of some cadre of hardworking, ultra-moral, god-like illuminati. In her case it's wealthy entrepreneurs and businessmen, for Marx it was the proleteriat, but neither system is workable because such people just don't exist - at least not in perfect form, and not as a cohesive socioeconomic grouping. I bet even George Washington told a few lies in his life.

In reality people will lie, cheat, steal, collude, screw other people over, make uneconomical decisions, act on bad or imperfect information, and so on. To some extent, where you draw the line between "earning" and "taking" is a political question that has no definite answer.

 

[Martinghoul]

Quote from Specterx:

Why on earth would you have to ban interest? If people want to earn interest they can invest in bonds, CDs or similar instruments that don't involve arbitrarily conjuring money into existence. Needless to say, if you wanted your money out immediately you'd have to hit the bond market's bid - but interest ain't just free money, it's compensation for risk.

Somebody mentioned MBS and CDOs... ultimately the RE market crashed (along with the value of those bonds) because of - wait for it - massive speculation fueled by cheap money. Probably a good deal of fraud there too. But when the system isn't built on leverage upon more leverage you wouldn't have a cataclysmic cascade of destruction, rather the people who made bad investments would just eat their losses and move on.

Demand accounts - checking and savings - would always be 100% available on demand, and banks would charge a small fee to "warehouse" such deposits. People would use such accounts for the security and convenience.

Full reserve banking will, indeed, always allow me to earn a mkt rate of interest, which, risk-adjusted, will be the risk-free rate. However, humans, being human, will always demand excess yield. How do you deliver that with full-reserve lending, pray tell?

As to your point on leverage, your argument is misdirected. Excess leverage, or, as you call it, 'leverage upon more leverage' is bad, I agree. All I am saying is that some leverage is inevitable. The goal of any market/regulatory framework is to prevent this leverage from spiraling out of control.

 

[Daal]

Quote from hofficita:

The point is that you only have times like this because of the previous monetary expansion, which produced the positive feedback loop.

Yeah, the argument 'we will have no recessions under the austrian utopia'

 

[hofficita]

Quote from Daal:

Yeah, the argument 'we will have no recessions under the austrian utopia'

You must have never read any Austrian economics, since none ever claimed that recessions could be eliminated. Austrian principles could however minimize much of the destruction caused by the credit fueled boom/bust cycle.

 

[Specterx]

Quote from Martinghoul:

Full reserve banking will, indeed, always allow me to earn a mkt rate of interest, which, risk-adjusted, will be the risk-free rate. However, humans, being human, will always demand excess yield. How do you deliver that with full-reserve lending, pray tell?

As to your point on leverage, your argument is misdirected. Excess leverage, or, as you call it, 'leverage upon more leverage' is bad, I agree. All I am saying is that some leverage is inevitable. The goal of any market/regulatory framework is to prevent this leverage from spiraling out of control.

I don't see your point. Of course people want free money, but that doesn't mean they can get it. Obviously it's impossible for everybody to earn 'excess' yield; equally obviously, any conceivable reforms to the financial system and the pensions system will need to take this reality into account, or else we haven't actually solved any problems. We're in this mess because everybody thought there was all this riskless "excess yield" out there for the taking, but of course it never existed except for the smart or lucky few.

Of course I don't think that any of these proposals have a chance in hell of actually being implemented, but it's because we lack the will to do it - not because the proposals lack merit.