What about Marxism? In its existence, did the Soviet Union suffer from this problem, YES or NO?

If it was free of the bankers, then is it worth trading our system, warts vs: warts?

http://www.princeton.edu/pr/news/97/q4/1231-lester.html

Also, when I asked if you thought people today could be trusted to implement a responsible monetary policy, I definitely was not trying to argue for private money systems. For the reasons you mentioned I think such a scheme would be the antithesis of democratic control over the money supply. What I was trying to ask was if you think some sort of an updated version of what Pennsylvania had almost four-hundred years ago would be possible today? Something along the lines of what Mark Thoma advocates here:

http://economistsview.typepad.com/economistsview/2009/11/the-fed-is-already-transparent.html

Actually, Thoma isn’t really arguing for democratic control over the money supply here either. Thoma doesn’t think the Fed is independent enough, and only wants to allow elections in order to create the illusion that the people are in control. Personally, I would go much farther than this. I’d like to see direct elections of Federal Reserve governors and chairmen/women. Actually, I find the whole: “the Federal Reserve needs to be insulated from political meddling,” argument to be incredibly naive. There’s tons of evidence showing both Federal Reserve Board governors and chairmen have been influenced by political considerations in the past. More troubling, these kinds of arguments show an utter contempt for the democratic process. I’m continually shocked by how easy it is for so-called new-age liberals to show their complete disregard for basic democratic values like majority rule without getting called to task. Whoever Mark Thoma’s civics teacher was should be ashamed of him/herself. Social Studies teachers everywhere unite! Down with John Locke! It’s time we started listening to Rousseau.

Libertarian monetarists are fond of private money systems – I personally am skeptical of something on that large a scale, primarily due to the concentration of power in the hands of agents that are beyond the control of democratic institutions. (Even more so than the Fed.)

The colonies had their own script and could pay for their activities while taking less in taxes. Colonial scrip was not backed by gold or silver and therefore the colonies could control its purchasing power. This was similar to the “tally stick” system used by the British Empire for over 700 years. It was different from the conventional European mercantilist system of money which required governments to borrow from banks and pay interest for those loans, as gold and silver were the only regarded forms of money. Colonial scrip, were “bills of credit” created by the government, based on the credit of that government, and this meant that there was no interest to pay for the introduction of money. This went a considerable way towards defraying the expense of the Colonial governments and in maintaining prosperity. The governments charged low interest when it loaned out this paper money to its citizens, with land as collateral, and this interest income lowered the tax burden on the people, contributing to prosperity.

*One of the commentators on Mark Thoma’s website turned me onto Dr. Lester’s work, but I can’t seem to find who it was so I can’t give them credit. My writing here incorporates a lot of that poster’ comments (I saved them in a word file) so if he/she is reading this I apologize for posting parts of your comments without giving credit.

Yes, but surely this rule is for benefit of the markets? Then does not destroying MtM application disadvantage the markets? Given that everyone faces the reality of asset valuation via market, an immediate audited replacement of MtM is required and any demand for MtM relief by a bank should be refused. Previous opinions re bank destruction etc were never more than opinios and their uncritical (criminal?) acceptance has cost us taxpayers over a trillion dollars!

We investors and plucked chickens must demand an immediate reinstatement of MtM and clawback of misdirectred public funds.

Couple this with taking public control and operation of our nation’s money!

I believe it will be better for banks for them to have a finite financial environment in which to operate. The particular concern is similar to that evinced when children behave badly with no boundaries.

Many banks probably operate in a risky manner because competition ensure thay do so or lose the profit race?

http://static.seekingalpha.com/uploads/2009/6/25/saupload_us_savings_rate.JPG

In terms of how much base money to feed into the system… enough to stabilize asset prices. At a _crude_ guess, the S&P 500 went from 180 in 1985 to 1100 today (down from peak in 2007). That’s a 6-fold increase. The monetary base went from 200 to 800 billion in that same time, a 4 fold increase. That suggests adding about 400 to perhaps 500 billion in _permanent_ base money into the system.

http://research.stlouisfed.org/fred2/series/BASE

Recent moves in the Base chart are misleading in the sense that the Fed has indicated it will withdraw most of that base just as soon as it can, which cripples the expectation of permanent price increases (unless you think the Fed will renege). As an alternative, the Fed could _slowly_ extract this “temporary” base, and replace it with a tax credit to match 30% of costs for high-priority long term infrastructure. That would finance 100 billion in long term credits per year for half a decade, which would match with >300 billion from the private sector per year. Of course, that requires Congress to actually do something useful since the Fed doesn’t run fiscal policy.

Instead, Congress would rather wait till things get worse, and then finance repeated extensions to unemployment insurance and watch tax revenues tank. Absurd.

We are in fact in a “doom loop”. All the bettors are compelled by the wildly speculative forces into betting on the next bubble, hoping beyond hope all along that they are wise enough, or have enough insider information to escape, or cash out before the inevitable collapse. Irrational exuberance alone is bruting, pimping, and propping up this market. The next crisis, (and it is inevitable that there will certainly be another horrorshow crisis because NOTHING has changed, and no one has been held accountable for wanton abuses and grotesque crimes) -will serve to further entrench the wealth and resources of the predatorclass from the blood and off the backs of the poor and middleclass.

Since said predatorclass owns and controls the socalled governments, and will certainly privatize gains and socialize losses, – the “doom loop” will be inevitable and unending.

The peoples only hope is to strike out at our oppressors. Governments are bought and paid for by the predatorclass and will not help us. There effectively is no law, since in harsh reality the predatorclass can and does play and operate by one set of laws and standards and is shielded and granted immunities and imponderable largess from the government they own, and control, – and an entirely seperate and oppressive set of laws and standards applied to the people with NO protections or good will from the government.

Guns and ammo are the best investments for the poor and middle class, because the predatorclass and the socalled governments they own and control are bent on enslaving or culling us.

In a short time, a months or a couple of years, – this entire nightmare (what we not endure and tolerate as civilization) is going pearshaped.

Stop paying your bills, close out all your accounts and hold cash, precious metals, stock up on food, water, medicines and survival supplies, guns and ammo, and get locked, cocked, and ready to rock, because the America and the world we were born into has already ended. The future is ruthless domination, enslavement, and/or a massive culling of the unwashed masses by the predatorclass. Know this predators, many of us will not go sheepishly, or peacefully to the slaughter. There will be blood.

I didn’t think I’d ever be so “on the same page” with you. Interesting.

Really, the bottom line is true election and lobby reform. Until that happens, the power structure will remain largely intact because no effective regulation of anything (financial, energy, healthcare, etc.) will ever be enacted. End of story.

This was a cogent piece and I need you and James (and others) to keep throwing stuff against the proverbial wall, in hopes that enough will stick to ultimately move things.

Re AIG: One man’s “botch job” is another’s windfall profit.