Easy Money--Why ?

[dilloduck]

Why did the Fed, the friendly Bank of the United States, make money so easily available that the regulation of this flow was such a hot topic ?

 

[Paulie]

I answered you in the other thread where you asked, sorry it took me so long to reply though, I had to handle some issues around the house.

Here's what I posted:

It's usually the same thing that always prompts the decision to slash rates artificially low. Low rates and the cheap, easy money that accompanies them entices added investment moves, because people want a place to put that extra money to make it work for them. Usually, especially in recent years such as these past 2 decades, it ends up being malinvestment into some intriguing asset class, which ends up overinflating and inevitably leads to a bubble that must burst, as no asset's value can rise to infinity. We've seen 2 big ones in the past 10 years.

During the time of economic "prosperity" when those bubbles are being inflated, the interest rates tend to creep back up to a more normal level, somewhere around 6%. This tends to contract the money supply though, and as those bubbles become inflated enough they eventually burst, and now you're stuck with less available money, consumer confidence falls, borrowing and lending slows down, and the economy overall starts to slow.

The only thing the Fed can, or seems to know HOW to do, is lower the interest rates and spark more lending and borrowing. This creates that cheap, easy money scenario all over again, which inevitably leads to an endless cycle of what I just explained. This is called the Business Cycle.

It will never end either, until the entire monetary policy is changed. There is no balance to it in its current form. We will ultimately live through endless boom and bust cycles, because there's no other possible effect from these policies.

The only problem NOW, is that the banks seem to have been picked clean, so to speak, and there's really nothing left to keep the cycle continuing without a serious recession or depression to cleanse all the bad "paper", so to speak.

So now we have our government saying it's all ok, we'll just finance it all FOR you, so we can continue this boom and bust cycle we have all come to know and love. Now instead of it being mostly a burden on the private sector, it's become a public burden, placed on the backs of the taxpayer.

I'm sure this isn't exactly the MOST accurate way of explaining it, and I imagine gonegolfin could articulate it much better than I, but in laymen's terms this is basically what we're dealing with.

In the end, it really is nothing more than control. They (the bankers) have us by the balls, because they get to decide what our money is worth, and how much of it we can have, with then ultimate burden placed not on THEM, but on us.

 

[CA95380]

I'm not about to touch this one! lol

I will wait until you explain why you think they did, first.

 

[dilloduck]

I answered you in the other thread where you asked, sorry it took me so long to reply though, I had to handle some issues around the house.

Here's what I posted:

Thanks for the answer--I guess some threads need merging. Im' really tired of everyone refusing the look behind the curtain here.

 

[Paulie]

Thanks for the answer--I guess some threads need merging. Im' really tired of everyone refusing the look behind the curtain here.

From the other thread...I'll just do my own version of merging:

So are you claiming that our banking systen is inherently flawed ? That the fed made too much money available to a corrupt system ? Now when you say bankers, are you referring to the Fed banks ?

The fractional reserve system of banking is flawed, in that there is exponentially more money lent out than kept in reserves. If there were ever a run on the banks, it would be pandemonium. The FDIC has nothing CLOSE to the amount available that it would need to cover all deposit liabilities. This however, is how all banks run. If there ever WERE a run on the banks, where do you think the money would come from to cover all the liabilities that the FDIC can not cover? And who do you think would foot the bill?

In regards to the Fed, yes, they make too much money available. Their answer to every problem is to make more money available, rather than let the market cleanse itself of the bad paper that was already causing the problem.

When I say bankers, I mean people like the Rothschilds, the Warburgs, the Fed board of governors, etc. It's those extremely wealthy banking families, and all the minions they use to do their dirty work at central banks. Case in point, Bernanke and Greenspan, for two recent and recognizable names.

I think the last fed chairman who made a GOOD move, was Paul Volcker when he raised rates up to almost 20% around 1980 to cleanse the excess from the 70's recession. The problem though, was during the Reagan years, deficits became the way to do business, and a lot of money was printed to finance it. The Fed rate went from around 19% in 1980 to 6% in 1986. That's almost a 70% drop in only 6 years.

The banking crisis in the 80's led to more severe rate cuts, bringing the rate down to around 3% in the early 90's during THAT credit crisis, which then sparked the dot-com bubble due to all the newly available money.

I'm hoping gonegolfin will come along to help out here as well. I think I'm pretty right about this, but I don't count out the fact that I could be off on some things.

EDIT: Also note, that when deficit spending became big and the national debt was expanded so much, it was due to defense spending and increasing military escapades. The end of the Cold War was a big loss. I believe that's why so many people believe 9/11 was an inside job. It gave the reason to increase defense spending again, and increase the military empire.

 

[dilloduck]

From the other thread...I'll just do my own version of merging:



The fractional reserve system of banking is flawed, in that there is exponentially more money lent out than kept in reserves. If there were ever a run on the banks, it would be pandemonium. The FDIC has nothing CLOSE to the amount available that it would need to cover all deposit liabilities. This however, is how all banks run. If there ever WERE a run on the banks, where do you think the money would come from to cover all the liabilities that the FDIC can not cover? And who do you think would foot the bill?

In regards to the Fed, yes, they make too much money available. Their answer to every problem is to make more money available, rather than let the market cleanse itself of the bad paper that was already causing the problem.

When I say bankers, I mean people like the Rothschilds, the Warburgs, the Fed board of governors, etc. It's those extremely wealthy banking families, and all the minions they use to do their dirty work at central banks. Case in point, Bernanke and Greenspan, for two recent and recognizable names.

I think the last fed chairman who made a GOOD move, was Paul Volcker when he raised rates up to almost 20% around 1980 to cleanse the excess from the 70's recession. The problem though, was during the Reagan years, deficits became the way to do business, and a lot of money was printed to finance it. The Fed rate went from around 19% in 1980 to 6% in 1986. That's almost a 70% drop in only 6 years.

The banking crisis in the 80's led to more severe rate cuts, bringing the rate down to around 3% in the early 90's during THAT credit crisis, which then sparked the dot-com bubble due to all the newly available money.

I'm hoping gonegolfin will come along to help out here as well. I think I'm pretty right about this, but I don't count out the fact that I could be off on some things.

Any non-partisan help is appreciated. If we have a flawed banking system to begin with then I guess it's pretty difficult to expect any great results to come out of it. We just continue playing as if the right hand doesn't know what the left hand is doing yet point fingers at who is to blame.
Apparently neither of the major parties has the balls to face the real problem for fear that they will lose power. All I can see is that the Fed has America financially blackmailed.

 

[Paulie]

Any non-partisan help is appreciated. If we have a flawed banking system to begin with then I guess it's pretty difficult to expect any great results to come out of it. We just continue playing as if the right hand doesn't know what the left hand is doing yet point fingers at who is to blame.
Apparently neither of the major parties has the balls to face the real problem for fear that they will lose power. All I can see is that the Fed has America financially blackmailed.

There was nothing partisan about it, btw. Just because I mentioned Reagan doesn't mean I'm blaming a side. It's just a simple fact that spending increased as much as it did starting in his terms. Congress was just as much to blame, and I believe control of congress was split during that time, with the Dems having a large majority in the house and the R's controlling the Senate.

Regardless, you're starting to realize now why so many people got so enthusiastic about a candidate who was willing to take this issue on in the mainstream. You NEVER heard anyone call the Fed out in presidential campaigns. Not like Ron Paul, anyway.

In my opinion, it's the single most important issue we face. Much bigger than any so-called threat of terrorism. It's the one thing keeping conservatives from getting what they really want. That, and the annoying social issue wedges that have been thrown into the mix. If we're ever to have real fiscal conservatism in this country, the Fed has to go.

 

[dilloduck]

There was nothing partisan about it, btw. Just because I mentioned Reagan doesn't mean I'm blaming a side. It's just a simple fact that spending increased as much as it did starting in his terms. Congress was just as much to blame, and I believe control of congress was split during that time, with the Dems having a large majority in the house and the R's controlling the Senate.

Regardless, you're starting to realize now why so many people got so enthusiastic about a candidate who was willing to take this issue on in the mainstream. You NEVER heard anyone call the Fed out in presidential campaigns. Not like Ron Paul, anyway.

In my opinion, it's the single most important issue we face. Much bigger than any so-called threat of terrorism. It's the one thing keeping conservatives from getting what they really want. That, and the annoying social issue wedges that have been thrown into the mix. If we're ever to have real fiscal conservatism in this country, the Fed has to go.

Sorry-- I wasn't being sarcastic as usual. I seriously meant to thank you for the non-partisan explanation. How is congress to blame for the abundance of cheap money ?

 

[Paulie]

Sorry-- I wasn't being sarcastic as usual. I seriously meant to thank you for the non-partisan explanation. How is congress to blame for the abundance of cheap money ?

I meant congress was as much to blame as Reagan for the spending increases, not the availability of cheap money. Although, congress is certainly to blame on an indirect scale.

Congress could agree to abolish the board of governors of the Fed and enact a new monetary policy, but they don't. Paul crafts that legislation once every couple years and submits it to his committee, but it never makes it out.

Congress is to blame because of their inaction. Most of them are owned by the same people who pull the strings at the central bank. If they aren't, they are in duress through potential blackmail. I believe most members of congress are dirty, and that should they ever get out of line, they would simply be brought down on whatever dirty deeds they've done throughout the years.

I believe they are ALLOWED to be corrupt to a certain extent, as it is held over their heads as a way to control them should they ever decide they have a conscience.

But what do I know, I'm a kook. Ask RGS.

 

[editec]

You folks seem to believe that the majority of money borrowed in this nation is done for real estate.

Compare the amount of money borrowed by all the real estate purchasers in America to the amount borrowed by corporations and get back to us with what you find, would you?

Heard this AM that Maine couldn't find a lending source for its bonds for infrastructure projects this week.

Heard also that Sweden trying to borrow sell some bonds and they market wouldn't lend them any money for less than 15% APR!

One commenter quipped they'd be better off funding their public works projects on credit cards than by selling long term government insured bonds.

This liquidity crises is going to shut down businesses and governments shortly, ya' know?

I'm starting to think that may not be such a bad thing, and yet at the same time I'm pondering what sort of arsenal I should be stocking up on to weather this imminent fall of civilization?

I'm finding it ironic that the GREAT KONG called government as we know it might take its final fall, and no revolution (from either right or left) will be necessary to make it happen.

No, it wasn't the airplane that killed the beast.

T'was greed that killed it.

 

[dilloduck]

I meant congress was as much to blame as Reagan for the spending increases, not the availability of cheap money. Although, congress is certainly to blame on an indirect scale.

Congress could agree to abolish the board of governors of the Fed and enact a new monetary policy, but they don't. Paul crafts that legislation once every couple years and submits it to his committee, but it never makes it out.

Congress is to blame because of their inaction. Most of them are owned by the same people who pull the strings at the central bank. If they aren't, they are in duress through potential blackmail. I believe most members of congress are dirty, and that should they ever get out of line, they would simply be brought down on whatever dirty deeds they've done throughout the years.

I believe they are ALLOWED to be corrupt to a certain extent, as it is held over their heads as a way to control them should they ever decide they have a conscience.

But what do I know, I'm a kook. Ask RGS.

Congress=Bank sock puppets.
They have to pretend that they care about the people just enough to keep their jobs. The spend the rest of their time pleasing bankers.

 

[Ravi]

The only thing the Fed can, or seems to know HOW to do, is lower the interest rates and spark more lending and borrowing. This creates that cheap, easy money scenario all over again, which inevitably leads to an endless cycle of what I just explained. This is called the Business Cycle.

Damn, I heard something about this the other day. A clip of Bush from 2003 patting himself on the back because lowering interest rates would enable millions of people to own their own homes, and not just shack homes, but nice homes (the way he sounded was like he was encouraging people to live beyond their means)...grrr....I wish I could remember where I heard this. It was somehow tied into the Iraq war or the GWOT.

 

[dilloduck]

Damn, I heard something about this the other day. A clip of Bush from 2003 patting himself on the back because lowering interest rates would enable millions of people to own their own homes, and not just shack homes, but nice homes (the way he sounded was like he was encouraging people to live beyond their means)...grrr....I wish I could remember where I heard this. It was somehow tied into the Iraq war or the GWOT.

fuck off Ravi----leave your partisan shit out of this

 

[Ravi]

fuck off Ravi----leave your partisan shit out of this

Sigh, I wasn't be partisan, retard. Bush does share some of the blame, and just because he's your homeboy doesn't mean it shouldn't be mentioned.

I posted a link to a big reason the housing fuck up happened a couple of months ago. NPR did an excellent story on how the Fed kept the rate artificially low so the WORLD didn't want to invest in T bonds, so they turned to Wall Street and started investing in the US housing market. This is where all this stuff happened. If you can take your blinders off, it's a good read.

This American Life Episode Transcript Program #355 The Giant Pool of Money [Ambient sound of piano playing and crowd murmur]

The link to the pdf is at the top of the page.

 

[dilloduck]

Sigh, I wasn't be partisan, retard. Bush does share some of the blame, and just because he's your homeboy doesn't mean it shouldn't be mentioned.

I posted a link to a big reason the housing fuck up happened a couple of months ago. NPR did an excellent story on how the Fed kept the rate artificially low so the WORLD didn't want to invest in T bonds, so they turned to Wall Street and started investing in the US housing market. This is where all this stuff happened. If you can take your blinders off, it's a good read.

This American Life Episode Transcript Program #355 The Giant Pool of Money [Ambient sound of piano playing and crowd murmur]

The link to the pdf is at the top of the page.

Well let's talk about the fed fucking up before this thread launches into another worthless finger pointing session. What did we do to get to where we are. We --as in Americans.

 

[Ravi]

Well let's talk about the fed fucking up before this thread launches into another worthless finger pointing session. What did we do to get to where we are. We --as in Americans.

Well, one thing is is that Americans as a whole bought into the myth that the best way to fight the war on terrorism was to go shopping. And with the Fed's drop of the interest rate, a lot of them went house shopping. And with no regulations on what type of loans the banks could offer, banks went mad with greed and a lot of people went mad with desire for things they couldn't afford.

The market can neither regulate itself dependably, nor apparently can the government dependably regulate it.

What do you think is the reason?

 

[dilloduck]

Well, one thing is is that Americans as a whole bought into the myth that the best way to fight the war on terrorism was to go shopping. And with the Fed's drop of the interest rate, a lot of them went house shopping. And with no regulations on what type of loans the banks could offer, banks went mad with greed and a lot of people went mad with desire for things they couldn't afford.

The market can neither regulate itself dependably, nor apparently can the government dependably regulate it.

What do you think is the reason?

Right---Americans believed that if they went out and used all this easy credit that it would help the war on terrorism.

Did you shop for Uncle Sam Ravi ?

My question is why did the Fed drop the rate ?

 

[Ravi]

Right---Americans believed that if they went out and used all this easy credit that it would help the war on terrorism.

Did you shop for Uncle Sam Ravi ?

My question is why did the Fed drop the rate ?

Were you alive in 2001? Don't you remember how the economy pretty much ground to a halt for several months because people were *cough* terrified? And Bush's grand idea was to encourage people to spend money to stimulate the economy? And the Fed's brilliant idea was to lower the interest rate to stimulate the economy...no, I didn't, I'm not a moron.

 

[dilloduck]

Were you alive in 2001? Don't you remember how the economy pretty much ground to a halt for several months because people were *cough* terrified? And Bush's grand idea was to encourage people to spend money to stimulate the economy? And the Fed's brilliant idea was to lower the interest rate to stimulate the economy...no, I didn't, I'm not a moron.

So the Fed just decided on thier own that this cheap money was a great idea ?

 

[Ravi]

Doubtful. The unmentionable one and his minions prolly asked the Fed what would be the best way to stimulate the economy.