How The Monetary System Works - And Why It Seriously Needs to Be Replaced

Just to clarify how loose Iriemon is with his words and definitions. Let's break down what he is talking about when he claims I'm wrong.

#1 Money Multiplier - When academics talk about the money multiplier they are talking about the amount of money banks can create based off the amount of reserves in the system. The theory holds that the Federal Reserve affects the money supply by changing the quantity of reserves in the system which effects the amount of money banks can create because they need to hold a certain amount against their deposits. The Federal Reserve says this multiplier does not exist and changes to reserves do not effect the amount banks lend.

Iriemon, uses a very loose definition of the money multiplier basically saying if you divide the amount of M2 by M0 you get a number, and whatever that number is, is the money multiplier, lol.

#2 Reserves as Money - When academics talk about reserves they call them reserves. Iriemon refers to them as money. Sure they are defined as a form of money but in the real world when someone says money, they are not talking about reserves. When they say reserves, they are not talking about money. The Federal Reserve never refers to reserves as money. And when people say they are printing money, they deny it and say they are creating reserves and not printing money. Iriemon just plays word games.

#3 Banks need Reserves to Lend - In the real world bank lending and bank settlements are two separate processes. In Iriemon's world, they are the same process which means banks need reserves to lend. Even though no one agrees with this in the academic world, Iriemon still plays his word games and continues to defend his theory that banks need reserves to create loans. Despite all the evidence presented to him that completely invalidate this claim.

#4 Monetary Base as "the money supply" - In the real world of academics when people refer to the money supply, they are referring to M2, which is the broad money supply and the money supply that is used in the real economy. When they talk about the monetary base, they call it the monetary base or base money supply. Iriemon switches back and forth and will say the Fed injects money in to the money supply. Not a single academic would say it that way and not a single person in the federal reserve would call the monetary base the money supply.


Be careful with Iriemon, he is incredibly loose with his definitions and plays word games. And he never apologizes or admits when caught doing so.

 

LMAO, a "central planner creating money"? The "government creating money in a fiat standard"?

Akphidelt is very loose and dishonest with his words. When someones says the "central planner creating money" or ""government creating money in a fiat standard" to most this means the Fed is increasing the amount of money in the economy. Just the same as when someone says "the Fed is injecting money in the money supply".

What he meant to say is the Fed is injecting reserves in to the monetary base.

Only hypocrites call someone else dishonest and then turn around and use the very same phraseology minutes later.

Don't expect an apology from him any time soon though. Been a dishonest girl for years.

 

Real world, a mystery to Akphidelt.

The short answer is that the financial system experienced some serious liquidity shortages in August 2007, and the Fed injected funds to help keep financial markets operating effectively so that they would continue to support ongoing economic activity.
http://www.frbsf.org/education/publ...august/temporary-reserves-liquidity-injection

Signs that the Fed could inject more money into economy
http://www.marketplace.org/topics/economy/signs-fed-could-inject-more-money-economy

The world's central banks have promised to keep "injecting" tens of billions of dollars
http://www.usnews.com/usnews/biztech/articles/070815/15blinder.htm

Finally, the Fed can affect the money supply by conducting open market operations, which affects the federal funds rate. In open operations, the Fed buys and sells government securities in the open market. If the Fed wants to increase the money supply, it buys government bonds.
http://www.investopedia.com/ask/answers/07/central-banks.asp

Don't expect an apology from him any time soon though. Been a dishonest girl for years.

 

Lol, case in point. The dishonest girl continues to play loose with words.

#1 Liquidity shortages in August 2007 had nothing to do with banks ability to lend or how much money they had available to create loans. Lol. But nice try

#2-3 The Federal Reserve disagrees and says they are not injecting money in to the system
http://www.federalreserve.gov/faqs/money_12853.htm

#4 The Federal Reserve disagrees and says their open market operations do not have an affect on the money supply
http://www.federalreserve.gov/pubs/feds/2010/201041/201041pap.pdf

Cool .com articles. I remember when I was in high school. We are all awaiting your apology.

 

Now you are just getting desperate.

 

Still pretending like the monetary base is not an accepted measure of the money supply?

 

No, what I meant to say was "For this issue, you're arguing that rather than the Govt borrowing money to make up deficit shortfalls, it prints money (or creates money electronically, same thing) instead. Of that $16 trillion, the Fed has "monetarized" maybe $2 trillion which has been injected in the money supply." Exactly what I wrote.

A brief primer for those who are unfamiliar with the basics of money creation, as Akiphidelt constantly proves himself to be.

How do open market purchases [by the Fed] add to bank reserves and deposits? Suppose the Federal Reserve System, through its trading desk at the Federal Reserve Bank of New York, buys $10,000 of Treasury bills from a dealer in U. S. government securities. (3) In today's world of computerized financial transactions, the Federal Reserve Bank pays for the securities with an "telectronic" check drawn on itself. (4) Via its "Fedwire" transfer network, the Federal Reserve notifies the dealer's designated bank (Bank A) that payment for the securities should be credited to (deposited in) the dealer's account at Bank A. At the same time, Bank A's reserve account at the Federal Reserve is credited for the amount of the securities purchase. The Federal Reserve System has added $10,000 of securities to its assets, which it has paid for, in effect, by creating a liability on itself in the form of bank reserve balances. These reserves on Bank A's books are matched by $10,000 of the dealer's deposits that did not exist before.

MODERN MONEY MECHANICS, published by the Fed. http://www.themoneymasters.com/wp-content/uploads/2009/12/ModernMoneyMechanics2.pdf

Basic stuff for anyone with a clue of how it works. When the Fed creates money by buying Govt debt, as in the statement I made, the result of the transaction is both a creation of reserves ($10k in the Fed's example) and deposits ($10k as well). So whether you want to use the definition of money to mean M1, which includes deposits, or M0, which includes reserves, the result of the Fed "monetarizing" the debt is injecting money in the money supply.

My statement is spot on. Basic stuff for anyone with an elementary knowledge of this stuff.

But the ignorant person who doesn't understand will also resort to ad homs and personal attacks and will call the knowledgeable person "dishonest" simply because the ignorant person doesn't have a clue about the subject.

Don't expect an apology from him any time soon though. Been a dishonest girl for years.

 

You always accuse your opponents of that when you're losing miserably. Tad predictable at this point.

 

Never said it wasn't considered a money supply. It is not referred to as the money supply in academia. Only on .com sites and internet forums. It is referred to as base money or the monetary base. When economists talk about the money supply they are not referring to the monetary base. So when someone says the Fed is injecting money in to the money supply, academics take that as the broad money supply. I understand your confused. You and Iriemon are on the same page though. That should give you comfort, lol.

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Only accuse them of that when they get desperate. Which that post clearly was, lol.

 

That is absolutely untrue. The Fed says no such thing.

 

Lmao!! They are talking about reserve deposits at the federal reserve bank. Not deposits that are included in the broad money supply!

Hahahaha, the dishonest girl has another thing to apologize for which she never will.

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They specifically say those things. MOD EDIT>>>INSULT REMOVED<<<

 

Sure. Feel free to explain how you saying a "central planner creating money" and the "government creating money in a fiat standard" is fundamentally different than my comment that "the Fed is injecting money in the money supply".

 

Absolutely untrue. I posted the verbatim words from the Fed's treatise on money creation. Let's see the quote with the words you claimed.

 

A question to Aki: If the Fed is NOT injecting money into the system, then what is it doing? If it's not, can it even call itself a Bank? What is it?

 

I don't even need to describe it in my own words, they say exactly what they are doing...

http://www.federalreserve.gov/faqs/money_12853.htm

Basically they affect interest rates and the cost of money. They also help banks out with interbank loans. And they are not a bank like the banks we use, they are the bankers bank.

 

The Board of Governors of the Federal Reserve system are not academic enough for you?

My source was not a ".com site", it was a ".gov site". I guess you can't even clink on a simple link and read its URL. Talk about embarrassing...

Where is your evidence for this? I haven't seen you cite a single academic or economist that agrees with your opinion on the money supply. In fact, everything I've ever read by the Federal Reserve economists, analysts, and officials contradicts virtually every claim you've ever made about the monetary system. You just like pretending that you're an expert "economist" when you're just some random loudmouth on the internet spewing gibberish...

 

They say specifically they are not creating money...

Although Federal Reserve purchases of Treasury securities do not involve printing money, the increase in the Federal Reserve's holdings of Treasury securities is matched by a corresponding increase in reserve balances held by the banking system.

http://www.federalreserve.gov/faqs/money_12853.htm

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It is a money supply but not referred to as "the money supply". I figured that was implied but I guess I have to spell everything out for you to understand.

Same answer as above

Everything I say comes directly from the federal reserve themselves. I don't make up anything like you do. And it's really embarrassing to include laughing emoticons. Really overcompensating for your lack of intelligence.

 

Heh heh, always enjoyable to see Akphi twist and flail as he digs himself deeper and deeper into his own hole.

I've bolded the relevant parts for people hard of reading comprehension. Obvious to any objective person who understands English that when the Fed is talking about the bank ("Bank A") crediting ("deposited" into) the Dealer's account creating "deposits", they are not talking about a "reserve account", as when they refer to a reserve account as in "Bank A's reserve account at the Federal Reserve is credited" they use the words "reserve account." Bank A could not credit a reserve account, because those are at the Fed. But they can create the dealer's deposit account.

Basic stuff to anyone with a clue. Or who can understand English. Or who is not dishonest.

 

Like I said, I use the Feds own words, I don't make up my own stuff.

 

Lmao, the way you try to get out of the crap you spew is hilarious. You'll spin anything! You should work for Fox News... they'd love you there.

We were talking about open market operations affecting the money supply. Now you are talking about banks deposits at the federal reserve. Hilarious.

 

Losing what? The Fed is lying and you are right? Meh, forgive me if I don't believe you.

 

It's like watching a re-run. First he makes his crazy statements like there is no multiplier by fractional lending or the Fed doesn't create money. Then he'll quote some language he doesn't understand that are either completely off point or undermine his own position. Then when that is pointed how he'll start calling folks who say he's wrong (which is just about everything) dishonest and other insults. Then as his case gets more and more destroyed he'll get more and more whacky and more and more vapid.

You and I have certainly had some major disagreements and all outs, so when we agree on something its pretty rare.

 

Lol, there isn't a money multiplier. Your definition of a money multiplier is simply dividing M2 by M0. That is not at all what the Fed refers to as the money multiplier. They even wrote a paper asking "Does the Money Multiplier Exist" and the entire paper is debunking all the myths you believe, yet you still believe them.

It is hilarious. I'm glad you got a friend in Ethereal. That's a solid dude to have on your side, lmao!!

 

No, the Fed has nothing to do with money creation. Who came up with that whacky idea?

LMAO