Indeed, and that extra 10% goes directly into the pockets of the bankers.Originally Posted by The Free Hornet
Really, it's many different things holding back the inflation (temporarily). All of these factors together are working to fuck us in the ass.
Last edited by bxm042; 09-17-2012 at 04:42 PM.
The Matrix is a system, Neo. That system is our enemy. But when you're inside, you look around, what do you see? Businessmen, teachers, lawyers, carpenters. The very minds of the people we are trying to save. But until we do, these people are still a part of that system and that makes them our enemy. You have to understand, most of these people are not ready to be unplugged. And many of them are so inured, so hopelessly dependent on the system, that they will fight to protect it.
This. Pretty much.
My cost of living has shot up in the past 5-10 years despite still being single and still living a pretty similar/modest lifestyle.
You don't need to be an economist to know inflation is well over zero.
Ron Paul: "For those who have asked, I freely confess that Jesus Christ is my personal Savior, and that I seek His guidance in all that I do."
Not really. Banks may get a small piece of it as interest but most of it either goes to borrowers (if they don't repay the loan) & to the government.
There is enormous inertia a tyranny of the status quo in private and especially governmental arrangements. Only a crisis actual or perceived produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable
- Milton Friedman
They are first in line to get their hands on the funny money, hot off the printer. I'm sure they get more than their "fair" cut.
Second in line is usually also bankers. Third in line is also a banker. They get their cut too.
Maybe the fourth person is a borrower.
The Matrix is a system, Neo. That system is our enemy. But when you're inside, you look around, what do you see? Businessmen, teachers, lawyers, carpenters. The very minds of the people we are trying to save. But until we do, these people are still a part of that system and that makes them our enemy. You have to understand, most of these people are not ready to be unplugged. And many of them are so inured, so hopelessly dependent on the system, that they will fight to protect it.
Let's look at a simple example of how new money usually enters the economy.
Depositors deposit THEIR money with banks > banks PAY Treasury to buy securities > now Fed pays newly created money to banks for the securities
Banks didn't get anything for free there, they pretty much get what they had PAID to the Treasury, most of it still indirectly belonged to the depositors, banks may just end up scoring the small difference between buying & selling, whether positive or negative.
On the other hand, the interest to be paid on Treasury-Securities held with Fed is handed back to the Treasury as Fed's profits so that much money is saved for the government, which would otherwise have ended up with outsiders, that's the gain for the government; not to mention, inflation pushes up everybody's incomes, which means they must pay more in taxes to the government.
Now, as for the borrowers, let's say there are X number of goods/services out there, when somebody borrows & buys stuff with it, they are essentially using depositors' purchasing-power to buy it & simultaneously push demand & prices up for everybody else
If they produce & repay the loan then fine but if they don't then they'll have essentially consumed goods/services out of the economy without adding equivalent amount of it back into the economy. In most cases, it's a loss for the bank as it didn't get the money from borrowers but they would still have to pay the depositors; & in case bank doesn't have enough profits to cover such losses, it fails & depositors don't get their deposits back either.
In the first instance, non-paying borrowers will have essentially stolen purchasing-power from the lending-bank while in the second instance, borrowers will have indirectly stolen purchasing-power from depositors; in either case though, they'll have also stolen a bit of purchasing-power from everyone in the economy as demand & prices were pushed up as borrowers consumed more than they produced.
There's a big difference between Fed & commercial banks, former creates a lot of problems while latter are an essential part of a market-economy, without which the economy & production will grow very slowly, it will like going back to Dark Ages when charging interest was restricted, which had profoundly negative effect on economy.
If the tirade against Fed turns into tirade against banking in general then we'll have a pretty bleak future to look forward to & there will be no difference between liberals & libertarians.
Last edited by Paul Or Nothing II; 09-18-2012 at 04:13 AM.
There is enormous inertia a tyranny of the status quo in private and especially governmental arrangements. Only a crisis actual or perceived produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable
- Milton Friedman
My personality type: INTJ - please forgive my weaknesses (Not naturally in tune with others feelings; may be insensitive at times, tend to respond to conflict with logic and reason, tend to believe I'm always right, tend to be unwilling or unable to accept blame )
Considering the volume of trades they do, there is nothing small about it. Most of the banking industry is just moving money around, not actually lending, and when they do lend, it's at a significantly higher rate than the rate at which they borrowed (~0%).
Bankers profit. Big time.
That's not what I'm saying. Banks and bankers are good, and serve a legitimate purpose. Banks and bankers who have a friend with a funny money printing press, is not good, and does not serve a legitimate purpose.If the tirade against Fed turns into tirade against banking in general
Last edited by bxm042; 09-18-2012 at 05:02 PM.
The Matrix is a system, Neo. That system is our enemy. But when you're inside, you look around, what do you see? Businessmen, teachers, lawyers, carpenters. The very minds of the people we are trying to save. But until we do, these people are still a part of that system and that makes them our enemy. You have to understand, most of these people are not ready to be unplugged. And many of them are so inured, so hopelessly dependent on the system, that they will fight to protect it.
Which is still small compared to the benefits gotten by non-paying borrowers & government, which was precisely my point.
Besides, who is to decide whom they should lend? If lending to government is in their self-interest, then of course they would, afterall, all of us are guided by our own self-interests too, we too try to optimize our earning, the return on our capital, be it monetary capital or human capital.
And why would anybody lend at the rate they are borrowing? That makes no sense so of course they are going to lend at a higher rate than they are borrowing at, otherwise there'd be point in doing it! And how high the rate ought to be is determined by the market as they compete with one another to offer the lowest rate possible to attract most borrowers.
We live in a majority-rule system so that printing-press even exists because majority chooses to support it indirectly, if majority wanted liberty & sound money then it'd be there in no time but no, instead they choose to support big government & socialist thievery so that's where the blame should go!
Do banks benefit by lending to government? Of course they do but if majority wanted to stop it & end Fed, they can but instead they are too busy collecting welfare-benefits which'd probably not exist if government couldn't re-finance itself thru Fed!
My point being that banks aren't the only ones benefitting, there are plenty of people who do benefit from the system so my original point still stands that banks are NOT necessarily the biggest nor the only beneficiary of the system.
There is enormous inertia a tyranny of the status quo in private and especially governmental arrangements. Only a crisis actual or perceived produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable
- Milton Friedman
I think it's a combination of things:
- CPI is understated, my guess is prices are rising somewhere around 5-7% a year. But that's still pretty low compared to how much we've printed.
- Banks are holding cash.
- Recession forces are putting downward pressure on prices.
- Foreigners are holding cash.
This is just a guess but I think the biggest factor is the last one, that foreigners are holding cash.
I have a feeling the longer this goes on the faster prices will rise when it finally hits.
I think the point in all this is that a number of factors can influence how much inflation we perceive. In all our history since 1913 and since 1971, we haven't seen inflation shoot up directly as a result of the printing of money. We didn't wake up one day and realize that our dollars were worth less. Some of the printed money sits, some of it goes overseas, some of it goes into the banking system and takes a while to get transformed to credit, some of it is simply exchanged for other forms of money. In other words, there is no directly noticeable effect. It is a cycle that is ongoing. It has been going on and the cycles have been overlapping so that there is no perceived change except that which we can see has happened over long periods of time. I would imagine there was some timing that went into the decision to initiate QE3, but the inflation as a result of that is just another rock thrown into an already turbulent lake.
Last edited by PaulConventionWV; 09-19-2012 at 10:04 AM.
"If you study science deep enough and long enough, it will force you to believe in God." ~Lord Kelvin
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