Wednesday, September 9, 2020

How to Save a Dying Republic: Lincoln and the Greenbacks — Matthew Ehret


History.
In his 1865 essay How to Outdo England Without Fighting Her, Lincoln’s economic advisor Henry C Carey stated: “The ‘greenback’ has fallen on the country as the dew falls, bringing with it good to all and doing injury to none.”

33 comments:

Andrew Anderson said...

The Bank Act of 1863 established reserve requirements for the first time, and also capped the interest rates in order to destroy usury within the nation itself. Matthew EhretMatthew Ehret [bold added]

ANY positive interest rate is Biblically (and historically) usury, not just high rates. Nor is any positive interest rate even needed since loans can be over collateralized to compensate for risk.


In order to eliminate international interference and manipulation from Wall Street financiers, the Bank Act also forced 75% of all bank directors to reside in the state in which the bank was located and all directors had to be American citizens. ibid

So local oppression by US citizens is OK?

Matt Franko said...

How is providing non-zero risk free interest income to savers “oppression,” ?

You are only looking at it from the non savers perspective....

Matt Franko said...

Remember: “Jesus saves!”

You want Jesus to not get any interest on His savings???

Matt Franko said...

“Will Trump have the strength to give neocon vipers in his cabinet the Bolton treatment before they unleash war with Russia and China? “

All of the previous approach was a soft power initiative to get the ROW to westernize....

Middle East didn’t do it, ch8na didn’t do it and Russia didn’t do it...

Soft power failed... so time to turn off the soft power...

Matt Franko said...

Trump has put a clock on all the soft power stuff and time is up...

Already has the Middle East all kissie kissie...

Getting Germany and Russia to figure it out among themselves..,,

China maybe getting the point too...

NeilW said...

"How is providing non-zero risk free interest income to savers “oppression,”"

There's no reason to give risk free interest income to savers. Savings are not a required resource. They actually cause more problems than they solve.

If they want an income, they need to invest.

Andrew Anderson said...

How is providing non-zero risk free interest income to savers “oppression,” ?
Franko

It's welfare proportional to account balance and not according to need.

And actually, considering overhead costs, non-NEGATIVE interest and yields constitute welfare.

Andrew Anderson said...

You want Jesus to not get any interest on His savings??? Franko

Interest is to come from foreigners (Deuteronomy 23:19-20) and is a means to subjugate them to a superior belief system.

Andrew Anderson said...

If they want an income, they need to invest. NeilW

Working from the following principles mandates another source of income too:

1) Some fiat creation is good - to keep up with population and potential economic growth, i.e. to counter wage and price deflation.
2) All fiat creation should be for the general welfare of all citizens.

Therefor ALL fiat creation beyond deficit spending for the general welfare should be via an equal Citizen's Dividend.

Of course we need land reform too so that all citizens may at least be self-sufficient wrt shelter and may grow their own food (Leviticus 25).

Matt Franko said...

Neil how are savers compensated for deferring their consumption?

Even WW2 war bonds had a decent yield...

You have periods when either output decreases or has to be diverted (like today with the shutdowns) so to foment a deferral of consumption you have to offer a savings rate that has an incentive...

So you see today we have this rate at zero so people are bidding up prices (wages, lumber, vehicles, copper....) in sectors of the economy that are not in shutdown... and there is all the increased speculation you see...

So if you have a law that says “maximum employment with stable prices” I don’t see how a permanent zero rate policy helps achieve stable prices in conditions like present...

Matt Franko said...

Neil remember dubya 19 years ago?

“We’re going to war.... go shopping...”

So he fomented all that property speculation at zero rates...

Sheet of plywood went to $50.... drywall $18 if you could even get any.... housing went to $175 psf...

Matt Franko said...

https://www.yahoo.com/news/used-car-prices-soar-during-180000173.html

Matt Franko said...

Even some Art degree MMT people have formed a new Art degree sect in Kansas City that allows for certain non zero savings rates... I think they may understand this at some level...

Greg said...

Neil how are savers compensated for deferring their consumption?

———————————


Why does deferring consumption need to be compensated? Why should I be rewarded for not spending today and instead possibly spending next year.?
Now, there are plenty of good reasons to not spend today, if you don’t need to. Saving up for a future purchase that requires more than you have disposable today is one reason, but that neither necessitates nor warrants “compensation” for those efforts. The future purchase is all the incentive needed.
We, in my view, over compensate saving. Treating it as more of a necessity than it is.

None of the above however means that I disagree with the idea that under today’s institutional arrangements a very modest interest rate on savings can be accommodated. I would say no more than 2.5% which would result in a doubling about every thirty years. As Neil said, people should be encouraged to invest in future production not just speculate or bet on how the prices of some commodity or even equity share might move. Most of what we call investment market activity is completely useless and is not much different than what happens on golf courses every day. If most of it ended today the world would be no worse off in real terms. In fact, I think too much of it disincentivizes the shareholders and many front office people to simply act in interest of short term share price and sacrifices future production, hurting us in real terms.

Andrew Anderson said...

None of the above however means that I disagree with the idea that under today’s institutional arrangements a very modest interest rate on savings can be accommodated. Greg

2.5% on risk-free savings is still welfare proportional to account balance.

Welfare should be according to need, not account balance.

Also, an equal Citizen's Dividend, to replace all fiat creation for private interests such as for the banks, would reduce the amount of welfare needed in the first place.

Matt Franko said...

“Why does deferring consumption need to be compensated?“

Because it is a policy to create conditions with stable prices... why else would people do it? MAGA?

It’s like any other fiscal policy that contains financial incentives.... cash for clunkers.... Section 179 expensing... deduction of mortgage interest for primary residence... etc.., They all provide financial incentives...

You have all of these pension funds with a 60/40 nonrisk/risk portfolio written right in the investment objectives where they project the 60 side to return 5% and the Fed dummies put the rate at zero bankrupting all the pension funds...

Now the municipalities rob all the money from the maintenance fund and the grass in the roadside is 3 feet tall and 12” potholes...

You better put a weed whacker in your trunk because if you get a flat and have to change it your going to have to cut the grass for them before you can get to the wheel well...

This is all due to ZIRP...

The new KC MMT sect which just formed may have finally figured it out...




Andrew Anderson said...

why else would people do it? Franko

Having risk-free savings is its own reward:
1) for contingencies.
2) for initial capital formation (Proverbs 31:16).
3) for liquidity needs.

That said, excessive risk-free savings constitute hoarding (Matthew 25:14-30) and is an abuse of a public utility.

Besides, risk-free saving is not the only alternative to consumption; like Neil said, investment is an option and one endorsed by Scripture too.

Matt Franko said...

Here:

Of principal concern were issues surrounding war financing. Many of President Franklin D. Roosevelt's advisers favored a system of tax increases and enforced savings program as advocated by British economist John Maynard Keynes.[37] In theory, this would permit increased spending while decreasing the risk of inflation.[37] Secretary of the Treasury Henry Morgenthau, Jr. however preferred a voluntary loan system and began planning a national defense bond program in the fall of 1940. The intent was to unite the attractiveness of the baby bonds that had been implemented in the interwar period with the patriotic element of the Liberty Bonds from the First World War.

https://en.wikipedia.org/wiki/War_bond

Forced savings/taxes or voluntary/incentive program back then...

Currently under COVID Mnuchin has run up the TGA $1T by increasing the rate of UST issuance under Covid so this may be another option in the future ... but some prices are still going up substantially under lockdown...

Matt Franko said...

What about all the extra fish and bread left over after the 5000 were fed which was more than they even started with?

In your prayers you better correct Jesus and tell him he really f-ed up there....

Matt Franko said...

Here:


https://www.bloomberg.com/news/articles/2020-09-11/u-s-consumer-prices-rose-in-august-on-further-gain-in-used-cars?utm_content=business&utm_source=twitter&utm_campaign=socialflow-organic&cmpid=socialflow-twitter-business&utm_medium=social

ZIRP allows higher car prices.., If they put the rates up the cars would be less affordable...

Greg said...

Yeah, just what we need.....less affordable cars!

If they put rates up we’ll also have less affordable mortgages

Again, if you are truly concerned with retirement it’s pretty easy to cut everyone a check at level you think is appropriate

Ive already stated I don’t have a problem with some level of return but 5%? Nah that’s too high. That would be almost 3 doublings in
the usual career length...... for doing nothing!!

Andrew Anderson said...

Ive already stated I don’t have a problem with some level of return ... Greg

Reminds me of a Churchill quip: "We've already determined than, madam. Now we're just haggling over the price."

It's time for a properly PRINCIPLED approach to fiat creation and banking and that doesn't include obsolete relics of the Gold Standard.

Matt Franko said...

“ Yeah, just what we need.....less affordable cars!”

No they couldn’t raise the prices so payments stay the same...

Cars have gone up because they dropped the rates to zero and implemented record fiscal transfers...

Same thing as the post 9/11 policy... “We’re going to war... go shopping”

If you pay 20k at 3% or 17.5 at 5% it’s like the same NPV ...

Here is the functional equation:

https://www.investopedia.com/terms/n/npv.asp

The law says “stable prices” so that is what they should pursue... just follow the law...

Matt Franko said...

Not that it looks like it’s going to happen any time soon but When they eventually start raising rates again (And they will) it’s going to cause major problems as asset values are going to collapse again... lock it...

Matt Franko said...

They probably believe moron Minsky with his bs thesis “stability creates instability!” lunacy...

Matt Franko said...

All Art degree unqualified and incompetent losers...

Greg said...

Ya know Matt, I was just quoting you on the less affordable cars comment


First off, used cars going up is good for the new car buyer (new car prices stayed stable) they get a better trade in, and lower financing costs is better for the borrower relative to the cash buyer ( a lot of people pay cash for used cars)

Housing is a much bigger portion of budget costs for people than cars so keeping mortgage rates low is a good trade off for slightly higher used car prices

Also it’s good not to let Trust Fund Boys sit back and double their inheritance every 10 - 12 years just playing golf and running a fake non profit, although the ones scamming MAGAts for the wall was pretty sweet.

Matt Franko said...

How is causing significantly higher prices by lowering rates to zero pursuing a policy of “stable prices”? Which is the words written right in the FRA....

Even orthodox MMT advocates for a permanent stable rate... the new KC sect advocates for a stable rate too but just nonzero for certain savers...

But both agree on stable rates..,

Just watch here the longer they keep the rate at zero the higher all of these financial asset prices are going to keep going...

Greg said...

Matt,

The Fed policies prior to this ZIRP May have stated they were “pursuing” stable prices but they certainly didn’t achieve it. And don’t give me any CPI data cuz that shit has been revised so many times to try and convince consumers they aren’t getting screwed. They keep dropping more and more of the “expensive and climbing” part of our budgets and then using Dollar General policy to keep our household budgets semi manageable while filling our houses with garbage built on the cheap or made by children in Asia.

But ......one last time.....I personally have zero problem with a permanent non zero rate but I don’t give one crap about affects on retirement accounts ( and I have a 401k with over 1 million in it for full disclosure..... very heavy in bonds too) because if we care so much about non working citizens income ........CUT THEM A CHECK! The amount can be haggled in the way our system is SUPPOSED to work . Not policy driven by the whims of a huckster who couldn’t keep fucking casinos solvent

Matt Franko said...

“ And don’t give me any CPI data cuz that shit has been revised so many times to try and convince consumers they aren’t getting screwed. ”

You’re making my point .... I know .... their “inflation!” is a figure of speech and they are surprised when they can’t even define what it is... they are incompetent unqualified losers...

Thank you... checkmate...

Matt Franko said...

If you’re 62 and annuitized that 1M at 6% for 30 years (you’d be covered thru age 92) you could get a monthly income of about $6k... Then add SS onto that and Medicare at 65 .... you’d be sitting on the dock of the bay...

You could retire... transition your job down to generation next and then they could be employed for 30 years... rinse and repeat...

This is what ERISA was designed to do...

Everything would be fine but we have art degree morons in control who then think they are going to help by reducing rates to zero and nobody can retire and young people can’t get into the jobs...

How about STICK WITH THE PLAN...

Greg said...

You ignore the second part of the FRA......... full employment. They make up this NAIRU BS to justify using policy which gooses stock markets when they desire it and keeping those necessary “savers” oh so happy. No way we can survive if those that previously deferred consumption can’t eventually galavant around the globe at their pleasure. They’ve never stuck with that part of the plan.

Tony Wikrent said...

Wow - people totally missed the MOST important point: "I contrasted Hamilton’s system which tied the value and behaviour of money to the increasing powers of production of a society through manufacturing and internal improvements, to the opposing system of British free trade which tied value to hedonistic impulses and the worshiping of money." Organize under the wrong system of political economy, and NOTHING will go right for anybody except elites and their courtiers.

People should try a little experiment: get your old college economics textbooks out, and look in the index. How many references are there to Hamilton, and how many to Smith?
My own results for 11 books -- including the most assigned introductory economics textbooks of the past decade, N. Gregory Mankiw, Principles of Economics -- is here: https://real-economics.blogspot.com/2017/07/rl-bruckberger-on-american-school.html