LegendKiller
Lifer
Not sort of.
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The Federal Reserve chairman is a joke
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Not sort of.
3chordcharlie
Diamond Member
Who 'creates' the interest to pay back the loans? (honest question)
LegendKiller
Lifer
Income (today's wealth created) pays interest.
AnonymouseUser
Diamond Member
100% of the Federal Income Tax is used to pay the interest on the money the privately held Federal Reserve Bank issues. Americans are debt slaves to the Federal Reserve Bank.
3chordcharlie
Diamond Member
I understand that you pay with what you earn later, but part of this honestly confuses me:
Non-durable goods are simply consumed, and durable ones are mostly purchased with credit.
Now, I get that when you 'buy' a house, the bank owns it, and you effectively buy it, longterm, from the bank. But you end up paying more for it in any sort of real dollars (say, about twice, depending on interest rates and term). But I can't see any economy-wide 'forgone consumption' that causes this to all work out (i.e. that holding the mortgage would eventually result in being able to purchase twice what you lent). So does it really only work via a constantly growing economy? Does it need to be real growth, or does monetary inflation work well enough as a means of wealth redistribution?
LegendKiller
Lifer
Here comes the troll again. Anybody want to bet how fast I can shoot down this idiotic point? I'll put 30s on this one.
The interest paid to the Fed is only the interest of the debt they hold. That interest is refunded to the tune of more than $80Bn for FY2006, 84bn for FY 2007. The amount of interest they keep is nothing more than overhead, employees and operations, that would be used whether the Fed were fully governmental or not. In fact, I'd hazard to guess that the government operations would cost more.
Additionally, the Fed isn't private, in that every American who has anything to do with owning stocks, own the member banks who own the Fed, since all National Associations (NAs) have to own a part of the Fed. Thus, no single cabal of banks can control the Fed.
The Fed is governed by politically appointed governors, who are appointed by the President and can be withdrawn by Congress. The Chairman has regular voting powers, but is more of the figurehead of the bank, and can be stripped of his powers by the President, Congress, or the Fed governors.
The Fed can also have it's powers removed from Congress. Congress receives and annual audit of the Fed, which is easily found, which shows a balance sheet, as well as an income statement to show the amounts refunded.
Ok, that took longer than 30s, more like 2 min. It was pretty dang easy though, since anybody with a 4th grade reading ability can easily find this info and learn it. But there's no accounting for intelligence I guess.
LegendKiller
Lifer
The wealth you pay is paid to people who deployed the capital. That isn't a redistribution of wealth among richer or poorer people, considering that all sorts of entities hold the debt in which you pay debt service to.
There is a foregone consumption, since the income you create (and interest you spend to bring income forward to present) is reduced by that interest paid for forward-used income.
The economy doesn't need to grow in order for this to occur, the money can be shifted around among people who are deploying capital and the ones who are using it, without growth itself. It doesn't create inflation, in and of itself, since it's really a zero-sum game.
ponyo
Lifer
LegendKiller
Lifer
He's so right that he said that Volcker had rates at 20%+. LOL, what fricking loony bin did he live in in the 1980s?
Then the idiot goes on to say the Fed should be abolished to get rid of inflation, yet fails to acknowledge what would happen if he did that.
So, on one hand, we had the US in 1929 where more or less his scenario played out. The Fed cut liquidity, the US economy collapsed, the dollar stayed strong, a deflationary spiral hit, and the only reason why we recovered (at least 10 years before we normally would have) is because a war.
On the other, he points out Japan, who still has a pretty fricking nice country. But narrow growth for 20 years.
Hmmm, absolute economic debasement but no currency debasement, or currency debasement, but economic stagnation but certain prosperity.
HMMMMMM...I guess we should choose to all become Okies!
They aren't trying to prevent a recession, they are trying to prevent a depression and panic collapse.
What's funny is that everybody's bitching about inflation caused by speculation in agriculture. What's happened to wheat? What's happened to corn? What's happened to metals?
They've all gone up significantly, adding huge inflation into the system, because people like him.
What's funny is that inflation in China isn't caused by a debased currency, yet they fail to recognize that inflation isn't totally caused by debased currency, obviously. It's funny that they blame inflation on currency, 100% of the time.
AnonymouseUser
Diamond Member
LegendKiller
Lifer
If Congress wanted to abolish the Fed, they could.
What's funny is that the Fed that many claim to hate because Fiat currency is the same one advocated by people who wanted a gold currency.
LegendKiller
Lifer
Ahh, "green MBA". Ohhhh, good one sparky! I am so mortally wounded! Care to counter anything I have, or are you going to more YouTube regurgitation?
There was more bullshit in that 10min video than I've seen out of Cramer's mouth all last week.
LegendKiller
Lifer
Yeah, I don't work in the industry, nor have years of education and experience (don't have a CFA charter, nor an MBA...etc). That's right. What've you got? Ohhh, that's right, exactly what you claim about me.
Nice try sparky.
LegendKiller
Lifer
Gosh, thanks!
LegendKiller
Lifer
I couldn't care less about the guy if he's saying bullcrap about the fed funds rate hitting 20%. Hyperbole, scare tactics, idiocy, and FUDD leads to nothing but further stupidity.
He didn't explain commodities to them. However, they had to explain how the Fed drops (or raises) rate targets.
It's also nice that he offers alternatives to the problem. Anybody can run around like a chicken with their head cut off suggesting extreme solutions but providing nothing that will work.
It's funny you're questioning my assertions by using youtube videos as a proxy, when you don't even have thin ice to walk on. Regurgitation is all you have, great!
3chordcharlie
Diamond Member
What I meant was a little different:
I want something today, but I can't afford it, so I borrow to do it (I'd like to explore the reserve system and how the money is created, too, but I'm trying to stick to this bit of the topic).
The 'rest of the economy' forgoes consumption of that good, and I have to pay it back, by forgoing more than this much future consumption of what I create. (Could be 1.1 times, could be 4 times, depending on rate and term). So the trouble is, that the money I borrowed exists, backed by the 'real asset' ('house'), assuming no fluctuation in values. But the interest only exists as long as I continue to create that wealth, and forgo it.
I would suggest based on this, that when people start defaulting on loans, the paper money in fact does not exist, either because no wealth was created, or because it was instead consumed. (Not a normative statement)
This would seem to match with the lack of liquidity we're seeing now, and the inflationary responses?
Miramonti
Lifer
The pleas of institutions over the last year should have been respected sooner and offered the fed funds window long ago, such as they did with banks. If its that important that these institutions don't fail, then they should have been involved sooner in more ways than one. For them to pretend they are on top of things now in preventing a bankruptcy by forcing a company to sellout at $2 a share at the 11th hour is a sham.
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