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Value of the Dollar
- Thread starter nate45
- Start date
My point is that the Fed Reserve Act does not violate the Constitution.My point is that the Fed Reserve Act does not violate the Constitution.
Fremmer I enjoy debating you and your input. I often agree with you, however the cases you cite at the most only ruled that Federal Reserve notes were 'legal tender' and that those questioning the constitutionality of the income tax would not be heard .
The question of the constitutionality of the Federal Reserve Act has never been brought before the court.
Tax protestor's claims concerning the constitutionality of the Federal Reserve System, Internal Revenue Code and establishment of tax court were so frivolous as not to require discussion and detail. USCA Const. Amends. 5, 13; 28 USCA §1346(a)(1); 26 USCA (IRC 1954) §6532(a), 7422(a).
U.S. v. Schmitz, 542 F.2d 782 certiorari denied 97 S.Ct. 1134, 429 US 1105, 51 L.Ed.2d 556. C.A.Cal. 1976.
That decision holds that the federal reserve system does not violate the Constitution. Which means the Federal Reserve Act is constitutional. Anyway, this is really just a collateral issue with regard to the value of the dollar. I really didn't intend to hijack this Thread. And I have to go mow the lawn.
I'd rather talk about the Constitution than mow the lawn. :barf:
U.S. v. Schmitz, 542 F.2d 782 certiorari denied 97 S.Ct. 1134, 429 US 1105, 51 L.Ed.2d 556. C.A.Cal. 1976.
That decision holds that the federal reserve system does not violate the Constitution. Which means the Federal Reserve Act is constitutional. Anyway, this is really just a collateral issue with regard to the value of the dollar. I really didn't intend to hijack this Thread. And I have to go mow the lawn.
I'd rather talk about the Constitution than mow the lawn. :barf:
Martin Mahoney was a Justice of the Peace. The justice of the peace, Martin V. Mahoney, entered his decision in defiance of the Minnesota Supreme Court. The case was overturned, and Daly was disbarred for being a nutcase whose tinfoil hat was too tight.
All filings here.
ETA: Mahoney was not assassinated, he merely died. There was never any evidence of foul play.
All filings here.
ETA: Mahoney was not assassinated, he merely died. There was never any evidence of foul play.
Its all a loony conspiracy theory and I'm a loon like Jefferson
"If the American people ever allow the banks to control issuance of their currency, first by inflation and then by deflation, the banks and corporations that grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied."-Thomas Jefferson
Does anyone reading this thread not think that a debt fueled economy and constant cycles of inflation and deflation is not a problem and a hidden tax on us all?
Lets consider the Great Depression.
In 1930 America did not lack industrial capacity, fertile farmland, skilled or willing workers, or industrious families. It had an extensive and highly efficient transportation system in railroads, road networks, and inland and ocean waterways. Communications between regions and localities were the best in the world, utilizing telephone, teletype, radio, and a well-operated mail system. No war had ravaged the cities or the countryside, no pestilence weakened the population, nor had famine stalked the land.
The creation of the Federal Reserve System increased the bankers' ability to inflate the currency supply sixfold. During 1923 to 1929 the bankers did inflate the currency supply enormously. Such an artificial inflation inevitably brings about a subsequent need for deflation. Federal Reserve bankers, the source of America's currency and credit, reduced the currency supply by refusing loans to stable and growing industries, stores, and farmers. At the same time they demanded payment on existing loans. They also increased interest rates. Currency was rapidly taken out of circulation and was not replaced. America was put in a depression and in deep trouble. Goods were available to be purchased, jobs waiting to be done, but little currency was available. Twenty-five percent of workers were laid off. Banks took possession of tens of thousands of farms and businesses through foreclosure. Gloom settled over America.
The contraction of the currency supply caused the stock market to collapse and the ensuing depression. Seven months before the collapse, Paul Warburg, the main architect of the Federal Reserve System, in his annual report to the stockholders of his International Acceptance Bank, wrote:
"If the orgies of unrestrained speculation are permitted to spread, the ultimate collapse is certain not only to affect the speculators themselves, but to bring about a general depression involving the entire country."
Both the inflation and the deflation, causing the depression, had been planned - as predicted by Jefferson in 1791!
Is it that complicated or is the process by which the banks gather wealth just too simple to be believed.
The only way new currency goes into circulation in America under this system is when someone borrows it from a banker. When people are confident of success, they borrow more currency, which increases the currency supply, and all seem to prosper for a while. Then, as they pay off their loans, the available currency supply shrinks and currency becomes "scarce." Borrowers must always take more currency out of circulation when they repay their loans, than they put in circulation when they receive their loans. Interest and charges make the repayment total larger than the loan. This means that only more people borrowing still more can keep the medium of exchange available to the nation.
This example may aid understanding. When a citizen goes to a banker to borrow $100,000 to purchase a home or a farm, and the loan is granted, the banker gives the borrower a check for $100,000 or credits the borrower's account with $100,000. The borrower, in turn, writes the necessary checks to the builder, seller, subcontractors, etc. (who, in turn, write more checks), thereby putting $100,000 of "checkbook currency" into circulation. However, on a 30-year mortgage with 10% interest, the banker wants $828 per month, or a total of $316,080. The buyer must take that $316,080 out of circulation, reducing the overall amount in circulation by $216,080.
The banker has not really produced anything of value, except the slip of paper called a check or deposit slip. Yet the banker ends up having $216,080 more than he had before, minus a few hundred dollars of clerical and office costs. But the people, as a whole, have $216,080 less.
Can you not see what this process is doing to and has done to the country?
Let us consider something as simple an auto loan for only three years. Step one: citizen borrows $6,000 and pays it into circulation (to the dealer, factory, etc.). Citizen agrees to repay the banker $7,200. Step two: Citizen pays $200 per month. In 36 months citizen has taken $7,200 out of circulation and paid it to the bank. Net result? $1,200 less currency in circulation.
Since currency requirements increase with expanding population, industry, and commerce, and paying off any loan decreases the available currency supply, it is clear that we would quickly run out of currency, unless more and more people borrow more and more currency to keep currency in circulation!
Multiply the above examples by hundreds of millions of times since 1913, and you can see why America has fallen from a prosperous debt-free nation to the most debt-ridden country in the world. Practically every home, farm, and business is heavily mortgaged to the bankers. Practically all our cars, furniture, and clothes are purchased with borrowed currency. The interest to the bankers on personal, state, and federal debt totals more than 25% of the combined earnings of the working population!
Can you not see that it is the bankers who are the prime beneficary of our current system and that the losers are all the rest of the country?
In 1910 the U.S. federal debt was $1,147,000,000 - $12 per citizen. State and local debts were practically non-existent, and government was small and not oppressive.
By 1920, after only six years of the Federal Reserve handling our currency, the federal debt had jumped to $24 billion - $228 per citizen. The Federal Government began to grow like an invisible cancer in its early stages.
By 1968 the federal debt had jumped to $347 billion - $1,717 per citizen. Ten years later, by 1978 it had doubled again to $763 billion - $3,500 per citizen. That is a debt of $17,500 for every family of five in America. Federal debt has been growing faster and faster since. And the Federal Government has become a debilitating cancer rapidly sapping and weakening its victim.
"If the American people ever allow the banks to control issuance of their currency, first by inflation and then by deflation, the banks and corporations that grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied."-Thomas Jefferson
Does anyone reading this thread not think that a debt fueled economy and constant cycles of inflation and deflation is not a problem and a hidden tax on us all?
Lets consider the Great Depression.
In 1930 America did not lack industrial capacity, fertile farmland, skilled or willing workers, or industrious families. It had an extensive and highly efficient transportation system in railroads, road networks, and inland and ocean waterways. Communications between regions and localities were the best in the world, utilizing telephone, teletype, radio, and a well-operated mail system. No war had ravaged the cities or the countryside, no pestilence weakened the population, nor had famine stalked the land.
The creation of the Federal Reserve System increased the bankers' ability to inflate the currency supply sixfold. During 1923 to 1929 the bankers did inflate the currency supply enormously. Such an artificial inflation inevitably brings about a subsequent need for deflation. Federal Reserve bankers, the source of America's currency and credit, reduced the currency supply by refusing loans to stable and growing industries, stores, and farmers. At the same time they demanded payment on existing loans. They also increased interest rates. Currency was rapidly taken out of circulation and was not replaced. America was put in a depression and in deep trouble. Goods were available to be purchased, jobs waiting to be done, but little currency was available. Twenty-five percent of workers were laid off. Banks took possession of tens of thousands of farms and businesses through foreclosure. Gloom settled over America.
The contraction of the currency supply caused the stock market to collapse and the ensuing depression. Seven months before the collapse, Paul Warburg, the main architect of the Federal Reserve System, in his annual report to the stockholders of his International Acceptance Bank, wrote:
"If the orgies of unrestrained speculation are permitted to spread, the ultimate collapse is certain not only to affect the speculators themselves, but to bring about a general depression involving the entire country."
Both the inflation and the deflation, causing the depression, had been planned - as predicted by Jefferson in 1791!
Is it that complicated or is the process by which the banks gather wealth just too simple to be believed.
The only way new currency goes into circulation in America under this system is when someone borrows it from a banker. When people are confident of success, they borrow more currency, which increases the currency supply, and all seem to prosper for a while. Then, as they pay off their loans, the available currency supply shrinks and currency becomes "scarce." Borrowers must always take more currency out of circulation when they repay their loans, than they put in circulation when they receive their loans. Interest and charges make the repayment total larger than the loan. This means that only more people borrowing still more can keep the medium of exchange available to the nation.
This example may aid understanding. When a citizen goes to a banker to borrow $100,000 to purchase a home or a farm, and the loan is granted, the banker gives the borrower a check for $100,000 or credits the borrower's account with $100,000. The borrower, in turn, writes the necessary checks to the builder, seller, subcontractors, etc. (who, in turn, write more checks), thereby putting $100,000 of "checkbook currency" into circulation. However, on a 30-year mortgage with 10% interest, the banker wants $828 per month, or a total of $316,080. The buyer must take that $316,080 out of circulation, reducing the overall amount in circulation by $216,080.
The banker has not really produced anything of value, except the slip of paper called a check or deposit slip. Yet the banker ends up having $216,080 more than he had before, minus a few hundred dollars of clerical and office costs. But the people, as a whole, have $216,080 less.
Can you not see what this process is doing to and has done to the country?
Let us consider something as simple an auto loan for only three years. Step one: citizen borrows $6,000 and pays it into circulation (to the dealer, factory, etc.). Citizen agrees to repay the banker $7,200. Step two: Citizen pays $200 per month. In 36 months citizen has taken $7,200 out of circulation and paid it to the bank. Net result? $1,200 less currency in circulation.
Since currency requirements increase with expanding population, industry, and commerce, and paying off any loan decreases the available currency supply, it is clear that we would quickly run out of currency, unless more and more people borrow more and more currency to keep currency in circulation!
Multiply the above examples by hundreds of millions of times since 1913, and you can see why America has fallen from a prosperous debt-free nation to the most debt-ridden country in the world. Practically every home, farm, and business is heavily mortgaged to the bankers. Practically all our cars, furniture, and clothes are purchased with borrowed currency. The interest to the bankers on personal, state, and federal debt totals more than 25% of the combined earnings of the working population!
Can you not see that it is the bankers who are the prime beneficary of our current system and that the losers are all the rest of the country?
In 1910 the U.S. federal debt was $1,147,000,000 - $12 per citizen. State and local debts were practically non-existent, and government was small and not oppressive.
By 1920, after only six years of the Federal Reserve handling our currency, the federal debt had jumped to $24 billion - $228 per citizen. The Federal Government began to grow like an invisible cancer in its early stages.
By 1968 the federal debt had jumped to $347 billion - $1,717 per citizen. Ten years later, by 1978 it had doubled again to $763 billion - $3,500 per citizen. That is a debt of $17,500 for every family of five in America. Federal debt has been growing faster and faster since. And the Federal Government has become a debilitating cancer rapidly sapping and weakening its victim.
Here is the U.S. NATIONAL DEBT CLOCK
The Outstanding Public Debt as of 21 Jun 2008 at 11:22:17 PM GMT is:
$9,373,103,375,436.83
The estimated population of the United States is 304,217,922
so each citizen's share of this debt is $30,810.49.
(that is how much each of you owe the share holders of the Federal Reserve)
The National Debt has continued to increase an average of
$1.37 billion per day since September 28, 2007!
With history as a guide does no one see a potential deflation ahead?
We have already seen the housing market 'bubble' crash what is next?
Still think the Federal Reserve is a friendly arm of the government out to help us?
The Outstanding Public Debt as of 21 Jun 2008 at 11:22:17 PM GMT is:
$9,373,103,375,436.83
The estimated population of the United States is 304,217,922
so each citizen's share of this debt is $30,810.49.
(that is how much each of you owe the share holders of the Federal Reserve)
The National Debt has continued to increase an average of
$1.37 billion per day since September 28, 2007!
With history as a guide does no one see a potential deflation ahead?
We have already seen the housing market 'bubble' crash what is next?
Still think the Federal Reserve is a friendly arm of the government out to help us?
Does anyone reading this thread not think that a debt fueled economy and constant cycles of inflation and deflation is not a problem and a hidden tax on us all?
This is the basis for a rational discussion and I agree with the concept. If you want to focus on the evils of defecit spending or the never-ending stream of government giveaway programs to buy votes, I will be happy to discuss the problems and potential solutions. But the conspiracy theories about Jewish bankers secretly running the world are ridiculous distractions.
But the conspiracy theories about Jewish bankers secretly running the world are ridiculous distractions.
Back when the idea of the Federal Reserve was sold to the public as an end to The Money Trust. The select group of wealthy families who owned and controlled the country.
I list the real owners of the majority of Federal Reserve stock to demonstrate that the same large banks and banking families who have run things for centuries still do, the very families that the creation of the Federal Reserve was supposed to control.
It is true that most of the largest banks in Europe and the world are owned by Jews, but not all of them. There is a historical and logical reason why jewish people are so heavily involved in banking. It goes back centuries to Christian monarchs and churches not wanting to be involved in usury so this profession fell to the Jews.
I don't care what race, religion or ethnicity the bankers are only what the debt fueled economy is doing to the country and world.
Any of you reading this thread who have wondered why politicians always spend more tax currency than they collect. The reason should now be clear. When you study our "debt-currency" system, you soon realize that the politicians are not the agents of the people. They are the agents of the Federal Reserve bankers, for whom they plan ways to place the people further in debt.
Furthermore economic busts and booms are carefully orchestrated by the bankers.
Consider this excerpt from Secrets of the Federal Reserve by Eustice Mullins.
Professor Cassel, in the Quarterly Journal of Economics, August 1928, wrote that:
"The fact that a central bank fails to raise its bank rate in accordance with the actual situation of the capital market very much increases the strength of the cyclical movement of trade, with all its pernicious effects on social economy. A rational regulation of the bank rate lies in our hands, and may be accomplished only if we perceive its importance and decide to go in for such a policy. With a bank rate regulated on these lines the conditions for the development of trade cycles would be radically altered, and indeed, our familiar trade cycles would be a thing of the past."
This is the most authoritative premise yet made relating that our business depressions are artificially precipitated. The occurrence of the Panic of 1907, the Agricultural Depression of 1920, and the Great Depression of 1929, all three in good crop years and in periods of national prosperity, suggests that premise is not guesswork. Lord Maynard Keynes pointed out that most theories of the business cycle failed to relate their analysis adequately to the money mechanism. Any survey or study of a depression which failed to list such factors as gold movements and pressures on foreign exchange would be worthless, yet American economists have always dodged this issue.
The rise and decline of our economy all carefully engineered by the bankers. The current rise of the Euro and decline of the dollar is no accident or unforeseen circumstance.
Furthermore economic busts and booms are carefully orchestrated by the bankers.
Consider this excerpt from Secrets of the Federal Reserve by Eustice Mullins.
Professor Cassel, in the Quarterly Journal of Economics, August 1928, wrote that:
"The fact that a central bank fails to raise its bank rate in accordance with the actual situation of the capital market very much increases the strength of the cyclical movement of trade, with all its pernicious effects on social economy. A rational regulation of the bank rate lies in our hands, and may be accomplished only if we perceive its importance and decide to go in for such a policy. With a bank rate regulated on these lines the conditions for the development of trade cycles would be radically altered, and indeed, our familiar trade cycles would be a thing of the past."
This is the most authoritative premise yet made relating that our business depressions are artificially precipitated. The occurrence of the Panic of 1907, the Agricultural Depression of 1920, and the Great Depression of 1929, all three in good crop years and in periods of national prosperity, suggests that premise is not guesswork. Lord Maynard Keynes pointed out that most theories of the business cycle failed to relate their analysis adequately to the money mechanism. Any survey or study of a depression which failed to list such factors as gold movements and pressures on foreign exchange would be worthless, yet American economists have always dodged this issue.
The rise and decline of our economy all carefully engineered by the bankers. The current rise of the Euro and decline of the dollar is no accident or unforeseen circumstance.
"This is a staggering thought. We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash, or credit. If the banks create ample synthetic money, we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defect remedied very soon."- Robert H. Hemphill, Credit Manager of the Federal Reserve Bank of Atlanta Georgia
Did you realize that you have made 26 out of the 71 posts on this thread? You have also posted 11 out of the last 20.
No, I hadn't realized that, sorry for making posts on a complicated subject to try and make my point on the thread I started.
You are very welcome to post your theory of how our money is created and whom the primary beneficiaries of that system are.
If its all too much to be absorbed, we could start with the fact that for an entity that according to you is on the up and up and aboveboard and closely watched by the congress...Why is it that...
The Federal Reserve has never been audited by the government since its inception in 1913. In 1975 a bill H. R. 4316, to require Federal Reserve audits, was introduced in Congress. Due to pressure from the currency-controllers, it was rejected. No audit of the Federal Reserve has ever been done.
The problem is that when you turn a discussion into a one sided lecture on a conspiracy theory, you make the signal to noise ratio so poor as to make people tune out, as it makes you look like a loon. Just lay out the facts and stop with the preaching. You might get more converts that way.
Nate,
Don't worry about it. You can tell who wants to shut down discussion by the desperation of their fallacies. So far I'm seein' ad hominems and well-poisoning, but no rebuttals to the fact that baseless currency naturally inflates.
These folks don't want to talk about it and don't want you to talk about it.
So keep on doin' what you're doin'.
Oh, and incidentally the reason Gold makes a good standard isn't it's appearance or industrial applications, but it's scarcity. Supply and demand, ya know?
Don't worry about it. You can tell who wants to shut down discussion by the desperation of their fallacies. So far I'm seein' ad hominems and well-poisoning, but no rebuttals to the fact that baseless currency naturally inflates.
These folks don't want to talk about it and don't want you to talk about it.
So keep on doin' what you're doin'.
Oh, and incidentally the reason Gold makes a good standard isn't it's appearance or industrial applications, but it's scarcity. Supply and demand, ya know?
Oh, and incidentally the reason Gold makes a good standard isn't it's appearance or industrial applications, but it's scarcity. Supply and demand, ya know?
It is scarce, durable, and easily recognizable -- by its density even more-so than by color. Gold is over 2/3 heavier than lead! (19.3 g/cc vs. 11.7 g/cc)
"An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense — perhaps more clearly and subtly than many consistent defenders of laissez-faire — that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other . . . . This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."-Alan Greenspan , from his 1967 article Gold and Economic Freedom.
When money is as good as gold, the government cannot manipulate the supply for its own purposes. Just as the rule of law puts limits on the despotic use of police power, a gold standard puts extreme limits on the government's ability to spend, borrow, and otherwise create crazy unworkable programs. It is forced to raise its revenue through taxation, not inflation, and generally keep its house in order.
As we stand now congress borrows almost unlimited amounts of fiat currency and the result is monetary inflation , the enrichment of the bankers and a lower standard of living for all of us.
When money is as good as gold, the government cannot manipulate the supply for its own purposes. Just as the rule of law puts limits on the despotic use of police power, a gold standard puts extreme limits on the government's ability to spend, borrow, and otherwise create crazy unworkable programs. It is forced to raise its revenue through taxation, not inflation, and generally keep its house in order.
As we stand now congress borrows almost unlimited amounts of fiat currency and the result is monetary inflation , the enrichment of the bankers and a lower standard of living for all of us.
Master Blaster
New member
When money is as good as gold, the government cannot manipulate the supply for its own purposes. Just as the rule of law puts limits on the despotic use of police power, a gold standard puts extreme limits on the government's ability to spend, borrow, and otherwise create crazy unworkable programs. It is forced to raise its revenue through taxation, not inflation, and generally keep its house in order.
The gold standard does no such thing, the government can always print more gold certificates and thus devalue the money that is out there unless you are using gold coins only. The number of times a coin is spent increases the money supply.
The money supply includes Demand deposits, and credit card limits, the money supply also has Velocity, a dollar is more than a dollar if it is spent many times, the more times that dollar is spent the more it contributes to the money supply.
The Federal Reserve previously published data on three monetary aggregates, but now it only publishes data on 2 of them. The first, M1, is made up of types of money commonly used for payment, basically currency (M0) and checking deposits. The second, M2, includes M1 plus balances that generally are similar to transaction accounts and that, for the most part, can be converted fairly readily to M1 with little or no loss of principal. The M2 measure is thought to be held primarily by households. The third aggregate, M3, which is no longer published, included M2 plus certain accounts that are held by entities other than individuals and are issued by banks and thrift institutions to augment M2-type balances in meeting credit demands; it also includes balances in money market mutual funds held by institutional investors. The aggregates have had different roles in monetary policy as their reliability as guides has changed. The following details their principal components[14]:
M0: The total of all physical currency, plus accounts at the central bank that can be exchanged for physical currency.
M1: M0 - those portions of M0 held as reserves or vault cash + the amount in demand accounts ("checking" or "current" accounts).
M2: M1 + most savings accounts, money market accounts, and small denomination time deposits (certificates of deposit of under $100,000).
M3: M2 + all other CDs (large time deposits, institutional money market mutual fund balances), deposits of eurodollars and repurchase agreements.
[edit] Monetary exchange equation
Money supply is important because it is linked to inflation by the "monetary exchange equation":
MV = PQ
• M is the total dollars in the nation’s money supply • V is the number of times per year each dollar is spent • P is the average price of all the goods and services sold during the year • Q is the quantity of goods and services sold during the year
U.S. M3 money supply as a proportion of gross domestic product.where:
velocity = the number of times per year that money turns over in transactions for goods and services (if it is a number it is always simply nominal GDP / money supply)
nominal GDP = real Gross Domestic Product × GDP deflator
GDP deflator = measure of inflation. Money supply may be less than or greater than the demand of money in the economy
In other words, if the money supply grows faster than real GDP growth (described as "unproductive debt expansion"), inflation is likely to follow ("inflation is always and everywhere a monetary phenomenon"). This statement must be qualified slightly, due to changes in velocity. While the monetarists presume that velocity is relatively stable, in fact velocity exhibits variability at business-cycle frequencies, so that the velocity equation is not particularly useful as a short run tool. Moreover, in the US, velocity has grown at an average of slightly more than 1% a year between 1959 and 2005 (which is to be expected due to the increase in population, unless money supply grows very rapidly).
Another aspect of money supply growth that has come under discussion since the collapse of the housing bubble in 2007 is the notion of "asset classes." Economists have noted that M3 growth may not affect all assets equally. For example, following the stock market run up and then decline in 2001, home prices began an historically unusual climb that then dropped sharply in 2007. The dilemma for the Federal Reserve in regulating the money supply is that lowering interest rates to slow price declines in one asset class, e.g. real estate, may cause prices in other asset classes to rise, e.g. commodities.
The gold standard does no such thing, the government can always print more gold certificates and thus devalue the money that is out there unless you are using gold coins only. The number of times a coin is spent increases the money supply.
The money supply includes Demand deposits, and credit card limits, the money supply also has Velocity, a dollar is more than a dollar if it is spent many times, the more times that dollar is spent the more it contributes to the money supply.
The Federal Reserve previously published data on three monetary aggregates, but now it only publishes data on 2 of them. The first, M1, is made up of types of money commonly used for payment, basically currency (M0) and checking deposits. The second, M2, includes M1 plus balances that generally are similar to transaction accounts and that, for the most part, can be converted fairly readily to M1 with little or no loss of principal. The M2 measure is thought to be held primarily by households. The third aggregate, M3, which is no longer published, included M2 plus certain accounts that are held by entities other than individuals and are issued by banks and thrift institutions to augment M2-type balances in meeting credit demands; it also includes balances in money market mutual funds held by institutional investors. The aggregates have had different roles in monetary policy as their reliability as guides has changed. The following details their principal components[14]:
M0: The total of all physical currency, plus accounts at the central bank that can be exchanged for physical currency.
M1: M0 - those portions of M0 held as reserves or vault cash + the amount in demand accounts ("checking" or "current" accounts).
M2: M1 + most savings accounts, money market accounts, and small denomination time deposits (certificates of deposit of under $100,000).
M3: M2 + all other CDs (large time deposits, institutional money market mutual fund balances), deposits of eurodollars and repurchase agreements.
[edit] Monetary exchange equation
Money supply is important because it is linked to inflation by the "monetary exchange equation":
MV = PQ
• M is the total dollars in the nation’s money supply • V is the number of times per year each dollar is spent • P is the average price of all the goods and services sold during the year • Q is the quantity of goods and services sold during the year
U.S. M3 money supply as a proportion of gross domestic product.where:
velocity = the number of times per year that money turns over in transactions for goods and services (if it is a number it is always simply nominal GDP / money supply)
nominal GDP = real Gross Domestic Product × GDP deflator
GDP deflator = measure of inflation. Money supply may be less than or greater than the demand of money in the economy
In other words, if the money supply grows faster than real GDP growth (described as "unproductive debt expansion"), inflation is likely to follow ("inflation is always and everywhere a monetary phenomenon"). This statement must be qualified slightly, due to changes in velocity. While the monetarists presume that velocity is relatively stable, in fact velocity exhibits variability at business-cycle frequencies, so that the velocity equation is not particularly useful as a short run tool. Moreover, in the US, velocity has grown at an average of slightly more than 1% a year between 1959 and 2005 (which is to be expected due to the increase in population, unless money supply grows very rapidly).
Another aspect of money supply growth that has come under discussion since the collapse of the housing bubble in 2007 is the notion of "asset classes." Economists have noted that M3 growth may not affect all assets equally. For example, following the stock market run up and then decline in 2001, home prices began an historically unusual climb that then dropped sharply in 2007. The dilemma for the Federal Reserve in regulating the money supply is that lowering interest rates to slow price declines in one asset class, e.g. real estate, may cause prices in other asset classes to rise, e.g. commodities.
Master Blaster
New member
Assuming that prices do not instantly adjust to equate supply and demand, one of the principal jobs of central banks is to ensure that aggregate (or overall) demand matches the potential supply of an economy. Central banks can do this because overall demand can be controlled by the money supply. By putting more money into circulation, the central bank can stimulate demand. By taking money out of circulation, the central bank can reduce demand.
For instance, if there is an overall shortfall of demand relative to supply (that is, a given economy can potentially produce more goods than consumers wish to buy) then some resources in the economy will be unemployed (i.e., there will be a recession). In this case the central bank can stimulate demand by increasing the money supply. In theory the extra demand will then lead to job creation for the unemployed resources (people, machines, land), leading back to full employment (more precisely, back to the natural rate of unemployment, which is basically determined by the amount of government regulation and is different in different countries).[citation needed]
However, central banks have a difficult balancing act because, if they put too much money into circulation, demand will outstrip an economy's ability to supply so that, even when all resources are employed, demand still cannot be satisfied. In this case, unemployment will fall back to the natural rate and there will then be competition for the last remaining labour, leading to wage rises and inflation. This can then lead to another recession as the central bank takes money out of circulation (raising interest rates in the process) to try to damp down demand.
The main debate amongst economists in the second half of the twentieth century concerned the central banks ability to know how much money to inject into or take out of circulation under different circumstances. Some economists like Milton Friedman believed that the central bank would always get it wrong, leading to wider swings in the economy than if it were just left alone. That is why they advocated a non-interventionist approach.
Current Chairman of the U.S. Federal Reserve, Ben Bernanke, has suggested that over the last 10 to 15 years, many modern central banks have become relatively adept at manipulation of the money supply, leading to a smoother business cycle, with recessions tending to be smaller and less frequent than in earlier decades, a phenomenon he terms "The Great Moderation" [24].
For instance, if there is an overall shortfall of demand relative to supply (that is, a given economy can potentially produce more goods than consumers wish to buy) then some resources in the economy will be unemployed (i.e., there will be a recession). In this case the central bank can stimulate demand by increasing the money supply. In theory the extra demand will then lead to job creation for the unemployed resources (people, machines, land), leading back to full employment (more precisely, back to the natural rate of unemployment, which is basically determined by the amount of government regulation and is different in different countries).[citation needed]
However, central banks have a difficult balancing act because, if they put too much money into circulation, demand will outstrip an economy's ability to supply so that, even when all resources are employed, demand still cannot be satisfied. In this case, unemployment will fall back to the natural rate and there will then be competition for the last remaining labour, leading to wage rises and inflation. This can then lead to another recession as the central bank takes money out of circulation (raising interest rates in the process) to try to damp down demand.
The main debate amongst economists in the second half of the twentieth century concerned the central banks ability to know how much money to inject into or take out of circulation under different circumstances. Some economists like Milton Friedman believed that the central bank would always get it wrong, leading to wider swings in the economy than if it were just left alone. That is why they advocated a non-interventionist approach.
Current Chairman of the U.S. Federal Reserve, Ben Bernanke, has suggested that over the last 10 to 15 years, many modern central banks have become relatively adept at manipulation of the money supply, leading to a smoother business cycle, with recessions tending to be smaller and less frequent than in earlier decades, a phenomenon he terms "The Great Moderation" [24].
The gold standard does no such thing, the government can always print more gold certificates and thus devalue the money that is out there unless you are using gold coins only.
Not if we were on a 100% reserve banking system. Then the issuance of banknotes over the amount of the reserve would constitute fraud.
It would also make mute the rest of your article as the banks and government would no longer be able to create money from debt thus eliminating virtually all inflation and all bank contraction forevermore.