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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Hawkmoon who wrote (107128)	2/28/2008 8:45:35 AM
From: Paul Kern	Read Replies (1) \| Respond to of 306849

Hawk, Those of us took who economics in the mid 1960s were taught, as a quick rule of thumb, that M3 needs to grow at an amount equal to GDP growth plus a small fudge factor to allow more growth. More than that is inflationary. As to the velocity of money, since the Fed no longer posts M3, that calculation is now only a guesstimate.

To: Hawkmoon who wrote (107128)	2/28/2008 10:30:46 AM
From: neolib	Read Replies (3) \| Respond to of 306849

All I was attempting to point out is that there are other ways to create money which don't involve Government debt at all. I've done so myself, with absolutely zero intervention or regulation on the part of the Government. I simply signed a note for a private loan to buy real estate from the owner. I've done this twice. Nobody looked over my shoulder to determine whether this was safe to do, or good for the economy or not, how it might impact inflation, etc. Just me and the seller decided to do so. The notes can be sold, indeed, the first one I did was in fact sold to a bank some years later. So it is in fact money creation, and it does have velocity as well. The entire monetary system COULD be run in just such a fashion, with zero collective currency and zero Government regulation at all. One can envision some problems however, particularly with stability of such a system, as well as its efficiency. Risk averaging all the pieces of debt paper floating around might be nice for example. A common currency does have advantages. Fundamentally most money creation in the USA is based on SOMEBODY deciding to shoulder some debt, but it is a mistake to assume that that somebody has to be anyone in particular, either Government or private. By collecting all the private money creation and denominating it with a single currency, and adding some Government control levers, I suspect things work better than without said mechanisms. But I doubt the optimal system has been discovered or implemented yet. If you doubt this, you should consider the gap between a gold based system and what we have now, and how much latitude that implies for other systems which could function as well. The question is what system functions best? Unfortunately, answers for that seem to be hard to come by, with people holding idealistic views of each pet theory. It is also kind of hard to run experiments on a scale large enough to be meaningful.