How should we punish China?

[Into the Night]

This is quite simply a waste of my time. Night is just making stuff up.

Inversion fallacy.

Technically speaking, the banks own the Federal Reserve.

No. The federal government owns the Federal Reserve.

They are required to buy into it to be banks in the USA.

As required by law. That is a law passed by Congress also.

The Board of Governors are appointed by the president, and confirmed by Senate.

In other words, the federal government.

They are appointed for a term of 14 years. Congress does not order the Fed to print money.

Yes it does.

The Fed is a conventional independent central bank.

No, it isn't. It is owned by the federal government.

In theory, Congress could change the laws, and take direct control. They have not done this.

They have direct control.

Massive deflation caused the Great Depression.

Nope. There was massive INFLATION during the Great Depression. The Depression was of economic activity, not of the value of the dollar, which dropped considerably in value during that time.

That happened after the Fed was founded.

Correct.

There was some deflation during the Great Recession too.

Nope. The dollar again inflated during those times (which Great Recession are you talking about?).

There would be news stories about it. It should be easy for you to prove.

There was. See the price of the dollar against various commodities. Historic charts are available.

[Into the Night]

Lets take some oversimplified stories to show you are wrong. First imagine a dollar bill that gets buried for a years. It has a velocity of zero, and therefore has effectively been destroyed during that time. It is contributing to deflation. Now imagine another dollar bill that is re-spent every day. It acts as 365 dollars in that year, and contributes to inflation.

Before Keynesian Economics, often recessions and depressions would lead to deflation as people became afraid to spend money. The deflation would lead to more deflation, as people hoarded the money that was becoming worth more. This led to worse economic problems.



That would technically be a drop in the cost of living, and not deflation. They look similar, but are not the same.

Money velocity is unrelated to the commodity value of a dollar bill.
Keynesian economics doesn't work. You can't print your way to prosperity. See the history of Mexico, Germany, and of course, the United States.

Money isn't wealth. It is only a medium of transacting wealth.

You also just nullified your own argument.

[Into the Night]

If you rent a safe deposit box, you are paying money for safe storage.

If you store it at home, you are paying money for safe storage.

Safe storage does not mean it will not cost you money, it means you will not lose the principle.

You will lose some principle value. That's the only value an object has. An object is not a loan.

So gold costs money to store, but it is still seen by some as a safe store of wealth.

Gold is not wealth. It is money. It is just another form of money.

Lets look at a real world example.

Define 'real'.

Hong Kong Dollars are printed by private banks which are required to keep US Dollars assets to backup those Hong Kong Dollars.

HKD are a creation of the Hong Kong monetary authority, a central bank. Every single HKD was created by that bank.

A bank might need a billion in US Dollar assets. The banker does not care if the dollar goes up or down, he just needs those dollars. He could keep a billion in cash in a vault, but that costs money, and loses about 2% a year to inflation. He could invest in stocks or bonds that might go up in value, but they also might collapse in value, in which case the banker would go to prison. Or he could buy US Treasurys which the banker feels are absolutely guaranteed. They may pay only 1%, less than the 2% lost to inflation, but that is 1% more than just keeping the cash in a vault.

A central bank does not need to tie anything to the U.S. dollar. Bonds are not dollars. They are loans.

As US Dollar denominated trade has increased, the number of people who need an absolutely safe store of US Dollars has increased.

It is currently decreasing.

These people do not care if there is inflation, or deflation, they just need someplace to put US Dollars where they cannot possibly lose the principle.

They are losing principle value. That's what inflation does.

If they can get a 1% return, that is great... Even if it is less than inflation.

You don't get a return on dollars. Bonds are not dollars.