THOMAS.BEHNKE

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  • in reply to: During depressions, are wage cuts… #18573

    Thank you so much for that very thorough explanation. Two quick follow-ups to it:

    1.) So if costs of production (including real wages) fall relatively proportionately to prices, then how exactly are the Average Joes (who manage to remain on the payroll without their hours being cut) hurt by the bust? If they’re making less due to the bust, but at the same time, everything costs less, are they really that worse off than before? On the other side of the coin, how are the business owners (those that did not face insolvency) hurt? Though they were forced to lower their prices, won’t they also be purchasing lower priced items for both production and consumption? So doesn’t this balance it out?

    2.) Can you please explain why the increased demand to hold money during the bust causes purchasing power to decline? I don’t understand why people would be so willing to hold on to their money when the bust causes prices to fall!, I also don’t get how holding money reduces purchasing power…does the lack of market activity not permit prices to adjust back to normal?

    in reply to: Books on the Fed from 1940-2000? #18561

    Just purchased both volumes. I’ll also make sure to take a look at Conceived in Liberty. Thanks for your help!

    in reply to: Colbertism and Inflation #18507

    Now that I’m thinking of it, I have one more quick question:

    Suppose I’m a shirt manufacturer. I take a shirt-making workshop to gain more experience. I can now make one shirt in 45 minutes instead of an hour. Thus, I can decrease the price of my shirts.

    ^^Is it almost 100% safe to say that demand will increase? Or can it stay put, causing me to make only an X amount of shirts in the future and use my surplus productive capacity on making something else, like socks (instead of more shirts)?

    Thanks again!

    in reply to: Colbertism? #18494

    Makes sense, thank you!

    in reply to: Colbertism? #18492

    Thank you so much for that! One more quick question for you. This comes out of Wealth of Nations:

    “By means of such regulations, indeed, a particular manufacture may sometimes be acquired sooner than it could have been otherwise, and after a certain time may be made at home as cheap or cheaper than in the foreign country. But though the industry of the society may be thus carried with advantage into a particular channel sooner than it could have been otherwise, it will by no means follow that the sum total, either of its industry, or of its revenue, can ever be augmented by any such regulation. The industry of the society can augment only in proportion as its capital augments, and its capital can augment only in proportion to what can be gradually saved out of its revenue. But the immediate effect of every such regulation is to diminish its revenue, and what diminishes its revenue is certainly not very like to augment its capital faster than it would have augmented of its own accord, had both capital and industry been left to find out their natural employments…”

    I’m assuming Smith is saying that when you grant a domestic company a monopoly (by banning foreign exports of that product), the company MIGHT be able to end up making the product cheap or cheaper than in the foreign country. However, this won’t increase sales.

    I don’t understand how granting a company a monopoly can ever lead to cheaper prices…am I misunderstanding what he’s saying?

    Got it! Thank you so much for taking the team to clear that up for me.

    Got it! Thank you so much for taking the team to clear that up for me.

    But lets say that I traded in a $10 gold coin for a $10 bank note. A month after I did so, the price of gold went from $10 an ounce to $9 an ounce. Didn’t I profit at the expense of the bank?

    Conversely, if I traded in a $10 gold coin for a $10 bank note, and months later the price of golf increased from $10 an ounce to $11 an ounce, didn’t the bank profit off of the exchange?

    This is why I’m confused. I can understand the point in all of this if gold coins did not have a monetary value (ex, $10) affixed to them and everything was based off of weight. Then, bank notes would simply be written out for a certain amount of gold ounces. Fluctuations in the price of gold would not cause anyone to lose/profit off of the deal.

    What am I not understanding?

    Okay, that makes a lot of sense. But didn’t this pose a small problem when even the 100 percent fractional reserve banks sprouted up? Gold could fluctuate in value, but didn’t the denominated bank notes that they could be redeemed with stay at a fixed value? So if the price of gold went up or down, the value of the bank notes stayed the same, causing either deflation or inflation?

    EDIT: I think I understand what you’re saying now. The bank notes would be written out for a certain number of gold ounces, and not a fixed DOLLAR amount. Thank you for that clarification.

    in reply to: Why does the US want world inflation? #18350

    I definitely see how this worked in the post-Nixon years, but how did it work out while we were still on the gold standard? Even though the FDR administration made it illegal for US citizens to hold gold, we still had to redeem bank notes in gold for trade purposes, didn’t we? Also, under the IMF, weren’t citizens of other countries permitted to redeem the US dollars they exchanged for in gold as well? If both of these statements are correct, then how did we still manage to pay out all of this gold to foreign nations? I’m sure a lot of gold shifted from the US to other countries…so I guess my question is did foreign nations benefit from the IMF more than we did in the pre-Nixon years?

    in reply to: Why should a fixed value be placed on gold to the dollar? #18340

    Right, I understand what you’re saying. But my question is why should a gold coin have a fixed value attached to it? Shouldn’t the exchange rate be determined exclusively by weight and the value in that specific time frame since the value can fluctuate?

    in reply to: Can You Please Check My Logic? #18307

    That article is brilliant. Thanks so much

    in reply to: Can You Please Check My Logic? #18305

    Dr. Herbener, the source that you provided is helping a lot. It made me think of one additional question though.

    I know I read somewhere (possibly Rothbard’s The Case Against the Fed?) that before people earned interest on their deposits, they paid a small fee to keep their deposits in banks. Essentially, banks were nothing more than storage vaults. Banks made their money exclusively from the storage fees.

    When did this occur? It doesn’t look like it happened in America at all, because even the 1790 central bank was operating on a fractional-reserve system. During this time, were people still paying that small fee (and not collecting interest on their deposits) even though the banks weren’t keeping the deposits 100% secure.

    Thanks again for your help.

    in reply to: Can You Please Check My Logic? #18304

    Thanks so much Dr. Herbener.

    in reply to: Environmental Regulations? #18284

    I do understand that the government is the world’s biggest polluter. Still, though, what would you say to an increase in environmental regulations in general (for both the government and corporations)?

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