[johnwinters91]

Also, why can a bubble finance system theoretically not be kept in place indefinitely? What would cause the bubble to burst other than the Fed raising rates?

[johnwinters91]

Is it true that the Fed looks at 30 day, 90 day, and 1 yr T-bills to determine whether or not to raise rates?

What should one make of the claim that the Fed simply responds to rises or falls in the market in order to determine whether to raise or cut rates?

Is this analysis correct:(?)

When rates on these bills are low, thats because the economy is underperforming and people flock to treasuries for safety, but when they are high, this indicates better economic conditions, as the government has to offer more interest to attract investors away from higher return investments people feel more comfortable making.

Also, why have we not seen the crisis that was widely predicted when the Fed raised rates? How can one tell whether or not the rate increase was due to economic recovery?

[johnwinters91]

How do we know the money that leaves the country due to imports will make its way back into the country?

[johnwinters91]

I still have a hard time understanding how this works if it’s not a true floating exchange rate system. It seems to me that Trump is right by saying that by pegging, China is ripping us off.

What am I missing?

[johnwinters91]

I’m having a hard time reconciling the statement that “the structure of prices will first be distorted and then restored.” with the statement that PPM goes down permanently.

I’m reading Rothbard’s Mystery of Banking, and in his chapter about the supply of money, he uses the Angel Gabriel example of the effects of a QE. He writes that after a monetary expansion where the angel doubles peoples’ checking account balances,

” as they rush to spend the money, all that happens is that demand curves for all goods and services rise. Society is no better off than before, since real resources, labor, capital, goods, natural resources, productivity, have not changed at all. And so prices will, overall, approximately double, and people will find that they are not really any better off than they were before. Their cash balances have doubled, but so have prices, and so their purchasing power remains the same.”

What am I missing?

Thank you

[johnwinters91]

Why does the Fed believe it needs to at times raise rates to slow economic growth?

[johnwinters91]

I’m trying to understand more about inflation and the saying, “any supply of money is optimal”.

Is this correct reasoning?:

1. An increase in the money supply drives down PP, temporarily.
2. As PP decreases, prices rise.
3. Eventually, as prices rise, PP reaches a point that is equivalent to where it was before the inflation.( if this part is correct, how does this happen?)

Therefore, the danger of inflation is not in higher prices per se, but in the fact that it distorts time preferences, leads to malinvestments, and unfairly benefits those who have first access to the newly created money.

[johnwinters91]

Thank you so much for your responses! You’ve been invaluable so far in my ongoing process of learning. There’s only so much one can get out of listening to lectures or reading, especially working full time, so I really appreciate your efforts.

I have some more questions:

1. This is my main, most nagging question. Would it be possible for there to be credit at all (at least from banks) in a 100% reserve system? I’m displaying my ignorance, but that’s why I’m here.

If banks have to keep full reserves, how would they be able to make loans?

I can see how runs would be a check against reckless lending and inflation in a specie based fractional reserve system, and how in such a system lending is still possible, but how would that work in a full reserve system? Would credit markets be possible?

2. What are the consumer goods ratings companies you are referring to?

3. Could bank runs occur in both fractional and full reserve hard money systems?

4. Could bank runs happen for no reason, or just out of nowhere, threatening the stability of our financial system? I’m not saying out system is inherently stable now, but what are the chances of something like that happening?

5. What caused the bank runs that caused panics prior to and leading to the establishment of the Fed? What’s the Austrian response to the critics who say that that would just happen again if we followed Rothbard or others?

6. Is there a standard (or better word:RELIABLE) metric used to measure the severity of a banking crisis? Is the percentage of losses relative to GDP the best way to measure this? Would such a metric be a reliable tool to measure the comparative severities of the banking crises/depressions before and after the Fed?

Thank you very much again for your time.

[johnwinters91]

What’s the name of Huelsmann’s book? I’m having trouble finding anything recent on Amazon.

Thank you

[johnwinters91]

Professor Herbener,

1. What is the consensus among Austrians as to the appropriate alternative to the Federal Reserve system, aside from an agreement about the desirability of a commodity standard? Is it a free banking system with fractional reserves, a free banking system with full reserves, or neither?

2. If the value of a commodity standard is that it prevents inflation due to the scarcity of the commodity, how do we know there would be enough money to go around? How would the value adjust from an ounce of gold being over $1k to being something that could be used in every day transactions? Is the current price of gold mostly due to its value as a hedge or due to the law of supply? How would there be enough gold to accommodate all the transactions in the economy?

3. In a free banking system, how would ordinary people with limited knowledge of financial instruments etc be able to accurately guage the soundness of a given bank? We saw the last time around how incompetent the rating agencies are, so what could the ordinary person look to as a vanguard against fraud and abuse by the banks?

4. How would banks make money if they couldn’t loan out their reserves and were required to keep 100% of their reserves?

5. What do you make of Joseph Salerno’s proposal to give Congress control of monetary policy in the short run? Would that result in the same thing we’ve seen thus far in terms of rampant inflation? And how would we transition from that to a more sound monetary system?

Thank you

[johnwinters91]

What is the practical difference between banks dealing/underwriting in securities and them just buying them for themselves?

The Act prohibits banks from dealing and underwriting securities, but allows them to purchase and sell them for investment purposes. How is this not just a semantical difference involving legal gymnastics?

I’m not asking that question suggestively, I’m just curious what the significant differences are.

Also, did the artificial supply of credit cause an increase in derivative speculation? Was there more risk taken in derivatives than historically occurred leading up to the bust?

Thanks again for your time.

[johnwinters91]

What is the practical difference between banks dealing/underwriting in securities and them just buying them for themselves?

The Act prohibits banks from dealing and underwriting securities, but allows them to purchase and sell them for investment purposes. How is this not just a semantical difference involving legal gymnastics?

I’m not asking that question suggestively, I’m just curios what the significant differences are.

Also, did the artificial supply of credit cause an increase in derivative speculation? Was there more risk taken in derivatives than historically occurred leading up to the bust?

Thanks again for your time.

[johnwinters91]

Is my reasoning correct that the risks taken in the derivatives markets wouldn’t have been taken if it weren’t for the credit expansion that the Fed caused?

Was there a greater level of risk taken in the derivatives markets than previously?

[johnwinters91]

Did derivatives play any role at all in leading to the financial crisis?

[johnwinters91]

Thank you!!

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