Why the modest inflation?

[Zippyjuan]

Bad assets or not, they still profit from the Fed. I've already explained this several times, it's simple supply and demand. The Fed buys products at a price that noone else is willing and able to buy at that time. Focusing on just the "bad assets" instead of just "assets" is just one of the countless strawmen you like to use.

The Fed purchases their assets via a competitive bidding process. They say how much they want to buy (say $10 million in US Treasuries) and dealers make offers of how much each of them are willing to sell and what prices they will be willing to sell them at. The price is the lowest one which allows the Fed to buy all the securities they are after.

[bxm042]

The Fed purchases their assets via a competitive bidding process. They say how much they want to buy (say $10 million in US Treasuries) and dealers make offers of how much each of them are willing to sell and what prices they will be willing to sell them at. The price is the lowest one which allows the Fed to buy all the securities they are after.

See previous post, Zippy. When a counterfeiter enters a market (regardless of how "competitive" it is), everyone who engages in trades with the counterfeiter benefits monetarily. It's basic economics.

Even indirect trades benefit. The closer you are to the counterfeiter, the more you will gain through their theft.

[Travlyr]

See previous post, Zippy. When a counterfeiter enters a market (regardless of how "competitive" it is), everyone who engages in trades with the counterfeiter benefits monetarily. It's basic economics.

And everyone else loses.

[bxm042]

And everyone else loses.

Indeed.

[Paul Or Nothing II]

It's basic economics. You should know this.

10 people attend an art auction. 1 of them, named Bernie, is a counterfeiter, who's job is to buy paintings. 1 of them, named Joe, really, really likes Botticelli.

A Botticelli piece goes up for bid. Joe is willing to pay up to $600,000 for the piece. The other 8 people are willing to pay only $200,000 for the piece.

Without the counterfeiter, Joe would win the auction at $201,000. With the counterfeiter, Bernie would win the auction at $601,000.

That's an extra $400,000 in the pocket for anyone who sold that Botticelli.

I think it's hilarious that you call this basic economic principle of supply and demand a "conspiracy theory."

You also have zero evidence that there is no significant monetary benefit from this process. All (well, nearly all) money enters the system through this process, and considering the amount of money in circulation, it's very foolish to say it's not a factor. The recent years have only reinforced this, by providing solid evidence of a correlation between money printed and banker profits. This has been going on for a very, very long time. The only difference is now, it is ridiculously obvious.



New? I posted this like 20 pages ago. This is solid proof they make more money with the Fed than without it, but you have repeatedly stated they do not. The Law of Supply and Demand obviously disagrees with you... but I guess that's just a conspiracy theory, right?

Law of Supply and demand = Conspiracy theory.... you crack me up, man.

So you're saying Fed buys paintings from banks & that's how banks profit???

Although conspiracy-theorists are completely capable of claiming that Fed buys paintings from banks, I'll take a chance & assume that this is some obscure reference to Fed buying Treasuries from PDs, which begs the question why one wouldn't offer an example with Treasuries but then what do I know, I not big on conspiracy-theories so....

Anyways, do you have any idea as to how Fed buys Treasuries from PDs? Clearly not! All the PDs quote their best possible prices to Fed & then Fed chooses to buy LOWEST priced ones so PDs don't just quote any price because there is competition amongst PDs to sell & quoting too high means the other guy sells his & you don't.

And the prices they quote are correlated to the market-prices of Treasuries because Fed isn't the only entity they sell to so selling too far above the market-price is out of the question & if you do then the other PD will undercut you because as I've said before, PDs are market-makers & market-makers are in the business of continuously buying/selling an instrument for tiny profits, that's how market-making works but clearly you wouldn't know any of that!

P.S. I didn't say that you personally said that Fed charges interest to government, all I've said that many conspiracy-theorists do make those senseless arguments without checking facts, but again your reading-comprehension isn't very strong so.....

[bxm042]

So you're saying Fed buys paintings from banks & that's how banks profit???

Although conspiracy-theorists are completely capable of claiming that Fed buys paintings from banks, I'll take a chance & assume that this is some obscure reference to Fed buying Treasuries from PDs, which begs the question why one wouldn't offer an example with Treasuries but then what do I know, I not big on conspiracy-theories so....

Anyways, do you have any idea as to how Fed buys Treasuries from PDs? Clearly not! All the PDs quote their best possible prices to Fed & then Fed chooses to buy LOWEST priced ones so PDs don't just quote any price because there is competition amongst PDs to sell & quoting too high means the other guy sells his & you don't.

The mechanics of the trade doesn't matter. Which is why I used a simplified example. This is just yet another red herring of yours. See below:

When a counterfeiter enters a market (regardless of how "competitive" it is), everyone who engages in trades with the counterfeiter benefits monetarily. It's basic economics.

And everyone else loses.

Are you seriously trying to tell me that because the Fed buys the lowest bid it invalidates this extremely basic economic principle outlined above?

And the prices they quote are correlated to the market-prices of Treasuries because Fed isn't the only entity they sell to so selling too far above the market-price is out of the question & if you do then the other PD will undercut you because as I've said before, PDs are market-makers & market-makers are in the business of continuously buying/selling an instrument for tiny profits, that's how market-making works but clearly you wouldn't know any of that!

You keep repeating this as if it's some kind of secret. Everyone and their mother understood this by page 4 of this thread. Give it a rest, already, for fucks sake.

Besides, the PD's are simply an intermediary. The profits earned due to printed money don't occur in just a single transaction. The PD's earn a little profit by trading with the Fed. The bankers earn a little profit by trading with the PD's. The assets and money changes hands between bankers, PD's, and the Fed, very often so all those "little profits" add up to a lot.

In fact, the amount of profits gained through those transactions can actually be calculated, with just a little analysis.

The monetary base as of 2011 is $2,150,000,000,000. That means the Fed, since its creation, has bought more than $2 trillion dollars worth of assets.

According to their Oct 31 2012 balance sheet, their current Assets-Liabilities = $54,760,000,000. That means they have bought $2 trillion dollars worth of assets, and only have $54 billion dollars to show for it. (There may be some mitigating factors in their balance sheet that changes these numbers, but my point is there is a concrete number that can be calculated.)

The Fed's $2 trillion loss over these 100 years is someone else's profit that obviously went somewhere. I can see only two possible recipients of that profit. 1) The bankers. 2) Military industrial complex, government contractors, hospitals, etc, and any other recipient of government funds. (Both groups 1) and 2) profit from the Fed)

That's $2,096,000,000,000 that just went "poof." You would have me believe that this free money (it is what it is), went to the bankers, and they didn't take any cut of this pie, and simply gave it all to the government without making any profit.

However, with some time and research, we could actually determine how much of this cut the bankers took using just a bit of subtraction. The only two possible recipients of these profits are the bankers and government spendee's. With the treasury data available, we should be able to determine precisely how much of that $2 trillion profit was distributed by the government

From there, we could determine how much the bankers have profited by simply subtracting the M0-normalized government spending from $2.15 trillion, and then multiplying it by M2/M0 to achieve the final result.

It would take some work and careful fact checking, but I think it can be done. And I do believe you would be surprised by the result. Taking into account FRB, it would quickly get quite substantial.

If you're interested, this would be an interesting project, and considering that you're a banker apologist, I'm sure you'd be more than happy to catch my errors in the process.

P.S. I didn't say that you personally said that Fed charges interest to government, all I've said that many conspiracy-theorists do make those senseless arguments without checking facts, but again your reading-comprehension isn't very strong so.....

I said you implied it. Which you did. Your exact words were "you people." Which a) is an assholish thing to say begin with. and b) I never said anything of that kind, so you throwing me in that group makes you a liar. Your purpose with that statement was obviously to try to discredit me. It's dishonest, and rather than own up to your mistake (or intentional lie?) you double down with more personal attacks.

[Travlyr]

The mechanics of the trade doesn't matter. Which is why I used a simplified example. This is just yet another red herring of yours. See below:





Are you seriously trying to tell me that because the Fed buys the lowest bid it invalidates this extremely basic economic principle outlined above?




You keep repeating this as if it's some kind of secret. Everyone and their mother understood this by page 4 of this thread. Give it a rest, already, for fucks sake.

Besides, the PD's are simply an intermediary. The profits earned due to printed money don't occur in just a single transaction. The PD's earn a little profit by trading with the Fed. The bankers earn a little profit by trading with the PD's. The assets and money changes hands between bankers, PD's, and the Fed, very often so all those "little profits" add up to a lot.

In fact, the amount of profits gained through those transactions can actually be calculated, with just a little analysis.

The monetary base as of 2011 is $2,150,000,000,000. That means the Fed, since its creation, has bought more than $2 trillion dollars worth of assets.

According to their Oct 31 2012 balance sheet, their current Assets-Liabilities = $54,760,000,000. That means they have bought $2 trillion dollars worth of assets, and only have $54 billion dollars to show for it. (There may be some mitigating factors in their balance sheet that changes these numbers, but my point is there is a concrete number that can be calculated.)

That's $2 trillion straight profit. I can see only two possible recipients of that profit. 1) The bankers. 2) Military industrial complex, government contractors, hospitals, etc, and any other recipient of government funds. (Both groups 1) and 2) profit from the Fed)

That's $2,096,000,000,000 that just went "poof." You would have me believe that this free money (it is what it is), went to the bankers, and they didn't take any cut of this pie, and simply gave it all to the government without making any profit.

However, with some time and research, we could actually determine how much of this cut the bankers took using just a bit of subtraction. The only two possible recipients of these profits are the bankers and government spendee's. With the treasury data available, we should be able to determine precisely how much of that $2 trillion profit was distributed by the government

From there, we could determine how much the bankers have profited by simply subtracting the M0-normalized government spending from $2.15 trillion, and then multiplying it by M2/M0 to achieve the final result.

It would take some work and careful fact checking, but I think it can be done. And I do believe you would be surprised by the result. Taking into account FRB, it would quickly get quite substantial.

If you're interested, this would be an interesting project, and considering that you're a banker apologist, I'm sure you'd be more than happy to catch my errors in the process.



I said you implied it. Which you did. Your exact words were "you people." Which a) is an assholish thing to say begin with. and b) I never said anything of that kind, so you throwing me in that group makes you a liar. Your purpose with that statement was obviously to try to discredit me. It's dishonest, and rather than own up to your mistake (or intentional lie?) you double down with more personal attacks.

Lolz... let me make a prediction. Which I am not all that good at predictions, but I'll make an exemption here. Paul or Nothing II will once again call you a crazy conspiracy-theorist which has nothing to do with your argument, but he, as the dumbass he is, will attempt to claim that the Fed is a good counterfeiter... not a bad counterfeiter. They mean well... and they wish you well while stealing your wealth.

[bxm042]

Lolz... let me make a prediction. Which I am not all that good at predictions, but I'll make an exemption here. Paul or Nothing II will once again call you a crazy conspiracy-theorist which has nothing to do with your argument, but he, as the dumbass he is, will attempt to claim that the Fed is a good counterfeiter... not a bad counterfeiter. They mean well... and they wish you well while stealing your wealth.

I think you'd win that wager

[Steven Douglas]

If I am in the business of loaning out other people's money as well as my own, I can certainly profit from that. That will be limited to what I and my lending customers can accumulate, of course, and there's nothing wrong with that at all. If I have a counterfeiter as a continual supplier, however, there is no question but that I am going to profit far more than if I did not have such a supplier.

The Fed is not the primary profiteer in any of this. As Ron Paul has stated repeatedly, the Fed is merely a facilitator. The artificial monetary expansion that the Fed facilitates on the warfare/welfare deficit spending government side is a drop in the economic bucket compared to what it facilitates on the inflationary, exponentially expanding monetary base and aggregate credit expansion side--with no aggregate contraction ever--on the commercial lending side.

Obfuscation begins as focus is divided, then concentrated on one part only, as if it represented the whole. In addition to the Treasury causing inflation through deficit spending, the Treasury also certainly profits from all of the Fed's commercial counterfeiting activities, since the Fed turns over all its profits, minus a small dividend paid out to member banks for their capital investment. But that is not even close to the whole of what is happening here.

Profits (interest paid) to the Fed from all the counterfeiting represents only the Treasury's cut (once it is turned over to it). Commercial banks have a different cut on those same counterfeiting operations. They aren't turning over the interest they charged over and above what the Fed charged. Profits from that interest, less whatever taxes the commercial banks do pay (read=practically zero), is entire theirs to keep.

And that's where confusion and obfuscation further ensues.

The fact that commercial banks are dealing in counterfeit funds in the first place is dismissed entirely, or quickly forgotten. The focus, by banking apologists, shifts instead to the "services" provided by banks. As the reasoning goes, "Banks can't be expected to lend counterfeit money, er, provide their services for free, can they?" Which completely ignores the fact that they are not profiting from services provided.

Banks aren't wiping people's asses, mowing their lawns or doing their windows for them. Even if they were, that is not what they are charging for. What they are providing is not a service, but rather access to counterfeited currency, a monetary good, at a profit. Even if the banks took ZERO profit, the currency would still be no less counterfeit, no less inflationary in the aggregate, so long as the pool of credit is exponentially ever-expanding, never contracting in the aggregate. But the banks are not taking zero profit. They do take a profit from all of this--enormous profits in the aggregate that make all the Treasury's combined profits absolutely pale in comparison. And all for the privilege of providing, not a service, but a counterfeit currency that perpetually and continuously dilutes all other currency in existence.

[Paul Or Nothing II]

The mechanics of the trade doesn't matter. Which is why I used a simplified example. This is just yet another red herring of yours. See below:

See previous post, Zippy. When a counterfeiter enters a market (regardless of how "competitive" it is), everyone who engages in trades with the counterfeiter benefits monetarily. It's basic economics.

Even indirect trades benefit. The closer you are to the counterfeiter, the more you will gain through their theft.

Are you seriously trying to tell me that because the Fed buys the lowest bid it invalidates this extremely basic economic principle outlined above?

No, it's not "basic economics". Ok, let's say there's a guy who can produce replicas of Fed's notes, he buys a machine from you, sure, you may make a profit from the sale but had that person not existed at all, you'd have sold it to somebody else & made that profit!

Accordingly, as I've said, PDs would be profitable whether Fed existed or not, they'd just be buying/selling from/to other market-participants.

Here's basic economics. Do you know what monopsony is? I don't think so but it's the opposite of monopoly where there's one buyer & many sellers, that's pretty much the situation Fed is in where 21 PDs are underbidding each other which would naturally lead to Fed getting the lowest price possible on the market. Saying that the price paid by Fed is significantly higher than the market-price is childish.

Besides, the PD's are simply an intermediary. The profits earned due to printed money don't occur in just a single transaction. The PD's earn a little profit by trading with the Fed. The bankers earn a little profit by trading with the PD's. The assets and money changes hands between bankers, PD's, and the Fed, very often so all those "little profits" add up to a lot.

Oh, the good ol' communist rhetoric - if somebody is profitting then it must be at everyone else's expense!
Well, the only way your hypothesis could be taken seriously is if Fed was the net-loser in its buying/selling activities but as it turns out, one of the components of Fed's profits is the profit they make through buying/selling, which then of course is handed over to the Treasury.

The Fed's $2 trillion loss over these 100 years is someone else's profit that obviously went somewhere.

If you didn't notice, there's actually an asset-side there somewhere so it's not technically "loss" but of course, that asset-side until recently largely consisted of Treasuries, which means Treasury creates IOUs & Fed creates new money to buy them so essentially, all those IOUs that Fed has are like free money given by Fed to the government.

On top of that if you add up the profit that Fed regularly has been handing over to Treasury over the years, then that in itself would run into trillions as well.

That's $2,096,000,000,000 that just went "poof." You would have me believe that this free money (it is what it is), went to the bankers, and they didn't take any cut of this pie, and simply gave it all to the government without making any profit.

No, it didn't go "poof", most of that went to the Treasury.
Again, here's how it works, just like any market-maker PDs usually hold some stock of Treasuries which they have bought with THEIR OWN money, now, Fed buys some & pays PDs with newly created money, PDs go & buy Treasuries with new money to replenish their stock of Treasuries, now, Treasury has new money & from there it enters the economy when they pay government-employees or war-contractors or give welfare or whatever, that pushes up demand & prices for goods/services/labor & so on across the economy.
Not to mention, it pushes up demand & value of Treasuries themselves & drives down interest on Treasuries, both of which help government in sustaining itself financially, without Fed being there to buy & increase demand for Treasuries, the value of Treasuries would fall as more & more of them are issued & interest would go up & at some point, interest on Treasuries itself would be high enough to consume all of the government revenue!
Anyways, point is that Treasury received all that money essentially for free INDIRECTLY from Fed, they don't need to pay it back because Fed is just another arm of the government & they essentially don't pay any interest on it.

Is it possible that a little bit of PDs profits constitutes inflation? Sure. But miniscule compared to the amount of monetary benefit government has been extracting out of the economy for a long time thru Fed-generated inflation.

Again, my original contention was to the following assertion of yours that bankers are the beneficiaries of all the inflation that occurs, which is just childish when one considers facts.

Another factor might be productivity. Instead of enjoying lower costs, any benefit from productivty is inflated away. We might make and distribute bread 10% more efficiently over a period of time, but inflation can wipe that out and result in a "modest" 5% price increase. The actual price increase, if adjusted for inflation, would be higher - like 15%.

Indeed, and that extra 10% goes directly into the pockets of the bankers.

Really, it's many different things holding back the inflation (temporarily). All of these factors together are working to fuck us in the ass.