|
Korean Job Discussion Forums
"The Internet's Meeting Place for ESL/EFL Teachers from Around the World!"
|
| View previous topic :: View next topic |
| Author |
Message |
jaykimf
Joined: 24 Apr 2004
|
 Posted: Thu May 13, 2010 6:47 am Post subject: |
 |
|
| The Happy Warrior wrote: |
| Bacasper wrote: |
A hundred years is enough. I'm Fed up.
|
Sorry, bacasper, we cannot give you credit for making up that catchy slogan.
Fed up (article from six months ago)
| Quote: |
Hardly anyone, citizen or congressman, completely understands what the Fed does, how it operates, or what the effects of its actions will be.
Here is a highly simplified outline. The Fed is a set of 12 regional banks under the command of a seven-member board of governors appointed by the president and approved by the Senate. Its 12-member Federal Open Market Committee (FOMC)�the board of governors plus five regional bank chiefs�is responsible for adjusting the federal funds interest rate, which is the rate banks charge each other for loans. The FOMC [adjusts the interest rate] through �open market operations,� buying and selling securities to affect the amount of money in the economy and thus the interest rate paid by banks to get more cash.
This process is hard enough to describe, let alone comprehend, and previous Fed chairmen have found it useful to keep their public pronouncements about the central bank�s operations maximally vague and obscure. A classic from Paul Volcker, chairman from 1979 to 1987: �We did what we did, we didn�t do what we didn�t do, and the result was what happened.� Volcker�s successor, Alan Greenspan, who enjoyed the longest stretch of low-inflation prosperity in Fed history (now widely seen as possibly laying the groundwork for the crash), helped reinforce both the central bank�s reputation for effectiveness and the expectation that its actions would remain inscrutable.
But these days the Federal Reserve faces challenges to both its power and its mystery, thanks to both hot public opinion and cold academic analysis. Politicians are demanding a peek behind the curtain, and holdovers from Paul�s 2008 presidential campaign have kick-started an �End the Fed� movement. Even within the central bank�s natural fanbase of economists and financiers, many are complaining about its appetite for regulatory power and its massive expansion of the money supply. During the last year the Fed has nearly doubled the monetary measure over which it has the most direct control, the �monetary base� (defined as circulating currency plus the reserves that commercial banks keep with Federal Reserve banks). |
Basically, it seems that the Fed manipulates the stock market to set the interest rate. Do I have that right? |
No, securities refers to debt-bearing instruments of the U.S. Government (treasury bonds etc.) not stocks. When it buys such securities, it injects additional money into the economy which affects interest rates. |
|
| Back to top |
|
 |
jaykimf
Joined: 24 Apr 2004
|
| Posted: Thu May 13, 2010 7:53 am Post subject: |
|
|
| bacasper wrote: |
OK, instead of "NOTHING," I should have said "not another consortium of private bankers." |
Well then, Who? Private banks that are not part of a consortium? Here's one option that existed before the Fed: "1836: State Bank Notes
With minimum regulation, a proliferation of 1,600 state-chartered, private banks issued paper money. State bank notes, with over 30,000 varieties of color and design, were easily counterfeited, which combined with bank failures to cause confusion and circulation problems." http://www.factmonster.com/ipka/A0774856.html
| bacasper wrote: |
| You don't think we pay interest to the Fed? Don't make me sic VQ on you! |
The U.S. pays interest to whoever holds the debt instruments it has sold to the public on the open market. The Fed buys a portion of that debt from the public, receives the interest , but then returns all of its profits to the U.S. treasury. That is how the Fed monetizes the debt.
| bacasper wrote: |
| The Fed has caused massive inflation by its insane printing of unbacked dollars. |
The same massive inflation would have resulted if there were no Fed and the printing had been done by the Treasury dept. |
|
| Back to top |
|
|
jaykimf
Joined: 24 Apr 2004
|
| Posted: Thu May 13, 2010 8:15 am Post subject: |
|
|
| Fox wrote: |
Personally, I'm in favor of the government simply not spending in excess of its revenue. If its funds are deficient, it needs to either raise taxes or lower spending. |
Large infrastructure projects that will be used over many years are often financed by the sale of bonds that will be paid off by revenue received over the length of the project. That doesn't seem to unreasonable to me.
| Fox wrote: |
If the government were willing to abolish the Federal Reserve, it wouldn't be giving the Federal Reserve's monetary policy it's full support though. |
I'm inclined to disagree but assuming that were true it would mean that the government won't abolish the Fed. |
|
| Back to top |
|
|
Fox
Joined: 04 Mar 2009
|
| Posted: Thu May 13, 2010 4:01 pm Post subject: |
|
|
| jaykimf wrote: |
| Fox wrote: |
Personally, I'm in favor of the government simply not spending in excess of its revenue. If its funds are deficient, it needs to either raise taxes or lower spending. |
Large infrastructure projects that will be used over many years are often financed by the sale of bonds that will be paid off by revenue received over the length of the project. That doesn't seem to unreasonable to me. |
Financing them in this fashion requires paying substantially more money for the exact same project due to the requirement of paying interest. I object to the state wasting funds in this fashion; I'd rather they simply drew from governmental savings and/or their annual budgetary funds to fund such projects. Same results, less public money wasted, which means either more potential positive public projects or lower taxes. It does require discipline, though.
I support government projects, I just want them funded in the most cost-effective way possible.
| jaykimf wrote: |
| Fox wrote: |
If the government were willing to abolish the Federal Reserve, it wouldn't be giving the Federal Reserve's monetary policy it's full support though. |
I'm inclined to disagree but assuming that were true it would mean that the government won't abolish the Fed. |
The government won't abolish the Fed. I think that's pretty clear. |
|
| Back to top |
|
|
jaykimf
Joined: 24 Apr 2004
|
| Posted: Thu May 13, 2010 4:23 pm Post subject: |
|
|
| Fox wrote: |
| jaykimf wrote: |
| Fox wrote: |
Personally, I'm in favor of the government simply not spending in excess of its revenue. If its funds are deficient, it needs to either raise taxes or lower spending. |
Large infrastructure projects that will be used over many years are often financed by the sale of bonds that will be paid off by revenue received over the length of the project. That doesn't seem to unreasonable to me. |
Financing them in this fashion requires paying substantially more money for the exact same project due to the requirement of paying interest. I object to the state wasting funds in this fashion; I'd rather they simply drew from governmental savings and/or their annual budgetary funds to fund such projects. Same results, less public money wasted, which means either more potential positive public projects or lower taxes. It does require discipline, though.
I support government projects, I just want them funded in the most cost-effective way possible.
|
So if your town needs a new high school, they should raise taxes by $20 million in year one to pay cash for it or or save up a million a year for 20 years before starting construction ? Of course by then it will cost $40 million. Is that the way you would buy a house ? |
|
| Back to top |
|
|
Fox
Joined: 04 Mar 2009
|
| Posted: Thu May 13, 2010 4:53 pm Post subject: |
|
|
| jaykimf wrote: |
| So if your town needs a new high school, they should raise taxes by $20 million in year one to pay cash for it or or save up a million a year for 20 years before starting construction ? |
If my town needs a new high school it should have been projected in advance and saved for in advance. There should also be a surplus fund in order to assist in situations where such projections are inaccurate. That's the level of effectiveness I expect from governance. If other people expected the same, it's the level of effectiveness we'd see. I hope some day other people will start raising their expectations.
So no, they shouldn't say, "We need a high school now, let's wait 20 years and build it," they should have seen the need coming and prepared. I don't want my government pissing away extra money on a project needlessly.
| jaykimf wrote: |
| Is that the way you would buy a house ? |
Yes. |
|
| Back to top |
|
|
jaykimf
Joined: 24 Apr 2004
|
| Posted: Thu May 13, 2010 5:49 pm Post subject: |
|
|
| Fox wrote: |
| jaykimf wrote: |
| So if your town needs a new high school, they should raise taxes by $20 million in year one to pay cash for it or or save up a million a year for 20 years before starting construction ? |
If my town needs a new high school it should have been projected in advance and saved for in advance. There should also be a surplus fund in order to assist in situations where such projections are inaccurate. That's the level of effectiveness I expect from governance. If other people expected the same, it's the level of effectiveness we'd see. I hope some day other people will start raising their expectations.
So no, they shouldn't say, "We need a high school now, let's wait 20 years and build it," they should have seen the need coming and prepared. I don't want my government pissing away extra money on a project needlessly.
| jaykimf wrote: |
| Is that the way you would buy a house ? |
Yes. |
So they should have foreseen that somebody would build a new subdivision and 3000 new families would move in? And Minneapolis should have foreseen that that Bridge would collapse? Well, OK. But realistically you must realize that it ain't going to happen, don't you? And I would never buy a house that way (But that's just me-- and 90% of all home buyers) |
|
| Back to top |
|
|
Fox
Joined: 04 Mar 2009
|
| Posted: Thu May 13, 2010 5:56 pm Post subject: |
|
|
| jaykimf wrote: |
| So they should have foreseen that somebody would build a new subdivision and 3000 new families would move in? |
Yes.
| jaykimf wrote: |
| And Minneapolis should have foreseen that that Bridge would collapse? |
Honestly, yes.
| jaykimf wrote: |
| Well, OK. But realistically you must realize that it ain't going to happen, don't you? |
I know. I can only talk about how I think things should be.
| jaykimf wrote: |
| And I would never buy a house that way (But that's just me-- and 90% of all home buyers) |
The majority does a lot of things I can't really empathize with. |
|
| Back to top |
|
|
The Happy Warrior
Joined: 10 Feb 2010
|
| Posted: Thu May 13, 2010 5:57 pm Post subject: |
|
|
Jaykimf is right about one thing. The American economy didn't get into trouble by letting people put 20% down on a house and then owing another 80%, it got into trouble by pushing people with more dubious credit prospects into near-to no money down scenarios. Yes, its reasonable, in the abstract, to allow gov't to pay for a valuable infrastructure contract with about 1/5th-1/4th of the price upfront, and the rest over the life of the asset.
But that's not how gov't actually works in America. And I think I get where Fox is coming from. The gov't creates bond issues to satisfy special interests while avoiding raising taxes on taxpayers.
The other problem is that the gov't already is paying for so much over the life of the infrastructure, that we can't afford new infrastructure investments. At some point, we've borrowed too much. Is 100% of GDP too much? Int'l markets considered 115% of GDP too much for Greece. |
|
| Back to top |
|
|
mises
Joined: 05 Nov 2007
Location: retired
|
| Posted: Tue Jul 06, 2010 4:46 am Post subject: |
|
|
The Fed and media:
http://www.zerohedge.com/article/new-york-feds-editorial-influence-over-wsj
What to say about the financial press..
Sometimes it is nice to have the truth repeated:
http://dailycaller.com/2010/01/08/workingman%E2%80%99s-fed/
| Quote: |
One of the most successful pieces of propaganda ever is the myth that the Federal Reserve exists to protect the dollar. Like all great myths it unifies its believers and shields them from the facts. But facts are stubborn things, as John Adams observed, and it is a fact that since the creation of the Federal Reserve the dollar has lost 92 percent of its purchasing power. If you had a nickel and three pennies in your hand, that�s what�s left of the dollar since the Fed took charge. Imagine if the Fed were in charge of air safety and 92 percent of the flights crashed on takeoff. That�s how well the Fed has done its purported job.
If the Fed does not protect the dollar, what is their job exactly; what do they really do? A little history helps here. In 1907, a financial panic nearly destroyed the banking system in the U.S. The system was rescued personally by J. P. Morgan who held all night sessions in his New York mansion and cajoled other bankers to join a rescue fund which barely saved the day. But it was a close call and the bankers realized they needed greater resources, a lender of last resort, to save them the next time. They knew there would be other panics and J. P. Morgan would not be around forever. They spent the years from 1908 to 1911 working on a solution in which the U.S. government would backstop the system with the ability to print potentially unlimited amounts of money but the system itself would be dominated by the bankers. The result was the creation of the Federal Reserve in 1913. Thus began the long, slow, persistent destruction of the dollar. The name for this process is inflation. That is what bankers really want and that is what the Fed gives them.
The Fed�s vaunted independence means it is barely connected to the U.S. government except to the extent it so chooses to carry out its own purposes. Fed governors are chosen by the President but with very few exceptions come from one of two sources � either the Fed�s New York Reserve Bank or the elite ranks of academic economists trained in the monetary manipulation of Milton Friedman and the deficit spending of John Maynard Keynes. Regional banks of the Fed system are even more insulated from the democratic process. They are owned by the banks in their regions and are controlled by local bankers. Now the Fed is seen for what it is � a super-bank created by other banks to bail them out when they�re in trouble by printing money to cause inflation. And inflation does not have to be very noticeable in order to work. Even 4% inflation will cut the value of your money in half in less than 18 years.
Doesn�t inflation hurt banks too by reducing the value of their loans? Don�t they get repaid in cheaper dollars? Yes, but consider the alternative. In deflation, the burden of loans gets heavier to the point that borrowers cannot repay. A banker would rather get paid in cheaper dollars than not get paid at all. And banks are leveraged institutions because they finance the loans with deposits. With inflation, their loans may be worth less but the deposits are worth less too so the banks are barely affected.
The Fed also bails out banks by keeping short term rates extremely low. So banks just borrow from depositors at 1% and invest in Treasury notes at 3% and pocket the 2% difference. They leverage this trade using deposits at a ten-to-one ratio to their capital so the 2% spread becomes a 20% return on capital once the leverage does its work. The only risk is that the 1% cost of funds goes up before all of the profits can be collected. Don�t worry says the Fed, we�ll make sure rates stay low as long as it takes and we�ll give you plenty of warning of an increase so you can unwind the trade before you lose money. Having the Fed on your side is as close to a sure thing as markets ever provide.
If Fed inflation and rigged interest rates are great for the banks, who suffers in this scheme? As usual, it�s the average working man or woman. Imagine asking your boss for a raise in this economic climate. The boss will probably tell you you�re lucky not to get fired and go back to your desk and quit complaining. Now imagine your salary stays the same but the price of everything you buy goes down. You still don�t have a raise but you do have a higher standard of living and increased purchasing power. A new car that used to cost $24,000 now costs $16,000 and is much more affordable. That�s the power of deflation; call it the workingman�s bonus. In a severe economic downturn, deflation happens naturally; it�s how purchasing power is restored and it�s how the average worker improves his standard of living when he can�t get a raise. The government dreads deflation because if you got a real raise they would tax it but when you get improved purchasing power through deflation the government cannot tax that. For the average worker, deflation is better than a raise because it can�t be taxed. The Fed causes inflation to cancel out the deflation. They take away the worker�s raise but the bankers still get theirs.
Perhaps you believe that Fed economic policymaking is complicated. It�s not. The Fed is controlled by the banks and its job is to prop up the banks even at the expense of average Americans. Now you know. Feel better?
|
|
|
| Back to top |
|
|
Ineverlie&I'malwaysri
Joined: 09 Aug 2011
|
|
| Back to top |
|
|
TheUrbanMyth
Joined: 28 Jan 2003
Location: Retired
|
| Posted: Tue Oct 18, 2011 5:02 pm Post subject: |
|
|
When I click on the above link it takes me to the news story 'tis true...but it also takes me to an ad for the Feb phone bomb audit.
Not that that in itself is a bad thing but when you click on the email address link in order to get an e-mail reminder of when the next phone bomb is... you get this message.
"The feed does not have subscriptions by email enabled"
So they ask for your support by email and then don't bother setting it up? |
|
| Back to top |
|
|
sirius black
Joined: 04 Jun 2010
|
| Posted: Wed Oct 19, 2011 3:15 am Post subject: |
|
|
I'm no economist and this is a genuine and sincere question. What did we do before the fed? The fed came about after the turn of the last century right? About a 100 years ago give or take?
By that time the U.S. had surpassed the UK in GDP. I recall (when I wasn't sleeping) in history class that the intention of creating the fed was to prevent the financial panics that occurred in the past. However, we had panics and financial problems after (the Great Depression, '70s stagflation and then recession, the near colllapse in '08 ).
So, did it do any good to have a Fed? Many of the things that caused the financial panics of the 1800s and early 1900s have regulations in place to stop that sort of thing these days.
So, again, can we do without the fed? I agree it won't be dismantled, at least in the near future. If Paul is elected it would be sorta a referendum on the fed since he speaks so much on it. So, with his election, a lot of light would shone on the fed and a lot of the mystery surrounding it will come to light. |
|
| Back to top |
|
|
|
|
You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum
|
|
FAQ
Search
Memberlist
Usergroups
Register
Profile
Log in to check your private messages
Log in
