Time to eliminate the Fed?

[william the wie]

Whatever her motives, Blanche Lincoln's attempts to rein in derivatives met the same fate as Brooksley Born did in 1998 when Larry Summers called Born to tell her if she continued to call for transparency her efforts would lead to the worst financial crisis since WWII.

I'm afraid this mess will be back sooner than any of us imagine.
Only worse.

Can't argue with your reasoning although I think Larry Summers was and is full of crap on this one. Would there be major transitional instability during the switchover, quite possibly. But as the 2000-1 and 2003-8 sequels to Born's proposal proved postponing a necessary step just increases the costs. Worse yet those transitional effects would be over in less than 6 months but the 100s of trillions of dollars of worldwide derivatives coursing through the US economy should have at least a 1% spin off in back office fees and such forever. Stupid politics and stupid economics.

How can the derivatives coursing through the world's economy have a greater dollar value than global GDP?

Is it credible a $38 million pool of mortgages could generate $280 million in total losses for investors before the principal was wiped out?

When does Larry Summers open his hedge fund?

Even before you get to synthetic CDOs securitized loans will normally generate 200% of face value in derivatives. That comes in the forms of tranches and CDSs with future and spot markets a multiple of 6 in the form of options also created, currency swaps in FOREX are also created but they would not go through the new exchange.

GDP is a measure of current production not wealth. At current interest rates the US "market capitalization" is about 1/3-1/2 quadrillion. Since derivatives are hedges and speculations against various risks nominal values can exceed the value of planet with no more than arbitrage speculation.

 

[Paulie]

The Fed isn't a private bank as many claim, but it's also not completely controlled by the federal government. It's a public-private hybrid.

It is not a public private hybrid. It is not controlled by the Federal Government. It is simply a mythical bank that we want the rest of the world to accept as real, so it can drive the prices of borrowed money down for our sake.

It can create money (Electronically) out of thin air, and it has the capacity to eliminate debt just by snapping its fingers. Crazy insan pieces of shit like Ron Paul would try to eliminate that just at the time that we need the Fed the most in history. If enough stupid pieces of stinking fetid shit like Ron Paul have their way, they can bankrupt the United States by claiming that we need to do away with the FED and own all of the debt that they could have erased. I sure hope he dies soon.

That has to be the craziest thing I have ever heard of, but what the hell, if CRAZY people are in the majority, they can destroy a damn good thing and destroy the whole country in the process.

It's been well established that you have no idea what you're talking about on this subject.

 

[Paulie]

The Fed isn't a private bank as many claim, but it's also not completely controlled by the federal government. It's a public-private hybrid.

It is not a public private hybrid. It is not controlled by the Federal Government. It is simply a mythical bank that we want the rest of the world to accept as real, so it can drive the prices of borrowed money down for our sake.

It can create money (Electronically) out of thin air, and it has the capacity to eliminate debt just by snapping its fingers. Crazy insan pieces of shit like Ron Paul would try to eliminate that just at the time that we need the Fed the most in history. If enough stupid pieces of stinking fetid shit like Ron Paul have their way, they can bankrupt the United States by claiming that we need to do away with the FED and own all of the debt that they could have erased. I sure hope he dies soon.

That has to be the craziest thing I have ever heard of, but what the hell, if CRAZY people are in the majority, they can destroy a damn good thing and destroy the whole country in the process.

I can't tell if you're really in love with the fed, or being sarcastic. Regardless, the fed is not a mythical bank. It is a collection of 12 privately owned reserve banks, plus a large collection of member banks. By the way, ANY bank in this country can and does create money out of thin air on a regular basis. Also, any bank in this country can, if it wants to, eliminate any debt it owns (although they almost never will, since it goes against the entire reason for the bank to exist).

What people seem to have forgotten is that there is one entity in this country, which is not a bank, but which has the ability to create money. That is the US gov't.

Any member bank that 'creates' money, did so from its reserves that were created by the Fed originally.

No member bank creates any new money beyond what the Fed has already created. Fractional reserve banking is just the next extension after the Fed's money creation.