Why Donald Trump must shut down The Federal Reserve

Discussion in 'Opinion POLLS' started by DennisTate, Dec 29, 2016.

?

Should The Federal Reserve be audited?

  1. Yes....

    27 vote(s)
    57.4%
  2. No.. they are doing a great job.

    4 vote(s)
    8.5%
  3. Maybe... I will research this further.

    3 vote(s)
    6.4%
  4. This is a hairball conspiracy theory.. ridiculous.

    13 vote(s)
    27.7%
  1. Iriemon

    Iriemon Well-Known Member Past Donor

    Joined:
    May 12, 2009
    Messages:
    82,348
    Likes Received:
    2,646
    Trophy Points:
    113
    Again, please provide your evidence that "the Fed has taken over total control of all important factors in the American economy".

    You continue to make these silly claims without a shred of evidence or proof.

    And while you're at it, why don't you start answering my questions instead of just repeating baseless rants? You make a bizarre claim, I ask you about it, you completely ignore my question and then rant on about something else.

    Let's dig just a tad deeper than what you've seen on "creature feature" videos, and answer these questions about your claims.
    Then maybe we'll be able to get somewhere.

    +++

    You rant about the Fed and "unilateral power" and "one all-domineering 'Father-figure' calling all the shots in a dictatorial fashion," yet your solution is to give this power to the president? You make no sense at all.


    Exactly what "free market economic system" do you contend should control our money supply? In the past as I recall you've identified a "free banking" system where banks can issue money. Which makes no sense. You rant and complain about the bankers controlling the Fed and the economy, but your solution is a system which will give the very largest banks far more power and control?


    You said you are against a gold standard, but when you were asked what kind of system you’d replace the Fed with, you said “How was 'money supply' regulated BEFORE the 'almighty-god' Federal Reserve System” The system they had before was a gold standard. Again, you’re not making sense. You criticize the Fed system, but you offer no reasonable alternative.


    Please provide your proof and evidence that "Bush took his orders from Henry Paulson" and Obama the same for Geithner.


    Where do you get this bizarre notion that everyone is starved for CASH?


    President Bush with consent of the Senate appoint Paulson to the Treasury Department, as well as his replacment. What's your point?


    President Obama with consent of the Senate appointed Geithner to the Treasury Department, as well as his replacment.. What's your point?

    +++

    If your goal is to just rant and not learn anything, then by all means ignore my questions again and you can continue your baseless ranting, I'll point out your repeated errors and illogical claims, and you can continue wondering why I'm not in the "end the Fed crowd."
     
    Last edited: May 30, 2018
  2. Iriemon

    Iriemon Well-Known Member Past Donor

    Joined:
    May 12, 2009
    Messages:
    82,348
    Likes Received:
    2,646
    Trophy Points:
    113
    Tell us exactly how, in your opinion, the Fed is "smothering interference in the private enterprise, free-market capitalist system."

    I'll admit that I'm no expert in European affairs, but your claim here just shows you "creature feature" based bias, in which you simply blame everything on the central bank, without basis or fact.

    For example, you blame the EU central bank for Greece. But EU monetary policy for Greece was no different than it was for Germany, or France, or Holland, or Belgium, or Norway, or Sweden, or any of the other EU countries that didn't have Greece's problems. Doesn't that fact give you pause that maybe it wasn't just monetary policy that caused Greece's problems?

    Did it ever cross your mind that maybe Greece's problems came from years of its government collecting too little, paying out too much, making over generous promises for social services without taking the steps to generate the revenue to pay for them?

    These are fiscal problems the central bank has nothing to do with.

    So if your concerned the US is going to end up like Greece, then look at the facts, including the fact that our current Aministration, at a time of full employment, a strong economy, and a huge debt, is running up the deficits and more debt to give out tax cuts mostly benefiting m/billionaires, and quit the sophomoric blaming of the Fed for everything that goes wrong. The fact that deficits are skyrocketing again has nothing to do with the Fed and everything to do with the Administration.

    Explain why you are blaming the Fed for jacking up our national debt? That is a fundamentally erroneous claim.

    The fact that you take such erroneous positions demonstrates you lack of knowledge, the misinformation you've gotten from your creature feature videos, and you extreme bias as a result.
     
  3. Pollycy

    Pollycy Well-Known Member

    Joined:
    Sep 24, 2008
    Messages:
    20,000
    Likes Received:
    5,607
    Trophy Points:
    113
    Gender:
    Male
    I just got finished a conversation with an old friend of mine in Germany. It is worse in Europe than even I imagined. If Italy goes under it will take France with it, and Spain (which is actually in worse shape than the others) will surely go also. Germany may be very badly affected, too. And all of this originated with the meddling of the European Central Bank trying to preserve the European wet-dream of free-for-all Socialism. More to come.... I see an economic alliance between Germany, Russia, and China coming even sooner than I thought possible. Hint: Vladimir Putin has a Ph. D in Economics....

    BTW, and I'm not trying to be coy... what the hell is a "creature feature"...?
     
    Last edited: May 30, 2018
  4. Iriemon

    Iriemon Well-Known Member Past Donor

    Joined:
    May 12, 2009
    Messages:
    82,348
    Likes Received:
    2,646
    Trophy Points:
    113
    I appreciate you have watched these "end the fed" creature feature Ron Paul videos for your information on the Fed. I've seen them too. But I wondered about the claims they made, and so I did the research for myself. And I found that these sources were based on lies.

    Just a couple examples. How often have your sources told you that the Fed has never been audited?

    Yet when I did the research, I found that the Fed is audited regularly by its own internal audit team; an external, independent auditing firm like Deloitte, the GAO, and the OIG. It is in fact probably the most heavily audited entity in the world. I've posted the sources to prove this, it's all on-line. It's all a big lie.

    Or that the Fed is a "combine" controlled by private banks. How often have they told you that? Yet when I did the research, what I found was that the Fed money policy is made by the Federal Reserve Board, comprised of member appointed by the President with the consent of the Senate. I found that federal banks (and state chartered banks that wish to participate) are required by statute to give the Fed a certain percent of their capital which gives the Fed more control over them. And while the member banks get shares, the shares cannot be sold or transferred, have no power to vote for management over monetary policy, and doesn't not entitled the banks to share in the "profit" made by the Fed.

    I've posted reliable sources including the actual statutes as well several times. It's all a big lie.

    There are many, many other examples we've seen in these threads through the years.

    You've seen this. You've seen their lies. You've seen the truth I've posted.

    You ask me why I'm not in on the Fed conspiracy train. I showed you the lies these conspiracy nuts make, and I show you the truth. So I'm the one wondering why you continue to believe the lies, and the people who tell them.
     
    Econ4Every1 likes this.
  5. Iriemon

    Iriemon Well-Known Member Past Donor

    Joined:
    May 12, 2009
    Messages:
    82,348
    Likes Received:
    2,646
    Trophy Points:
    113
    Great. Get him on the forum, and maybe he can answer the numerous questions I've asked based on your claims and positions, and you've dodged.



    Why aren't you answering my questions, Pollycy? Seriously.
     
    Last edited: May 30, 2018
    Econ4Every1 likes this.
  6. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,330
    Likes Received:
    292
    Trophy Points:
    83
    the failure of the Euro and the PIGS is the fact that those nations that participate in the European Economic Union surrendered their monetary sovereignty. Their deficits were capped at 3% of GDP. That works for Germany because they are net exporters (they outsource their currency creation). But other nations that rely on imports are doomed to failure.
     
    Last edited: May 30, 2018
    Pollycy likes this.
  7. Pollycy

    Pollycy Well-Known Member

    Joined:
    Sep 24, 2008
    Messages:
    20,000
    Likes Received:
    5,607
    Trophy Points:
    113
    Gender:
    Male
    Just one quick reply at this point... quite the busy day for me. It has been YEARS since I said that the Fed had not been audited. Indeed, you can take credit for being the person who informed me and all the others on this Forum that the Fed is audited, regularly, and I remember that it is the prestigious accounting firm of Deloitte that conducts this audit. That was when I first began to take real notice of you, and to begin to realize that you are someone who is fact-based, and who is logical, and thorough in your assessments and conclusions. It is therefore all the more surprising to me that you defend the Fed as you do, but I thought it important to state this reminder. The Fed, good or ill, IS AUDITED, and @Iremon is the forum member who first pointed it out, years ago....

    I still don't like the Fed -- mostly because the way it has usurped total power over the money supply and interest rates. Surely you can't dispute that! But I do have much respect for you, even though you think me "bizarre". I'll close by making you think I'm really nuts -- I can think of ONE Fed Chair that I thought was very good for the country and who made a lot of common sense -- Paul Volcker!
     
  8. Iriemon

    Iriemon Well-Known Member Past Donor

    Joined:
    May 12, 2009
    Messages:
    82,348
    Likes Received:
    2,646
    Trophy Points:
    113
    My point is to question why, having seen this lie from the "end the Fed" folks, you continue to put credit into what they tell you?

    And it's certainly not the only lie that has been exposed.

    Believe it or not, I respect you too, you are a small minority of people who are inquisitive and actually demonstrate a willingness to consider facts and contrary arguments. Which I suppose is why I get a little frustrated when you persist in some of these dubious beliefs.

    I've never claimed the Fed system is perfect. It is a human endeavor, and is susceptible to fault just like every other human endeavor.

    But no one has provided me with a better alternative. Which is why I asked. It's like Churchill said about democracy -- democracy is the worst system of government in the world, except for everything else.
     
    Last edited: May 30, 2018
    Pollycy likes this.
  9. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,330
    Likes Received:
    292
    Trophy Points:
    83
    Here is a piece I wrote about the Fed on Quora... No one asked, but it puts a lot of the questions about the Fed in a single post...

    The question was "Who owns the Fed"?


    The Federal Reserve System is not "owned" by anyone. Although parts of the Federal Reserve System share some characteristics with private-sector entities, the Federal Reserve was established to serve the public interest.

    The Federal Reserve derives its authority from the Congress, which created the System in 1913 with the enactment of the Federal Reserve Act. This central banking "system" has three important features: (1) a central governing board--the Federal Reserve Board of Governors; (2) a decentralized operating structure of 12 Federal Reserve Banks; and (3) a blend of public and private characteristics.

    The Board of Governors in Washington, D.C., is an agency of the federal government. The Board--appointed by the President and confirmed by the Senate--provides general guidance for the Federal Reserve System and oversees the 12 Reserve Banks. The Board reports to and is directly accountable to the Congress but, unlike many other public agencies, it is not funded by congressional appropriations. In addition, though the Congress sets the goals for monetary policy, decisions of the Board--and the Fed's monetary policy-setting body, the Federal Open Market Committe--about how to reach those goals do not require approval by the President or anyone else in the executive or legislative branches of government.

    Some observers mistakenly consider the Federal Reserve to be a private entity because the Reserve Banks are organized similarly to private corporations. For instance, each of the 12 Reserve Banks operates within its own particular geographic area, or District, of the United States, and each is separately incorporated and has its own board of directors. Commercial banks that are members of the Federal Reserve System hold stock in their District's Reserve Bank. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. In fact, the Reserve Banks are required by law to transfer net earnings to the U.S. Treasury, after providing for all necessary expenses of the Reserve Banks, legally required dividend payments, and maintaining a limited balance in a surplus fund.

    There is no stock in "the Fed".

    The Fed consists of "agency-like" entities, like the Board of Governors, which members are federally appointed, and who take federal oaths of office.

    The Fed also consists of twelve regional banks, which are wholesale banks. They do not make monetary policy. They're banks.

    The stock is in the banks. When a member bank buys stock in the Richmond Fed, it's ONLY stock in the regional bank in Richmond.

    It gives that bank no say over monetary policy.

    Do stockholders get any profits? No. Like preferred stockholders, they get a guaranteed 6% dividend on paid-in capital. In other words, no matter how much "profit" the regional bank makes, they get the same 6% of their paid- in capital as a dividend.

    Banks are also subject to assessments, or cash calls.

    Banks cannot trade their stock. They can only sell it back to the regional bank at the same price they bought it.

    Banks cannot buy more or less stock. The Fed tells them, based on their size, how much capital they must pay in to be Fed member banks. No matter how much they are assessed, they have one vote. One share, one vote. Your local bank, if a Fed member, has exactly the same number of votes as Citibank - one.

    All profits made by regional banks (less operating costs and the 6% dividend) are surrendered to the Board of Governors, who surrenders them to Treasury (the Fed's books are available on their website).

    But doesn't the Fed print money and charge is interest on it?

    No.

    The Fed prints no money. Currency is printed by the Treasury, who "loans" it to the Board of governors (those profits turned over to Treasury which earns nominal interest on all Federal Reserve Notes on circulation).

    The BoG then sells the notes to the regional banks, who sell them to your bank - for one dollar each.

    "Printing money" really isn't monetary policy. Currency is just distributed to respond to your demand at the ATM machine.

    "But aren't Fed employees and expenses not paid by the Federal government"?

    Sure they are. Federal monetary operations make money. Every year, the Fed turns its profits over to Congress. That's the government's money. The Fed's expenses and payroll are paid with money that would be paid to Congress - in other words, they come out of government's pockets.

    Also, nobody disputes that the Postal Service is federally owned, and its expenses are paid exactly the same way.

    So is the Fed privately owned?

    No.

    Not even a little bit. It does function as a "private entity" in very limited circumstances. If a truck owned by a regional bank hits you, you have no case against the government -

    Just against the regional bank.

    But there is no - count 'en, zero - private owners of the Fed.

    Remember, being independent within the government is not the same as being independent of the government.

    [Edit] - This is taken from a lot of sources, unfortunately, while I was collecting this info I didn’t maintain a good list of sources.

    If you have any question or you’re interested in a serious conversation about anything I’ve claimed, please let me know and we’ll try to locate a source.

    Some good reading on the topic:

    Statement for the Press: Letter to Wright Patman, House of Representatives
     
    Iriemon likes this.
  10. Iriemon

    Iriemon Well-Known Member Past Donor

    Joined:
    May 12, 2009
    Messages:
    82,348
    Likes Received:
    2,646
    Trophy Points:
    113
    I believe the Treasury sells, not "loans" the notes to the Fed at cost.

    To get a bit technical, money printed by the Treasury's mint (i.e. hard cash) and provided to the Fed is the "physical" equivalent of member bank's reserves held at the Fed, which conversely, is the electronic equivalent of hard cash. Banks can freely exchange electronic reserves for hard cash and vice versa.


    ...
    Very good summary of the some of the misconceptions of what the Fed is and how it operates.
     
    Last edited: May 30, 2018
  11. Pollycy

    Pollycy Well-Known Member

    Joined:
    Sep 24, 2008
    Messages:
    20,000
    Likes Received:
    5,607
    Trophy Points:
    113
    Gender:
    Male
    Question please, re:

    "The Fed also consists of twelve regional banks, which are wholesale banks. They do not make monetary policy. They're banks.

    The stock is in the banks. When a member bank buys stock in the Richmond Fed, it's ONLY stock in the regional bank in Richmond.

    It gives that bank no say over monetary policy.

    Do stockholders get any profits? No. Like preferred stockholders, they get a guaranteed 6% dividend on paid-in capital.
    "

    Is a Federal Reserve Bank like the one in Kansas City able to issue something akin to Certificates-of-Deposit to private individuals (like me)? I live in Colorado, and so the K.C. bank would have jurisdiction over the state where I live. I'd jump on a "guaranteed 6%" return on a CD-like instrument in a heartbeat! I know you can pore through the morningstar.com website and find many divident plays, but there is, of course, risk. I'd take 6% without risk any day. I take it there's a minimum? It might be too rich for my blood, but if the minimum weren't over half a mil I could probably participate. Thank you! I learn something new every day.
     
    Last edited: May 30, 2018
  12. Pollycy

    Pollycy Well-Known Member

    Joined:
    Sep 24, 2008
    Messages:
    20,000
    Likes Received:
    5,607
    Trophy Points:
    113
    Gender:
    Male
    I do not advocate giving all power to one man -- be that president a Republican or a Democrat. I never have advocated this.
    I do not advocate giving the entire ability to control money supply and interest rates to central bank(s) consisting of no one who is directly responsible to American citizen voters.
    I do see that Americans ARE 'starved for cash', and the American propensity to run up private DEBT to stratospheric levels is moot testimony to that fact. From just three months ago, at a liberal website: https://www.cnbc.com/2018/02/13/total-us-household-debt-soars-to-record-above-13-trillion.html .

    Iriemon, nobody with any degree of adult intelligence level would take on such DEBT if instead he/she could simply pay CASH (or pay off credit card balances each and every month)! Nobody with any sense buys anything that automatically depreciates in value (or is an outright consumable) on CREDIT -- and then lets that total increase, month after month! And yet that is what Americans are doing -- in staggering amounts... why? because they HAVE to. Plainly put, they don't have any damned money, and they live from paycheck to paycheck.

    OK, fine. Then why is the Federal Reserve still crushing interest rates into the dirt? The 'Great Recession' ENDED almost nine freaking years ago! The demand for money is high! Why haven't interest rates already returned to a normal level? You criticize me for not answering your questions, but I am. And if I'm wrong I welcome more criticism -- but of a specific nature. Why don't you tell me why the Fed is still crushing interest rates? It makes no sense, given the amount of DEBT that Americans are racking up....
     
    Last edited: May 30, 2018
  13. Pollycy

    Pollycy Well-Known Member

    Joined:
    Sep 24, 2008
    Messages:
    20,000
    Likes Received:
    5,607
    Trophy Points:
    113
    Gender:
    Male
    And so, in summation:
    1. Trump will not 'shut down' the Federal Reserve System. He couldn't if he wanted to...and there's no indication that he wants to....
    2. For better or worse, central banks are stitched into the fabric of every nation's structure today.

    BUT:
    3. There is no reason why the Fed or any other central bank should ever have been given the exclusive ability to determine interest rates.
    4. There is no reason why the Fed or any other central bank should be the sole decision-maker regarding levels of money supply.
    5. There is no legal or constitutional basis for the Fed or any other central bank to "rescue" any private entity, to act on some subjective assumption that any private entity is "too big to fail", or to artificially manipulate overall economies to unfairly favor stock market gamblers, to the detriment of ordinary middle-class working citizens and those who wisely and intelligently SAVE money to provide for their own needs.

    Afterthought: Want to see what happens when a central bank takes over economies? Take a good look at EUROPE today!

    [​IMG]. "We central bankers know what's BEST for you....":party: .:twisted:
     
    Last edited: May 31, 2018
  14. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,330
    Likes Received:
    292
    Trophy Points:
    83
    Two thoughts.

    If we look to Brazil, a nation whose politicians control their CB, they have a tendency to enact favorable monetary policy when the party in power nears an election regardless of the long-term consequences. It creates havoc in their monetary system. Putting monetary policy in the hands of politicians is a bad idea because voters will always support favorable terms because few people understand how those terms can cause economic calamity in the long run.

    As far as cash-starved. I would tend to agree with you here. When the bottom 80% of the adult population increases its debt, it's usually a sign that wages aren't keeping up with the needs and desires of people who want to spend. The result is increased borrowing.

    The problem is not the Fed, in this case, it's Congress. The Fed cannot place money into the hands of spenders because banks facilitate lending, they don't spend. The Fed's policy options are to lower rates to increase favorable terms, but as I'm sure you realize, you cannot go below 0% without penalizing savers with a so-called negative interest rate.

    New money enters the private economy via deficit spending (money that is not offset by a liability in the private sector). Of course, simply spending isn't enough if that spending doesn't end up in the hands of people who need it. This is why recent tax cuts will be a mixed bag. If those cuts went primarily to the bottom 80% of wage earners it would have helped to cure the "cash-starvation you speak of. But instead, the vast majority of it went to those who aren't cash-starved. As a result very little in the way of increased consumption (and the jobs that might have followed as a result) will follow.

    Approps, this is why when the economy went into surplus from 1998-2001 there was a massive reduction in money in the economy. When you balance out these factors:

    (Government spending - Taxes) + (Imports - Exports) + (Savings -Investment).

    Source https://www.whitehouse.gov/omb/historical-tables/

    If the result is negative, and from 1998-2001 it was massively negative, the economy will starve for cash. The bubbles that followed (.com and housing) were the private secors attempt to "borrow back" the money that the government had either taxed away or that the government simply stopped buying things that it had bought previously.

    Here is a graph I created showing the cumulative effect. I didn't factor in savings-investment because the two are generally considered equal.

    [​IMG]


    Remember that the numbers are relative. I arbitrarily started the graph in 1992, so all numbers are relative to that year. It's not important where "0" is, it's just an indication of change. THe red and blue lines is what we want to look at, the "bars" are to scale and visually show relitive differences between years. Red bars pull the line down, green bars push the line up.

    The yellow portion (included in the red line) shows only cumulative household debt (not government, state or business debt) as taken from page 6 of this report (page as indicated in the doc). The red bars indicate money is taken out of the US private sector and the green bars show money added back to the US private sector. As I stated, the yellow shows how consumers react is the relative amount of money declines. 2008 shows us what a "Credit Crunch" looks like as consumer borrowing went negative (repayments exceeded new loans). This reduces bank reserves and lending tightens.

    Look how imports decrease and government spending increases. This is how the economy has clawed it's way out of the hole it was in. And I should mention, just in case it isn't clear, the money created via QE is not included in these figures because the money created via QE didn't add a single dollar to the private sector.

    Here's one more illustration I created. This shows, in simpler terms, what I call the balance of the economy (not the budget). This, in my opinion, was the precursor to the Great Recession. Clinton's desire to run a surplus resulted in reduced incomes. People have a tendency to increase their borrowing to save investments like homes and cars hoping that future employment will allow them to recover. Of course, some people borrowed (i.e. used leverage) to try to increase their income and that induced massive systemic risk.

    [​IMG]


    Basically, in the left side we have money that increases "assets" in the private sector and on the right we have reductions to assets in the private sector.

    Cumulatively, US government fiscal policy (not monetary policiy) resulted in $3.3 trillion dollars being "removed" from the US private sector. Of course, as the first graph shows (the yellow bars) how the private sector reacted and borrowed far more than $3.3 trillion, which is why GDP grew over the same period.

    Why am I telling you all of this? Because it's not simply the Fed that's the problem. It is as much if not more, US fiscal policy in the hands f our Congress that is as much to blame. But, prophetically Congress understands the economy about as the voters that put them there. That is to say, most people in Congress don't understand what I've just laid out. They want to cut spending in a time when the economy needs more, not less. Which is why Congress cannot be trusted to control monetary policiy.

    With that, I submit to you, that one of the reasons that the Fed appears so inept is that Congress is inept but has the benefit of a pulpit to stand on and malign everyone else but itself, including the Fed.

    Metaphorically I imagine the marriage of the Fed and Congress something like two people driving a car. The Congress controls the gas and brakes and the Fed is steering. You can't see Congress under the dashboard. The Fed wants to go left, but every time it does, Congress hits the brakes, so the Fed ends up taking three right turns to go left and you and I are decrying how stupid that was not realizing that Congress has forced this situation.

    You already said it. Despite all the spending that's taken place, the money is not finding its way into the hands of the people that really drive an economy. The middle class. The result is increased borrowing. While I advocate increased deficits (which will increase the money in the economy) I also beleive that it matters who earns that money (remember that spend is income and lack of spending is a reduction in income). If the money stays in the top 20% of wage earners, those people simply cannot drive enough demand to put the other 80% of us to work. So more money and fewer taxes to the middle and lower classes.

    Having said that. I don't think there is a nefarious plan to force the middle class into debt, I think this problem is created organically within the system itself. That is, there's no evil cabal of bankers, just a large group of people making disconnected decisions that, as a group, people at the top benefit from.

    Sorry for the book, I hope you find all of this helpful.
     
    Last edited: May 31, 2018
    Pollycy likes this.
  15. Pollycy

    Pollycy Well-Known Member

    Joined:
    Sep 24, 2008
    Messages:
    20,000
    Likes Received:
    5,607
    Trophy Points:
    113
    Gender:
    Male
    I am humbled that you would undergo the truly Herculean task of writing the post above. I will need time to consider it carefully for you have covered a great deal of ground, and in depth.

    Admittedly, I'm a hypocrite. I am constantly complaining about the U. S. Tax Code and how it so blatantly favors the wealthy of all political parties with its 'smorgasbord' of tax loopholoes, tax shelters, exemptions, exclusions, deductions, etc., and that would seem to make me an advocate for 'socialism-lite'. And, I rail against the central bank (the Fed), for 'rescuing' those it unilaterally deems to be 'too big to fail', and for its manipulation of interest rates, money supply, et al, to coddle and favor stock market gamblers. But, to illustrate my hypocrisy, I am always speaking in defense of the 'free market capitalist system', which would seem to revel in all the central bank manipulation it can get, along with all the painfully obvious tax breaks for the über-wealthy, and all that neo-Nietzschean, egocentric stuff that enriches to top-tier while inevitably suppressing the middle and lower-classes.

    Our friend, @Iriemon is far better educated regarding economics than I am, and I would relish reading discussions between the two of you concerning central banks, and different aspects of economic topics. Before I began reading his posts, I was all for charging the doors of the Fed's headquarters, with pitchfork and torch in hand, ready to smash down the whole corrupt, manipulative machine. My attitude has moderated, even though he thinks me irrational regarding the Fed. From him I have learned that, yes, the Fed is audited -- by Deloitte, no less. And I've also learned that we must accept the reality of central banks in today's world, although I still believe that the government should run these banks... not the other way around.

    I will read your offerings here with interest, even though, as I've said, I didn't major in Economics, and therefore lack the scholastic foundation necessary to understand these things in the same way that you and Iriemon, do. I find economics interesting, although I have to admit that I'm forced to believe that nothing is going to change much, going forward, for probably another 100 years. The rich will continue to go on getting richer, the tax laws will continue to be unfair, and we'll probably continue to plod our witless way along toward a "1984-esque" scenario of central governmental command and control. Unfortunately, it's all consistent with human nature....
     
    Last edited: May 31, 2018
  16. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,330
    Likes Received:
    292
    Trophy Points:
    83

    Wow, considering how our conversation started, I am truly humbled that you would be so introspective. I extend to you sir my greatest respect to you for that, regardless of any points we may disagree on. Introspection is the hardest single activity a person can engage in, well, that and Soccer 8)

    @Iriemon and I, I beleive, agree on a lot. I suspect there are some things he is more familiar with than I am and I'm sure there are a few things I know that he may not.

    I'm not classically trained in economics, however, I think classical educations can be as much of a hindrance as promote understanding.

    Lastly, sometimes I can be a little sloppy with the terms I use. I'm usually in the company of other people who are smarter about this stuff than I am, so when I use a term, they often understand what I mean and don't correct me, so if I've used a term wrong or it's just plain confusing, please don't hesitate to ask/ correct me.

    Thanks!
     
    Pollycy likes this.
  17. Pollycy

    Pollycy Well-Known Member

    Joined:
    Sep 24, 2008
    Messages:
    20,000
    Likes Received:
    5,607
    Trophy Points:
    113
    Gender:
    Male
    Where to begin? I must say, I've never really thought about several of the points you've made here, and instead focused all my disapproval entirely on the Fed. I still don't think that a 'central bank' should have exclusive control of money supply and interest rates, but you make a very good case that Congress would not do a better job, really. And, from that I think we can also assume that no single, politically-motivated executive administration would to a better job, either.

    Before I forget, I am fascinated by the graph you labored on, but I see that even in its larger depiction, not all of it appears. Please, is there a way that you could repeat the graph so that all of it shows. It is certainly worth keeping, and studying in detail.

    Your explanation of the peculiar behavior of the government during the Clinton years, and the resultant recessions is compelling, and no, I'm not trying to assert that those were necessarily Bill Clinton's fault, per se. Rather, it is the movement of vast sums of money, almost like forces of nature, that create the sudden surpluses and deficits that we've seen. It almost seems like the sloshing of water in a full bathtub when some big, fat drunken guy staggers around in the water.

    The money has not been moving into the hands of the bottom 80%, but with very few exceptions, when has it ever done so? The old saw that "the rich get richer and the poor get poorer" seems to be an unfortunate axiom that is common to all nations, all histories, all civilizations. And yet, the unemployment rate is announced today as having been lowered to 3.8% (U3), and even the U6 report is down to 7.6%. Link: https://www.bls.gov/news.release/empsit.t15.htm .

    What will we see going forward? Perhaps an perverse return to the 'Stagflation' of the 1970's? We appear to be on a trajectory toward higher inflation, and maybe much more so than currently anticipated by the Fed because of developments in the growing 'Trade War' between China, the U. S., Mexico, Canada, and the EU (primarily). Wages are somewhat improved, and the tax cuts promoted by President Trump may eventually spur more disposable wealth in the hands of "worker bees", but it may take a full year or more (much more). I speculate that this could be a drawn-out process because many employers are evidently planning to take their tax cut money and plow it into robotics and IT methodology which will not require hiring lots more people But, again, there's that pesky unemployment rate, which tonight is the lowest it's been since December 2000. :omg:

    Lastly, in spite of myself, I must admit that you make a compelling case that the Fed is very possibly as much an unwilling participant in this overall economic dislocation we've found ourselves in for possibly 20 years (?). If you have not already done so, perhaps you should write a book, or create your own website. And please do make contact with @Iriemon. He is much more your 'equal' in this arena, and, I would very much enjoy reading your discussions with him.
     
    Last edited: Jun 1, 2018
    Econ4Every1 likes this.
  18. ARDY

    ARDY Well-Known Member Past Donor

    Joined:
    Mar 1, 2015
    Messages:
    7,169
    Likes Received:
    1,127
    Trophy Points:
    113
    Suppose trump shuts down the fed
    Then what. No central bank
    No fdic?

    I do not see how the fed has negatively impacted me

    What is debt free money?

    Lets suppose the value of the dollar had not declined. Lets suppose the dollar was worth 500x current value. Do you think your wages would be 500x and your house would be worth 500x. What is the benifit of an un inflated dollar?

    By the way, the national debt is not because of the fed. It is congress which has spent and borrowed this money
     
    DennisTate likes this.
  19. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,330
    Likes Received:
    292
    Trophy Points:
    83
    I look forward to answering this when I have more time.

    As far as the graph, that's all of it, but I've been meaning to run the numbers for 2016-17...Perhaps your interest will spur me to finally do it. I've also been meaning to add in businesses and the Federal govenrment, but that is a laborious task. That graph took me about 2 weeks to perfect, though it shouldn't take as long now that I have the format down.

    Thank you, and for what it's worth, I'm glad we were able to get past the friction in our conversation and reach this point...
     
    Last edited: Jun 2, 2018
    Pollycy likes this.
  20. Pollycy

    Pollycy Well-Known Member

    Joined:
    Sep 24, 2008
    Messages:
    20,000
    Likes Received:
    5,607
    Trophy Points:
    113
    Gender:
    Male
    Could you please make one more attempt at posting your fascinating "cumulative effect" graph. It didn't appear fully in your earlier post.

    Oh, BTW, did you see Robert Samuelson's column today entitled, "Who Gets Credit For The Roaring Economy"? He seems to be giving the credit to the Fed and "easy money". I rarely agree with Samuelson on much of anything because his answer to all economic problems in this country seem to originate with his obsession that we must cut EARNED Social Security and Medicare entitlements. Still, after reading this piece, I see that maybe (MAYBE) I've been too harsh about the way the Fed handled this particular "Great Recession" downturn. I'm beginning to understand that maybe (MAYBE) the Fed board members were 'the-only-adults-in-the-room' when the wheels finally came off of this wretched, stupid, criminal debacle. Indeed, @Iriemon tried to convince me for years that it was necessary for the Fed to make these 'rescues' for those who were considered to be 'too big to fail', etc. I alway rejected that notion, preferring instead for the free market to take over, and if a bunch of conniving criminals went bankrupt, then so be it.

    But, when we add all the stupid, irresponsible idiots who bought way more 'house' than they could possible afford to all the other criminal idiots who were making hundreds of millions of dollars by cheerfully LETTING them so, it may have presented a totally disastrous situation for all of us, and the entire economy; one which REQUIRED "rescue"... even though the whole idea of it still makes me furious.
     
  21. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,330
    Likes Received:
    292
    Trophy Points:
    83
    In the graph, can you see 1992 through 2015? If yes, that's all of it. Here is the original link to Imagur, if that's doesn't work, I'll be happy to provide you a better link.

    https://i.imgur.com/vGhTwWo.png

    As far as the Fed and rescues I am reminded of my days as a hockey goalie in high school. I'd make a fantastic save and look to my coach after the game to bolster my performance. Imagine my disappointment when he told me the only reason that my saves looked so good was that I was out of position in the first place, thus my "great saves" were just the result of earlier mistakes. While that crushed me at the time, it's served as a pretty good metaphor in my life.

    I would agree 100% that the Fed's actions were better than doing nothing and letting the whole global system recalibrate itself via deleveraging would have been a calamity and caused untold human suffering and misery. When people are driven to desperation, violence often results. However, the long-term "fix" belonged to Congress, not the Fed and that, IMO has resulted in the economy we see today. Strong, but fundamentally unstable.

    What happened or more accurately, the result post-2008 can be explained in simple terms. The government bought trillions of dollars of private debt. But who's debt? If a house was in foreclosure and the government has simply paid for it, both the homeowner and the bank would have improved. The Fed simply increased the amount of capital the banks had in order to recalibrate what "failure" would have been.

    In other words, a bank has $1 billion in assets and $800 million in debt has $200 million in capital. That capital includes lots of mortgages (MBS). When the mortgages failed and people stopped paying, the same bank might now have $600 million in assets and $800 million in debt. That makes the bank insolvent. So what did the Fed do? It purchased bank bonds. So in this case, if it bought $400 million in bonds, the bank's assets would increase to $1 billion. Bingo! The Fed recalibrated the sale via asset purchases, but that did nothing for the average person. Which in turn only increased the leverage of bankers and the money they could make (because they can make money equally well on an economy in an up-tick as well as a down-tick).

    The problem is, the economy and its strength aren't grounded in the strength of its banks, but the strength and productivity of its people. But people like you and I didn't get relief which is why the recovery has been 10-years in the making, but if Congress, instead of using trillions to fund programs like TARP had used that money to help people pay their mortgages every day people on Main St. would have been better off and the bank's assets wouldn't have lost value and the Fed wouldn't have had to create trillions in QE money.

    The problem is, Congress would have been singularly responsible for the $10 trillion dollars in increased debt because people are awful at evaluating other possibilities. They wouldn't have seen the world as you and I have experienced over the last 10 years.

    Now, I'm not saying that this is an ideal situation. Again, back to the hockey metaphor, it shouldn't have ever come to this (starting with the surplus in 2000, the .com bubble and later the housing bubble). So saying that my solution would have been good is only within the context of the problem. Standing outside that bubble the whole thing stunk.

    You are now beginning to see the forest past the trees and it's complicated to say the least.

    -Cheers!
     
    DennisTate likes this.
  22. Pollycy

    Pollycy Well-Known Member

    Joined:
    Sep 24, 2008
    Messages:
    20,000
    Likes Received:
    5,607
    Trophy Points:
    113
    Gender:
    Male
    The problem is confined to the depiction of data for the "Great Recession" area. It is as if the graph is simply not "tall enough" to contain that entire column. I don't think the link is at fault; rather, I think that the graphic may not have been configured fully, or not "pasted into" Imgur in quite the right way. I'm not complaining... it is a remarkable work, and I'd love to be able to see all of it.

    BTW, as an aside, I'm very impressed that you were a hockey goal-tender! Only this past season, after becoming completely disgusted with the NFL, my wife and I turned to watching hockey -- particularly our Colorado Avalanche. The "Avs" had an extraordinary season (compared with the past few), and we've had two remarkable goalies -- Varlamov, and Bernier. But, unfortunately, both were afflicted with sickness and injuries. Nevertheless, we made the playoffs this season, which for the Avs, was almost like winning the Cup.
     
    Last edited: Jun 4, 2018
    Econ4Every1 likes this.
  23. Pollycy

    Pollycy Well-Known Member

    Joined:
    Sep 24, 2008
    Messages:
    20,000
    Likes Received:
    5,607
    Trophy Points:
    113
    Gender:
    Male
    I am beginning to acknowledge that sometimes, in rare situations, it is necessary to do some bad things to keep even worse ones from happening. In my revised view (which I'm not altogether happy about), I can see how the Fed did, indeed, feel that it needed to do some 'bad things', perhaps to keep the entire economy from collapsing.

    I still think that entirely too many innocent people were abused... others who were merely innocent bystanders were screwed (especially those who live within their means, avoid debt, and who actually SAVE money). In other words, I still believe that entirely too many comfortable accommodations were made for irresponsible people who acted stupidly, and, for others who were little better than outright criminals, who actually came out of the recession even wealthier than before. But nothing is perfect... nor has it ever been.

    We agree, though, that even given that today's economy appears to be robust, it is fundamentally unstable! There is a very real "house-of-cards" aspect to this current economy, because as you point out, it was rescued by the act of repeatedly buying bad debt with imaginary 'money'. It is made worse, IMHO, by the sheer overkill used by the Fed (again, IMHO) in laying out the red carpet for stock market gamblers and speculators. I'm not an economist, as I've said... but by no stretch of the imagination can I reconcile today's stock market valuations to reality....

    At this point, I see a critical point arriving, and it may do so this very month of June. I want to SEE whether or not the Fed will raise interest rates (as it has said that it would), and it should raise interest rates in keeping with demand for real money -- at least one full point. I know... not any chance of that happening. Ah, how I miss Paul Volcker, who was certainly the best of a bad lot.

    The other 'perfect storm' aspect to June is the looming 'Trade War', which apparently is back on track.
     
    Last edited: Jun 4, 2018
  24. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,330
    Likes Received:
    292
    Trophy Points:
    83
    The fed doesn't control the supply of money, it influences the cost of money. Pre-2008 this was done by increasing or decreasing the supply of reserves which banks are required to hold in order to make loans. If the Fed wants to target a higher rate, it sells bonds. Bond sales to anyone cause the supply of reserves to decrease. This increases the scarcity of reserves and raises the cost. Post-2008, the Fed had swamped the market for reserves which pre-2008 were measured in just a few billion, post-2008 were measured in 4000 billion (4 trillion). This drove the cost of reserves to zero. Banks generally lend at the reserve rate plus some amount taking into consideration risk and other costs.

    So the Fed influences rates (fairly directly) and influences borrowing (indirectly). But the Fed cannot add money to the economy, only borrowers can do that and even then it only happens when the rate of borrowing exceeds the rate of repayment. The problem with creating money in your economy via private debt is that each of us has a very real limit, a limit that is influenced by the availability of jobs and wage growth. Pre-2008 jobs and wage growth flattened out, but borrowing didn't stop (as lending standards had been lowered to absurd levels).

    I would say that Congress and the Fed have to know their jobs and coordinate based on the prevailing economic situation. I assert that most members of Congress are literally clueless about how our money system works. Even worse, the few that have been educated, when they really begin to understand they realize that if they act on that understanding, they will be voted out of office.

    I predicted, in a post on Quora, that the economy would fail if Trump were elected, UNLESS, he increased deficit spending significantly, lowered taxes or both.

    He influenced Congress to do both.

    Spending is a requirement for a strong economy that has spare capacity.

    Here's a chart that shows the nations unused productive capacity.

    [​IMG]

    If the economy is doing so well why are we so far below peak capacity utilization? Heck, we're still below the 30-year historic average...

    How can unemployment be so low and capacity utilization be so low?

    Well, we see that huge amounts of deficit spending and tax reductions have begun to move the "needle" in the right direction, but the economy has a lot of spare capacity. reaching 85% shouldn't be a problem unless deficit spending and tax reductions aren't going to the people that would create the demand necessary to increase capacity utilization....

    No, I agree, Congress is in control of the budget, but Clinton was a popular president and if you were a Democrat and voted against the budget you were definitely putting your policial career on the line. So, yeah, I blame Clinton (politically) and Congress (based on their actions), they are both culpable for the events that followed and the fallout that we are still feeling today.

    I think I agree, though I'd say it slightly differently, banks and wealthy investors don't make much money in a stable economy. They make money when there are "waves" (as you put it). The investor class in incentivized to create waves, up or down, they don't care, they make money on both sides while most of us only do well on the upswings...

    Well, perhaps I should have said, money is continually moving from the hands of the 80% into the hands of the top 20% as evidenced by this chart:

    [​IMG]
    Source: https://whorulesamerica.ucsc.edu/power/wealth.html


    YES! That is exactly what we see as long as Congress fears deficits and fails to enact spending on things like infrastructure and education and healthcare, things that benefit beifit the middle class.

    Inflation results when demand exceeds supply. If the capacity utilization chart is to be believed, we have the capacity to create a lot more. The question is, what will increase spending cause us to run short of? Even if we begin to run short of things, are we incapable of expanding businesses such that supply and demand come back into line? If yes, doesn't inflation provide an opportunity to future businesses to meet increasing levels of demand? Won't that in turn lower unemployment, cause a potential rise in wages and increase capacity utilization?

    Automation, everyone's favorite thing to hate will be a big part of preventing inflation by increasing output, especially when available labor declines, but because automation affects those with lower skills, we are going to see a problem which is that a significant portion of the population won't be able to earn enough to consume what we can create. Hopefully, you can see the dycotomy. The last thing we want is our businesses creating and exporting to other nations whose citizens have the money to consume what we create (a-la-China). That will do nothing to raise the average person's standard of living.

    Sure, but remember that we are looking at the U3 rate. The U6 rate is still fairly high. As wages and benefits increase, people will be enticed to re-enter the job market.

    I'm not, by any means, letting the Fed off the hook, as I said before, I'm just trying to target peoples outrage with the Fed in a more accurate and productive direction :)

    I am working on creating something for mass consumption, but I always feel like there is more to learn before I embark on that task...lol
     
    Last edited: Jun 4, 2018
    DennisTate and Pollycy like this.
  25. DennisTate

    DennisTate Well-Known Member Past Donor

    Joined:
    Jul 7, 2012
    Messages:
    21,653
    Likes Received:
    1,228
    Trophy Points:
    113
    Gender:
    Male
    Wow!!!!!

    Extremely helpful information Econ4Every1!

    I could be wrong........ but I have a number of reasons to be optimistic that
    President Donald J. Trump wishes to go down in history as President #3 to
    tackle flaws in the American financial system...........
    and I would not put it past him to come out with a basic minimum income for
    all Americans............

    ...... President Trump has produced reality films.... and in a sense....
    as President.... he is C.E.O. of a film production cooperative with over 320 million Americans.....
    all of whom could be actors playing the role of themselves........

    Matthew Fox Ph. D. stated in his book "Coming of the Cosmic Christ" that only ART
    could be used to produce full employment in an economy where technology was putting so many people out of work.........

    I half expect President Trump to refer to what was accomplished by President Lincoln......
    and President John F. Kennedy to explain how a basic minimum income is actually quite possible..... .and it does not necessarily have to increase taxes..........

    .....
    https://www.michaeljournal.org/articles/politics/item/abraham-lincoln-and-john-f-kennedy
    .....
    .......
    A basic minimum income is one of the only possible ways to begin to put more money into the hands of the bottom eighty percent of the population.

    I would not put it past President Trump to coopt some of Mark Zuckerberg's ideas on this!

    http://www.businessinsider.com/mark-zuckerberg-universal-basic-income-alaska-2017-7

    Mark Zuckerberg doubles down on universal basic income after a trip to Alaska


    I think that this would be even more likely if P. M. Benjamin Netanyahu liked the idea:

    P. M. Netanyahu, President Trump has a 4.3 trillion dollar problem....
     
    Last edited: Jun 4, 2018

Share This Page