[LapsangGuzzler]

> If all the govt did was warn, we may not have the mental bandwidth to process all that into rational actions.

The government does not exist to make sure that you just get the right amount of information that you need so you aren't cognitively overburdened while they handle everything else for you behind the scenes. It's never worked that way.

> The question is really about where the risk threshold is that transitions their role from warning to regulating.

This came from CFPB, which exists primarily to warn against bad actors in the financial world. They're positioned to do this largely because the finance industry has repeatedly lobbied successfully to block effective regulation. To get around this, Elizabeth Warren created CFPB as an office explicitly to watch how the finance industry interacts with consumers post-2008. The fact that this warning even exists represents an improvement because CFPB was created exactly to do this. They do not have the power to declare who's a bank and who's not.

And to be clear, PayPal et al haven't committed any crimes here, CFPB is just pointing out that they're not insured as bank so you can't rely on the government bailing them out. CFPB sued Wells Fargo over the fraudulent account scandal, etc. They're more than capable of acting when crime has occurred. The problem (and this is the product of the finance industry understanding the game) is that a company failing isn't itself a crime. No bank execs went to prison over 2008 because they didn't commit any crimes as the legal system defines them. The best thing the government can do in so many cases is warn people not to be stupid with their money. They can't actually manage it for you.

[MereInterest]

> It's never worked that way.

Yes, it has. When the FDA was formed in 1906, it didn’t write memos to notify buyers about the state of the meat-packing industry, it banned them. When thalidomide was found to cause birth defects, it was banned.

When the Federal Reserve Act was passed, the result was not just a letter written to customers of specific banks. It brought specific changes on how banks may legally operate.

[WalterBright]

The purpose of the Fed was not to regulate banks, but to create a fiat money system instead of a gold reserve system. The purpose of a fiat money system is to enable the government to print money and spend it with wild abandon, resulting in endemic inflation, and has happened to every single fiat money system.

The Fed and the government will never admit this, however, which is why they blame inflation on:

1. speculators

2. profiteers

3. wage-price spiral

4. cost push

5. demand pull

6. Putin

7. Arab cartels

8. oil companies

and about anything else they can think of. Anything but the real reason.

[WalterBright]

One of the more astonishing pieces of propaganda coming from the Fed is the idea that 2% inflation is some sort of "good for the economy" thing. Astonishing in that people buy it hook, line and sinker.

What it is is a 2% annual tax on the economy. Even worse, your illusory inflation "gains" on assets then get taxed, too.

The only thing it is good for is the politicians.

[Straw]

Although I agree wholeheartedly with the economic logic, I have a couple of minor counterpoints:

1. Constant 2% inflation at least doesn't have the negative effects of unpredictable inflation, its just a 2% tax.

2. Certain prices appear to be slightly sticky in that they don't go down, for example, wages are almost never cut in nominal terms, for psychological/cultural reasons- people tend to quit if their wages get cut. Slight inflation allows these to slowly decrease without running into the asymmetric price stickiness behavior.

What do you think?

[WalterBright]

I'm actually ok with a 2% inflation rate as a means of funding the government. I just wish the Fed and the government would be honest about it. I don't like losing all respect for the officials pushing the propaganda.

[WalterBright]

"As we have repeatedly emphasized, maintenance of the gold Standard means that the stock of money must be whatever is necessary to balance international payments. On the other hand, the real bills criterion sets no effective limit to the quantity of money."

-- Monetary History of the United States, pg 191, Friedman

Endemic inflation set in the next year.

[bumby]

Didn't Friedman also acknowledge that more recent monetary influences (1980 onward) deviate from the data he used to draw his conclusions in Monetary History of the United States? In other words, the statistics he used wouldn't necessarily draw the same conclusions today?

In that context, his statement is fine as a historical study but may not be suitable to model current economics.

[anonymouskimmer]

> The purpose of

GP comment was writing about "the result" of, not "the purpose of".

[bumby]

I think the confusion between our points is that the GP was referring to the “govt” and not “CFPB”. The govt is a bigger umbrella that contains regulators, but that isn’t mutually exclusive with pointing out the CFPB can’t regulate.

Beyond that, the govt is a service organization. Those services run the gamut from physical security, to regulation, to providing information.