You are wrong. The Federal Reserve System = the banks. Virtually every bank in America is a member of the Federal Reserve. Saying “the banks aren’t the Federal Reserve” is like saying John, Paul, George, and Ringo aren’t the Beetles. Yes they are.
Of course the government is involved in money creation. So are you when you take out a car loan. The banks create the money to lend the government, and they create the money to lend to you. The difference is that the banks will always create money for the government, while they may or may not create for you.
The Minimum wage raises the amount of paper in a worker’s pocket, but it ultimately doesn’t increase the amount of MONEY, thanks to rising costs and inflation. Minimum wage advocates, like most socialists, just don’t fully consider the impact of their economic interventionism.
If we don’t have a “living wage” now, then we will never get one via legislation.
Jason, he did respond to your statement. He used this:
Thing is, the Ma and Pa stores are worked by the family and are not affected near as much by the minimum wage. Big box stores are much more affected, and use their more efficient use of labor to take business away from Ma and Pa. Abolishing the minimum wage would help no one in the economy. Increases to the minimum wage provide increases to consumer spending by the poorest consumer, and that spending works its way up through the entire economy benefiting everyone.
Note this is all he said. Anything you would like to say about it?
The federal reserve is its own entity. I understand your analogy…but I do not believe it references the federal reserve. Banks long existed before the federal reserve..and they didn’t decide to get together and create this massive entity. But I believe your second paragraph. The government selling T-bills to banks increases the money supply. But when it comes to lending money, they can lend money they have on reserve. Of course, the reserve requirements(which is 10%) forces banks to keep a certain amount of their money in interest free accounts. So the government selling T-bills, as well as their ability to change the reserve requirement, gives the government a huge part in increasing/decreasing the money supply. The banks do the rest.
My parents run the second-hand store in question. Michigan just raised its minimum wage. They have to pay people, illegally, under the table. People come into their store begging for work. They hire them, illegally, to sweep the sidewalks, etc.
Wal-Mart advocates a higher minimum wage. They already pay their workers more than minimum wage. It destroys their competition.
This “money goes through the economy, benefitting everyone” is the biggest load of B.S. ever. “Money” doesn’t help anyone ever. If it did, the banks could just create enough to “help” everyone. What “helps” people is the increased production of goods and services. How does raising the minimum wage produce more goods and services? It doesn’t.
But what if it did? Would it give the government the right to set wages and prices? This is communism. Your teacher is a communist. And communism kills.
Of course, what could be exepcted of your teacher? He is part of the education-industrial complex. A welfarist parasite. You’ll almost never get good economics training from a state-funded or subsidized institution. But his “logic” is absurd on the face of it. Why are we having this discussion? It is ridiculous.
Dude. You are wrong. Banks are members of the Federal Reserve System. They comprise the Federal Reserve. Look it up on any source. This isn’t an “analogy,” it is a fact. Even your socialist text book will say so.
The government selling T-Bills doesn’t increase the money supply. The creation of the money increases the money supply. If the banks paid for the bonds out of existing funds, the money supply would not be increased. You are confusing a symptom with the disease.
Who sets the reserve requirements? The Federal Reserve. Who has to obey them? Members of the Federal Reserve. Who are the members? The banks.
Just becuase there were banks before the Fed doesn’t mean the banks aren’t the Fed. That is incredibly stupid. That’s like saying there were soldiers before the U.S. military, so the U.S. military is not composed of soldiers.
This wasn’t my teacher saying this. This was the guy I was aruging with initially first off. I find him to be a moron though.
Secondly, about my econ professor, he seems to follow the chicago school of economics(note that I do go to a private university..not a public school..even though from K-12, I did do public). I concluded this from him saying that the great depression of the 30’s wouldn’t have been so bad if the feds simply raised the monetary base of the economy. He did acknowledge though that the feds were pretty fucked up in the 30’s…but I will assume that all of those attacks against my teacher are for the guy I am aruging with.
Even though calling him a “communist” he will consider rude and call it an ad homineum attack. But I will get back to you on how he responds to this(the guy I am arguing with on facebook, not my professor. my professor would never say anything that dumb).
Oh yeah, he uses this website to determine that the minimum wage in michigan actually improved the economy.
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.
I told him that this is a bad figure to look at to determine the health of michigan. He basically responded with this:
The measure of unemployment is somewhat subjective. Like you said, if they don’t look for benefits, are they unemployed? If they’ve stopped looking for work, are they unemployed? What if they’ve left the job market for early retirement or for homemaking? But the weekly report on UI benefits gives you the trends better than any other report. The trend shows a constant improvement to the job market over the last 6 months, so suddenly the unemployment figure is at a 14 year high??? Bullshit!
There is another guy on the forum who is speaking of michigan’s horrors. he says that their unemployment rate is at a 14 year high. I mean, let me ask…have prices been increasing and things getting worse as minimum wage increased? Is he wrong for saying that the economy of michigan has “improved?”
The economy of Michigan has absolutely not improved. I can’t say for certain it’s gotten any worse because of the minimum-wage hike, but it certainly hasn’t improved. The source of Michigan’s economic problems is government intervention. More intervention is not going to solve it.
It’s hard to tell when you’re speaking for yourself, “the moron,” or your teacher.
Me too. But unless you go to Hillsdale College, you don’t really go to a private university. I’m sure your college accepts federal aid and SLM-backed student loans. Therefore, the government gets to tell them what to do. They are, for all real intents and purposes, an organ of the state, feeding you state propaganda.
He’s an inflationist then. Inflation cannot solve the problems that inflation started to begin with. Inflation equals the confiscation of the people’s wealth. If that isn’t communistic, what is?
I don’t know what else to call it when someone thinks the government should set prices. If private companies and consumes can’t set prices, or if employers and employees can’t peacefully come to wage terms, then that means the business owners don’t really own their businesses. If they really owned them, they would get to control them and set their own prices (through the market process). When government sets prices, it usurps ownership. That is the very essence of communism.
I will be more specific when I quote people next time.
I have heard good things about hillsdale. That is where Dr. Robert Murphy teaches economics. I enjoyed his book “politically incorrect guide to capitalism.” It wasn’t too highly detailed, but he highlighted things about the economy that I didn’t even think about. And yes, the college I go to(DePaul university) does accept federal aid(I use it myself). A friend of mine sent me how much each college gets from the federal government, and I believe DePaul gets about $80,000 a year from the feds for “research.” I don’t believe everything they teach is propaganda, but it is pretty far left for being the largest catholic university in the nation.
“He’s an inflationist then. Inflation cannot solve the problems that inflation started to begin with. Inflation equals the confiscation of the people’s wealth. If that isn’t communistic, what is?”
I find him following the views of milton friedman. I disagree with many views of his..and I would consider him an interventionist. But he rarely if ever, gave out his own opinions on anything. When describing government intervention into the economy, he gave what the government feels is their justification for interfering in the economy. All the professors I have had have been very good of not giving out their own opinions..or what the government SHOULD do. He simply tells how it works..and what has been happening. Not as good as if I was taught by Dr. Murphy, but I do have a better idea of how banking works..which is probably my worst subject when it comes to economics.
But if anything, setting prices means interventionism. Statism as some authors have said on LRC. But the “moron” doesn’t really care for that and says minimum wage is all about efficiency. He talks about how the median wage should equal the average wage(he calculated the average wage by dividing the nominal GDP to the population. But since not all the population works, which he says is half, he believes the average wage is about $83,000 a year. Therefore, we need to raise minimum wage to $10-$15 an hour in order to put the median wage at that average. Once the mean = the median, then our economy will be efficient. He doesn’t give any justification for it…but this is his logic.
To be blunt, this guy is an utter moron. The main reason why a lot of raw unemployment statistics alone tend to prove little indeed is that there may be other factors at work negating the effect of the minimum wage. On grounds of efficiency price controls are miserable failures. The minimum wage is just a price control, a minimum price as it were. If your friend proposes socialist measures but objects to the label, ask what he’d rather be called. Again, if minimum wages are good, then so are all other price controls.
I am not sure. I my opinion he (A) makes $1,000 deposit, but bank can lend $900 [it should save 10% reserve]. A guy B who borrowed those $900 makes some transaction in which a guy C receives $900. The guy C $900 makes deposit and the bank can lend now $810 to a guy D… So it is creation, because the guys A,C,D has money A and C in deposit and D in cash. But summing up $1000+$900+$810+0.9*$810+0.90.9$810… it makes indeed $10000. But the bank can make bigger reserve than 10%, when the rates are high or in case of lack of the central bank…
Indeed low rates and minimum wages is typical Keynesian understanding the ecomy that some virtual money improves it.
That is exactly how the Federal Reserve came into existance. A central bank is just a cartel of banks with a cartel agreement backed up by law. The big banks lobbied for the fed and it was they who set it up. Nominally the Fed member banks still own it.
He doesn’t teach there anymore, but he used to. So did Lew Rockwell. But the college is largely a theocon institutition now.
I also went to a “private” Catholic university (I am not Catholic myself), which was also somewhat “left.” I also used federal student loans and financial aid – and now I’m in debt up to my eyeballs to the Sallie Mae corporation (ticker:SLM). My intent wasn’t to judge you or disparage you, but just to point out the fact that these colleges are feeding at the trough. You’re never going to get the truth. They teach neo-keynsian or neo-“classical” inflationist economics with a heavy emphasis on the mathematics of central planning. It is all B.S.
No offense, but I don’t think you do. You’ve argued that banks don’t create money, that banks aren’t the Fed, and that banks didn’t conspire to create the Fed, all of which are untrue.
If you get to tell me how much I can sell something for, you effectively tell me whether I can sell it or not. You are asserting control, which is tantamount to ownership. But whatever. The point is that intervention doesn’t work because the interveners can never be smarter than the market. Your “moron” friend is in fact a moron, and you will not find satisfaction in arguing with him. Maybe he’ll come around one day, and maybe your argument will be a part of that. But right now he is blinded. He cannot see objective fact. And nothing anyone here relays to you to tell him is going to change his mind. He thinks a political elite can and should make decisions for people instead of allowing them to make them for themselves. That is the essence of communist totalitarianism, even if it is a “kinder, gentler” brand.
The people who will always be the first to defend central planning are in fact self described “moderate liberals”…
They are also the people who will be first to attack public debt increase under Bush 43.
It is what it is… Identifying them is easy[6]
In terms of free banking, is there some type of regulation required, be it private regulation? Something like a union, although with no government granted privilege.