[Lezard]

...Some of these kids are unaware of the term synonymous to EX: Gold is synonymous to Paper, because it is useless to consume or shelter. Thus I cannot shelter myself with gold nor can I feed myself with gold. This is impart that gold is just a rock and paper is just paper. Both are useless to the person seeking consumption of liquids and food and is unaware of the their "WORTH."

The Reserve needs to be toned down or restructured, as it is causing all these problems, just to benefit their investments.

[+LogicalApex MVC]

Amen the fed needs to die.

btw: sources include inside job and capitalism: a love story.

And replace it with what? We need a bank of last resort to ensure stability in the economy. It also has the side benefit of lowering costs for us tax payers by a great deal over time.

[abysal]

i hope they do, guy is an idiot and the federal reserve is the biggest scam in human history (well second... religion is number one)

^ This.

[presence06]

And replace it with what? We need a bank of last resort to ensure stability in the economy. It also has the side benefit of lowering costs for us tax payers by a great deal over time.

Too bad that only happens if the economy is doing better than **** and they stop printing money that doesn't exist...

[+LogicalApex MVC]

i hope they do, guy is an idiot and the federal reserve is the biggest scam in human history (well second... religion is number one)

The biggest problem for the Fed is the average person doesn't understand what they do and why they do it. As a result, you get a lot of this... People saying we need to throw the Fed out the door without understanding the implications of doing so.

The Fed wasn't designed as a shadow, but it was kept separate from the rest of government's direct arm as to keep the political influence as low as possible. Their job is to ensure economic stability and high employment and that is what they do... They don't eliminate cycles, but they help steer to keep them from lasting too long or going too deep...

I think what is really needed is many people need to read more on monetary policy and understand why it exists...

There is a reason every country in the world has a central bank...

Too bad that only happens if the economy is doing better than **** and they stop printing money that doesn't exist...

Them expanding monetary supply isn't a net negative, depending on your perspective. There are some benefits to an expanding monetary supply. The biggest benefit is it lowers the national debt without any real money having to be spent to do so...

The other major benefit of an expanding monetary supply is your able to ensure there is enough free capital in the market to ensure higher levels of employment than there would otherwise be...

By injecting new money in the economy they effectively help to counter the tightening grip at the top of our monetary supply (since rich people save more them hoarding more money increases the value of money at the detriment of the average worker, for instance).

[Lezard]

You forgot to add the worst part and that is inflation.

[DukeEsquire]

The biggest problem for the Fed is the average person doesn't understand what they do and why they do it. As a result, you get a lot of this... People saying we need to throw the Fed out the door without understanding the implications of doing so.

The Fed wasn't designed as a shadow, but it was kept separate from the rest of government's direct arm as to keep the political influence as low as possible. Their job is to ensure economic stability and high employment and that is what they do... They don't eliminate cycles, but they help steer to keep them from lasting too long or going too deep...

I think what is really needed is many people need to read more on monetary policy and understand why it exists...

There is a reason every country in the world has a central bank...

Them expanding monetary supply isn't a net negative, depending on your perspective. There are some benefits to an expanding monetary supply. The biggest benefit is it lowers the national debt without any real money having to be spent to do so...

The other major benefit of an expanding monetary supply is your able to ensure there is enough free capital in the market to ensure higher levels of employment than there would otherwise be...

By injecting new money in the economy they effectively help to counter the tightening grip at the top of our monetary supply (since rich people save more them hoarding more money increases the value of money at the detriment of the average worker, for instance).

Exactly. Well said. There is a lot of misunderstanding about what the Fed is or what it does.

I wonder how many people that are complaining about the Fed can actually say, off the top of their head, what the Fed does and what are the pros and cons of increasing the money supply.

It may come as a surprised to some people, but weakening the US dollar actually has many beneficial effects including making our products cheaper to export and thus helping the trade deficit. It generates increased demand to US products overseas.

[+LogicalApex MVC]

You forgot to add the worst part and that is inflation.

Me? I didn't... An expanding monetary supply is the very definition of inflation...

Understanding how much control over inflation the Fed has is very hard though. The USD is the world's reserve currency so the vast majority of it is locked up on bank vaults and stored... So printing more money doesn't automatically lead to a devaluing the the current monetary supply...

[.Kompressor]

"Too Big Too Fail"

check it out.

[presence06]

"Too Big Too Fail"

check it out.

Started watching that the other day. Didn't finish, but watched half. Was very interesting.

[Lezard]

What Does Inflation Mean?

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Central banks attempt to stop severe inflation, along with severe deflation, in an attempt to keep the excessive growth of prices to a minimum.

Source

The Fed reserve is one of the biggest mistakes that the U.S. has created. The ability to back our currency in gold was taken away from us and all that was given to us was a bubble that could either burst, or fill up with imaginary financial assets.

That was the biggest mistake, to say we fail to see what the Fed reserve does is completely asinine and ignorant. All we have seen is ridiculous loans that were being handed out with no risk, to the lender as he would just pass the volatile loan to another bank/ investor. This is something that the Fed reserve failed to control and now just talks out of their A holes.

[DukeEsquire]

What Does Inflation Mean?

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Central banks attempt to stop severe inflation, along with severe deflation, in an attempt to keep the excessive growth of prices to a minimum.

Source

The Fed reserve is one of the biggest mistakes that the U.S. has created. The ability to back our currency in gold was taken away from us and all that was given to us was a bubble that could either burst, or fill up with imaginary financial assets.

That was the biggest mistake, to say we fail to see what the Fed reserve does is completely asinine and ignorant. All we have seen is ridiculous loans that were being handed out with no risk, to the lender as he would just pass the volatile loan to another bank/ investor. This is something that the Fed reserve failed to control and now just talks out of their A holes.

One thing I've always wondered about going back to the gold standard is how it will affect the price of products that require gold.

I understand that certain electronics use gold because gold has useful properties. If we go back to the gold standard, wouldn't the value of gold skyrocket and thus make these product impossible to produce?

[gian]

Exactly. Well said. There is a lot of misunderstanding about what the Fed is or what it does.

I wonder how many people that are complaining about the Fed can actually say, off the top of their head, what the Fed does and what are the pros and cons of increasing the money supply.

It may come as a surprised to some people, but weakening the US dollar actually has many beneficial effects including making our products cheaper to export and thus helping the trade deficit. It generates increased demand to US products overseas.

And you need a private bank to weaken the US dollar?

The problem with the Fed and all but 5 central banks in the world is not the fact that they have control over the money supply and can affect the currency value etc. the problem is that it's not "Fed".

Off the top of your head can you tell what the "fed" does? One very simply thing. It creates Debt.

The fed prints money which doesn't represent some sort of value such as gold anymore. They can just print as much paper as they want. And then they sell it to the USA (that's you) by "loaning" that money. So every time the fed prints money your debt is getting bigger.

And the cool thing is that since you need more money to pay that debt and the only way to get more money is through Fed (see the JFK assassination thread in this board..), which guess what, will create more debt for you.

That's basically the biggest scam ever, not that their other actions are to support the US interests only the bank interests.

And this applies pretty much to all the countries in the world.

Come on... by today everybody should know how the federal reserve works and who owns it...

One (big) family "funded" all the others and all together funded the federal reserve. And this is no conspiracy theory, maybe someone likes to still present it like that but it ain't.

[Athernar]

But you can dig it out of the ground. :)

You can also create gold in a lab, but the technology is expensive.

I'll make myself more clear then.

Gold has a limited supply, shelter and food can be created or foraged for with ease.

And good luck trying to find a nuclear transmutation process that doesn't cost vastly more than the gold it produces.

P.S. Gold doesn't occur in the ground (in significant quantity) all over the world. ;)

[+LogicalApex MVC]

What Does Inflation Mean?

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Central banks attempt to stop severe inflation, along with severe deflation, in an attempt to keep the excessive growth of prices to a minimum.

Source

The Fed reserve is one of the biggest mistakes that the U.S. has created. The ability to back our currency in gold was taken away from us and all that was given to us was a bubble that could either burst, or fill up with imaginary financial assets.

That was the biggest mistake, to say we fail to see what the Fed reserve does is completely asinine and ignorant. All we have seen is ridiculous loans that were being handed out with no risk, to the lender as he would just pass the volatile loan to another bank/ investor. This is something that the Fed reserve failed to control and now just talks out of their A holes.

This thread is getting insane. I'm not saying the Fed doesn't have its issues, but as much as you want to say otherwise you don't understand the point of the Fed. You also don't understand the purpose of currency...

For starters, the Federal Reserve Bank (created 1913) was created far earlier than the end of Bretton Woods in the 1970s. The primary purpose of the Fed is to be a Bank of Last Resort. If you understand how banking works, it is an inherently risky business. For a bank to have cash on hand (i.e. money that isn't loaned out) is a REALLY bad thing. The bank needs to pay depositors money (interest) in order for them to hand their money to the bank and the bank needs to lend that money to collect interest on it to pay its lenders (the depositors). Without a bank of last resort then runs on banks can have devastating and reverberating effects across the economy as happened in the Panic of 1907.

The Federal Reserve also attempts to stabilize the monetary supply to ensure "full employment". Essentially the Federal Reserve attempts to ease monetary supply in tough economic times (lower interest rates lead to increased business borrowing and investment - essentially creates jobs) and lower monetary supply in super hot markets (raise interest rates or bank reserve ratios to pull money out of the economy and reduce borrowing and investments - essentially slowing growth). The point really being in smoothing out the peaks and valleys of the Business Cycle to ensure as many people are employed as possible.

You seriously should read on the Federal Reserve Bank and you'll understand a lot more of why it is structured the way it is...

Secondly, being realistic there is NOTHING wrong with no longer pegging the dollar to Gold or Silver or any other precious metal. What is the purpose of currency? The sole purpose of currency is to facilitate trade between interested parties. The Dollar is universally accepted by people in the US as a universal medium of exchange, potentially because of the legal requirement, but that was the same under Bretton Woods. So having the Dollar pegged or unpegged doesn't have any material effect on the ability of the consumer to transact in it (after all people aren't going to start buying donuts from Dunkin' Donuts using Gold Bullion). But the major benefit of the removal of the pegging to a finite resource was in the ability of the Fed to better manage the currency supply.

Make no mistake, even with a pegged dollar you still suffer from inflation and supply issues. The end of Bretton Woods allows the Fed to adjust the monetary supply freely, but currency only works as a scarce resource; and it remains as such. As a result, under Bretton Woods when consumers, central banks, or others horde gold they have the power to artificially inflate the currency (reducing the supply of the currency). Allowing another country to have an exuberant influence on our economy with no way for us to attempt to stabilize the currency and economy.

I may explain this more depending on how this thread continues to go. I decided to slow down as I'm giving out a lot of information and I don't want to kill any chance of anyone ever reading this. At any rate, the Federal Reserve Bank isn't out to kill your kittens. It would be you, and the rest of us, a great service if you understood it more. I'm not saying reforms aren't worth asking for and worth being implemented, but to advocate that the system is somehow killing our nation is insanity.

[Vlad]

This thread is getting insane. I'm not saying the Fed doesn't have its issues, but as much as you want to say otherwise you don't understand the point of the Fed. You also don't understand the purpose of currency...

Good call stopping there, your post was getting long, but you made some good points. As much as I dislike the Federal Reserve system I'm aware of the historical volatility of gold (such as the effect on the price when the S.S. Central America sunk). Anyways, I think the point you're not making that you should make is the difference between gold and paper dollars: gold is a store of value while paper is essentially worthless. The original move to paper was just to facilitate trade; it wasn't until the Fed emerged that the paper became a fiat currency. A dollar is not worth as much now as a dollar was a hundred years ago, but an ounce of gold now is worth just as much now as it was a hundred years ago. *That* is the difference between gold and fiat dollars. Because of this I don't think you're correct in saying there is "NOTHING" wrong with having a fiat currency: anyone holding fiat dollars essentially loses INFLATION% of their wealth per year. I think moving off the gold standard was a terrible idea and that moving to the Fed was one of the most significant mistakes ever made by our government, but there's almost certainly no going back now.

The whole banks not wanting to hold dollars is also a little silly; modern banks pay trivial amounts (much less than 1%) of interest to the majority of their customers. Why? Because it's FAR cheaper to borrow from the Fed than from private citizens. What does this do? It inflates the currency making the money worth even less. Banks should be borrowing from citizens and offering competitive interest rates in return for holding our currency. This would reduce inflation and protect the money average citizens are holding rather than the wealth of giant corporations (which can get multi-billion dollar 0% interest loans while I have to pay 5% interest on a measly $250K loan).

[+LogicalApex MVC]

Good call stopping there, your post was getting long, but you made some good points. As much as I dislike the Federal Reserve system I'm aware of the historical volatility of gold (such as the effect on the price when the S.S. Central America sunk). Anyways, I think the point you're not making that you should make is the difference between gold and paper dollars: gold is a store of value while paper is essentially worthless. The original move to paper was just to facilitate trade; it wasn't until the Fed emerged that the paper became a fiat currency. A dollar is not worth as much now as a dollar was a hundred years ago, but an ounce of gold now is worth just as much now as it was a hundred years ago. *That* is the difference between gold and fiat dollars. Because of this I don't think you're correct in saying there is "NOTHING" wrong with having a fiat currency: anyone holding fiat dollars essentially loses INFLATION% of their wealth per year. I think moving off the gold standard was a terrible idea and that moving to the Fed was one of the most significant mistakes ever made by our government, but there's almost certainly no going back now.

It is late and I have a long day at work tomorrow so I'll attempt to be breif. Thanks for taking the time to make it through my wall of text.

The dollar has depreciated in value, but that isn't really a bad thing. I could explain why from a number of angles, but the primary one is the easier access to money has allowed more persons to have money today than did in the past. It also has helped to keep the wealthy from excessively hording money to our deteriment entirely.

The whole banks not wanting to hold dollars is also a little silly; modern banks pay trivial amounts (much less than 1%) of interest to the majority of their customers. Why? Because it's FAR cheaper to borrow from the Fed than from private citizens. What does this do? It inflates the currency making the money worth even less. Banks should be borrowing from citizens and offering competitive interest rates in return for holding our currency. This would reduce inflation and protect the money average citizens are holding rather than the wealth of giant corporations (which can get multi-billion dollar 0% interest loans while I have to pay 5% interest on a measly $250K loan).

It doesn't matter if the bank is paying .5% or 20% interest to depositors. They need to have that money loaned out in order to be able to bill out interest to someone so they can pay that depositor. Bank loans are generally non-callable (meaning the bank can't just call the borrower and demand immediate repayment in full) and have long payoff periods. This is great for the bank, and the depositor, as it allows the bank to extract a large amount of money over time, but it is inherently risky. The bank MUST satisfy the depositor's request for any amount of money in his/her account immediately, but they can't demand that money from the borrower. I'm sure you understand the risk inherent in this type of a system.

In good times it works well. People shove their money in the bank and they let it grow happily. The problem is when they start to feel uncertain in large numbers. They feel the bank might not survive. Those people then demand their money from the bank and push the bank to collapse (as the bank can never have all of its depositors money on hand to give to them immediately). This is where the Fed comes in. They are allowed to lend to banks as a "Lender of Last Resort".

That basically means they are allowed to lend to bank when no one else will. Enabling the banks to ensure their stability and decrease the people's likelyhood of performing a run on many banks as the more people who see banks fail the more they get worried about their own bank (a domino effect emerges).

The majority of bank lending isn't actually done between the Bank and the Fed. It is regulated by the Fed (when you hear the Fed interest rates commonly quoted, the Fed Funds Rate, this is what they are talking about), but it is inter-bank. Banks are required to meet the Fed reserve ratios in order to operate in the US (if memory serves this is 10%). As a result, the bank must have 10% of its assets in Cash sitting in a valut at the Fed every morning to open for business.

When a bank falls short they borrow money from other banks that have extra. These loans have to be paid off the very next day (they are overnight inter-bank loans). The interest rate charged for this lending is the Fed Funds Rate.

The Fed can also lend money to banks using The Discount Window which does come from the Fed Directly, but the loans are still very short-term.

I'll delve into it more tomorrow if there is any interest.

[Vlad]

It is late and I have a long day at work tomorrow so I'll attempt to be breif. Thanks for taking the time to make it through my wall of text.

The dollar has depreciated in value, but that isn't really a bad thing. I could explain why from a number of angles, but the primary one is the easier access to money has allowed more persons to have money today than did in the past. It also has helped to keep the wealthy from excessively hording money to our deteriment entirely.

It doesn't matter if the bank is paying .5% or 20% interest to depositors. They need to have that money loaned out in order to be able to bill out interest to someone so they can pay that depositor. Bank loans are generally non-callable (meaning the bank can't just call the borrower and demand immediate repayment in full) and have long payoff periods. This is great for the bank, and the depositor, as it allows the bank to extract a large amount of money over time, but it is inherently risky. The bank MUST satisfy the depositor's request for any amount of money in his/her account immediately, but they can't demand that money from the borrower. I'm sure you understand the risk inherent in this type of a system...

Thanks for the information, I've never really explored the intricacies of the US banking system; this is good to know.

I can think of more than a few reasons of why depreciation of the dollar is a good thing (everything from increased exports to larger liquid capital) and I should say that I anticipate inflation to /at least/ keep pace with population growth. I think MANY of our financial problems would have been avoided if more systems were pegged to population growth rather than the comparatively volatile economics. Where I grow uncomfortable is the control and influence the government has over this process, primarily in regards to it acting as a conduit for cheap/free money. While people are quick to blame Wall Street and banks for the housing collapse, the true malfeasance occurred in our own government. What the government did was essentially undercut market rates for housing loans by making larger amounts of money available to a larger group of people than would normally be allowed by the market. The net effect of this was housing prices spiraling out of control: the money supply far exceeded the price demand of housing (the market was super-saturated with dollars), buoying prices to record, unrealistic, and unsustainable levels. There were other problems with the system too, but this was the foundation the house of cards was built on. Frankly, I don't trust the Federal government to manage its money and the Fed isn't helping by cow tailing to every demand they make. The notion held by both political parties that entitlements are some kind of sacred cow and are more important than our national security/freedom is *disturbing*. Those are the reasons why I don't trust the Fed to manage a fiat currency.

So why are savings account rates so low while housing/personal lending/credit rates are so high? During high growth periods I'd expect interest rates to increase as banks look for additional capital to invest with; during low growth/stagnation periods I would expect rates to fall to near zero. Instead, I think rates have been <1% for my entire adult life.

[Jebadiah]

That's not always the case, diamonds are a good example of something in abundance but with the price of a rarity. Sometimes price is purely based on what people are willing to pay regardless of how rare something is or isnt.

True that is because there is an artificial rarity created by the diamond monopolists which includes DeBeers and the like.

The biggest problem for the Fed is the average person doesn't understand what they do and why they do it. As a result, you get a lot of this... People saying we need to throw the Fed out the door without understanding the implications of doing so.

I don't believe the Fed needs to be taken out. I believe the corrupt people in the Fed, including corporate lobbyists, need to be taken out. Only elected people, that are not corporate lobbyists, need be part of the Fed or any other govt. entity.

Them expanding monetary supply isn't a net negative, depending on your perspective. There are some benefits to an expanding monetary supply. The biggest benefit is it lowers the national debt without any real money having to be spent to do so...

The other major benefit of an expanding monetary supply is your able to ensure there is enough free capital in the market to ensure higher levels of employment than there would otherwise be...

By injecting new money in the economy they effectively help to counter the tightening grip at the top of our monetary supply (since rich people save more them hoarding more money increases the value of money at the detriment of the average worker, for instance).

There is ZERO money without valuable resources. Expanding monetary supply without producing anything valuable is simply raising the inflation. A country needs to manufacture value to be truly eligible to expand the monetary supply. Money doesn't come out of thin air, which is what the Fed of many countries are doing to artificially inflate and deflate the economy. This is bad practice because ultimately it will come to bite you even though it gives a temporary relief to everybody in the country. Given that almost everything is imported from China, Japan, Mexico, Canada, Puerto Rico, Iraq, Saudi Arabia, etc. there is no good reason to "quantitatively ease" the economy other than to fill pockets. There is a reason why good planning and budgeting is important, so that you don't expand the monetary supply by trillions of dollars.

[Shaun N.]

Interesting.

[Jebadiah]

Corrections and updates to my above post: I meant inflate or deflate the dollar*. The bad practice I am referring to is "quantitative easing or printing money without producing valuable goods".