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the 3.3 trillion in tax payer money the FED loaned to at risk US AND foreign banks at almost no interest during the financial crisis?

So right before all this hoopla about the government shutting down highjacked mainstream media, a court order finally went through where the Fed was ordered to release who it loaned money to from 2008 - 2011. Here is the problem:

1. This is only a brief snap shot of Fed activity never before disclosed but it shows the Fed playing fast and loose with tax payer money (3.3 trillion) lending to whoever it saw fit with nalmost no interest being charged on very high risk loans. Remember, when the Fed looses on a risky loan, they send the bill to the tax payers, when they win the member banks take most of the profits. This has been going on since its creation in 1914. Which institutions who are loaned money fail or suceed and at what loss, we have no idea because the Fed has never had to disclose the details. But the treasury and tax payers foot the bill.
2. The Fed had to create all this new money (3.3 trillion) out of thin air. What happens when you introduce 3.3 trillion more $$$ into the market??? The buying power of the $$$ previous in circulation goes down. What that means for you and I and everyone else around the world participating in a global economy is the price of everyting goes up, including food and gas.

Edit: sorry I did type million but its billion

thedude wrote:
1. This is only a brief snap shot of Fed activity never before disclosed but it shows the Fed playing fast and loose with tax payer money (3.3 trillion)...

The Fed's money isn't tax payer money. Even if you don't know anything about economics, cursory research will tell you that US federal tax revenue is only about 2.4 trillion USD per anum.

thedude wrote:
Remember, when the Fed looses on a risky loan, they send the bill to the tax payers, when they win the member banks take most of the profits.

That's also wrong. When the Fed "loses" no cost is passed to the tax payers except in the sense that US currency loses value.

thedude wrote:
2. The Fed had to create all this new money (3.3 trillion) out of thin air. What happens when you introduce 3.3 trillion more $$$ into the market??? The buying power of the $$$ previous in circulation goes down.

It is far more complicated than that because currency is valued according to perception rather than actual ubiquity.

Yay the government agreed on a 34 million budget cut, so can we start talking about...

34 million budget cut, so can we start talking about...

34 million

million

Why does my brain hurt so much.

Yes, the Fed uses tax payer (indirecly)money despite the popular premise that they dont
Yes when the Fed looses money, tax payers take a hit and not just through inflation.
Sure it is more complicated then that but the end result is as simple as stated, this Keynasian school of thought advocating fiat currency predominant in the US is a result of the corporate takeover of the country. That is the whole premis of all this money manipulation, that we need the Fed to tinker and manage our countries money because as long as we keep up appearances and keep the perception that there is no need for lack of faith in our economy all will be well, but that is just not the case, there will be a tipping point.

So lets see how it works..

First it is worth noting that the FED is not government, it made up of member banks where the head is appointed by the president however its shareholders are private banks. All of its shareholders are private banks. None of its stock are owned by the government.
The fact that the Fed does not get "appropriations" from Congress basically means that it gets its money from Congress without congressional approval, by engaging in "open market operations."

Let me break it down here...when the government is short of funds, the Treasury issues bonds and delivers them to bond dealers to auction them off. When the Fed wants to create money it buys bonds from these dealers with newly-issued dollars acquired by the Fed for the non existent costs of inputing imaginary money into a computer. This is what is known as 'open market operations' because the Fed buys the bonds on the "open market" from the bond dealers. The bonds then become the "reserves" that the banking establishment uses to back its loans.

The interest on bonds acquired with its newly-issued Federal Reserve Notes pays the Fed’s operating expenses plus a in interst rate of return
Not only do they get this interest return, the banks will now be getting interest from the taxpayers on their "reserves." The basic reserve requirement set by the Federal Reserve is 10%. The website of the Federal Reserve Bank of New York explains that as money is redeposited and relent throughout the banking system, this 10% held in "reserve" can be fanned into ten times that sum in loans; that is, $10,000 in reserves becomes $100,000 in loans. That means we the taxpayers will be paying interest to the banks so that the banks can retain the reserves to accumulate interest on ten times that sum in loans.

"The banks earn these returns from the taxpayers for the privilege of having the banks’ interests protected by an all-powerful independent private central bank, even when those interests may be opposed to the taxpayers’ -- for example, when the banks use their special status as private money creators to fund speculative derivative schemes that threaten to collapse the U.S. economy. Among other special benefits, banks and other financial institutions (but not other corporations) can borrow at the low Fed funds rate. They can then turn around and put this money into 30-year Treasury bonds at 4.5%, earning an immediate 2.5% from the taxpayers, just by virtue of their position as favored banks. A long list of banks (but not other corporations) is also now protected from the short selling that can crash the price of other stocks. "

Now with the negative liablity scam slid in under the radar in january, when the Fed takes a loss such as buying Treasury bonds for much more than they are worth, they do not have to show this as a loss but as a negative liablity against the Treasury sheet. In this way the Fed can never go bankrupt no matter how reckless it is with Treasury bonds and this negative liabiilty goes against what is pays back to the treasury when on the Feds website it says

"The Federal Reserve’s income is derived primarily from the interest on U.S. government securities that it has acquired through open market operations. . . . After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury."

So to illustrate
The Fed spends 100 billion on treasury bonds worth 50 billion. They cannot sell the bonds for 100 billion so they write 50 billion as a negative liability NOT A LOSS. They then deduct the amount of that negative liablity from what they would sent back to the treasury from the interest it has earned through this whole process. The banks get richer and the government or the tax payers loose money.

This speaks nothing of the dedriment creating all this imaginary currency on inflation and irresponsible big bank behavior.

thedude wrote:Yes, the Fed uses tax payer (indirecly)money despite the popular premise that they dont

No they don't, its not a matter of popularity, they simply don't. It would be closer to correct to say that you spend their money, but still false.

thedude wrote:
Yes when the Fed looses money, tax payers take a hit and not just through inflation.

No, only through inflation.

thedude wrote:
Sure it is more complicated then that but the end result is as simple as stated, this Keynasian school of thought advocating fiat currency predominant in the US is a result of the corporate takeover of the country. That is the whole premis of all this money manipulation, that we need the Fed to tinker and manage our countries money because as long as we keep up appearances and keep the perception that there is no need for lack of faith in our economy all will be well, but that is just not the case, there will be a tipping point.

That's not Keynesianism, its Monetarism. And yeah fiat currencies, and really even commodity-marked currencies, need management; in fact they cannot exist without being managed, because large holders have that effect whether or not they intend to.

thedude wrote:
First it is worth noting that the FED is not government...

No one sensible would ever say that the Fed is not a government institution, including the Fed itself.

thedude wrote:
Not only do they get this interest return, the banks will now be getting interest from the taxpayers on their "reserves." The basic reserve requirement set by the Federal Reserve is 10%. The website of the Federal Reserve Bank of New York explains that as money is redeposited and relent throughout the banking system, this 10% held in "reserve" can be fanned into ten times that sum in loans; that is, $10,000 in reserves becomes $100,000 in loans. That means we the taxpayers will be paying interest to the banks so that the banks can retain the reserves to accumulate interest on ten times that sum in loans.

No, it doesn't. Again, the holdings of the federal reserve are not taxpayer dollars.


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thedude wrote:
So to illustrate
The Fed spends 100 billion on treasury bonds worth 50 billion. They cannot sell the bonds for 100 billion so they write 50 billion as a negative liability NOT A LOSS. They then deduct the amount of that negative liablity from what they would sent back to the treasury from the interest it has earned through this whole process. The banks get richer and the government or the tax payers loose money.

Dude, you already stated that the Fed is a government institution, and now you're saying that the government is separate from it? Please stay consistent.

Secondly, your example isn't consistent with what you cited. You're essentially stating that the Fed manipulates the money supply, but not explaining how any resultant debt is passed on to consumers. The way to explain it is inflation/deflation, but that's obvious to anyone and not representative of your "point" that the Fed somehow uses taxpayer money.

dogma wrote:

thedude wrote:
1. This is only a brief snap shot of Fed activity never before disclosed but it shows the Fed playing fast and loose with tax payer money (3.3 trillion)...

The Fed's money isn't tax payer money. Even if you don't know anything about economics, cursory research will tell you that US federal tax revenue is only about 2.4 trillion USD per anum.

thedude wrote:
Remember, when the Fed looses on a risky loan, they send the bill to the tax payers, when they win the member banks take most of the profits.

That's also wrong. When the Fed "loses" no cost is passed to the tax payers except in the sense that US currency loses value.

thedude wrote:
2. The Fed had to create all this new money (3.3 trillion) out of thin air. What happens when you introduce 3.3 trillion more $$$ into the market??? The buying power of the $$$ previous in circulation goes down.

It is far more complicated than that because currency is valued according to perception rather than actual ubiquity.

Thank you for explaining this, dogma.

However, currency valuation is a little more complex than mere perception. it takes mroe into account than basic supply and demand and perceived value. That would be more similar to Shares traded that day.

dogma wrote:Secondly, your example isn't consistent with what you cited. You're essentially stating that the Fed manipulates the money supply, but not explaining how any resultant debt is passed on to consumers. The way to explain it is inflation/deflation, but that's obvious to anyone and not representative of your "point" that the Fed somehow uses taxpayer money.

Are you saying that the Fed doesn't use taxpayer money?

biccat wrote:

dogma wrote:Secondly, your example isn't consistent with what you cited. You're essentially stating that the Fed manipulates the money supply, but not explaining how any resultant debt is passed on to consumers. The way to explain it is inflation/deflation, but that's obvious to anyone and not representative of your "point" that the Fed somehow uses taxpayer money.

Are you saying that the Fed doesn't use taxpayer money?

I think he said that the revenues are not as high as the amount stated by the OP, and in the example given, the context of how the money is used is incorrectly sourced to taxpayers.

biccat wrote:
Are you saying that the Fed doesn't use taxpayer money?

Yes, at least in the sense that the Fed doesn't direct government accounts funded by tax payers.

Sorry Dogma but with due respect did you actually read the entire post or skim for key points that counter to your view to refute? It is clear we do not agree on whether the FED uses tax payer money, i'll make a final note then simply agree to disagree. As I showed, through the how the Fed monatizes debt, they certainly use tax payer money, or more specifically they borrower tax payer dollars at a devalued rate then send the loss to the treasury which (WILL make its way to the tax payers)through the negative liabilites scheme. I am not sure how you do not see how this process affectst the tax payers. Without using outragous figures and a simple anaology, lets imagine that you need to borrower money and instead of just letting you borrower money, that I agree to sell you $200 worth of shares at $50 with the premise that any profits you accumulate will be passed back to me after you pay any costs of operating, this way we both have a chance to profit from the situation. But you dont actually give me any money, you simply increase what the computer shows I have in the bank. Now lets say you can only sell that $200 worth of shares for $150. First, out of the $100 you made, you cover your operating costs. Lets say that leaves you with $50 (just using round numbers). Now on your books instead of showing the $50 you did not earn (because you could not sell it at $200) you simply move it over to a new column (negative liabilities) and subtract it from any profits you would pass back to me. Now I have no money from you and could actually be in debt to you (now lets say you start doing with on high risk stocks...oh my)This is essentially what happens between the Fed and the Treasury...when our government looses money, it is not our government (have elected officials taken pay cuts?) who suffers but the people as costs rise and taxes go up.

Again I realize it is more complicated than this but this is essentially what is happening.

Also a very important distinction that must be made, the Federal Reserve Bank is not a government entity, I do not recall stating they where, if at any time I stated this, it was in error. Dogma, the quote you showed doees not imply the Fed is the government just because they interact with the Treasury. No employees of the FED are government workers, they do not receive the same entitlements of government workers, they are paid by the member banks. The FED does not receive a part of the budget from congress. The FED was created by congress and its member banks appointed. The head of the FED is appointed by the president, the buying of stock in the FED member banks is buying stock in private companies, you are not investing in government shares. The Fed likes to say 'it has aspects of both government and private banking entities' which is true but it uses this to skirt the issue it is not a part of the government. It is not subject to government oversight. As the controller of our nations monatary system, it is required to update congress but does not have to provide audit records or details of any of its transactions.

Dogma, I agree fiat currencies need management, I dont dispute this in the slightest, and I am against fiat currencies for this purpose. I believe in true free markets, supply and demand where the currency has true value and when it does not have value, another will replace it, fiat currencies and central banking are the tools of governments to big to be held accountable and who enslave their people. I sympathize with some of the ideals of socialsm but dispute it as a valid system under the various forms of communism because of its dependancy on a central banking system in its economy. Central banking is the destroyer of nations because it supports the interest of very few at the costs of the majority.

dogma wrote:

biccat wrote:
Are you saying that the Fed doesn't use taxpayer money?

Yes, at least in the sense that the Fed doesn't direct government accounts funded by tax payers.

I suppose this is marginally correct from a semantics argument.

The Fed doesn't use taxpayer money, they create money by inflating the money supply which causes inflation, thereby taking money not from the taxpayers, but from anyone who holds the currency.

thedude wrote:As I showed, through the how the Fed monatizes debt, they certainly use tax payer money, or more specifically they borrower tax payer dollars at a devalued rate then send the loss to the treasury which (WILL make its way to the tax payers)through the negative liabilites scheme.

The money that the Fed uses does not come from tax payers, it comes from the purchasers of the open-market financial instruments that the Fed uses to manipulate the money supply. That's what you showed.

Moreover, negative liabilities are not a loss, though they can eventually entail one.

thedude wrote:
I am not sure how you do not see how this process affectst the tax payers.

That isn't what I said. I said that the Fed does not use taxpayer dollars, which is true. Its also true that the Fed's action affect taxpayers, obviously so given that they are the US central bank and heavily influence things like inflation.

thedude wrote:
First, out of the $100 you made, you cover your operating costs. Lets say that leaves you with $50 (just using round numbers). Now on your books instead of showing the $50 you did not earn (because you could not sell it at $200) you simply move it over to a new column (negative liabilities) and subtract it from any profits you would pass back to me.

This is inaccurate. What you're describing is a negative liability for the initial lender. Negative liabilities occur when either an asset is transferred at a discounted rate (for example, the initial transaction of $200 would be recorded as a $150 negative liability by the seller), or a purchaser overpays for a given commodity (eg. you pay for something twice). If we apply this to the behavior of the Treasury and the Fed, then the Fed would incur a negative liability when selling Federal Reserve Notes to the Treasury at sub-market rates, and the Treasury would incur a negative liability when selling securities to the Fed at sub-market rates. In both cases the selling institution loses money only in the sense that the transfer was below market value.

What you're describing would be recorded as a loss.

thedude wrote:
Now I have no money from you and could actually be in debt to you

Actually, you can't be in debt. Failing to obtain the full value of any discounted purchase would simply incurred as a loss by the purchaser.

thedude wrote:
Also a very important distinction that must be made, the Federal Reserve Bank is not a government entity, I do not recall stating they where, if at any time I stated this, it was in error. Dogma, the quote you showed doees not imply the Fed is the government just because they interact with the Treasury.

You said that the Fed uses tax revenue, that implies that they are a government entity. Similarly, if the Fed passes debt to the treasury, which it doesn't, then it also implies they are a government entity. The Fed transacts with the government, which isn't the same thing as actually using tax revenue, if it were then anyone receiving money from the state through commercial transaction would be a government entity

thedude wrote:
Dogma, I agree fiat currencies need management, I dont dispute this in the slightest, and I am against fiat currencies for this purpose. I believe in true free markets, supply and demand where the currency has true value and when it does not have value, another will replace it,

That's what fiat currencies are, and that's how they behave. The USD is simply the final survivor of a period in early American history where there were many currencies competing against each other. A process that is no carried out on a global scale.

Of course they create more money. It's the only way to prevent a monetary system from collapsing under the weight of it's own self-destructive foundations...

The whole process of making money is, as said, needed in order for the people to pay their loans. The problem is basically, that banks loans money with interests attached. The calculation are quite simple, yet bound to meet it's own end eventually.

Whenever a bank loans you 100 dollars with the condition that you pay them back with interest, they're really telling you to create money yourself. As this is only possible by the bank itself, and hence requires the bank itself to create the money, the numbers just doesn't add up.

In the end, we have a system with people that owe's the bank (altogether, that is) more money, than there actually exists.

In the end, the process of creating more money is nothing more than postphoning the whole system from collapsing. The worst part of it is, that this whole self-ruining system is so incorporated in our way of life, that it cannot be stopped, once the wheel has been set in motion.

Dogma,
Google negative liability The FED. The problem is while what I described should be shown as losses, it is not in this case. This is part of my point regarding the problem. In theory, if the Fed only uses government bonds for monetizing debt, then no matter how many real losses are incured it will never show a loss or go bankrupt. This is not shown as a loss to the purchaser which is the problem.

Also, the USD is not the survivor of currency. The USD bank note or Federal Reserve Note that we know as our money today was first printed in 1914. Before that each bank printed its own notes. There were central banking notes that was used for currency as well but it was not the national standard. Each state also controled their own currency in the sense that they could accept any currency they chose and have faith in, the most common was gold. When the Fed was created, shortly after, the use and ownership of gold was made illegal so that the only allowable currency was the FED reserve note (our paper money). This is not anything like once currency surviving because of its true value. Also, the 'dollar' has become the world reserve standard. We live in a global economy, because of this, the actions of the FED affect the rest of the world. To state anything else is simply wrong.

This information is history, I would encourage everyone to do this research, it is fascinating and very telling


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Billinator wrote:Of course they create more money. It's the only way to prevent a monetary system from collapsing under the weight of it's own self-destructive foundations...

The whole process of making money is, as said, needed in order for the people to pay their loans. The problem is basically, that banks loans money with interests attached. The calculation are quite simple, yet bound to meet it's own end eventually.

Whenever a bank loans you 100 dollars with the condition that you pay them back with interest, they're really telling you to create money yourself. As this is only possible by the bank itself, and hence requires the bank itself to create the money, the numbers just doesn't add up.

In the end, we have a system with people that owe's the bank (altogether, that is) more money, than there actually exists.

In the end, the process of creating more money is nothing more than postphoning the whole system from collapsing. The worst part of it is, that this whole self-ruining system is so incorporated in our way of life, that it cannot be stopped, once the wheel has been set in motion.

Thats right, while the banks make more and more money posting record profits and while the money you are paid buys less and less. So the people turn to the government and ask for more and more help, giving them more and more power and the process expands exponentially. Remember to that the FED rate that is lends amongst is own banks is something like 0.25%. What rate are you paying your bank for access to that money? Is it twice that? 2 times that? 4 times that? You should be so lucky. All the while these practices are reducing the buying power of your dollar so you are paying more and more to the banks.

thedude wrote:1. This is only a brief snap shot of Fed activity never before disclosed but it shows the Fed playing fast and loose with tax payer money (3.3 trillion) lending to whoever it saw fit with nalmost no interest being charged on very high risk loans. Remember, when the Fed looses on a risky loan, they send the bill to the tax payers, when they win the member banks take most of the profits. This has been going on since its creation in 1914. Which institutions who are loaned money fail or suceed and at what loss, we have no idea because the Fed has never had to disclose the details. But the treasury and tax payers foot the bill.

While it was, unacceptably, kept secret at the time, the amounts and who they were loaned to are actually now being revealed. So yes, we do know who received the money.

You are making a huge mistake in assuming the entirety of this $3.3 trillion will be lost. In fact, from what I've seen none of it will be, as no organisation lent money is likely to collapse.

2. The Fed had to create all this new money (3.3 trillion) out of thin air. What happens when you introduce 3.3 trillion more $$$ into the market??? The buying power of the $$$ previous in circulation goes down. What that means for you and I and everyone else around the world participating in a global economy is the price of everyting goes up, including food and gas.

Umm, no, 3.3 trillion into the market only causes inflation if you assume ceterus parabus. In this case we were looking at a severe contraction in the money supply due to collapse in the banking sector, and that means you're actually facing deflation. Getting money out into the economy was the right thing to do, and while there were prominent economists arguing that the amount the Fed pumped out would lead to inflation, they were wrong. Utterly wrong. Inflation remains tiny. Irrelevant, even.

Now as the money is repaid you'll see the countering effect, as it comes out of the system again, offsetting inflation otherwise expected in the recovery.

What the Fed did, in terms of their actions, was absolutely right. But they were utterly wrong to keep it from Congress and the American people.


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thedude wrote:Sure it is more complicated then that but the end result is as simple as stated, this Keynasian school of thought advocating fiat currency predominant in the US is a result of the corporate takeover of the country.

Absolute nonsense. Far from Keynesian economics being somehow predominant in the US thanks to some poorly defined corporate takeover, the US is actually the only place where you'll see the fundamentals Keynesian economics questioned.

Everywhere else the basic concepts are treated as fundamental components of good government, because Keynes was proven right generations ago, and the rest of us had the good grace and common sense to accept this.

That is the whole premis of all this money manipulation, that we need the Fed to tinker and manage our countries money because as long as we keep up appearances and keep the perception that there is no need for lack of faith in our economy all will be well, but that is just not the case, there will be a tipping point.

No. That has nothing to do with any concept in Keynesian economics.

Tragedy of the commons. Look it up. Aggregate demand. Look it up. Accept these things, then move on with your life.

First it is worth noting that the FED is not government, it made up of member banks where the head is appointed by the president however its shareholders are private banks. All of its shareholders are private banks. None of its stock are owned by the government.

They are "shareholders", in that they are required to put up the funds to finance the Fed. But those banks do not get to appoint its board or set its policies, that is done by government, which suddenly makes them a lot less like shareholders and a lot more like any industry where members are required to pay a licence to operate.

That means we the taxpayers will be paying interest to the banks so that the banks can retain the reserves to accumulate interest on ten times that sum in loans.

No. You've missed the step where the banks actually have to lend that money, then receive it again in deposits, that they pay interest on.

In short, you've missed the core component of how banking operates. Please instead of reading fringe lunatics and go and study the actual operations of monetary economics.

You'll then be able to understand how government bonds and currency printing form a core part of maintaining currency supply, and keeping inflation at the desired level.

for example, when the banks use their special status as private money creators to fund speculative derivative schemes that threaten to collapse the U.S. economy.

Yes, it is important to keep banking seperate from hedge funds. If financial institutions are to grow too big to fail, they must be kept out of risky industries.

They're not money creators though. That's nonsense. If you lend me $10 for my promise that I'll pay 2% interest, and I lend it to dogma at 5% interest, who uses it to pay for lunch made by ShumaGorath, who then invests it with me at 2%, and I then lend it to AvatarForm, then I've "created money" in the exact same way that banks do.

Think about that. Then realise that the people you've been reading were lying to you. Then stop listening to them, because they're making you look silly.

Now with the negative liablity scam slid in under the radar in january, when the Fed takes a loss such as buying Treasury bonds for much more than they are worth, they do not have to show this as a loss but as a negative liablity against the Treasury sheet.

A negative liability is a common accounting term, used to recognise any overpayment of a debt. The underlying asset still exists. This piece of nonsense was bandied about last year, and it was bs sold by lying liars. Don't believe them.


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thedude wrote:Without using outragous figures and a simple anaology, lets imagine that you need to borrower money and instead of just letting you borrower money, that I agree to sell you $200 worth of shares at $50 with the premise that any profits you accumulate will be passed back to me after you pay any costs of operating, this way we both have a chance to profit from the situation. But you dont actually give me any money, you simply increase what the computer shows I have in the bank. Now lets say you can only sell that $200 worth of shares for $150. First, out of the $100 you made, you cover your operating costs. Lets say that leaves you with $50 (just using round numbers). Now on your books instead of showing the $50 you did not earn (because you could not sell it at $200) you simply move it over to a new column (negative liabilities) and subtract it from any profits you would pass back to me. Now I have no money from you and could actually be in debt to you (now lets say you start doing with on high risk stocks...oh my)This is essentially what happens between the Fed and the Treasury...

Except it doesn't work this way. A negative liability is a very simple thing. I owe you $50. This is a liability. I pay you $75 (by mistake, or because you really need the extra $25 or you'll go bankrupt). You owe me $25. Now in the classic sense I have now have an asset, your debt to me of $25, but because it was raised through a party who is traditionally a creditor and therefore a liability, it gets called a negative liability. Also because it will typically be recovered not through repayment but offsetting against future debts to that organisation.

The game the people who've deceived you are playing is that they're pretending the money will never be paid back. Have they shown you any documents that state that the money paid will not be returned? Have they listed any companies who were paid money who are now incapable of repaying it? No, they just bamboozle you with a mangled description of an accounting concept, then slip in the idea that money will never be repaid.

Also a very important distinction that must be made, the Federal Reserve Bank is not a government entity, I do not recall stating they where, if at any time I stated this, it was in error.

Fed policy is dicated by government. Well, sort of, they endeavour to maintain independance because of the lessons learned in the 70s, where government interference in monetary matters led to rampant inflation and in turn stagflation.

But the idea that they are bought and paid for by the banks is wildly misleading.

Dogma, I agree fiat currencies need management, I dont dispute this in the slightest, and I am against fiat currencies for this purpose.

You can't be opposed to fiat currency while having any real understanding of the modern economy. It's an impossibility.

A modern economy grows at around 3% a year. Which would mean you'd need to increase gold reserves by around 3% each year, or face deflation that'd be crippling for investment and future growth. You'd also be taking a productive asset essential for industrial use, and putting it in a big bank where it did no good for anyone. You can change the material from gold if you want, but the above all remains the same.

And you're not even gaining stability because of it. If you reach the point where people have lost faith in the currency then the economy has stopped working and people aren't going to want gold anyway, at that point they're going to want food, water, guns...

I believe in true free markets, supply and demand where the currency has true value and when it does not have value, another will replace it, fiat currencies and central banking are the tools of governments to big to be held accountable and who enslave their people. I sympathize with some of the ideals of socialsm but dispute it as a valid system under the various forms of communism because of its dependancy on a central banking system in its economy. Central banking is the destroyer of nations because it supports the interest of very few at the costs of the majority.

This is incoherent gibberish. Socialism has nothing to do with the currency base. Nor does fiat currency focus power, that was actually a product of mercantilist based economic system built around currency with precious metals as a base.

Please... just... go and actually study economics. This stuff you're posting here is complete piffle.


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biccat wrote:The Fed doesn't use taxpayer money, they create money by inflating the money supply which causes inflation, thereby taking money not from the taxpayers, but from anyone who holds the currency.

Which is a grave concern for anyone who considers inflation to be a terrible thing, and who doesn't realise that you need to grow the money supply each year just to match economic growth and avoid deflation.

While it was, unacceptably, kept secret at the time, the amounts and who they were loaned to are actually now being revealed. So yes, we do know who received the money.

They court order to reveal docs only covers who they loaned money to during the discount window if I am not mistaken (2008-2010). So for the other 96 years we are still in the dark, yes?

You are making a huge mistake in assuming the entirety of this $3.3 trillion will be lost. In fact, from what I've seen none of it will be, as no organisation lent money is likely to collapse.

Admittedly, the my first sentence of this thread and possibly others make can lead one to assume this is where I was coming from. However, I do not mean to imply the entire lot of what was lent will be lost. That said, I would expect losses sent to the treasury in huge sums regardless of what banks fail. In order for the Fed to loan money to these big banks they monetize debt through treausry bonds as discussed before. Losses incurred against government backed securities are shown as negative liabilties which ultimately costs our government and 'main street' (sorry to use such a ridiculous buzz word ) more money.

And really no orgainziation lent money by the fed will fail, ....ever heard of Bearn Sterns?????

"Despite the receipt by Bear Stearns of Federal Reserve funding through a bridge loan '(12.9 billion on 13.8 billion worth of assets)' on March 14, 2008, market pressures on Bear Stearns worsened that day and during the weekend. Bear Stearns likely would have been unable to avoid bankruptcy on Monday, March 17, without either very large injections of liquidity from the Federal Reserve or an acquisition by a stronger firm."

Umm, no, 3.3 trillion into the market only causes inflation if you assume ceterus parabus. In this case we were looking at a severe contraction in the money supply due to collapse in the banking sector, and that means you're actually facing deflation. Getting money out into the economy was the right thing to do, and while there were prominent economists arguing that the amount the Fed pumped out would lead to inflation, they were wrong. Utterly wrong. Inflation remains tiny. Irrelevant, even.

Now as the money is repaid you'll see the countering effect, as it comes out of the system again, offsetting inflation otherwise expected in the recovery.

Just because the rate of inflation has stayed relatively normalized (around 2%) over the last several years does not mean that inflation is irrelevant or that the FED pumping out all this money was the right thing to do or even that the economists who argued against it where wrong. That is quit a leap with only a few years worth of data. So if I am understanding you, this is all working because despite the costs of living rapidly increasing for the American people because we see (or think we can) a (jobless) recovery, all is well?

Absolute nonsense. Far from Keynesian economics being somehow predominant in the US thanks to some poorly defined corporate takeover, the US is actually the only place where you'll see the fundamentals Keynesian economics questioned.

Are you really arguing that Keynesian economics is not the predominant thought across the globe including in the US? Keynesian economics in its broadest form is the idea that the private sector is not capable of managing its own economy through a true open market so a large role of government is required. That certainly doesnt mean it is right, all that shows me is that governments across the globe are too big and the 'people' are loosing power.

Everywhere else the basic concepts are treated as fundamental components of good government, because Keynes was proven right generations ago, and the rest of us had the good grace and common sense to accept this.

Everywhere is a broad term and this statement makes it clear that you are all for big government, or that is at least what you seem to imply if we follow the logic through on your statement. Therefore I suppose this statement would be true in your case. That is one taking this standpoint could argue that Keynes was right (although proven certianly is a relative term) since government has gotten bigger exponenitally with laws extending further into personal rights along with national debt, costs of living, corporate profits and the widening of the gap between the wealthiest top perccent and the middle class. I however, believe in limited government and these effects (as mentioned in the previous sentence) of government involvement and central banking as a bad thing, therefore the results experienced since the Keynesian domination would appear to be indicitave of failure from my view. I must state I find it disheartening that you suggest we need to simply accept this thought process. Are you familiar with the Tenets of Marxism? I do not mean to imply you are a Marxists in any way. I only bring it up because it emphasizes the need for central banking to control a fiat money supply to increase state profits and power in an effort to reach its uptopian society. You may find it interesting to to study why this is considered such a crucial step. Will you now try to argue that the increased role of central banking and government power has nothing to do with this? As is central banking and a larger government working with large corporations somehow does not affect things like these or is this just a side effect of progess?

No. That has nothing to do with any concept in Keynesian economics.

Ummm yeah, a mixed economy with private sector, central banking and government involvement is almost the very definition of keynesian economics.

They are "shareholders", in that they are required to put up the funds to finance the Fed. But those banks do not get to appoint its board or set its policies, that is done by government, which suddenly makes them a lot less like shareholders and a lot more like any industry where members are required to pay a licence to operate.

A collection of private banks where the board is appointed by an elected president in a nation where big business has huge stakes in lobbysist (but does not set policies) simply appears to be a conflict of interest.

No. You've missed the step where the banks actually have to lend that money, then receive it again in deposits, that they pay interest on.

Are you refering to the modicum of interest relative to what they receive on the deposits? Sure the bank has operating costs and this would be considered part of it but are you suggesting banks arent making money and that the interest they pay out exceeds what they take in? The fact that the banks pay interest to consumers is irrelevant because we pay the banks much more than they pay us.

In short, you've missed the core component of how banking operates. Please instead of reading fringe lunatics and go and study the actual operations of monetary economics.
You'll then be able to understand how government bonds and currency printing form a core part of maintaining currency supply, and keeping inflation at the desired level.

I fully understand this premise, I took economics in college as well. But to suggest that I form my thought process simply from reading 'fringe lunatics' is an easy way out. There are other schools of thought that dispue the need for fiat currency and central banking. Spend some time educatuing yourself on a broader picture of though. A great place to start, if for nothing else to confirm your own stance in what you believe through education of other viable options is http://mises.org/

Yes, it is important to keep banking seperate from hedge funds. If financial institutions are to grow too big to fail, they must be kept out of risky industries.

Too big to fail bank should be oxymoron. A too big to fail bank breeds and environment where actions and risk are taken less and less on reserves and deposits and more and more on risky speculation, this is what we have today.

They're not money creators though. That's nonsense. If you lend me $10 for my promise that I'll pay 2% interest, and I lend it to dogma at 5% interest, who uses it to pay for lunch made by ShumaGorath, who then invests it with me at 2%, and I then lend it to AvatarForm, then I've "created money" in the exact same way that banks do.

This is not totally accurate but lets run with it: you are missing a step; you forget that in order to lend that $10 that you pay 2% I had to take 5$ of ShumaGoraths profits explaining after I collect the intest on my 2% I will share my profits. The rub is this is after I deduct the fact that I lost $5 giving it to you as a negative liablity then I really dont give much if anything back to ShumaGorath and chances are he lost money between the $5 I took and the costs of production. Now he may not ever catch on because there could be situation where I am able to give him some return on his money but in the end he still looses through this process of monetization of debt.

A negative liability is a common accounting term, used to recognise any overpayment of a debt. The underlying asset still exists. This piece of nonsense was bandied about last year, and it was bs sold by lying liars. Don't believe them.

Yes a negative liability is a common accounting term which is most likely why when this was released in January, not last year, it wasnt picked up on by accounts and economists until several weeks later. The difference here is when the FED monetizes debt from treasury bonds, they aren not actually paying for any product or service, they are inputting a number into the computer then calling the difference between their investment and bonds and the fair market value a negative liability instead of a loss.

If you were to write a check to a broker, for a stock that you thought was going to give returns greater than it actually does and then try to collect the differnce of what you thought the fairmarket was on your taxes by calling it a negative liablity you would get into a bit of trouble with the IRS. That is not to say anything about the fact that one could also make the case that in this scenario the check was never cashed.

Except it doesn't work this way. A negative liability is a very simple thing. I owe you $50. This is a liability. I pay you $75 (by mistake, or because you really need the extra $25 or you'll go bankrupt). You owe me $25. Now in the classic sense I have now have an asset, your debt to me of $25, but because it was raised through a party who is traditionally a creditor and therefore a liability, it gets called a negative liability. Also because it will typically be recovered not through repayment but offsetting against future debts to that organisation.

Yes again that is typically the way a negative liablity works...however, this issue here is the fact that This is the process between the FED and the Treasury. Please explain why the treasury is in debt to the FED when the Treasury is selling discounted bonds to the FED who gives profits to the Treasury after after the FED collects its profits from the transaction?

The game the people who've deceived you are playing is that they're pretending the money will never be paid back. Have they shown you any documents that state that the money paid will not be returned? Have they listed any companies who were paid money who are now incapable of repaying it? No, they just bamboozle you with a mangled description of an accounting concept, then slip in the idea that money will never be repaid.

First the FED has not provided a list of who has repaid funds and who has not, we know Bear Sterns did not repay funds but say Bank of America did because they have stated it for their shareholders to know. So we have no way of knowing what kind of figures we are talking about. The point is this practice accurs and if nothing else the public should be concerned that bonds where bought a reduced costs so that the FED could provide enormous loans to private banks who were engaging in extremley risky investments and deritives schemes. And now they have the ablity to do this and show any money lost when using government bonds as a future debt against the treasury?

Also because I disagree with you and dispute the whole idea of central banking and a fiat currency, I must be subject to reading literature from lunatics? I suppose if you are a christian and someone suggests there is a god then they are possessed and going to hell, if that how you see it as well?

Fed policy is dicated by government. Well, sort of, they endeavour to maintain independance because of the lessons learned in the 70s, where government interference in monetary matters led to rampant inflation and in turn stagflation.

Who in the government is dictating FED policy? Bernake is tasked with directing the actions of the FED and controling the policies that direct our economy. Is it congress in they specialised understanding of economics that tell Bernake what to do? Is it congress who suggest to Bernake that when they ask to see who the FED is lending money to he should in return state that doing so would have a negative impact on the economy but not to worry because they'll just a get a court order that requires him to turn over those docs..its all for show?

You can't be opposed to fiat currency while having any real understanding of the modern economy. It's an impossibility.

I think you just lost all creditibility here. first, i would not argue that case could not be made for fiat currency, I dont look down on anyone for making this claim for fiat currency. I believe the the negative effects point to it not being the solution is all and part of the problem we face today. But dismissing other arguments and spouting the numbers you are showing simply shows you have not been educated with anything else but the same text book.

This is incoherent gibberish. Socialism has nothing to do with the currency base. Nor does fiat currency focus power, that was actually a product of mercantilist based economic system built around currency with precious metals as a basePlease... just... go and actually study economics. This stuff you're posting here is complete piffle

Have you studies Marxism or communism, or does your education extend to economics alone? Central banking and centralised control over the money supply is one of its key tenants. The government cannot control the means of production in a free market.

I have studied economics and I would suggest you actually try to do some research instead of spouting text book theory as fact

sebster wrote:

biccat wrote:The Fed doesn't use taxpayer money, they create money by inflating the money supply which causes inflation, thereby taking money not from the taxpayers, but from anyone who holds the currency.

Which is a grave concern for anyone who considers inflation to be a terrible thing, and who doesn't realise that you need to grow the money supply each year just to match economic growth and avoid deflation.

There's nothing wrong with an agency that creates currency to match economic growth and avoid deflation. And inflation is not a bad thing, in fact, it's a very good thing because it spurs investment. Which is why I'm convinced people who advocate returning to a precious metal based currency are nuts, or at least, haven't completely thought out their position.

However, I do think it creates a problem when the Fed creates money to transfer wealth elsewhere. Lending to foreign countries to support their economies is a government function, not a central bank function, because it involves transferring wealth, not merely managing the money supply.

thedude wrote:They court order to reveal docs only covers who they loaned money to during the discount window if I am not mistaken (2008-2010). So for the other 96 years we are still in the dark, yes?

You asked about the $3.3 trillion. But when I explained that was being detailed, now you shift to worrying about what money might have been given to other people?

Admittedly, the my first sentence of this thread and possibly others make can lead one to assume this is where I was coming from. However, I do not mean to imply the entire lot of what was lent will be lost. That said, I would expect losses sent to the treasury in huge sums regardless of what banks fail. In order for the Fed to loan money to these big banks they monetize debt through treausry bonds as discussed before. Losses incurred against government backed securities are shown as negative liabilties which ultimately costs our government and 'main street' (sorry to use such a ridiculous buzz word ) more money.

No, seriously, in order to predict a loss you have to identify which of the organisations that were lent money is actually going to fail.

And really no orgainziation lent money by the fed will fail, ....ever heard of Bearn Sterns?????

I didn't say that. Please read more carefully. I said that no organisation who received part of this $3.3 trillion has yet been identified as having failed, and there is no reason to believe the US will receive any less than $3.3 trillion back.

Just because the rate of inflation has stayed relatively normalized (around 2%) over the last several years does not mean that inflation is irrelevant or that the FED pumping out all this money was the right thing to do or even that the economists who argued against it where wrong. That is quit a leap with only a few years worth of data.

You're not following. You said the impact of printing this money was inflationary, and I explained that the inflationary effect of releasing this money is actually countering the deflationary pressure caused by the contraction of investment in the wake of the GFC. No part of that says inflation is irrelevant, it remains and should remain as the primary concern of every central bank around the world.

The debate among economists was over the inflation rate. Some argued that there was strong deflationary pressure coming as a result of the GFC, and that releasing more money was needed to offset this. Others said this wasn't happening, and the release of so much money into the economy was going to spike inflation, hurt the recovery and possibly lead to stagflation.

This debate was had in 2008/2009. The subsequent year's inflation figures showed that those predicting deflation and arguing extra funds to be released were absolutely, 100% correct.

So if I am understanding you, this is all working because despite the costs of living rapidly increasing for the American people because we see (or think we can) a (jobless) recovery, all is well?

No, you're not reading me at all, you're just making stuff up that had nothing to do with what I said.

The actions taken by the Fed in increasing the money supply in the wake of the GFC was absolutely the correct policy. That remains true regardless of what anyone thinks about the other policies taken in response to the GFC, or to the policies that created it in the first place.

You need to understand the scope of your own argument and keep to it.

Are you really arguing that Keynesian economics is not the predominant thought across the globe including in the US? Keynesian economics in its broadest form is the idea that the private sector is not capable of managing its own economy through a true open market so a large role of government is required.

No, you've failed to read properly, again. I said that Keynesian economics are dominant across the globe, and the only place they're questioned in any seriousness is in the US.

And no, Keynesian economics doesn't claim the private sector isn't capable of managing the economy. It accepts the plainly fething obvious fact that the private sector doesn't manage itself as a whole, instead it involves millions of firms each looking after their own interest, which can produce a situation where every party pursues their own interests but this is actually to the detriment of the whole. The classic example is a slight economic downturn, leading to each company laying off workers to protect their own bottom line, resulting in a greater economic downturn, resulting in companies laying off more workers, and so on and so on.

As I've already asked, "tragedy of the commons" - go read about it.

That certainly doesnt mean it is right, all that shows me is that governments across the globe are too big and the 'people' are loosing power.

That's an absurd conclusion, the product of ideology and lazy thinking. Keynesian economic strategies are dominant because it has been shown to consistantly be the best approach to addressing a significant economic downturn.

Everywhere is a broad term and this statement makes it clear that you are all for big government, or that is at least what you seem to imply if we follow the logic through on your statement.

No, it doesn't. You've just invented that out of nowhere. Never mind that 'big government' is gibberish political sloganeering, the statement doesn't follow at all.

You could sum up Keynesian economics as something like; "I believe that when government is facing a significant decrease in aggregate demand in the wake of supply shock, the correct response is to increase government spending to offset the worst of that impact and move more quickly towards recovery.”

Read that. Then read it again. Then realise that's the primary component of Keynesian economics. Then consider what you wrote in response. Consider how Keynes was referring only to government action in the short term. Then consider all the stuff you wrote about gradual expansion of government, national debt, Marxism and the rest. Then realise that what you wrote was complete and utter nonsense.

Ummm yeah, a mixed economy with private sector, central banking and government involvement is almost the very definition of keynesian economics.

I’m somewhat used to people not bothering to read my posts before responding, but it always comes as a shock when they don’t even read their own.

You said; “That is the whole premis of all this money manipulation, that we need the Fed to tinker and manage our countries money because as long as we keep up appearances and keep the perception that there is no need for lack of faith in our economy all will be well, but that is just not the case, there will be a tipping point”

I replied; “No. That has nothing to do with any concept in Keynesian economics”

And now you’ve responded with some comment about a mixed economy, a central bank and government involvement. Which is a completely different statement to your original crazy man rant about money manipulation and an economy built around perception.

Please follow your own conversation.

A collection of private banks where the board is appointed by an elected president in a nation where big business has huge stakes in lobbysist (but does not set policies) simply appears to be a conflict of interest.

That’s a completely different statement. If you want to make a claim that the president and congress are influenced far too much by moneyed interests, that’s fine and I’d almost certainly agree.

But that is not the same thing as your original claim that the central bank is run by the private banks. Now be honest and retract your original claim.

Are you refering to the modicum of interest relative to what they receive on the deposits? Sure the bank has operating costs and this would be considered part of it but are you suggesting banks arent making money and that the interest they pay out exceeds what they take in? The fact that the banks pay interest to consumers is irrelevant because we pay the banks much more than they pay us.

No, I’m not claiming that. I’m pointing out that the money creation process you were claiming was some magical invention of government is actually a product of the private market.

I fully understand this premise, I took economics in college as well.

If you took economics how did you get suckered into believing that nonsense about banks creating ten times the amount given to them by the Fed?

Because that was utter tosh, and anyone with a minor in economics should be able to pick it from a mile away.

But to suggest that I form my thought process simply from reading 'fringe lunatics' is an easy way out. There are other schools of thought that dispue the need for fiat currency and central banking.

There are a wide range of economic beliefs, that have a lot to offer economics as a whole. There are also a number of fringe nutters, who combine misunderstanding with conspiracy theories and outright nonsense.

Every single group that argues against fiat currency belongs in this last group.

Spend some time educatuing yourself on a broader picture of though. A great place to start, if for nothing else to confirm your own stance in what you believe through education of other viable options is http://mises.org/

I’ve been there before. It’s takes basic classical economics and mixes it up with that peculiarly American strain of liberty and produces this weird thing that isn’t quite politics but sure as hell isn’t economics.

If you’d really taken any major economics classes you would have seen that, you would have seen it from a mile out.

Too big to fail bank should be oxymoron. A too big to fail bank breeds and environment where actions and risk are taken less and less on reserves and deposits and more and more on risky speculation, this is what we have today.

More or less, yeah.

This is not totally accurate but lets run with it: you are missing a step; you forget that in order to lend that $10 that you pay 2% I had to take 5$ of ShumaGoraths profits explaining after I collect the intest on my 2% I will share my profits. The rub is this is after I deduct the fact that I lost $5 giving it to you as a negative liablity then I really dont give much if anything back to ShumaGorath and chances are he lost money between the $5 I took and the costs of production. Now he may not ever catch on because there could be situation where I am able to give him some return on his money but in the end he still looses through this process of monetization of debt.

That’s fun and all but it has nothing to do with what I was trying to explain to you. What I explained to you was the actual process of how money released by government actually comes to represent more and more money through the economy through the operations of the private sector, as opposed to the ‘aaargh! conspiracy!’ thing were saying.

Yes a negative liability is a common accounting term which is most likely why when this was released in January, not last year, it wasnt picked up on by accounts and economists until several weeks later. The difference here is when the FED monetizes debt from treasury bonds, they aren not actually paying for any product or service, they are inputting a number into the computer then calling the difference between their investment and bonds and the fair market value a negative liability instead of a loss.

If you were to write a check to a broker, for a stock that you thought was going to give returns greater than it actually does and then try to collect the differnce of what you thought the fairmarket was on your taxes by calling it a negative liablity you would get into a bit of trouble with the IRS. That is not to say anything about the fact that one could also make the case that in this scenario the check was never cashed.

Except that by accounting rules the loss can only be recognised when realised, or as part of an overall asset write down. And even then it would only be written down if the money was not recoverable in future in any way.

First the FED has not provided a list of who has repaid funds and who has not, we know Bear Sterns did not repay funds but say Bank of America did because they have stated it for their shareholders to know.

Neither Bear Stearns nor Bank of America were funded through this recent $3.3 trillion.

So we have no way of knowing what kind of figures we are talking about.

And that’s really the problem here. In amongst all the stuff you’ve posted, your fundamental point is predicting that funds to parties you don’t know will fail to make payments for reasons you haven’t explained.

If you want to say that the Fed should be making all it’s operations public, then I agree. If you want to say that given the cost of bailing out the banks, we should ensure that no similar bail out is ever needed, and do so by restricting how these banks are allowed to operate in the future, then I’d agree.

But when you throw in all the conspiracy stuff then mangle the term ‘negative liability’ and I have to keep explaining to you how you’re wrong.

Also because I disagree with you and dispute the whole idea of central banking and a fiat currency, I must be subject to reading literature from lunatics?

Yes, if you disagree with the idea of fiat currency then you are reading literature from lunatics.

I suppose if you are a christian and someone suggests there is a god then they are possessed and going to hell, if that how you see it as well?

No, that belief doesn’t fly in the face of things we know to be wrong. Believing that fiat currency is wrong and that we should return to currency based on precious metals is fundamentally, factually wrong.

Who in the government is dictating FED policy?

The board is appointed by the President.

In the same way, the shareholders of a company appoint it’s board. Are you going to claim that shareholders don’t dictate company policy?

I think you just lost all creditibility here. first, i would not argue that case could not be made for fiat currency, I dont look down on anyone for making this claim for fiat currency. I believe the the negative effects point to it not being the solution is all and part of the problem we face today. But dismissing other arguments and spouting the numbers you are showing simply shows you have not been educated with anything else but the same text book.

It’s not “the negative effects”, those points I made demonstrate that it’s a complete impossibility. The scope of the modern economy means precious metals can’t underwrite currency.

Have you studies Marxism or communism, or does your education extend to economics alone? Central banking and centralised control over the money supply is one of its key tenants. The government cannot control the means of production in a free market.

First up, Marxism and communism are economic theories. Second up, I’ve studied each, extensively, and dare say I could do a far superior job in explaining the failings of each (and no, the correct answer doesn’t include the terms ‘bodycount’, ‘Stalin’ or ‘freedom’, but should make heavy use of the terms ‘venture capital’ and ‘innovation’). Hell, just go searching through the forums here, you’ll find a fair few examples of me bashing my head against a wall explaining the failings of each system to people who really don’t want to know about it. It’d probably read a lot like our conversation, here 

Anyhow, you’ve made a big mistake in assuming because something is bad, that everything that is part of that thing is bad. As in, Marxism is bad, and Marxism had a central bank, therefore central banks are bad.”

Alternatively, you could write “Hitler is bad, and Hitler had a dog, therefore dog ownership is bad.”

Hopefully the failings in that line of thought should now be clear, and you’ll let that point go.

I have studied economics and I would suggest you actually try to do some research instead of spouting text book theory as fact

Yeah, you said. You studied it in college. I’m guessing one macro and one micro unit, more or less what people might cover in late highschool?

Anyhow, economics is a lot more than that. I think you probably need at least one starting unit in monetary economics, which would dispel most of what you’d written here.


Automatically Appended Next Post:

biccat wrote:There's nothing wrong with an agency that creates currency to match economic growth and avoid deflation. And inflation is not a bad thing, in fact, it's a very good thing because it spurs investment.

Absolutely. That's why central banks across the globe focus in on that magic 3% as a target.

Which is why I'm convinced people who advocate returning to a precious metal based currency are nuts, or at least, haven't completely thought out their position.

They're either nuts, or they lack the economic grounding to know that what a lunatic is telling them is lunacy.

However, I do think it creates a problem when the Fed creates money to transfer wealth elsewhere. Lending to foreign countries to support their economies is a government function, not a central bank function, because it involves transferring wealth, not merely managing the money supply.

I absolutely agree. The Fed should not have given that money out without a congressional directive telling them so. That they did so without even telling congress is terrible.

I wonder if the Whitehouse knew?

thedude wrote:Dogma,
Google negative liability The FED. The problem is while what I described should be shown as losses, it is not in this case. This is part of my point regarding the problem. In theory, if the Fed only uses government bonds for monetizing debt, then no matter how many real losses are incured it will never show a loss or go bankrupt. This is not shown as a loss to the purchaser which is the problem.

It isn't shown as a loss because it isn't a loss, its really that simple,. Ultimately you've simply failed to understand the accounting concepts being discussed here.

thedude wrote:
Also, the USD is not the survivor of currency. The USD bank note or Federal Reserve Note that we know as our money today was first printed in 1914. Before that each bank printed its own notes. There were central banking notes that was used for currency as well but it was not the national standard. Each state also controled their own currency in the sense that they could accept any currency they chose and have faith in, the most common was gold. When the Fed was created, shortly after, the use and ownership of gold was made illegal so that the only allowable currency was the FED reserve note (our paper money). This is not anything like once currency surviving because of its true value.

Actually, that's exactly what its like. Note that at several points in history the federal government has tried to develop a central banking system. The reason they were finally able to do so was the inherent confidence that the public placed in federal guarantees, which is ultimately what leads to the valuation of currency.

I'm not sure what "true value" is though. Value is based on what people will give you for X, nothing has inherent value in the sense that you seem to be discussing.

thedude wrote:
Also, the 'dollar' has become the world reserve standard. We live in a global economy, because of this, the actions of the FED affect the rest of the world. To state anything else is simply wrong.

Well, duh. I've said that in virtually every post I've made in this thread. Hell, the purpose of the Fed is to affect the domestic economy, and by extension the global one as well.

Remember when teachers, public employees, Planned Parenthood, NPR and PBS crashed the stock market, wiped out half of our 401Ks, took trillions in TARP money, spilled oil in the Gulf of Mexico, gave themselves billions in bonuses, and paid no taxes? Yeah, me neither.

Remember when pouring money into the education system raised testing scores for children in the U.S., welfare was used for people to buy food and clothing and not drugs and alcohol, presidents were not passing bills to help low income families buy houses they couldn't afford, and healthcare laws were passed that even the president and congress had to abide by? Yeah me neither!!!

It isn't shown as a loss because it isn't a loss, its really that simple,. Ultimately you've simply failed to understand the accounting concepts being discussed here.

Dogma, did you actually research the feds version of negative liabiliity. I am very familiar with the basic accounting function of negative liablity. However, in this case, please explain to me why the Treasury owes the fed money when the Fed buys bonds from the Treasury through the monetization process. If the Treasury does not owe the FED money then how can the FED show negative liabilities here? Please enlighten me.

Actually, that's exactly what its like. Note that at several points in history the federal government has tried to develop a central banking system. The reason they were finally able to do so was the inherent confidence that the public placed in federal guarantees, which is ultimately what leads to the valuation of currency.

Yes and Executive Order 6102 had nothing to do with this? The great depression also had nothing to do with this? I mean its not like the mases to turn to the government in time of need and its not like a government to captillize on a situation for its own profit, right? The government nor the FED benefited from this right?
One could argue the first two central banks (three if you count the Bank of North America) did not succeed and were not able to create a national currency because of key opposistion. Both the first two central banks had prominent elected officials in opposistion until each central banks charter was revoked (such as Thomas Jefferson and Andrew Jackson). The Fed and government both took enormous steps during the creation of the FED through the great depression that widely expanded their control and power and the masses gave them the power to do so. This is simply history, I am not implying malicious intent either, just recognizing the nature of humanity to act in ones best interest. We see this time and time again throughout history, when times are tough the people relinquish their power and forfeit their freedoms for more security which always equates to bigger government and more government control.

In other words, just because an attempt at central banking in the US finally took and its currency become the standard through legislation outlawing competing forms during a period of great economic turtmoil, doesnt necessarily mean the free markets have determined the value of the currency and which currency is to be used.

Well, duh. I've said that in virtually every post I've made in this thread. Hell, the purpose of the Fed is to affect the domestic economy, and by extension the global one as well

This was simply a misunderstanding...in your post it states 'A process that is no carried out on a global scale.' It is clear now you meant it is 'now' as opposed to the negative no or not.

thedude wrote:
Dogma, did you actually research the feds version of negative liabiliity. I am very familiar with the basic accounting function of negative liablity. However, in this case, please explain to me why the Treasury owes the fed money when the Fed buys bonds from the Treasury through the monetization process. If the Treasury does not owe the FED money then how can the FED show negative liabilities here? Please enlighten me.

Federal monetary policy is a significant chunk of the work I do on a daily basis. Its something I'm pretty familiar with, I knew you were wrong the instant I read your first post. By recording interest to be remitted to the Treasury as a liability instead of as capital it is possible for the Fed to delay remittance of interest to the Treasury in the event that doing so would incur a loss, meaning that, when an agreement is reached with the Treasury, the Fed can substitute payment for the promise to pay.

Anyway, the Treasury owes money to the Fed because the Fed over pays when it buys bonds from the Treasury, this creates a negative liability on the Fed's balance sheet. Its exactly that simple, and in no way indicates a loss. As Sebster said, it can only be regarded a a loss if either the Treasury announced that it would not repay the Fed, which it won't, or the US itself declares bankruptcy.

thedude wrote:
Yes and Executive Order 6102 had nothing to do with this? The great depression also had nothing to do with this?

Of course, both of them did. Most other currencies (most because the high value of the dollar lead to regional black currencies) couldn't compete because the government was able to leverage their authority at the time in a way which gave their currency a unique degree of value. After all, its not like the government seized gold assets without any exchange.

This is almost exactly how any other currency would rise to dominance (only a bit more formal) as any realization of "true value" would necessitate asset hoarding by the parties controlling the production of currency.

thedude wrote:
I mean its not like the mases to turn to the government in time of need and its not like a government to captillize on a situation for its own profit, right? The government nor the FED benefited from this right?

Do you think that a private, currency issuing bank would do something different? Do you think that said private bank would not profit from the situation?

thedude wrote:
In other words, just because an attempt at central banking in the US finally took and its currency become the standard through legislation outlawing competing forms during a period of great economic turtmoil, doesnt necessarily mean the free markets have determined the value of the currency and which currency is to be used.

There's no such thing as a free market, in the sense you're using the term, unless all actors have equal assets. Since that's impossible, and asset conglomeration tends to lead to the formation of governing authorities (either by intention or sheer mass of monetary power), I don't see how it could have been anything other than what we generally discuss as a practical free market.

thedude wrote:
This was simply a misunderstanding...in your post it states 'A process that is no carried out on a global scale.' It is clear now you meant it is 'now' as opposed to the negative no or not.

No problem.

So your assertation is it is perfectly acceptable to take the difference between fair market value and what you pay and show it essentially as a credit on your account IF you pay more than fair market value, as opposed to a loss that is(I realize what you are saying is the standard answer for how the treasury owes the FED money but it does not make it right)?

Sure there really is no problem as long as the FED itself does not claim any losses on Treasuries. But, lets say the FED took a 1 billion dollar loss on treasuries, its marks it as a negative liabililty for future payment instead of a loss. Then lets say the FED pays the Treasury 100 million as part of what is left over from its earning. It now can deduct that 100 million from its negative liabiities page essentially working off its debt even though it would still be paying this amount to the treasury regardless. This process means the FED will not ever be insolvent and it can engage in any risky venture it wishes when dealing with government debt.

So, no effort to respond to my post thedude? Too hard? Couldn't do it?

thedude wrote:So your assertation is it is perfectly acceptable to take the difference between fair market value and what you pay and show it essentially as a credit on your account IF you pay more than fair market value, as opposed to a loss that is(I realize what you are saying is the standard answer for how the treasury owes the FED money but it does not make it right)?

Yes, because doing so allows you to recoup your losses through future transactions.

thedude wrote:
Sure there really is no problem as long as the FED itself does not claim any losses on Treasuries. But, lets say the FED took a 1 billion dollar loss on treasuries, its marks it as a negative liabililty for future payment instead of a loss. Then lets say the FED pays the Treasury 100 million as part of what is left over from its earning. It now can deduct that 100 million from its negative liabiities page essentially working off its debt even though it would still be paying this amount to the treasury regardless.

No, that's nonsense. Once recorded as a negative liability the account payments to the Treasury become part of the Fed's operating expenses, meaning that they would be paid before normal remittance. In effect, once a negative liability is incurred, the Treasury would not receive normal remittance payments from the Fed until that account was brought back into the black.

thedude wrote:
This process means the FED will not ever be insolvent and it can engage in any risky venture it wishes when dealing with government debt.

Again, that's nonsense. The Fed can still be rendered insolvent by the only real means it could happen before: devaluation of the USD.

LOUD NOISES

Actually Sebster, I did not see this response from you until you politely directed me to it.

You asked about the $3.3 trillion. But when I explained that was being detailed, now you shift to worrying about what money might have been given to other people?

Yes, I am fully aware that we know now after court orders, appeals and appeals overturned who was loaned the money through the discount window from what 2008-2010? I was simply pointing out the fact the majority of the last 100 years we have no idea who the FED loaned money and how much it has lost to which at the heart of the problem as mentioned in my initial post. We have glimpses here and there as some loans make the news in an effort to promote confidence in the system but again, we have just a glimpse of this activity. Back to the core point. When the money was loaned out during this period and frankly the period leading to particular discount window, banks around the world were in serious trouble therefore these bailout loans where risky loans and on a global scale. It is true from what I could find as well, it doesnt look like these banks are in danger of failing but in no way can you tell me that the FED knew this at the time, otherwise you have to conclude they also knew that in contrast they did know Bear Stearns would fail. Therefore that was risky investment.

This debate was had in 2008/2009. The subsequent year's inflation figures showed that those predicting deflation and arguing extra funds to be released were absolutely, 100% correct.

yet, we are not seeing a drop in the price of goods, quite the contrary, we are seeing a rapid increase in pricing, how does that make them 100% correct?

That's an absurd conclusion, the product of ideology and lazy thinking. Keynesian economic strategies are dominant because it has been shown to consistantly be the best approach to addressing a significant economic downturn.

Not lazy or ideology. I supsect I have done more objective research on the matter than you. Again, what constitutes best approach, who decides what is workign and what is not? Your logic for the validity of your argument shows how subjective and short sighted you are. The theories you hold as truth that have been validated in your viewpoint (and admittadly majority of the civialized world) through short gains over a short period of time meanwhile the gap between the wealthiest and the exponentially expands to the detriment of the so called middle class. Our dollar buys less every day. Our unemployemnt rates are nearing records highs in some states despite all this government spending. Our governments are racking up records levels of debt that are expontially growing.

You could sum up Keynesian economics as something like; "I believe that when government is facing a significant decrease in aggregate demand in the wake of supply shock, the correct response is to increase government spending to offset the worst of that impact and move more quickly towards recovery.”

The key here is government spending. Core to Keynesian economics is increased government spending to deal with low aggregate demand. You said it yourself. Keynesian thought is generally not so concerned with inflation as long as employment is up for example, so polices are required that keep employment up. It becomes a snowballing effect with larger and larger government role, a natural step then is central banking in close contact with government so the two may work to keep the balancing act afloat. This is how things like mixed economly and central banking become part ofthe converstation. I will spell it out next time.

But that is not the same thing as your original claim that the central bank is run by the private banks. Now be honest and retract your original claim.

Certainly not, just because one influences the other does and they both benefit from each other does not mean they are the same. My statement that the Federal Reserve is not a goverment entity still holds true.

No, I’m not claiming that. I’m pointing out that the money creation process you were claiming was some magical invention of government is actually a product of the private market.

At what point did I claim this was some magical invention of the government? I have a problem with the Fed monetizing treasury debt because they are not actually paying for the bonds (adding it in on a computer screen is not the same thing but i'm sure you'll argue it is) and they have the abliltiy to take possibliy unlimited losses on this because of the fact they pay the treasury. I think I saw the next post from Dogma where he states negative liablities are not a problem because they will be settled before the regular payments are remitted ( I think that is what he said. I did not see anywhere in the Fed release that stated losses would be covered before normal remittance was made.

Every single group that argues against fiat currency belongs in this last group.

Well I guess you cant argue with stubborness like that.

But when you throw in all the conspiracy stuff then mangle the term ‘negative liability’ and I have to keep explaining to you how you’re wrong.

No, all these practices ultimatly have an effect on the tax payers that costs the 'people'. Its not consiracy. Its bad policy that encourages reckless spending and reckless money management.

The board is appointed by the President.

The board are not paid by the government and are not government employees. Of course they dictate FED policy but you seem to be suggesting that the president has specific economic input on the day to day which i am sure is just not the case. I am also sure though that
he has a general agenda that supports his constituants that he makes it know to be supported at the FED.

Anyhow, you’ve made a big mistake in assuming because something is bad, that everything that is part of that thing is bad. As in, Marxism is bad, and Marxism had a central bank, therefore central banks are bad.

my distain for central banking is unrelated to any form of socialism, it was mearly brought up to point out how essetional it is to the core of marxism for example in hopes of illustrating a slippery sloap. central banking put to much power in the hands of too few.

thedude wrote:Actually Sebster, I did not see this response from you until you politely directed me to it.

Oh. Sorry I was a little snippy, but it sucks to have a post ignored.

Yes, I am fully aware that we know now after court orders, appeals and appeals overturned who was loaned the money through the discount window from what 2008-2010? I was simply pointing out the fact the majority of the last 100 years we have no idea who the FED loaned money and how much it has lost to which at the heart of the problem as mentioned in my initial post.

No, we have you speculating that such loans must have been made. It was not a difficult process to have the loans revealed this time. Nor was there much reason in the past to make such loans to secure international stability (as the economy was much less inter-connected, so US stability was much less dependant on international stability, nor was such a thing desired, you look at the 1929 crash and how much of it was driven by efforts to protect one's own economy at the expense of all others).

Back to the core point. When the money was loaned out during this period and frankly the period leading to particular discount window, banks around the world were in serious trouble therefore these bailout loans where risky loans and on a global scale.

It wasn't luck that stopped these organisations collapsing, it was the nature of risk they were exposed to. They were in liquidity risk, not balance sheet risk. The injection of cash can quickly resolve the former, and when the latter doesn't exist you actually have almost risk free lending.

It is true from what I could find as well, it doesnt look like these banks are in danger of failing but in no way can you tell me that the FED knew this at the time, otherwise you have to conclude they also knew that in contrast they did know Bear Stearns would fail. Therefore that was risky investment.

You're mistaken here. While there was a plan initially put in place to finance Bear Stearns, this was not followed through. The only money put up by the Fed was to finance the takeover by JP Morgan.

yet, we are not seeing a drop in the price of goods, quite the contrary, we are seeing a rapid increase in pricing, how does that make them 100% correct?

But you're not seeing a rapid rise in pricing. The latest figures for March 2011 show annualised inflation of 2.68%.

You can't just make things up.

Not lazy or ideology. I supsect I have done more objective research on the matter than you. Again, what constitutes best approach, who decides what is workign and what is not?

A stable economy with sustainable growth is a working economy. You should have read this at some point in your objective research.

The theories you hold as truth that have been validated in your viewpoint (and admittadly majority of the civialized world) through short gains over a short period of time meanwhile the gap between the wealthiest and the exponentially expands to the detriment of the so called middle class.

Your assertion that Keynesian economics are somehow responsible for a growing divide between rich and poor is just nonsense. It has nothing to do with anything, it's like saying 'there's a table, therefore bigfoot is real.'

But by all means, please explain how a policy of deficit spending during economic downturn increases the divide between rich and poor. Please, I'm all ears.

Our dollar buys less every day.

Of course. That's inflation. We've already been through that.

Our unemployemnt rates are nearing records highs in some states despite all this government spending.

That's a downturn. They happen. And when they do, populist economics sprout up again, pretending they have some magic pill to defeat the inherently complex and nebulous forces of modern economic structures.

Our governments are racking up records levels of debt that are expontially growing.

Yes, and this is bad. But nothing in Keynesian economics dictates that governments should maintain deficit spending. Indeed, the opposite is true, they state that during periods of overheating government should run surpluses to pull aggregate demand down.

The key here is government spending. Core to Keynesian economics is increased government spending to deal with low aggregate demand. You said it yourself. Keynesian thought is generally not so concerned with inflation as long as employment is up for example, so polices are required that keep employment up. It becomes a snowballing effect with larger and larger government role, a natural step then is central banking in close contact with government so the two may work to keep the balancing act afloat. This is how things like mixed economly and central banking become part ofthe converstation. I will spell it out next time.

Sure, and in the late 70s you had stagflation, where government manipulation of interest rates in an effort to keep unemployment down ended up producing both. Which led to reform in central banks, so that their task become one almost entirely of dealing with inflation, and leaving employment to the elected government. It's a change that's worked wonders, inflation has been kept under control for decades.

Your argument had validity, if this was 1979. Who's been describing such outdated problems to you?

Certainly not, just because one influences the other does and they both benefit from each other does not mean they are the same. My statement that the Federal Reserve is not a goverment entity still holds true.

But it's misleading, because stated as such it causes people to think that it is an independant entity acting on behalf of the private interests of the banks. Which it clearly isn't.

At what point did I claim this was some magical invention of the government? I have a problem with the Fed monetizing treasury debt because they are not actually paying for the bonds (adding it in on a computer screen is not the same thing but i'm sure you'll argue it is) and they have the abliltiy to take possibliy unlimited losses on this because of the fact they pay the treasury. I think I saw the next post from Dogma where he states negative liablities are not a problem because they will be settled before the regular payments are remitted ( I think that is what he said. I did not see anywhere in the Fed release that stated losses would be covered before normal remittance was made.

Well I guess you cant argue with stubborness like that.

What do you expect. I gave reasons that a gold standard (or any precious metal based currency) would not only struggle, but be utterly impossible in the modern world, and you gave some pat answer that those things didn't really matter or something.

You're clearly not interested in actually defending the practicality of the gold standard, else you would have explained what precious metal should be used to base the 13 trillion dollar economy of the US. As you're not honest to bother doing that, why should I do anything but inform you that people who propose the gold standard are fringe lunatics.

The board are not paid by the government and are not government employees. Of course they dictate FED policy but you seem to be suggesting that the president has specific economic input on the day to day which i am sure is just not the case. I am also sure though that
he has a general agenda that supports his constituants that he makes it know to be supported at the FED.

As I already pointed out, the board is independant of the President and congress, and for good reason. This does not make the Fed a law unto itself, it is still ultimately responsible to government for fulfilling the core goal that was tasked to it by government - control of inflation.

my distain for central banking is unrelated to any form of socialism, it was mearly brought up to point out how essetional it is to the core of marxism for example in hopes of illustrating a slippery sloap. central banking put to much power in the hands of too few.

That makes no sense. You're relying on vague allusions to very bad things to attempt to make your point. When every first world nation has a central bank and they have managed to maintain their freedoms and capitalist systems for many decades, and centuries in some cases, then pointing to marxism and saying "slippery slope! slippery slope!" means absolutely nothing.

So stop pretending it does. Start making an honest look at how many weak arguments you've made in this thread, how little sense so much of your argument has made, and start thinking that maybe you've gotten horribly misled on economics by some very foolish or very deceitful people.

Easy to get the docs revealed is relative. The facts a the FED did not want to turn them over and made a stink about how it would hurt the consumer confidence if they were forced to turn it over, a court order was a appealed and the appeal rejected and now we have the records. If it was so easy why dont we have the loan history for the past 100 years? And of course such loans have been made. We are on a totally different path if you feel i was speculating whether loans have been made by the fed in the past, or even risky loans. Of course they have and back to point stated in my first post. This brief window simply shows a glimpse of wha the FED does and illustrates a problem here.

You are wrong again with regards to the risk. In 2008 and 2009 the only idea we had as to what kind of risk the banks where exposed to was that we had no idea. The nature of how toxic assets were being bundled with A paper and then marked as A paper because some of it was A paper made it very difficult to get an idea how much exposure was out there. As we learned more, we saw that the exposure was greater than expected with deratives schemes or best case scenario careless money management from hedge fund managers spaning across a plethora of financial markets. Pumping money into a market saturated by toxic assets and claiming no risk was taken is just plain wrong. Again Bear stearns had a liquidity problem that what something like a 14 million injection was not able to replenish its lossess and stop the hemeraging.

You also state that by havign the FED back and insure the Chase take over that somehow this loss is not traced back to the FED. Clearly everyting they do works right

You go on and are pointing at the fact we are near the target inflation rate as a the fact that the system is working and even went so far as to say we have not seen a rapid increase in pricing. While there are various factors for commodity pricing of course, inflation is just as a prominant factor today as a result of all this QE affecting our global economy as supply and demand or speculation is. While inflation cannot be held soley to blame, we have seen a rapid increase in prices and it is a contributing factor for this perfect storm of...say it with me...rapid price increases.

Your logic as to what constitutes a working economy is the same logic as the man who has managed to keep his life raft afloat by bailing out the water faster than the current holes are leaking the water in.

Further, my assertion is Keynesian economics is somehow responsible for the divide between rich and poor is only indirectly. The combination of central banking and human nature is to blame. Keynesian ideals does not require central banking but it is a match made in heaven if you will. When you couple this with fiat currency you have the catalyst for unlimited government spending and a situation where you have what we see today.

You keep trying to belittle my point by assuming someone is feeding me this information that is all based on consipiracy theories and the call for so called 'sound money' is just rantings from an uninformed vocal minority.In this you are wrong on all accounts. The system is fundamentally flawed. The government will go further in debt, wars will continue to be waged for profit and the central bank will continue to fund all of this and the system will reach a level of unsustainablity eventual without complete reform.

thedude wrote:I saw the next post from Dogma where he states negative liablities are not a problem because they will be settled before the regular payments are remitted ( I think that is what he said. I did not see anywhere in the Fed release that stated losses would be covered before normal remittance was made.

You're confusing losses and negative liabilities again. If you can keep those two things separate in your mind, then you will have a much easier time understanding this.

Anyway, the Fed's operating costs are always accounted for prior to any remittance to the Treasury, and a negative liability in any account with the Treasury would take precedent over remittance as it would be a component of operating costs. Alternatively you might think of annual remittance as a debt owed to the Treasury, and the negative liability as a debt the Treasury owes to the Fed. In this latter model the Fed would merely deduct the debt owed to it by the Treasury from any debt the Fed incurred via the remittance requirement.

This isn't something that would be mentioned in the Fed release, as its simply a natural consequence of their mandate (put simply, operating costs paid for prior to remittance).


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thedude wrote:
Your logic as to what constitutes a working economy is the same logic as the man who has managed to keep his life raft afloat by bailing out the water faster than the current holes are leaking the water in.

No, that nonsense. Sebster's definition of a working economy has nothing in common with what you're analogy. The boat analogy implies that we are in danger of "sinking". Sebster's definition makes no such claim. Unless you're attempting to claim that all economic activity is fundamentally forward thinking, and therefore predicated on staving off the natural forces of entropy that begin to affect static actors; in which case the analogy is appropriate, but not for any reason that you're likely to have thought of (eg. it isn't damning of central banks, but rather a mere analogical description of what happens when competing over scarce resources).

You're either not reading closely, incapable of understanding the points being made, or willfully ignoring them in order to account for some deeply held belief; maybe all three.

thedude wrote:
The system is fundamentally flawed. The government will go further in debt, wars will continue to be waged for profit and the central bank will continue to fund all of this and the system will reach a level of unsustainablity eventual without complete reform.

That might, happen, yes. Though given that there are plenty of other countries with central banks and fiat currencies that have none of those problems, I fail to see how you can see that as being inevitable. Wait, I take that back, I understand how you could see that as being inevitable, its simply that no reasonable person can draw such a conclusion.

More generally, you seem to be chasing some kind of perfect, universally stable and effective system, which is fool's errand for a number of reasons.