tag:blogger.com,1999:blog-15695487.post4277349559294896955..comments2024-01-01T08:42:49.037-07:00Comments on Mother-Lode: Sabbath or Slavery: Understanding the Banking Bailout Part 2Kim Andersonhttp://www.blogger.com/profile/14821817787450687811noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-15695487.post-27688801566693646922008-10-06T06:59:00.000-06:002008-10-06T06:59:00.000-06:00Hi Matthew! Your comments are very interesting.It...Hi Matthew! Your comments are very interesting.<BR/><BR/>It's true that Friedman wasn't prejudiced against the government - in fact he saw the government as the savior. His main point was that the government intervened incorrectly and therefore sent us all into a depression.<BR/><BR/>My main point is that the government is NOT the savior. As long as it is composed of sinful, fallible human beings, the government cannot be trusted to manipulate the money supply. The government will either miscalculate or will manipulate the supply for political purposes and to increase its own power. <BR/><BR/>During the Great Depression era, the Fed did both. And what we see in the current bailout is pretty much the same thing. Already we see that people don't buy it. The markets continue unstable, while governments around the world are amassing more and more power at the expense of their constituents.<BR/><BR/>It may be that precious metals markets can be manipulated, however that market is tied to something that the government cannot manipulate - the actual supply of an actual commodity. With fiat money, the only limit to its expansion or contraction is the unchecked imagination and ambition of the current regime.<BR/><BR/>I submit that unchecked human ambition is not a stable basis for a just system of weights and measures for trade. Fiat money can never be a "predictable framework" for commerce, because its value is completely fluid. The Sabbath principles outlined in the Old Testament provide for checks on ambition and a reset point for the markets which limit the greed of men without the need for government intervention on the scale that Friedman advocates.<BR/><BR/>The Sabbath principles allow us to fall into the hand of God rather than into the hand of men when times get tough.Kim Andersonhttps://www.blogger.com/profile/14821817787450687811noreply@blogger.comtag:blogger.com,1999:blog-15695487.post-35689387571573412272008-10-03T11:01:00.000-06:002008-10-03T11:01:00.000-06:00Thanks for the post, Mrs. Anderson. I enjoyed it. ...Thanks for the post, Mrs. Anderson. I enjoyed it. However, I don't think you're being fair to Friedman.<BR/><BR/>Friedman was not simply prejudiced against government, because he saw that no stable economic system exists unless the government takes negative measures (such as enforcing contracts) and positive measures (such as establishing property law, corporations, and a currency) that let people manage their own affairs within a predictable framework.<BR/><BR/>Trade is easy in the modern economy (and therefore the average person is better off) because there is a standard currency available when it is needed. Friedman knew that if there is not enough money in the economy, people have a harder time getting ahold of it to make trades with, and the economy slows down. Additionally, if the currency supply is contracting, prices go down and businesses have to sell their inventory for less than they bought it for while lenders walk away with the profit by collecting a more valuable currency than what they lent, both of which factors lead to recession and slowed economic growth. When the currency supply expands, on the other hand, prices go up and businesses make more money than they spent on inventory, borrowers get a reprieve by paying their debts back in a less valuable currency, and consumers are hurt because wage increases follow rather than lead price increases.<BR/><BR/>Neither a great amount of inflation nor a great amount of deflation is good in the long run, although inflation is generally the lesser of the two evils. Keeping our currency tied to a gold standard is about the worst thing we can do, because it leaves our currency supply in the hands of fickle commodity markets and the vagaries of mining exploration. Friedman recognized that the government should try its best to keep our currency supply stable and avoid needless fluctuation of currency levels. Since the value of currency depends not only on its supply but on its velocity (how much it is used), keeping the same amount of currency while economic activity increases will lead to deflation. So Friedman proposed that the government make sure the currency inflates at a reasonable amount each year, to keep pace with economic growth.<BR/><BR/>One of the main ways that currency circulates in the modern economy is through credit. If you want to start a business, it makes more sense to borrow money from someone who is not using it than to save up until you're too old to start the business anyway. When credit dries up, that means that people are hording their money instead of lending it to business people or others who will use it. That in turn means that the velocity of the currency goes down, and since its value is the product of its velocity and its supply, the decrease in credit leads to deflation just as surely as burning bills would.<BR/><BR/>The depression was the result of too little credit. Economists disagree on why it happened, but even Friedman doesn't think the problem was "government intervention," because "government intervention" is what gave us our money supply in the first place! And whatever the government does now, if credit is allowed to dry up, there will be another depression.Anonymousnoreply@blogger.com