I agree with him, but he keeps blaming the banks. It's easy to hate the banks, because they are the beneficiaries, but they're not the ones directly robbing us, they're not the ones holding guns, charging taxes, inflating the money supply and providing the cheap money.

The culprits are the government's economic policy + the Fed.

You can't expect a bank not to act like a bank, like a business, and take advantage of the cheap money being thrown at it.

Greed and fear balance each other out. When the Fed comes in with all sorts of guarantees, there is nothing to fear, so the banks get extra greedy. Even if they act too risky, there's no fear of loss or bankruptcy to hold them back, the Fed just waltzes right in and bails them out!

When is this guy going to realize that regulating banks is not the answer, it's the Fed and the government that should be regulated or have their powers removed.

It's this kind of fallacy that allows governments to keep screwing the economy. They use taxpayer money and a printing press carelessly, then blame the banks, capitalism and greed for whatever happens.

^ True, even though I guess it would be harder without the Fed providing cheap money.

@GenjiKilpatrick that is why the idea of bitcoins was pretty awesome to me. It doesn't have the failure of a gold standard (not being able to inflate fast enough to avoid a deflationary spiral), or pure fiat (that can be manipulated behind closed doors to finance all sorts of evils by inflation). All valuation is inevitably fiat, which is why a gold standard actually makes LESS sense than a fiat, so in that, to devise a fiat that can't be manipulated by the inscrutable would be a very good currency indeed! The things you DO with money should be evil or good, not the supply itself! Money controlled by a computer system/formula, just makes sense. But it will never happen, bankers will make sure of that. Cheap money, great for bankers bad for Americans

Tags for this video have been changed from 'celtic tiger, banks, money, Ireland, greed, cheap money' to 'celtic tiger, banks, money, Ireland, greed, cheap money, michael flatley, economy' - edited by xxovercastxx

>> ^nock:

Inflation gets a bad rap, the Fed's job is to maintain yearly inflation of about 1-2%. Deflation is really bad because it means that my money is more valuable sitting in my pocket/under mattress/etc today than it will be tomorrow. So why would I buy a large item (car, house, etc) if my ability to purchase increases the more I hold onto my money? In essence, the economy stops because consumers earn more by spending less and companies must lower prices, which leads to layoffs which leads to decreased earnings which leads to less spending which leads to lower prices which leads to layoffs which...


The same logic could be applied for the purchase of technology; why buy today, when something awesome will come out in 6 months. In reality, people do not operate like that. Most people buy object A for X dollars in whenever X dollars is achieved.

Like I said in my comment before, when you start to swing money supply extreme in either direction, that is where the danger starts. Mild deflation or inflation is nothing to troubling. The real problem is there is no objective mathematical principle in which the fed operates the money supply. Minor inflation is smart when considering a continual rise in the population, but there is no standard metric that they follow for this because they ALSO try and heat and cool markets, something they shouldn't be in the business of doing.

Saying inflation is bad or good isn't really viable. Inflation is good for some, bad for others. Deflation is the same bed, good for some, bad for others. Most notably, it is bad for big business. It is in big business's best interest to have cheap money they can spend before it inflates to fill their coffers. Deflation places its power to individuals financing slower endeavors. What is "better" is a matter of taste of lifestyle, one that I don't think the government has any business regulating per say. And I say that in spite of the fact that, most likely, the decisions people would make would tend us towards a lifestyle that I don't enjoy as much (living in perpetual debt...house, car, cards, chrismas!!)...but so be it.

In short, debt as a source of wealth favors those that save money for others. Savings as a source of wealth favors those that save their own wealth for themselves and those they chose to share it with. Both work, but for whom and to what degree sways largely, and in our case, largely on the decisions unelected quzi-public servants make...unacceptable.

This is a very clear and concise description of Austrian economics (aka libertarianism wearing a t-shirt labeled "economics"). It should be titled as such, and not as a primer on "how money works".

It seems to me that there is a big gap between the assertion that money must be a store of value, and that the value stored has to permanently be fixed.

Even if we were on the gold standard, what I could buy with a dollar would still vary wildly over time as other aspects of the economy changed.

The Austrian theory of boom/bust is pretty silly. It essentially says that fundamentally markets can't function properly -- if interest rates are ever "low", the market will always make stupid bets with the cheap money (boom), and then lose their shirts and make everyone raise rates (bust). It then declares that somehow this is government's fault for ever trying to use interest rates to dampen booms and busts, and if we just trust in the market, everything will be free of booms and busts (even though history says otherwise).

It's better to focus on things like interest rates and liquidity problems with regard to monetary policy, rather than trying to maintain currency value to an arbitrary standard.

Rest of the world buys treasuries and our financial product because our system has been solid so far. After corrupt financial system sold trash, and cheap money rotted our economy we are just waiting for the economic slump.

So here's Schiff's logic:

1. Government gave free cheap money to banks
2. The non-government banks fucked themselves over with it
3. Therefore government should be removed from the equation

Anyone see the issue with that chain of logic?

Does it get better when his metaphor for the situation poses Government as an adult, and the private banks as children?

Yes, yes, I understand that it's the free cheap money he thinks is the issue, but isn't there some sort of "personal responsibility" that conservatives are supposedly big on? Shouldn't the people who abuse the treat be the ones to blame for their own idiocy?

The banks didn't have to spend all their money on crazy derivatives and securities backed by questionable mortgages that they freely and knowingly loaned out to people with insufficient means to cover the loans.

They could've invested in gold, or automobile plants, or agribusiness, solar panels, or a shoe factory -- something that would've helped correct the US's terrible trade imbalance that they, by the simple virtue of being privately owned, naturally would understand better than anyone in government, even if that government employee was formerly the CEO of Goldman Sachs?

Government, business, they're all made of people. They're all capable of doing things wrong, and businesses have proven time and again that they need adult supervision, or they will try to set up Schiff's opening parable, with lowly middle-class people standing in for the Asians.

Speaking of that parable, it sounds to me like it was lifted from the socialist revolution -- workers doing a little redistribution of wealth from management, as it were.

Maybe he knows deep down this conservative philosophy is BS, and that it's as important to "spread the wealth around" as it is for people to be "free" to get suckered by fat Americans.

Or how about this one: Banks borrow record $437.5 billion per day from Fed

"The banking system is going to become addicted to this very cheap money. Unwinding it will be very difficult," said Howard Simons, strategist with Bianco Research in Chicago.