It must be very tiring, Peter Hume, carrying around all that rage.

I think you are fighting the wrong battle, though.

You seem to think that the US Federal Reserve is some kind of evil cartel, dedicated to the subjugation of humankind, and simply trot out a laundry-list of slogans to justify your position.

It may possibly have escaped your notice, but we tend to muddle along quite well with the current system - it is by no means perfect, but that is because it is run by people. We have survived each boom and bust intact, each time just that little bit better off.

Your random mish-mash of idealistic wishful thinking is fine, so long as you don't try to apply it to the real world. It is perfect, though, for a bit of prissy-mothed sanctimony between consenting Mises-nuts.

Ron Paul's entire rationale rests on two foundations; an incomplete understanding - either natural or wilful - of the mechanism of debt, and an entirely irrational loathing - either real or simulated - of the Federal Reserve. His stance is nothing more than vote-catching sloganeering, directed equally toward fellow bandwagoners, and those folk either disinclined, or unable, to think for themselves.

Much of the recent drama was caused by the overenthusiastic use of financial "instruments" that employed massive amounts of dollars chasing the tiniest arbitrage opportunities. Regulation was pitifully inadequate, due mainly to the Emperor's New Clothes syndrome - regulators were loath to admit that they didn't fully understand the complex algorithms created by slightly-mad mathematicians with multiple PhDs.

It wasn't the system that failed. Just the people.

peter hume needs to understand some facts he argues the reserve or central (the state) should not issue money. Well it was private banks issuing derivatives based on valueless property outside the regulatory reach of the state which caused the GFC. The market and all the private sector banks could not determine their real market value. If it was not for the action of the reserve banks in easing monetary value, quantative easing and government fiscal stimulus policies that prevented a catastrophy. Peter please explain how the state was responsible for dutch tulip bubble in 1634-1637.
the austrian school of ineptitude strikes again

Grim
“The CAUSE of the GFC was a bunch of ratbags manipulating a financial system in the absence of Law.”

Grim is reduced to arguing by a theory that monetary policy, which has no other purpose than to manipulate the price of money, had nothing to do with the financial crisis. And the entire regulatory machinery, including the Fed, the Treasury, Fannie Mae, Freddie Mac etc. etc. etc. represents an ‘absence of Law’, and had nothing to do with the GFC.

“What bothers me is that no one seems to be asking whether or not this was premeditated. Did the ratbags perpetrate this crime, knowing full well they would be bailed out?”

Well the government’s history of hundreds of years of bailing out pet businesses obviously wouldn’t have *reduced* the risk of the ratbags perpetrating this crime, would it? That’s the point!

Why are you defending the monetary policy that a) manipulated the price mechanism to benefit banks at the expense of everyone else, and then b) bails them out when they get into trouble?

In the absence of a governmental mechanism to bail them out, they would, and should, have failed. Why are you defending this criminal scamming?

Slasher and Pericles
By definition, *derivatives* are the wrong place to look for the *origin* of something. The function of derivative contracts is to hedge risk in the underlying contracts. The greater the risk in the underlying contracts, the greater the multiplier effect in the derivative contracts.

You assume that the manipulation of the money supply had nothing to do with the blow-out in the risk in the underlying contracts. Thus you are assuming what is in issue.

It is simply false to say that the banks that did this were ‘outside the regulatory reach of the state’, because the relevant effect is in the *increase of the money supply*. According to your theory, every single aspect of every single transaction would need to be controlled by government. But if not, why not? Answer?

Slasher
Good question about tulipmania.

Tulipmania was a result of monetary policy, essentially the same as caused the GFC. In short, the state ascribed to money a value *above* its market value (trying to value debased coins at face value). This state-sponsored increase in the money supply then led to massive inflation, speculation and large-scale malinvestment.

Full details: http://mises.org/story/2564

But even if earlier crises and cycles had happened without government intervention, that would still not amount to an argument for government manipulation of the money supply, considering it has presided over both the Great Depression and the GFC.

Pericles
“regulators were loath to admit that they didn't fully understand the complex algorithms created by slightly-mad mathematicians with multiple PhDs.”

Well surprise surprise. Did you?

In the absence of profit and loss, what else would they have to go by to determine the proper price? Answer?

Even assuming the regulators are all-knowing, all-virtuous, and all-capable, - which is not conceded - *how* exactly are they to know the difference between the market price and the supposed right price? Answer?

What is Ron Paul’s alleged misunderstanding of debt ?

I’m not trotting out “slogans”. I’m arguing that governmental regulation of the money supply is bad for numerous reasons and cannot be justified on the basis of the reasons given.

So far the statists here have offered
a) personal argument (my supposed rage)
b) circular argument (assuming what is in issue)
c) appeal to absent authority (assuming the knowledge, capacity and disinterestedness of governmental controls)
d) irrelevance (‘that’s how it is’)
which are invalid forms of argument.

No-one has yet given reason to think that government is able to create net wealth by printing paper; that this is anything but mere redistribution; that it does not cause inflation, malinvestment and financial crises; or that government control of capital allocation is anything but non-viable.

Politically, it enables ever-increasing governmental power, which leads society down a dead-end path of government control over anything and everything, the non-viability and abusiveness of which was demonstrated in the 20th century both in theory and practice. The Emperor has no clothes.

And China is bailing out the world.

all right the austrians believe that we should not have state controls over money, they believe the market sets a price to enable demand and supply to form an equilibrium.
they believe speculative bubbles come from increase in money supply.
please answer this question if the market through the price signal is best gauge of risk of asset and value of the asset, then why would an increase in volume of money matter, the market would factor that in and would reduce the price of all assets accordingly. is it because the rational market hypothesis is flawed?
the greatest period of stable growth occurred from 1945-72 under the bretton woods arrangements, with government controlled exchange rates.
it collapsed with the opec embargoes and vietnam and the fact that the world economy had grown beyond the capability of one nation's economy to be the reserve currency.
when private merchant banks created hybrid securities/derivatives not regulated by the state why was it that the market could not assess their true worth, why was it that ratings agencies failed?
bring back all the economic tools, quantitative controls through changing reserve ratios for lendings to different sectors, fixed exchange rates and transparent system for devaluation/revaluations, we need to democratise the economy not anarchisise the economy.