I'm making two AMAs, an economics and a philosophy edition.

Hopefully a number of questions will engender a broad and interesting discussions about various aspects of both of those fields. And, if you consider me a reliable authority (you really should by now), I might be able to help you understand a certain process or concept.

Can monopolies be either inherently good or bad for the market?

Nothing is inherently good or bad. If a monopoly were to keep prices at as low levels as possible, then I suppose that would be good since they're disallowing competition through a legitimate practice. There's just no guarantee that they'll do or continue to do that.

Quote from: Meta Cognition on January 07, 2015, 10:55:04 AM

Quote from: DAS B00T x2 on January 07, 2015, 10:49:58 AM

Can monopolies be either inherently good or bad for the market?

Nothing is inherently good or bad. If a monopoly were to keep prices at as low levels as possible, then I suppose that would be good since they're disallowing competition through a legitimate practice. There's just no guarantee that they'll do or continue to do that.

Is such a scenario likely to occur in an unrestricted market though?

No, not unless you have a "natural monopoly". Although I've seen very little evidence for their existence in any significant capacity; most monopolies evolve by lobbying the government and having regulations passed for their field of commerce which restricts new entrants or gives them some kind of benefit.

Competition--especially free trade--are the best safeguards against monopoly.

Is this an acceptable understanding of the Federal Reserve? The Fed prints money in order for private banks to loan and make investments.

Not exactly. It's all very convoluted, but essentially the federal reserve controls inter-bank interest rates for the trading of federal funds (feel free to question any of the variables mentioned there). When it comes to printing money, they do it primarily to stabilise the price-level, and keep inflation at 2pc.

I also have a couple other questions: if the Fed merely loans out the money, doesn't that mean they eventually get all that money back? And if they do, what exactly do they do with all that wealth?

I do know that the Fed makes a profit, but I'm not entirely sure how that's done. To my knowledge, however, they either use it for self-financing or turn it over to the American government.

Isn't the Fed technically redistributing wealth as they print money? They decrease the value of the dollar but print more of them for themselves to own.

Well, the Fed isn't making itself richer, as it were. But it does decrease the value of the currency if it's profligate in its printing.

Does the economy need inflation for the whole system to work? Or is inflation just nice to have?

It's a lot better if it does. Inflation is the thing which "greases the wheels". For instance, if you run into a time of economic hardship and you need to cut back, you'll more than likely fire people over cutting their wages. Wages, for behavioural reasons, are very sticky and difficult to cut in value. If you have, say 2pc inflation with 2pc wage growth, it's much easier to cut it down to 1pc wage growth as opposed to making a 1pc cut with no inflation at all.

What are the pros and cons of having a gold-backed currency and why do you support not having a gold standard?

The gold standard can induce long-term price stability, with high inflation and hyperinflation being both rare and almost impossible respectfully. Any inflation that occurs will normally be due to supply-side issues--for instance, you'll have the same amount of money chasing less goods.

However, the unequal distribution of gold throughout the world makes it more advantageous for the biggest gold-producing countries. Also, because the amount of gold is finite, it acts as a cap on economic growth--the money supply should increase as the value of the economy does. Not to mention, it makes an economy more susceptible to deflationary shocks.

Why is the EU economy doing so bad?

cus countries like greece, italy, and romania

le cheeky bump