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Philosophy, Politics, and the Human Condition
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Ivo
 Sep 6, 07 - 10:24 PM |
Realism and Interest Rates
Gold Rupee would end depositors’ uncertainty Interest rates have to be determined by economic fundamentals not by market turbulence. Uncertainty belongs to the essence of capitalism. An opinion “The world is not ready for free investment” published last night on the website of the Russian News agency RIA Novosti argues that the leading economies are closing their doors to foreign investment because Russia, China and the Gulf countries (the opinion forgets India) do not want to their huge foreign trade proceeds to stay idle in GOLD and currency. (1) Could it be that while the sun is setting on the West’s “hard” currencies as the world’s international monetary reserve, no transition have been planned to a new paradigm that the financial elite just “winging it” to see how things shake out? Or are plans being carefully devised and executed behind the scenes and later sold to the masses under the guise of boogey men and emergencies? Methinks that there is a relationship between gold, which rose almost 15 dollars in New York yesterday, and the West’s “hard” currencies’ inevitable replacement. The Syrian military said yesterday that it opened fire on Israeli jets violating its airspace. Syria and Israel remain technically at war following the seizure by Israel of the Golan Heights in 1967. Tensions between Israeli and Syria have been rising in recent months. Both countries' leaders have said they do not want a war, while accusing the other side of arming for a conflict. In a summer where the two countries seem to have oscillated from possible war to possible peace talks, the alleged violation of Syria's airspace will serve only to heighten tensions between the two countries. (2) Another war which is going on is the war between those who view interest rates as a way to deal with market turbulence - at present, this turbulence is due to problems in the US subprime mortgage market and those who adhere to the role of interest rates, who argue that interest rates have to be determined by economic fundamentals - at present, these fundamentals are the inflationary risks resulting from the rising price of oil. |
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Ivo
Sep 6th, 2007 - 10:25 PM |
Re: Realism and Interest Rates
THE FIRST GROUP The European Central Bank (ECB), the Bank of England, the US Federal Reserve Bank and most of the West’s other “hard” currencies’ central banks clearly belong to the first group, The European Central Bank (ECB) yesterday left its main interest rate unchanged at 4 per cent just hours after it injected euro 42.2bn into euro money markets in its latest emergency liquidity-boosting operation. The decision – although in line with expectations – marked an about-turn for the ECB. Jean-Claude Trichet, its president, had signalled at the start of August that the central bank expected a rise to 4.25 per cent. But its plans were blown off course by the global financial market turmoil. Earlier on Thursday, the Bank of England kept UK rates on hold at 5.75%. Central banks in Australia and Canada also decided to keep rates on hold this week. Explaining the background to the ECB's unanimous decision, Trichet said the fundamentals of the eurozone economy remained strong but the recent turmoil on financial markets meant policymakers needed to proceed with caution. "The financial market volatility and reappraisal of risk in recent weeks have led to an increased UNCERTAINTY," he said. "Given this high level of uncertainty, it is appropriate to gather additional information and examine new data before deriving further conclusions for monetary policy." Mr Trichet said growth across the eurozone had slowed during the second quarter but that key indicators such as unemployment remained "favourable". (3) |
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Ivo
Sep 6th, 2007 - 10:28 PM |
Re: Realism and Interest Rates
THE SECOND GROUP Those who belong to the second group recognise that a good is “when” as well as “what”. An apple today and an apple tomorrow are two different goods. That’s why there is such a thing as interest rate which is the price at which quantity supplied (of current apples to be exchanged for future apples) equals quantity demanded (of current apples to be exchanged for future apples). (4) Those who belong to the second group recognise not only with Hayek, but also with Keynes and even Marx, that the capitalist economy as full of uncertainty. (5) Hence they recognise that it is impossible to wholly eliminate all uncertainty (6) and that public coercion, not only to prevent unjust actions, but to achieve particular results for specific purposes or groups, such as the arbitrarily fixing of interest rates in order to protect home-owners, is inadmissible. (7) The second group respects the real distinctions in the world (of interest rates). (8) It respects the facts of how the world is and how it works, recognises that there is a world of real existence which men have not made or constructed and exists independently of the human mind, and views that truth, the correspondence of interest rates with economic fundamentals, is an essential presupposition of any sane philosophy, not to mention any sane science. (9) |
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Ivo
Sep 6th, 2007 - 10:31 PM |
Re: Realism and Interest Rates
100 PERCENT GOLD RUPEE BANKING Instead of depositors each believing that they have a total, say, of rupee 1 billion of deposits, while they are all laying claim to only rupee 100 million of reserves, under a 100 percent Gold Rupee banking, money would be saved and loaned to a bank for a definite term, the bank then relending these savings at an interest differential, and repaying the loan when it becomes due. This is what most people wrongly believe the commercial banks are doing now. (10) This would mean an end to all (economic) warfare and to all uncertainty for depositors. It is about time that Henry's C.K. Liu's injunction in the April 11, 2002 Asia Times Online be followed: US dollar hegemony has got to go! (11) Hence, while China is dumping the dollar, it is being denied that central banks are buying gold, said Ambrose Evans-Pritchard, in a column “Is China quietly dumping US Treasuries?” in yesterday’s London Telegraph. (12) Ivo Cerckel ivocerckel AT siquijor DOT ws http://blogs.siliconindia.com/goldrupee |
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Ivo
Sep 6th, 2007 - 10:33 PM |
Re: Realism and Interest Rates
ENDNOTES (1) http://en.rian.ru/analysis/20070906/77128861.html (2) http://news.bbc.co.uk/2/hi/middle_east/6981674.stm (3) http://news.bbc.co.uk/2/hi/business/6981621.stm (4) David D. Friedman, “Price Theory – An Intermediate Text”, Cincinnati, Ohio, South-Western Publishing Co., 1986, p. 262 (5) Hoon Hong, “Marx's value forms and Hayek's rules: a reinterpretation in the light of the dichotomy between physis and nomos”, p.47 www.ceeol.com/aspx/getdocument.aspx?logid=5&id=8f9af00f-c7e7-443c-9638-87c9e3ce8863 (6) Friedrich A. von Hayek, “Law, Legislation, and Liberty”, The University of Chicago Press, 1976, II p.38 (7) Friedrich A. von Hayek, “Law, Legislation, and Liberty”, The University of Chicago Press, 1973, I p.2 (8) Here, I am perhaps confusing realism with natural law as defined by Frank Van Dun, on p. 46 of his essay “The Pure Theory of Natural Law” http://users.ugent.be/~frvandun/Texts/Articles/Natural%20Law%20-%20part%20I.pdf A breakdown of natural law manifests itself when people do not heed the real distinctions between persons and other things and between one person and another that define the natural law. The words, actions or property of one person are ascribed to another and action is based on the ascription rather than the reality. One person is blamed for, or credited with, what another said or did. The guilty and the innocent, the producers and the parasites, the debtors and the creditors, the malefactors and the victims—they all get confused with one another. Accordingly, justice, in the setting of natural law, is the attempt to instil respect for the real distinctions among persons and between persons and other things. (9) Barry Smith, “John Searle - From Speech Acts to Social Reality” in: Barry Smith (ed.), “John Searle”, Cambridge UP, 2003, 1, p.2 (10) Murray N. Rothbard, “The Case for the 100 Percent Gold Dollar” Publication history: Leland Yeager (ed.), In Search of a Monetary Constitution. Cambridge, MA: Harvard University Press, 1962, pp. 94-136. Reprinted as The Case For a 100 Percent Gold Dollar. Washington, DC: Libertarian Review Press, 1974, and Auburn, Alabama: Mises Institute, 1991, 2005. http://www.mises.org/story/1829#CASE (11) http://www.atimes.com/global-econ/DD11Dj01.html (12) Is China quietly dumping US Treasuries? By Ambrose Evans-Pritchard Last Updated: 12:25am BST 06/09/2007 http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/09/05/bcnchina105.xml A sharp drop in foreign holdings of US Treasury bonds over the last five weeks has raised concerns that China is quietly withdrawing its funds from the United States, leaving the dollar increasingly vulnerable. + Robin Bhar, a metals analyst at UBS, said there was little evidence yet that Asian central banks were switching heavily into gold. Most of the recent buying of gold has been on the COMEX futures markets, the playground of hedge funds. |
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