Did Friedman Subvert Free Markets?

Off Topic Politics and World Issues
21

(previous post hasn’t appeared, so can’t just add)

Tell you what Lifticus, I can tell you’re a man of principle.

So I am sure that for now and for the rest of your life, or at least until you admit your error, you will be consistent with your beliefs and when or if you need a loan for a car, to buy a home, and so forth, you will not go to the banks. No, all needs for loans can be met from sane businessmen! You will instead go around to businessmen to get private funding.

Have fun at the pawn shop.

Actually, I’m sure that since you’re so principles, that has already been the only local place you’ve been willing to get a loan, right? How have the rates worked out for you?

22

[quote]Bill Roberts wrote:
It is a mistake or most certainly unproven by you or anyone I’ve ever seen that at all if indeed any moments in time, the sum of sane businessman having money to lend and wishing to do necessarily matches the amount of sound, profitable ventures that will generate more profit if able to borrow more money.

Where is your proof that it is so?

In fact even with the existence of fractional reserve banking enabling lending beyond this, there can be periods in which businesses with very sound plans and data to back it up, even sure things, cannot obtain loans including from individuals or entities wishing to lend their own money.

Your idea that the latter would be completely sufficient is not in accord with any demonstrated facts. If you disagree, provide the demonstrated facts. Thanx[/quote]

Common sense is all the facts I need. You seem to either be lacking in it yourself or not trusting of it.

How is it hard to understand that people will risk other people’s money before they would risk their own? Do you also not understand the immorality of theft through counterfeit?

This would not be such an issue if competition in the money supply were legal. But then again, to a person with intelligence there would be a red flag when he understands the consequences of a monopoly on the supply of money – and maybe he would understand also what motivates those in power to try and keep it that way.

23

“Common sense is all the facts I need” is your way of skating around the leeeeetle problem that no facts support your utopian dreaming.

I truly have no idea what your ranting about competition in the money supply refers to. You don’t think for example credit unions exist? Is it counterfeiting that you are advocating?

If you’re against fractional reserve banking, then why would you be for “competition” in fractional reserve banking beyond the fact that already multiple banks exist?

Frankly, you’re so deluded, and by your own admission your “logic” is fact-free, that there can be no value in going further with you.

24

[quote]milod wrote:
Bill -

“Gaussian Copula Function” David X. Li

Also, “I have never seen how losses became greater as a result of the loans being sold” - If the loans could not be sold, they wouldn’t have been made in the first place. Those who made and then sold the loans didn’t care whether the loans would default, because they had no plans to hold the assets anyway. In many cases, subprime loans were made to borrowers who qualified for prime loans simply because the subprime loans could be sold for more money. Unfortunately the payment schedules of those loans made them more likely to default, especially if housing prices fell.[/quote]

Thank you!! It had completely escaped me.

I should have stated that a little differently. I should have said that I have never seen how losses become greater as a result of this sort of trading, rather than being sold in the first place. Absolutely, the fact that Fannie Mae and Freddie Mac were out there to buy them up increased the issuance of these loans. But that had nothing to do with the Gaussian Copula Function, but only desire of Congress for the loans to be put out and a foolish or corrupt compensation system that rewarded the executive running Fannie Mae with something like $95 million for buying up all these things as performance bonuses. (It is a terrible idea to give incentive pay for what may be destructive acts, but some entities do it.)

If it is the case that private buyers as well were there in the first place driving these loans, rather than being after the fact – and I don’t know – then yes that would have increased it. Not all the trading afterwards, but the initial availability of the buyers, if private buyers were also plainly available to snap them up at the time of issuance, thus affecting decision to issue.

25

[quote]Bill Roberts wrote:
“Common sense is all the facts I need” is your way of skating around the leeeeetle problem that no facts support your utopian dreaming.[/quote]

You’re making stuff up and it is causing you to make fallacious arguments. There are plenty of logical facts that are supported by reason. Utopia has nothing to do with it but I must say this is some delicious red herring you are serving up.

[quote]
I truly have no idea what your ranting about competition in the money supply refers to. You don’t think for example credit unions exist? Is it counterfeiting that you are advocating?[/quote]

How is offering the same money supplied by the federal reserve considered competition in the money supply? Please explain. I swear I am arguing with an amateur. Do you not even try to analyze the meaning of words before you consider using them?

26

[quote]Bill Roberts wrote:
orion wrote:
Bill Roberts wrote:
Please explain why you claim current problems are caused by central banking, as opposed to commercial banks being required to lend under conditions historically considered unwise, government running massive deficits, vast numbers of pension plans having been underfunded for decades, Social Security being a Ponzi scheme that due to changing demographics is on its way to near-term collapse, finally near enough that people really see it, businesses and investors facing tax increases and planning accordingly for this, and other causes having nothing to do with central banking?

Well there is the obvious fact that no matter how lax some standards may have been you can only lend out money that you have.

Ah.

So let’s say the situation had been the exact same except these borrowers had been more financially solid.

Would it have been better for the economy had money not been available to lend them?

You seem to be arguing that non-availability of money, even if to qualified borrowers, is better.

If you are not arguing that then I don’t see the applicability of what you’re saying.

You’re also leaving out all these other factors.

I’m also failing to see where it is a reasonable argument that if not for Milton Friedman, there wouldn’t be central banking, therefore – if granting central banking were the cause – it is Milton Friedman that is to blame.
[/quote]

Well, I don´t think that Friedman is to blame for central banking.

What I am arguing is that money stands for something, purchasing power. That purchasing power does not get greater if you print more money, but it appears to be greater which makes people seem to be able to afford something who really aren´t.

Meaning, at 4% interest rates more people will buy a house than at 8%.

This leads to more people investing in houses, more construction firms to invest in house building equipment and more people people being trained to build houses.

However, sooner or later we learn that the actual demand for houses was never there, just the Fed created illusion and the bubble bursts and we have thousands of useless construction machines and a workforce with unmarketable skills.

Now I do agree that the reason why the bubble formed where it formed is because of a system practically begging for it, but had it not formed there it would have formed somewhere else.

27

[quote]Bill Roberts wrote:
If you don’t understand my point, you need to get the fuck out.

In fact if you actually believe what you wrote as you wrote it, then also for that reason you have no place discussing these matters. There are people like that and they are worth no one’s time. Goodbye. [/quote]

There can be no profitable undertakings because there is more money in the system.

Why would more money free up more resources?

28

[quote]Bill Roberts wrote:
It is a mistake or most certainly unproven by you or anyone I’ve ever seen that at all if indeed any moments in time, the sum of sane businessman having money to lend and wishing to do necessarily matches the amount of sound, profitable ventures that will generate more profit if able to borrow more money.

Where is your proof that it is so?
[/quote]

Well that is why interest rates indicate how expensive money is at the moment and whether it makes sense to invest in a particular undertaking at the moment?

That market signal tells you something, like for instance that there are not enough resources in the system to finish your idea and make a profit.

Do you think that that will change if you simply print a few green pieces of paper?

edit:

It is really not that hard:

Resources to invest are scarce. Ventures trying to be realized need to compete for money, i.e. those resources. The most profitable ventures can afford the highest interest rates and get financed first and therefore money magically is transferred into the sectors where unfulfilled consumer demand is greatest. The less profitable ventures will have to wait until the more profitable have been realized.

If you print some extra money there will be endevours that could not even pay the money back under normal circumstances, neither the production capacity to build them nor the consumer demand to buy their services is actually there.

Therefore, your idea that money and ventures have to magically match is odd. Money is a good, or should be a good, like all others. Just like not everybody gets to drive a Porsche not everybody gets a business loan. Most people should not drive a Porsche because they cannot afford them and most business ideas should not get a loan either because they cannot afford them either.

There is never a perfect match, just an equilibrium that depends on how much money is out there to be reinvested.

29

Milton Friedman on the Federal Reserve: The Mess That Greenspan Made: Milton Friedman on the Federal Reserve

I’m pretty sure that Friedman did not agree with the existence of a federal reserve, but I believe his take was that if it cannot be eliminated, it should not be run at the whim of a man. He argued for an increase in money supply tied to GNP increases: [quote] If the Federal Reserve Board were required to increase the money supply at the same rate as real GNP increased, he argued, inflation would disappear [/quote]

Reference link: Milton Friedman - Econlib

This next link is a good read on the topic in general. Long article but it addresses the [quote]troubled housing market[/quote] , The [quote] Century-Long Erosion of American Banking [/quote] and [/quote] The Moral Cause and the Moral Cure [/quote]

Altruism: The Moral Root of the Financial Crisis:

http://capmag.com/article.asp?ID=5503

30

Your Porsche analogy doesn’t have any relation to what I was saying whatsoever. I could with equal (that is to say, no) validity say that your ideas are like a person who thinks that calling water “wine” will make it suitable for getting drunk.

It’s just making stuff up.

If your position is that if a business makes the evaluation that it will generate more profit, in excess of the cost of the loan, from taking a loan, and another entity’s evaluation is that it too will generate more profit, adding to GDP, if it makes the loan as opposed to not, the fact that you sit back and say “Not everyone should get to drive a Porsche” has nothing to do with the fact that the loan is beneficial to the economy, not harmful.

Your concept on signals has some validity but also fails to recognize that you are not the only person in the world that understands the concept in question. The idea that everyone else is so stupid as to be unaware and thus deceived, when obviously they could understand the concept and make some correction, is pretty conceited.

Compared to the fact that credit contraction has been observed to damage GDP and your scheme, that lending should be cut back to being only from persons and companies having the cash (or gold, I don’t know) on hand would be a vastly greater contraction than ever seen before, your deep concern for effect of mistaken interpretation of signals combined with total lack of concern for the above is just whacked, really. You can’t see the mountain range for the hill you are so concerned about. It’s not that the hill doesn’t exist, but that pretending the mountain range doesn’t with arguments such as “Not everyone should drive a Porsche” is just so far out of balance as to be almost beyond belief. Except when recognizing that we are dealing with a faith system here, not the real world. Then your position makes sense and your arguments are not surprising at all.

People that rail against devils – fractional reserve banking, for example – but don’t have backed-up evidence that proposals of theirs would work better, but only assertions and utopian dreaming, really cannot be reasoned with, as reasoning is not involved. You are going to believe in your utopia and against your devil no matter what. Like Lifticus, your faith and dreams is all you need, not facts. To you, you are free to just assert that loans for productive ventures should be limited anyway because not everyone should drive a Porsche,.

That really should have ended it right there. You’re not operating in the real world or with real concerns, not dealing with real issues such as whether productive ventures will be able to obtain the loans they need or whether the economy will be hamstrung by countless such ventures being unable to do so: you are concerned only only dreams and ideals and not bothersome things like that.

31

[quote]Bill Roberts wrote:
If your position is that if a business makes the evaluation that it will generate more profit, in excess of the cost of the loan, from taking a loan, and another entity’s evaluation is that it too will generate more profit, adding to GDP, if it makes the loan as opposed to not, the fact that you sit back and say “Not everyone should get to drive a Porsche” has nothing to do with the fact that the loan is beneficial to the economy, not harmful. [/quote]

Now you have to use reason to discover the alternative possibilities – never mind the fact that Orion and I have been doing this all along.

I don’t think you really understand because you cannot even distinguish when a loan is beneficial and when it is not. Apparently not all loans can be beneficial as is witnessed by many of the failures made possible by cheap and easy credit.

32

[quote]Bill Roberts wrote:
Your Porsche analogy doesn’t have any relation to what I was saying whatsoever. I could with equal (that is to say, no) validity say that your ideas are like a person who thinks that calling water “wine” will make it suitable for getting drunk.

It’s just making stuff up.

If your position is that if a business makes the evaluation that it will generate more profit, in excess of the cost of the loan, from taking a loan, and another entity’s evaluation is that it too will generate more profit, adding to GDP, if it makes the loan as opposed to not, the fact that you sit back and say “Not everyone should get to drive a Porsche” has nothing to do with the fact that the loan is beneficial to the economy, not harmful.

Your concept on signals has some validity but also fails to recognize that you are not the only person in the world that understands the concept in question. The idea that everyone else is so stupid as to be unaware and thus deceived, when obviously they could understand the concept and make some correction, is pretty conceited.

Compared to the fact that credit contraction has been observed to damage GDP and your scheme, that lending should be cut back to being only from persons and companies having the cash (or gold, I don’t know) on hand would be a vastly greater contraction than ever seen before, your deep concern for effect of mistaken interpretation of signals combined with total lack of concern for the above is just whacked, really. You can’t see the mountain range for the hill you are so concerned about. It’s not that the hill doesn’t exist, but that pretending the mountain range doesn’t with arguments such as “Not everyone should drive a Porsche” is just so far out of balance as to be almost beyond belief. Except when recognizing that we are dealing with a faith system here, not the real world. Then your position makes sense and your arguments are not surprising at all.

People that rail against devils – fractional reserve banking, for example – but don’t have backed-up evidence that proposals of theirs would work better, but only assertions and utopian dreaming, really cannot be reasoned with, as reasoning is not involved. You are going to believe in your utopia and against your devil no matter what. Like Lifticus, your faith and dreams is all you need, not facts. To you, you are free to just assert that loans for productive ventures should be limited anyway because not everyone should drive a Porsche,.

That really should have ended it right there. You’re not operating in the real world or with real concerns, not dealing with real issues such as whether productive ventures will be able to obtain the loans they need or whether the economy will be hamstrung by countless such ventures being unable to do so: you are concerned only only dreams and ideals and not bothersome things like that.[/quote]

And again, yet even simpler.

Last try, because I have not found out yet how to do even simpler without destroying the message.

We can only invest what has been produced and not been consumed.

That is all there is-

Money stands for these idle resources and can therefore allocate them to ventures of some kind but it cannot produce more of it.

Ex nihilo-nihil.

Do we agree so far?

33

[quote]orion wrote:
Bill Roberts wrote:
Your Porsche analogy doesn’t have any relation to what I was saying whatsoever. I could with equal (that is to say, no) validity say that your ideas are like a person who thinks that calling water “wine” will make it suitable for getting drunk.

It’s just making stuff up.

If your position is that if a business makes the evaluation that it will generate more profit, in excess of the cost of the loan, from taking a loan, and another entity’s evaluation is that it too will generate more profit, adding to GDP, if it makes the loan as opposed to not, the fact that you sit back and say “Not everyone should get to drive a Porsche” has nothing to do with the fact that the loan is beneficial to the economy, not harmful.

Your concept on signals has some validity but also fails to recognize that you are not the only person in the world that understands the concept in question. The idea that everyone else is so stupid as to be unaware and thus deceived, when obviously they could understand the concept and make some correction, is pretty conceited.

Compared to the fact that credit contraction has been observed to damage GDP and your scheme, that lending should be cut back to being only from persons and companies having the cash (or gold, I don’t know) on hand would be a vastly greater contraction than ever seen before, your deep concern for effect of mistaken interpretation of signals combined with total lack of concern for the above is just whacked, really. You can’t see the mountain range for the hill you are so concerned about. It’s not that the hill doesn’t exist, but that pretending the mountain range doesn’t with arguments such as “Not everyone should drive a Porsche” is just so far out of balance as to be almost beyond belief. Except when recognizing that we are dealing with a faith system here, not the real world. Then your position makes sense and your arguments are not surprising at all.

People that rail against devils – fractional reserve banking, for example – but don’t have backed-up evidence that proposals of theirs would work better, but only assertions and utopian dreaming, really cannot be reasoned with, as reasoning is not involved. You are going to believe in your utopia and against your devil no matter what. Like Lifticus, your faith and dreams is all you need, not facts. To you, you are free to just assert that loans for productive ventures should be limited anyway because not everyone should drive a Porsche,.

That really should have ended it right there. You’re not operating in the real world or with real concerns, not dealing with real issues such as whether productive ventures will be able to obtain the loans they need or whether the economy will be hamstrung by countless such ventures being unable to do so: you are concerned only only dreams and ideals and not bothersome things like that.

And again, yet even simpler.

Last try, because I have not found out yet how to do even simpler without destroying the message.

We can only invest what has been produced and not been consumed.

That is all there is-

Money stands for these idle resources and can therefore allocate them to ventures of some kind but it cannot produce more of it.

Ex nihilo-nihil.

Do we agree so far?

[/quote]

But, but…money shortages…

:slight_smile: