User:Vtaylor/Financial stories/Money, monetary and fiscal phenomenon

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Money, monetary and fiscal phenomenon

currency, Federal Reserve, interest rates, money supply, Keynesian, Austrian

  • Charged with maintaining the stability of the currency (which was stable as a rock for the preceding century), the Fed has proceeded to devalue the dollar by 95% since its inception in 1913. Used to the steady ravages of inflation, we don’t notice any more that the government steadily steals away the value of our money, just as governments have done throughout history by debasing the coinage. ... Over the years, Fed Chairmen have mostly tried to regulate both interest rates and money supply. Money supply, or credit supply, is used to stimulate the economy by making it easier and cheaper for people to borrow money. [1]
  • Keynesian theory basically says that if you put money in people’s hands through direct borrowing, or by indirect borrowing through government deficits, they will consume more and therefore stimulate economic activity. In Keynesian theory, this growth process will become self-sustaining and the stimulus can then be removed. [2]
  • Interest rates in Austrian theory are an expression of time preference; at some price I am willing to defer my consumption and lend you my money so that you can consume or invest now rather than later. If my time preference is weak, then I ask a low rate of interest, and vice-versa. [3]

  • This is where the money comes from. The economy is being driven by the flood of new credit from refinancing home mortgages. The MBA index is the most important measure of money creation. [4]
  • the overwhelming majority of people are long inflation, and the market generally does not reward the majority. They are long inflation because they are highly leveraged with debt, which they expect to repay in devalued dollars. In effect they are long assets (houses, cars, stocks, etc.) and short the dollars with which to pay for them. [5]

  • Business models
    There are three basic business models which underpin the US economy today. These are the private business model, the non-profit business model and the government business model. All business models extract revenue and deliver benefits to various groups. These business models are elemental; most real organizations are a combination, for example a non-profit organization that is partially funded by tax revenue distributed by government is a combination of the non-profit and government models. [6]