"Why the modest inflation?" Because very few people have any money. The Fed keeps printing money, but it just gets pissed down the government toilet on its way to the elite banking sewer. A real stimulus would be when money ends up in the hands of ordinary people and they start spending it. That's when you would have inflation if you didn't implement other policies to stop it.
It really functions more like part of the actual budget than being "borrowed". If there are surplus payroll taxes they are "invested" into government debt, by an arm of the government. Which really isn't savings, or investment, at all- anymore than moving money from your savings account into your checking account and then spending it on air jordans is somehow an investment on your part, or a debt to yourself.Originally Posted by Brian4Liberty
Sure, if you wanted to really to be stubborn with the idea you could say that you actually have an extra $100 in your savings account because your checking still owes it $100. But in the end the only way that $100 is going to appear in any account is for you to actually work for it...which would be the exact thing you would have to do anyway if that $100 "debt/investment" never existed in the first place. It is just a semantic retardation, a fallacy of composition.
E che sospiri la libertΰ!
Helpful illustration:
source: http://www.federalreserve.gov/datado...mn&pp=Download
(Link may or may not work, if not go to the Data Download Program and select excess reserves)
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.
Printing money, by its nature, is a type of default.One thing that can offset the counterfeiting is defaulting on debt.
Still it is hard to see inflation up close for me. I'm guessing its been over 8% a year most of my life. I think once some time passes and we look back at the last few years we will be able to see it was alive and well. Actually I have been thinking the last year we had a nice break and had some counterfeiting easing.
Anyway if you look long term it looks heavy duty. Not like the figures they dish out anyway.
My music/art page is here"government is the enemy of liberty"-RPThat which doesn't kill me has made a grave tactical error[IMG]https://pbs.twimg.com/media/BMoF6luCUAIm1vO.jpg[/IMG]
No, they don't! That's just more conspiratorial garbage for the simple-minded!
Government created & sustains the system because government itself is its biggest beneficiaries, although there may be other INCIDENTAL beneficiaries, all the wealth that government rakes in with the prevelant system isn't going to them, it certainly does NOT hand it over to the banks but rather government uses all that wealth on ITSELF!
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
Government not being able to sell those securities at par in itself will be problem when the arrives. When those losses become due, how do you think Treasury is going to pay them? Treasury doesn't even have enough money to pay its "regular" expenditure, which it pays by selling Treasuries! Well, Treasury will simply have to sell "additional" debt to raise enough money to pay off Fed's losses
And then Fed Balance Sheet will essentially go something like this :
(continued from this link - http://www.ronpaulforums.com/showthr...=1#post4405329)
Case 3 : Fed sold MBS at a loss
Treasury meets the losses by selling additional Treasuries to the marketCode:Liabilities Assets Currency in circulation - 1 trillion Treasuries/US debt - 2 trillion All banks' reserves - 1.5 trillion Losses/Treasury A/c - 0.5 trillion
Losses written offCode:Liabilities Assets Currency in circulation - 1 trillion Treasuries/US debt - 2 trillion All banks' reserves - 1 trillion Losses/Treasury A/c - 0.5 trillion Profits/Treasury A/c - 0.5 trillion
Fed buys equivalent amount of Treasuries in order to prevent interest on Treasuries from rising & choking US governmentCode:Liabilities Assets Currency in circulation - 1 trillion Treasuries/US debt - 2 trillion All banks' reserves - 1 trillion
When the losses become due, Treasury will either give debt-securities worth the amount to Fed or Treasury will simply sell them to Primary Dealers & Fed will immediately buy from them but one way or another, more or less of those losses will "replace" more debt-securities on Fed's Balance Sheet.Code:Liabilities Assets Currency in circulation - 1 trillion Treasuries/US debt - 2.5 trillion All banks' reserves - 1.5 trillion
So there will be no "shrinking" of Fed's B/S that you are talking about. In fact, the real "problem" is the fact that if Fed can't sell those bad securities at par then it will become even harder for them to shrink their B/S & that will set up stage for higher inflation!
The more money government needs > the more debt they issue > more of the debt will have to be bought by the central-bank to keep down interest on debt to prevent government-bankruptcy > the more central-bank buys > the more money is created > higher future inflation
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
Are you seriously trying to tell me that the banks don't pick our candidates nowadays? "Conspiracy garbage" ok
Ya, the banks huge profits over the last decades was surely incidental, I'm sure they had zero influence in making sure that free money chopper was at full capacity. You're selling to someone who just isn't buying, sorry.Government created & sustains the system because government itself is its biggest beneficiaries, although there may be other INCIDENTAL beneficiaries, all the wealth that government rakes in with the prevelant system isn't going to them, it certainly does NOT hand it over to the banks but rather government uses all that wealth on ITSELF!
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.
Well, at the most fundamental level through taxes & debt........
I'm not sure but I'm assuming you want to know how Fed enables the system & helps out the government.....
If that's indeed the question then -
1) Interest saved - All the interest Treasury "pays" to Fed on Treasuries held by Fed is eventually handed BACK to the Treasury when "Fed's profits" are given back to Treasury. If somebody else had held these Treasuries then money would GO OUT of US government but having Fed there means that much interest essentially goes nowhere & remains with the US Treasury so that it can spend it where it wants.
2) Seigniorage on Coins & Notes -
US Treasury sells coins to Fed at face value to circulate into the economy through 12 regional Fed-banks, as per the communication received from commercial banks about the public-demand for coins; so the difference between cost of production & face value of coins is profit for Treasury.
Just like with coins, as public-demand for notes increases, commercial banks ask for more notes from the 12 regional Fed-banks, these Fed-banks have to buy Treasuries to issue notes into circulation, which they buy from Treasury. Again, the interest saved on these Fed-held Treasuries benefits government.
3) Lower cost of borrowing (interest on Treasuries) - The most significant benefit Fed (all central-banks really) offer to the government is that without a central-bank, government would have to pay much higher interest for borrowing money from the market but with central-banks' virtually unlimited capacity to "create money", they create additional demand for Treasuries & drive down interest on Treasuries/debt, which means government can borrow & spend more than it could have without the existence of a central-bank. Without Fed, US government would probably have bankrupted itself by now but the existence of Fed has enabled it to prolong the inevitable by a few decades at the least.
Without a central-bank, governments' borrowing habits would have to be curtailed significantly or the system would collapse a lot faster so central-banks almost stand to legitimize high government spending & borrowing!
4) Higher taxes - As inflation hits & prices rise, income rise subsequently, so do taxes!
There are too many perhaps but a couple would be that "banks get money for free" or that "Fed is private"; it's alright to agitate people with such statements to get them to want to know what Fed & government is doing but that's all should be its utility because as has already been pointed out, neither do banks get "free money" (since they have to repay their loans with interest) nor is Fed run like a truly "private" company (since it's just another arm of the government & hands over its profits to Treasury).We need to be a little more specific, but not too detailed!
What are the (untrue) myths and conspiracy theories?
Except they would call it money "invested"! You know because all the wise people in government have chosen to "invest" our money in government-debt as it's the "safest" instrument out there since government will never default on its obligations (it's beside the point that they will just devalue it)
Last edited by Paul Or Nothing II; 09-26-2012 at 09:03 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
Are you in the habit of getting off-track?Are you seriously trying to tell me that the banks don't pick our candidates nowadays? "Conspiracy garbage" ok
Ya, the banks huge profits over the last decades was surely incidental, I'm sure they had zero influence in making sure that free money chopper was at full capacity. You're selling to someone who just isn't buying, sorry.
The original point of contention was - who's the BIGGEST beneficiary of the system?
You'd said it was the banks & I'd contended that government is the biggest beneficiary of the system & I still stand by that.
Again, banks would be pretty profitable whether borrowing-rates were at 0.XX% while lending-rates being 2-3%, or whether borrowing-rates were at 4-5% while lending-rates being 7-8%, they'd still make good money so long as there was demand for their services, which there usually is in productive societies; but without Fed, government wouldn't be able to borrow at such discounted rates that it does!
Banks are intermediaries, they borrow from one side & lend from the other while they make the spread for providing their services so the rates of interest don't directly affect them but the rates directly affect the ACTUAL borrowers/spenders & lenders/savers.
A libertarian attacks the Fed & the government while a liberal would attack the whole banking industry & anyone that seems to be making a lot of money!
I don't think I could ever convince anyone who relies on conspiracy theories so I don't even try but I just choose to post for those few who might be interested in facts!
Last edited by Paul Or Nothing II; 09-26-2012 at 09:23 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
Are you serious? The Rothchild Family is worth $Billions upon $Billions.
Sure, the small bankers are not necessarily raking in as much dough as they would like, but they are participating in the theft of America too. Fractional reserve banking is a theft scheme ... plain and simple.
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