There is something to be said about this man I am arguing with. Here, you will see his logic.
We are legally bound by the money we use today.<
But there can be no law that sets the real value. It changes month to month. The law cannot make the greenback worth more than a blank sheet of paper. ONLY the banking system puts value into their issue. The law does nothing.
You describe Fiat money…but are calling it representative money. Fiat money gets its value from the promissory backer.<
There is no difference between the money before and after government approval.
Do you believe the middle ages represent laissez-faire capitalism?<
Yup.
Do you believe a poor person can get rich without government in general? <
The economy cannot thrive without effective and democratic government.
What, do you believe all large corporations got to where it is today because of government rules? <
Yes.
What kind of rules helped them become rich?<
Today, minimum wage is the primary support for the economy. Rules allowing commoners to colonize granted land were the initial impetus for America’s and England’s wealth; this put pressure on the labor market, allowing the wages to rise that fueled the industrial revolution. Rules favoring unions also seem to encourage the consumer spending that the economy depends on. There should be rules disallowing any government or government representative from any capitalistic endeavors, but the west seems to be getting along without those.
Money isn’t created by banks.<
Think about this statement. You may believe that local banks SHOULDN’T create money, but saying they don’t is a denial of reality.
The first origins of money comes from people.<
Fine, and then these people created banks.
So you are willing to tell me that the workers that worked at wal-mart when it was first created…have the same situation of wages/benefits as wal-mart today?<
No, because the minimum wage has gone up a bit, and the economy external to Wal Mart puts upward pressure on the wages. I SAID that the wealth of Wal mart does nothing toward raising the wages/benefits of the cashiers.
I’m not pointing out a gap. Tennessee has no state minimum wage. And not all employees are subject to the federal minimum wage.<
A gap means “NOT ALL”!! Duh
The growth of the 1900’s(1900-1920) was due to industrialization, not minimum wage.<
1900’s means 1900 to 1999. Federal rules favoring the labor movement seem to have been enacted right at the start of the 20th century, and these do seem to have had some positive effect, but the growth of the first decade of the twentieth century pales compared to the growth of the last half of the century.
There was a lot of growth there(comparing the growth to today’s growth is a bad comparison)<
Why?
Does a bank simply write on the ledger $20,000,000 and all of a sudden, has $20 million dollars in the bank?<
No. When the bank receives your mortgage, the value recorded must be offset. This is the loan it gives you. Money IS bank credit which is exchanged for private credit. Any credit is worthless until accepted. That you may have good credit, it cannot be exactly valued until you use it in a transaction. Same with bank credit; it cannot have value until you borrow it, exchange it for your own. A bank loan cannot be made without creating money. Money cannot be created without a bank loan.
The <> statements are the ones I have written. Everything else is the stuff he has written. Anybody wants to comment on his logic…or what I am saying?
Today, minimum wage is the primary support for the economy.
What does that statement even mean? Are you saying that the economy will suddenly collapse if minimum wage laws are repealed?
What “supported” the economy before minimum wage laws?
What, do you believe all large corporations got to where it is today because of government rules?
The government helps large corporations in some ways. Large corporations can more effectively wield the government-provided weapons of patents, copyrights, and litigation to beat down smaller competitors. Large corporations can also more effectively bribe government officials to procure corporate welfare and to errect protective laws and tarrifs.
However, I think the government’s overall retardation of the economy through confiscation of wealth (taxation), incontinent monetary policy, and legislative meddling hurts large corporations far more in the long run.
I say as of now, government has the power to create money out of thin air. By law, only the central banks are allowed to create money. I took this from the money FAQ here on this forum
Note what I said. I said ALL corporations. This isn’t necessarily true about all large corporations. There are big corporations out there that have been successful without the help of government. Wal-mart for example, made its fortune without government help(even though recently, they have been asking for it). Yes, I do believe government helps some large corporations..but not all of them. Nor would I say all large corporations got to where they are today because of things like government subsidies and government protecting them from competition.
No. When a bank issues a loan, it is creating the money “out of thin air” – more accurately, out of debt. This is how money is created.
Example: You go to the bank and deposit $1,000 that your grandma gives you as a graduation present. Then, your buddy comes in and wants to borrow $1,000 for a car. The bank assesses his credit risk and loans him the $1,000. In this example, no money has been created. However, banks are legally permitted to lend up to 10X of their deposits, as per the Fed’s reserve ratio. So if your buddy wanted to borrow $3,000 or $9,000, and the bank lent it to him, they would be creating $2,000 or $8,000 in new money.
Banks create money. The goverment gives them license to, through the Federal Reserve System, because it serves the government’s interest. The Fed monetizes the government’s debt by creating money “out of nothing” (out of debt, which is really out of “less than nothing”), and then returns the interest profits on that debt to the Treasury – thus allowing the government to effectively print its own money without actually doing it.
The Federal Reserve SYSTEM creates money, and virtually every bank in every town in America is a member of that system. The Fed sets the reserve ratio, which is currently 10:1, meaning for every $1 on hand, a bank may lend $10. So if you take your $1,000 to the bank, deposit it, and the bank then uses that $1,000 to legally lend $10,000, then it has just created $9,000 in money.
Banks create money. Your failure to undestand this underminds the rest of your argument.
I’ve read some article in FT, where Greenspan criticized creation of superfund which was to buy some assets and he used the same argumentation, which Austrian Economics uses to FED - coniunctural cycles, inresposibility of investors etc…
It looks like Greenspan was afraid of loosing monopoly for fixing price of money… I don’t want to write some plot history, but it is worth to wonder…
wow… please tell me it didn’t take long to write this because it is almost all completely wrong and i would be surprised if you find anyone with any economics background to agree with any of your statements.
A minimum wage at 10 times its value should be better.
A minimum wage at 100 times its current value would be awesome.
A minimum wage at 1,000,000 times its current value would be spectacular.
A minimum wage at 1,000,000,000 times its current value would be narley…
Of course anyone who wants a functioning economy would realize that at some level the minimum wage is a bad idea. So why is it good for the poorest folks whose output is worth less than the minimum wage? It isnt at 1billion times its current value and it isn’t at its current value and the only good value for it is zero.
Logic I like to use on misguided wage-control advocates: Let’s say there’s a second-hand store serving a poor community. It is operated by its owner with no other employees. She is overworked and not making a lot of money, but getting by. She wants to hire some part-time help, but she’s crunched the numbers and discovered that she would be losing money to pay any more than $5 an hour. Should she be forced to lose money in order to hire someone? Should she just not hire anyone? How are these good solutions? If there is a person with limited skills who will do the job for $5 – he has no other job opportunities in the community – should he be barred from accepting the job for $5 an hour?
Force them to face this reality: Someone who cannot pay more than $5 an hour and someone who’s willing to work for $5 an hour are BREAKING THE LAW if they come to terms on employment. That is insane.
Well, a couple days ago, my econ professor explained to the class how money is created. The federal reserve DOES have a part in the money creation. I didn’t see it as the explanation you gave..nor do I think the person I am arguing with sees it the way you do. But I believe now banks are doing something totally wrong and practicing counter-feiting.
Ok, he responded to someone else explaining how the michigan minimum wage increase has increased unemployment. He responded with this:
I see one report of that, (repeated by you and others) but I’ve been following the UI weekly reports since we first discussed this, and except for a couple of blips, MI UI shows constantly improving job market for the last 6 months. I seriously question the validity of that figure. http://ows.doleta.gov/unemploy/page8/2007/102007.html http://ows.doleta.gov/unemploy/page8/2007/032407.html
Falling from 4.3% to 2.6% strictly from UI data. Still not good, but certainly in much better situation. With Chrysler laying off again, I expect that MI’s taking another hit, but you’d be in so much worse state without that MW hike.
The data he gives is the unemployment claims that are filed. The less unemployment claims that are filed..he assumes there is less unemployment. That is what I am getting from this data. So basically, if an unemployed person does not file for unemployment, he will assume that they are employed.
The other main problem with the unemployment statistics is there are a whole bunch of ‘undocumented’ workers out there who couldn’t file for unemployment even if they wanted to. There’s the bulk of your marginal workers, 10 million or some such number. You going to fire your girlfriend’s cousin or somebody from Guatemala, one of those choices makes for a very uncomfortable Thanksgiving dinner conversation.
Minimum wage is only good for those at or above the new level or businesses that already pay over the minimum to give them an edge over the competition who can’t afford the higher wages and so have to sacrifice their profits or limit the amount of business they conduct.
If you make $5.75 and lose your job because they bumped the minimum wage up to $7 and your employer can’t afford to have as many employees at that rate then the minimum wage hasn’t helped you one bit. Generally speaking, the minimum wage workers are the truly marginal workers in any business because if they had the skills to get another job at a higher wage they’d be gone in a flash.
Nope, minimum wage laws only hurt those they were meant to protect.
Banks through fractional reserve lending as was explained earlier.
The Fed through buying debt, mostly government debt, called monetizing debt and on super rare occasions through poof, your reserve account is bigger now so go ahead and pyramid some loans off that. The ‘poof’ method is called the discount window or some such thing, they used it not so long ago to ‘inject’ $2 billion into the economy.
I think you should force your friend to consider what Anonymous Coward said. Explain to him the law of demand and how prices work, and don’t let him evade it by saying he considers economics a cult or some stupid response meant to avoid the consequences of the law. Increasing a price of a good whilst holding all else constant will result in less demand for it. So it is with a wage too. Practically, this manifests in the case of marginal producers. Also make it clear how unemployment statistics work. Ask him, incidentally, if a minimum price for Coke, say of $10, would increase demand for it…
He is saying it is purely banks that create money. The federal government has nothing to do with the money creation. Yes, that is how my economics professor explains it. The feds have a part in the money creation. They buy T-bills from a bank…injecting credit into the economy…and the banks do the rest in the creation of more money. But I believe there is a difference between “banks” and the federal reserve. I mean, it is true that all banks work with the federal reserve..but they are NOT actually the federal reserve.