[jmherbener]

Prior to the Fed, commercial banks still held some gold as reserve in the U.S. The Fed centralized the banking gold stock during WWI. But Americans could still own gold legally until 1933-34. The statistics, however, are for gold held by the government.

The typical economic analysis uses government gold stocks or, when appropriate, the gold stock used as monetary reserves and not the total gold stocks owned by everyone in the country. Governments and banks obtain gold reserves through international trade.

Take a look at the Figure 1 World Gold Reserves 1925-1932 in this paper by Doug Irwin:

http://www.dartmouth.edu/~dirwin/Did%20France%20Cause%20the%20Great%20Depression.pdf

This chart gives the lie to the claim that gold flowed into the U.S. and caused the Great Depression because the Fed and Treasury sterilized the inflow. The chart clearly shows that the U.S. gold stock remained roughly the same, $4 billion, from 1925-1932. Gold did, however, flow into France. Also, the world gold reserves steadily increased from around $9 billion in 1925 to nearly $12 billion in 1932.

[jmherbener]

Take a look at Ludwig von Mises’s book, Liberalism, section 3:

http://library.mises.org/books/Ludwig%20von%20Mises/Liberalism%20In%20the%20Classical%20Tradition.pdf

There is also his work, The Free and Prosperous Commonwealth, mentioned in this article by Leonard Liggio:

http://mises.org/daily/6461/

Here are videos of a conference on Imperialism sponsored by the Mises Institute in 2006:

http://mises.org/media/categories/94/Imperialism-Enemy-of-Freedom

Here is Joe Stromberg on American Empire:

https://mises.org/journals/jls/15_3/15_3_3.PDF

[jmherbener]

The gold inflows, which occurred after the beginning of 1934, fed monetary inflation and credit expansion which caused the boom of 1934-1937 which led to the bust in 1937-1938.

Here is a chart of the DJIA from 1920-1940:

http://stockcharts.com/freecharts/historical/djia19201940.html

[jmherbener]

The U.S. gold stock was $4,356 million in January 1931. It rose to $4,708 million in August and then fell $4,173 million in December 1931.

Here are the figures:

January 1931 – $4,356 million
January 1932 – $4,129 million
January 1933 – $4,265 million
January 1934 – $4,033 million

The data is in Table No. 156, page 537:

http://fraser.stlouisfed.org/docs/publications/bms/1914-1941/section14.pdf

After the gold stock was revalued at $35 an ounce in February 1934, the figures are:

February 1934 – $7,438 million
January 1935 – $8,391 million
January 1936 – $10,182 million
January 1937 – $11,538 million
January 1938 – $12,756 million
January 1939 – $14,682 million
January 1940 – $17,931 million

The argument is that the outflow of gold was bad for the European countries because, under the rules of the classic gold standard (which as pointed out already didn’t exist after WWI), it would have forced them to deflate their money stocks leading to price deflation. Allegedly this deflationary effect was not counter-balanced by an inflation in the U.S. because the Treasury was sterilizing the gold inflow, i.e., offsetting the additional gold with a decline in other forms of money.

But the gold sterilization program of the Treasury did not occur until 1937:

http://www.dartmouth.edu/~dirwin/1937.pdf

http://economics.yale.edu/sites/default/files/files/Workshops-Seminars/Economic-History/irwin-110926.pdf

[jmherbener]

It depends on how one defines social mobility and what proxy one uses to indicate its extent. Sowell claims that the standard sociological definition is not the relevant one and suggests replacing it with “economic mobility.”

http://townhall.com/columnists/thomassowell/2013/03/06/economic-mobility-n1525556/page/full

http://cafehayek.com/2007/11/economic-mobili.html

Here is the IRS study on income mobility:

http://www.treasury.gov/resource-center/tax-policy/Documents/incomemobilitystudy03-08revise.pdf

Here is a broader study on income mobility put out by the Boston Fed:

https://www.bostonfed.org/economic/wp/wp2011/wp1110.pdf

[jmherbener]

It is false that all jobs have been out sourced or replaced by machinery. Just take a look at the distribution of employment in the different sectors of the economy.

http://www.bls.gov/emp/ep_table_201.htm

Prices of output are determined by consumer demands, not costs of production. Higher wages cannot be passed on to consumers by raising prices. If it were true that businesses could raise prices without any negative repercussions in lost sales, then businesses would have already raised prices before they had to pay higher wages. Businesses always ask the highest prices they can given consumer demand. If they ask prices high enough, the amount people buy will decline.

Consumers cannot pay ever higher prices for goods unless the money supply increases. With a given stock of money in society, if consumers pay more for some goods, they must pay less for other goods. Regardless of whether an entrepreneurs are producing in a market in which their output prices are rising or falling, their input prices will adjust accordingly. If their output prices are rising, then they will increase their demands for inputs and drive input prices up until no additional profit can be made. If their output prices are falling, then they will decrease their demands for inputs and drive input prices down until no losses are suffered.

[jmherbener]

Yes, this is wrong. The pre-World War I classic gold standard was destroyed. No country ever returned to it. The gold exchange standard of the interwar period was pegged exchange rate system in which each country pegged its exchange rate to the pound. the pound was no longer redeemable for gold coin, but only for bullion bars. Thus, it was effectively no longer redeemable for gold for the average person. Look at Part 4 in Rothbard’s book, A History of Money and Banking in the United States:

http://library.mises.org/books/Murray%20N%20Rothbard/History%20of%20Money%20and%20Banking%20in%20the%20United%20States%20The%20Colonial%20Era%20to%20World%20War%20II.pdf

It is true that after FDR devalued the dollar from $20.67 an ounce to $35 an ounce, that gold, which remained redeemable in the U.S. for foreigners, began to flow into the U.S. At the time, it was called the “golden avalanche.” But this steady, significant gold inflow began in 1934, too late to explain the downturn of the Great Depression which occurred from 1929-1933.

http://www.fee.org/the_freeman/detail/money-and-gold-in-the-1920s-and-1930s-an-austrian-view/#axzz2pkQnDlyD

[jmherbener]

As Salerno points out in chapter 16 of his book, the inter-war period monetary system was not a gold standard. The classic gold standard was destroyed by the belligerent countries in the First World War. Read Salerno’s chapter 23, “The Role of Gold in the Great Depression” for his analysis of the arguments that the “gold standard” caused the Great Depression. He cites Murray Rothbard’s books, America’s Great Depression and A History of Money and Banking in the United States for further analysis.

http://library.mises.org/books/Joseph%20T%20Salerno/Money,%20Sound%20and%20Unsound.pdf

To see how a true international gold standard would work, take a look at Salerno’s chapters 13 and 15.

[jmherbener]

If the minimum wage is raised to $15, then it would be a criminal offense for an employer to pay less than $15 to any of his workers regardless of when they were hired. So, there is no benefit to low-skilled workers who cannot generate at least $15 an hour in DMRP. Low-skilled workers who remained employed must be able to generate at least $15 an hour in DMRP. Otherwise the law makes it a crime to employ them. So, an effective minimum wage destroys all legal jobs for workers with DMRP below the minimum wage and entrepreneurs will abandon businesses that rely on labor that produces DMRP below the minimum wage. Unless they can adapt by restructuring in such a way that their lowest skilled workers produce at least $15 in DMRP, restaurants will go out of business. The lowest paid jobs, which pay $15 under the minimum wage, can only be filled by workers who generate at least $15 in DMRP. Free labor market provide the opportunity for entrepreneurs to configure their businesses in such a way as to employ lower-skilled workers at wages commensurate with their DRMPs.

[jmherbener]

Take a look at chapter 16 in Joe Salerno’s book, Money, Sound and Unsound:

http://mises.org/books/sound_money_salerno.pdf

[jmherbener]

I’m not familiar with Jensen’s work. He has taught at Harvard Business School since 1985. As a business professor, his work in leadership is not economic-theoretical.

http://www.hbs.edu/faculty/Pages/profile.aspx?facId=6484&facInfo=res

For comparison and contrast, here is an economic-theoretical approach to entrepreneurship and business by Peter Klein:

http://library.mises.org/books/Peter%20G%20Klein/The%20Capitalist%20and%20the%20Entrepreneur%20Essays%20on%20Organizations%20and%20Markets.pdf

[jmherbener]

The enormous build-up by commercial banks of excess reserves afforded by Ben Bernanke’s QEs have created both a potential for hyperinflation on the one hand and radical bank reform on the other.

On Dec. 9, 2013, commercial banks had Total Checkable Deposits of $1,423.2 billion and Excess Reserves of $2,440.8 billion. Because the Fed has the authority to set the reserve requirement ratio for commercial banks, it could simply require them to hold 100 percent reserves. Their current Required Reserves are $124.5 billion. Thus, banks would have to convert $1,298.7 billion of their excess reserves into required reserves leaving them $1,142.1 billion in excess reserves. Then the Fed would need to convert the required reserves held by banks as deposits with the Fed into cash that commercial banks would hold in their vaults. At that point, commercial banks would be 100 percent reserve banks and deposit insurance and regulation could be removed without any possibility of adverse bank runs.

[jmherbener]

The Fed can finance its purchase of securities either by selling assets it owns and using those funds to buy the securities or incurring liabilities. One has to look at the evidence to see whether or not the Fed has expanded the money stock when buying securities. Often they do, but sometimes they don’t.

Among its liabilities, if the Fed incurs either the liability of printing new currency or of crediting deposits commercial banks hold at the Fed, then it has increased bank reserves and banks can issue additional fiduciary media and expand the money stock.

Among its assets, if the Fed sells reverse repurchase agreements to finance its purchase of securities, then it drains bank reserves.

Table 8 in the Fed Release H.4.1 has the statistics for the week of Dec. 11:

http://www.federalreserve.gov/releases/h41/current/h41.htm#h41tab9

[jmherbener]

When the crisis came, banks were illiquid and insolvent. The QEs were designed to provide them both liquidity and solvency. They are not lending because demand for credit has dried up and they want to remain liquid until demand returns.

[jmherbener]

One has to look at the evidence to see whether or not bank reserves expand when the Fed buys securities. Often they do, sometimes they don’t.

But in our current situation, in which banks are holding over $2 trillion in excess reserves, muted price inflation has little to do with the Fed using reverse repos to counter-balance a further increase in reserves from its securities purchases. Price inflation has been muted for two reasons. First, because banks have been building excess reserves instead of creating fiduciary media. And, second because the demand to hold money has been increasing.

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