Does anyone think we need the Fed?

[Paulie]

Yes. Why not? What law prevents it?

Can you create $9,000 out of thin air? Wouldn't you get arrested for counterfeiting if you did that?

It's not out of thin air. It's out of deposits in the bank.

I think what he's getting at is the Fed creating it out of thin air, which they do.

They create an amount of brand new money on their balance sheet, and purchase assets with it which increases the reserve amounts of member banks, giving said banks the ability to lend more than what they currently hold in demand deposit.

 

[rubberhead]

Moving the economy away from a fractional banking system would collapse the economy because credit would implode and make last fall's financial collapse look like a picnic.

Whether or not the Federal Reserve system is the best system, central banks with an "elastic currency" (how very 1920s of you) generally are more adaptive and have less volatility in the economy.

What happens when you stretch out an elastic band? It's cross-sections get thinner and thinner until the band snaps. Not a very good omen eh? Maybe the "crazy train" argument doesn't really hold up. Basically you're saying we should stay on this train that's going off a cliff because derailing it would be too costly. Think it over.

 

[Paulie]

The balance to the equation is that the Fed can extinguish the reserves they've created by selling assets.

The main problem with the Fed is that they've never gotten that part right. One would think that after almost 100 years of what amounts to trial and error, they would have been a little more responsible about their actions going through the latest housing debacle.

But no, instead their figurehead, who is SUPPOSEDLY a free marketer if you ask any liberal, comes out and tells us to borrow even MORE, while he leaves bank reserve amounts at historic levels to sustain the borrowing he advocated. And not just typical borrowing did he advocate, but borrowing against the little bit of significant wealth that the middle class could still claim at that point: HOME EQUITY GROWTH.

Talk about "change". The ******* CHANGE we need is how the monetary situation is handled in this country. When is enough ******* ENOUGH?

 

[rubberhead]

well one, thats not my webite.. and two I have to dumb it down somewhat. In effect, the fed sells our own money to us. We go into debt to buy it, and then we get taxed to finance it.

We do not go into debt to create Federal Reserve notes. Federal reserve notes are exchanged for government debt, which is held as an asset on the balance sheet. Holding government debt is not the same thing as going into debt.

As government debt grows and proportionally the risk of taking on government debt grows, it is less of an asset. If the Fed is a government agency, isn't this a conflict of interests? I mean if you could print money, wouldn't you loan it to yourself?

 

[The Rabbi]

Can you create $9,000 out of thin air? Wouldn't you get arrested for counterfeiting if you did that?

It's not out of thin air. It's out of deposits in the bank.

I think what he's getting at is the Fed creating it out of thin air, which they do.

They create an amount of brand new money on their balance sheet, and purchase assets with it which increases the reserve amounts of member banks, giving said banks the ability to lend more than what they currently hold in demand deposit.

No, what he's talking about has little to do with the Fed, since it is the member banks making the loans.
I still want to know what's wrong with it.

 

[rubberhead]

Id be fine with letting the fed do what it does as long as we could have competing currencies in silver and/or gold.

Over time youll see that "elastic" is just another word for "volatile"

A gold/silver standard would mean that the money supply would be reliant on the profitability of mining firms and the political whims of third world countries. It makes little sense from an economic perspective to be reliant on an industry that was irrational for three decades and from a political perspective to be reliant on countries that are often basket cases.

And it would cause a massive deflation. There isn't a whole lot of gold/silver in the world. This was the issue in the 19thc, not enough capital.

No, the issue was that the government wanted deeper pockets. The only problem is that they are making everyone's arms shorter in the process. Deflation means that everyone's money is more valuable. How is that a bad thing? Please educate me, Rabbi Hitler-Keynes. How do you define capital? I define it as something that generates value. How does printing paper that inflates the currency generate value?

 

[The Rabbi]

A gold/silver standard would mean that the money supply would be reliant on the profitability of mining firms and the political whims of third world countries. It makes little sense from an economic perspective to be reliant on an industry that was irrational for three decades and from a political perspective to be reliant on countries that are often basket cases.

And it would cause a massive deflation. There isn't a whole lot of gold/silver in the world. This was the issue in the 19thc, not enough capital.

No, the issue was that the government wanted deeper pockets. The only problem is that they are making everyone's arms shorter in the process. Deflation means that everyone's money is more valuable. How is that a bad thing? Please educate me, Rabbi Hitler-Keynes. How do you define capital? I define it as something that generates value. How does printing paper that inflates the currency generate value?

Are you still posting here? Do you have no shame whatsoever, having been unmasked as an ignoramus and noob in these matters?
Deflation means that prices go down. There has never been a country that experienced deflation as a positive thing.
And educating you is impossible. You are uneducable.

 

[Paulie]

It's not out of thin air. It's out of deposits in the bank.

I think what he's getting at is the Fed creating it out of thin air, which they do.

They create an amount of brand new money on their balance sheet, and purchase assets with it which increases the reserve amounts of member banks, giving said banks the ability to lend more than what they currently hold in demand deposit.

No, what he's talking about has little to do with the Fed, since it is the member banks making the loans.
I still want to know what's wrong with it.

The member banks are making loans not only from what is demand deposited, but from the reserves that the Fed is increasing via its asset purchases to meet the reserve minimum.

You understand that the Fed creates money that doesn't yet exist, and buys assets (typically only treasuries until this recent financial mess) from banks, which increases those respective banks' reserves, right? This is how they establish, and attempt to maintain, a federal funds target rate. The more a bank has on reserve, the less they'll require in interest to loan it, because the risk to the balance sheet is mitigated.

What I personally think is wrong with it is what I posted here: http://www.usmessageboard.com/1611152-post223.html

 

[rubberhead]

I get the idea that you're a crank.
Look at P2 where it says any surplus goes to the Treasury. I guess that's the same with Fed Ex too, right?

Sure their "surplus" goes back to the treasury..But theres a few issues with that. One the real issue is seignorage and that the debt is created in the first place. Also we dont really know what the fed does because its books are not open to a government audit. They can transfer govt debt to member banks or other places and then no money is remitted back to the treasury. Basically around the $23 or so billion the fed collects they remit back approx $19 or $20 billion. But we really dont know whats going on behind the scenes.. And theres no reason for this debt to be created in the first place.


Another problem comes from the fractional reserve banking system which uses these created federal reserve notes as reserves to make out loans and such. These banks in turn will create more checkbook money on top of the paper federal reserve notes so that we get a very unstable and very inflationary environment that all the while makes it impossible for all debts to get paid off.

The system is always taking somebody's house, car, business, property etc. Thats how it works.

Our currency is debt and we continually have to go into debt to buy more of it.

Your description of the fractional reserve system baffles the mind. If I deposit $1000 in the bank what are they supposed to do with it? Stick it in the vault?

Yes, unless I tell them that they can do whatever they want with it. And if I were to do that, I would probably expect to be paid for my troubles. Otherwise, why not just put my money in my vault at home?

 

[rubberhead]

And it would cause a massive deflation. There isn't a whole lot of gold/silver in the world. This was the issue in the 19thc, not enough capital.

No, the issue was that the government wanted deeper pockets. The only problem is that they are making everyone's arms shorter in the process. Deflation means that everyone's money is more valuable. How is that a bad thing? Please educate me, Rabbi Hitler-Keynes. How do you define capital? I define it as something that generates value. How does printing paper that inflates the currency generate value?

Are you still posting here? Do you have no shame whatsoever, having been unmasked as an ignoramus and noob in these matters?
Deflation means that prices go down. There has never been a country that experienced deflation as a positive thing.
And educating you is impossible. You are uneducable.

I'm so ashamed that I think prices going down is a bad thing. Does anyone agree with this loon?

 

[The Rabbi]

Sure their "surplus" goes back to the treasury..But theres a few issues with that. One the real issue is seignorage and that the debt is created in the first place. Also we dont really know what the fed does because its books are not open to a government audit. They can transfer govt debt to member banks or other places and then no money is remitted back to the treasury. Basically around the $23 or so billion the fed collects they remit back approx $19 or $20 billion. But we really dont know whats going on behind the scenes.. And theres no reason for this debt to be created in the first place.


Another problem comes from the fractional reserve banking system which uses these created federal reserve notes as reserves to make out loans and such. These banks in turn will create more checkbook money on top of the paper federal reserve notes so that we get a very unstable and very inflationary environment that all the while makes it impossible for all debts to get paid off.

The system is always taking somebody's house, car, business, property etc. Thats how it works.

Our currency is debt and we continually have to go into debt to buy more of it.

Your description of the fractional reserve system baffles the mind. If I deposit $1000 in the bank what are they supposed to do with it? Stick it in the vault?

Yes, unless I tell them that they can do whatever they want with it. And if I were to do that, I would probably expect to be paid for my troubles. Otherwise, why not just put my money in my vault at home?

Geez are you stupid. So let me ask, assuming you actually had money (I mean more than $3.26 in recyclable cans) do you put it in the bank? Like, where it will collect interest and be secure from theft and loss?
As for prices going down, it's a great thing if you're a buyer. And since you've probably never been a seller of anything except hemoglobin you wouldn't understand that when prices go down, that includes asset prices like houses and stock portfolios. How is having less money a good thing?

 

[Paulie]

Your description of the fractional reserve system baffles the mind. If I deposit $1000 in the bank what are they supposed to do with it? Stick it in the vault?

Yes, unless I tell them that they can do whatever they want with it. And if I were to do that, I would probably expect to be paid for my troubles. Otherwise, why not just put my money in my vault at home?

Geez are you stupid. So let me ask, assuming you actually had money (I mean more than $3.26 in recyclable cans) do you put it in the bank? Like, where it will collect interest and be secure from theft and loss?
As for prices going down, it's a great thing if you're a buyer. And since you've probably never been a seller of anything except hemoglobin you wouldn't understand that when prices go down, that includes asset prices like houses and stock portfolios. How is having less money a good thing?

Price decreases during deflation are not necessarily universally equal. Housing prices can continue to decline while equities prices can perform quite well. We're watching that happen right now. I've also noticed that the price of milk has come down about $1 from a year ago, and gasoline is also becoming cheaper. But equities continue to climb.

The biggest issue in this, is education. If you understand how to position your wealth, you can profit from inflation OR deflation. If you have enough cash to pay your bills, have low debt, and are intelligent enough to position your money to grow during deflation, then deflation can be your best friend. It becomes your opportunity to accumulate desirable products and services while the time is right. After that time expires, you reposition your money into sectors that benefit from inflation, and enjoy the excess accumulation you enjoyed during the deflationary period.

These matters are not for the undereducated. People who don't understand money have no other recourse but to complain about either of the two monetary evils.

Personally, besides the sympathy I have for those who've lost so much, I've rather enjoyed this latest deflationary spiral. I have very little debt, I continued to be gainfully employed, and I am growing my portfolio rather nicely after finding some great entry points near the equities bottom.

Now, I'm looking at starting to find my positions to benefit from the future inflation that seems all but inevitable. And I've taken ZERO courses about any of this in any kind of school. What I've learned about this, is what ANYONE can learn about this.

Or, they could just DVR all the newest reality TV shows and fatten their asses up even more while they waste away on their couch.

 

[rubberhead]

Your description of the fractional reserve system baffles the mind. If I deposit $1000 in the bank what are they supposed to do with it? Stick it in the vault?

Yes, unless I tell them that they can do whatever they want with it. And if I were to do that, I would probably expect to be paid for my troubles. Otherwise, why not just put my money in my vault at home?

Geez are you stupid. So let me ask, assuming you actually had money (I mean more than $3.26 in recyclable cans) do you put it in the bank? Like, where it will collect interest and be secure from theft and loss?
As for prices going down, it's a great thing if you're a buyer. And since you've probably never been a seller of anything except hemoglobin you wouldn't understand that when prices go down, that includes asset prices like houses and stock portfolios. How is having less money a good thing?

Wow, it's difficult to pick out the actual facts from all the personal attacks but let me see... Ok, how much interest does a savings account normally accrue? And what fraction of a banks deposits do they actually hold in general? Ok, now let me ask if this is actually a good return on investment for the account holder? Next, so prices going down is bad for sellers hmm? Well, if they bought responsibly then that wouldn't really be an exposure now would it? I mean, if they only bought things that they could afford then the falling price wouldn't ruin their lives now would it? It sounds like you are on the side of greed. Not just the greed of wanting to accumulate wealth, but the greed where you want others to bear the risk for your greedy behavior. Pretty ******* sickening dude. Are you even human Rabbi Hitler-Keynes?

 

[Mike Mitrosky]

It's not out of thin air. It's out of deposits in the bank.

I think what he's getting at is the Fed creating it out of thin air, which they do.

They create an amount of brand new money on their balance sheet, and purchase assets with it which increases the reserve amounts of member banks, giving said banks the ability to lend more than what they currently hold in demand deposit.

No, what he's talking about has little to do with the Fed, since it is the member banks making the loans.
I still want to know what's wrong with it.

A $1,000 deposit into the banking system becomes upwards of $9,000 and you dont see a problem with that?

 

[Mike Mitrosky]

And it would cause a massive deflation. There isn't a whole lot of gold/silver in the world. This was the issue in the 19thc, not enough capital.

No, the issue was that the government wanted deeper pockets. The only problem is that they are making everyone's arms shorter in the process. Deflation means that everyone's money is more valuable. How is that a bad thing? Please educate me, Rabbi Hitler-Keynes. How do you define capital? I define it as something that generates value. How does printing paper that inflates the currency generate value?

Are you still posting here? Do you have no shame whatsoever, having been unmasked as an ignoramus and noob in these matters?
Deflation means that prices go down. There has never been a country that experienced deflation as a positive thing.
And educating you is impossible. You are uneducable.

Deflation is a wonderful thing. When a sound money system is in play deflation is the norm, to the betterment of the people.

 

[Elutherian]

I most certainly don't.

The Fed has the legal ability to counterfeit. This practice is the source of our economic troubles.

 

[The Rabbi]

I think what he's getting at is the Fed creating it out of thin air, which they do.

They create an amount of brand new money on their balance sheet, and purchase assets with it which increases the reserve amounts of member banks, giving said banks the ability to lend more than what they currently hold in demand deposit.

No, what he's talking about has little to do with the Fed, since it is the member banks making the loans.
I still want to know what's wrong with it.

A $1,000 deposit into the banking system becomes upwards of $9,000 and you dont see a problem with that?

No, why not explain what the problem is.
Rubberdickhead is going on iggy. I can't deal with anyone tht stupid.

 

[Toro]

As government debt grows and proportionally the risk of taking on government debt grows, it is less of an asset. If the Fed is a government agency, isn't this a conflict of interests? I mean if you could print money, wouldn't you loan it to yourself?

It is not a conflict of interest. It is the Fed's mandate.

The Fed's assets are primarily short-term government securities, or at least they were until the crisis hit. The Fed holds these assets and submits almost all of its profits back to the government, which was $40 billion in 2008 if I recall correctly.

Would I loan money to people who would sell me debt in exchange for bills of exchange that are not interest bearing? You bet I would. That's is how the Fed makes its profits. However, the Fed has a legal mandate to control inflation (and maintain employment). If the Fed prints too much money, it will create inflation. Thus, its legal mandate is a restriction on how much money it can print.

 

[Mike Mitrosky]

I most certainly don't.

The Fed has the legal ability to counterfeit. This practice is the source of our economic troubles.

Thank you... Ah.. What a breath of fresh common sense.

 

[Mike Mitrosky]

As government debt grows and proportionally the risk of taking on government debt grows, it is less of an asset. If the Fed is a government agency, isn't this a conflict of interests? I mean if you could print money, wouldn't you loan it to yourself?

It is not a conflict of interest. It is the Fed's mandate.

The Fed's assets are primarily short-term government securities, or at least they were until the crisis hit. The Fed holds these assets and submits almost all of its profits back to the government, which was $40 billion in 2008 if I recall correctly.

Would I loan money to people who would sell me debt in exchange for bills of exchange that are not interest bearing? You bet I would. That's is how the Fed makes its profits. However, the Fed has a legal mandate to control inflation (and maintain employment). If the Fed prints too much money, it will create inflation. Thus, its legal mandate is a restriction on how much money it can print.

There is no real restriction on how much money the fed can make.. Any such restriction died with the gold standard... Thats the whole purpose of having sound money.