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Thread: Why the modest inflation?

  1. #241
    Member bxm042's Avatar
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    Quote Originally Posted by Zippyjuan View Post
    I am having troubles trying to follow your numbers here. You seem to be trying to claim that the entire montary base is all profits and that the Federal Reserve only has $54 billion? That the rest of their assets have gone "poof?" It is true that the base comes from Fed purchases but they still own those purchases- they didn't go "poof".
    That's the thing: they don't still own those purchases. Not according to their balance sheet.

    The "Vanishing assets" the Fed purchased? According to their latest report http://www.federalreserve.gov/releas...urrent/h41.htm the Federal Reserve holds $2.5 trillion in total securities with $1.65 trillion of those being US Treasury notes. I cannot see where you are getting a $54 billion figure from.
    You're forgetting about the other side of the equation: the liabilities. The bottom line that you should be interested in is Assets - Liabilities. This represents the net sum of the Fed's holdings, and is only $56 billion.

    Think about it this way. If the Fed wanted to, would it be able to sell its assets and contract the monetary base back to 0? Clearly not. That means that the Fed has taken a net loss over the past 100 years, and that loss, naturally, was someone else's profit. (Whether that be the bankers or recipients of government funds)

    Profits? The Federal Reserve returns all profits (minus their expenses) to the Treasury. They did not lose $2 trillion but instead earned some $80 billion and turned $77 billion over to the US Treasury. Last year the amount was even higher. http://www.nytimes.com/2012/01/11/bu...-treasury.html
    I don't think you're understanding my point. I'm actually not talking about the Federal Reserve's profits. I'm more specifically talking about their net loss, over the past 100 years.

    For example, since you brought up this point, if you were to look at the Federal Reserve as a normal (for-profit) corporation, it is not accurate to say that the Federal Reserve returns all profits to the Treasury. In the context of this point, it would be better stated as an operating cost, and the Fed's profit is 0. In that sense, the Fed isn't returning all profits to the Treasury, but is simply not making any profits at all because of this "operating cost."

    This cost, that the Fed sends to the Treasury, the government obviously turns around and spends. So this goes back to what I was saying earlier, there are only two possible profiteers of the "poofed" money, and that is, 1) bankers, and 2) recipients of government funds. The government itself clearly hasn't profited from this money, because it is deeply in debt. They just received the money and sent it out flying in random directions.

    Again, back to the original point, the Fed has bought $2.15 trillion worth of assets but only has $56 billion in net assets. That means, over the past 100 years, it has lost $2.1 trillion into the economy (and that's just M0.. the M2 is obviously much higher). Yes, much of that went to the Treasury, but some of it was also lost to the bankers. You said it yourself, the Fed only hands over to the Treasury its Profits minus Expenses. Those expenses obviously include a banker profit component (or the Fed wouldn't have anybody to trade with - bankers don't work for free).
    Last edited by bxm042; 11-07-2012 at 06:02 PM.
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  3. #242
    Member Zippyjuan's Avatar
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    That's the thing: they don't still own those purchases. Not according to their balance sheet.
    I have no idea where you are getting the notion that the Fed does not still own the securities they have purchased. Yes- they are listed on their balance sheet. See this link:
    http://www.federalreserve.gov/releas...urrent/h41.htm

    Securities held Outright: $2.583 trillion

    US Treasury Securities: $1.650 trillion
    Federal Agency Debt Securities: $81 billion
    Mortgage Backed Securities: $852 billion
    I am Zippy and I approve of this message. But you don't have to.

  4. #243

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    Quote Originally Posted by Steven Douglas View Post
    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.
    I've already responded to the things you have said but instead of responding to those responses you have chosen to repeat the things as if they were never responded to so I won't repeat myself allover BUT one thing I do feel compelled to repeat is that Fed's benefits to Treasury are NOT limited to whatever profits they hand over to Treasury, they are just small part of it, the actual benefits may well run into trillions a year......Ron Paul has talked this & I've explained it several times in this very thread, & if you were able to recognize those then you'll definitely feel compelled to challenge the above quoted statements of yours.
    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

  5. #244

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    Quote Originally Posted by bxm042 View Post
    You are again proving you are a waste of my time. If you can't understand this basic economic principle, then you are either economically brain-damaged, or you're simply a shill for the bankers. Take your pick.

    In either case, whatever it is you have to say in the rest of your post has no value and it's not worth my time to read it.
    Well, that's the thing about conspiracy-theorists, they just don't want to hear anything that gets them to challenge their beliefs that "bankers are evil" so they just accept things that vindicate their beliefs & reject everything that challanges them.
    It's like arguing with communists/socialists who believe "profits are evil", they are just unwilling to keep an open mind that may be profits aren't evil & therefore no matter what arguments are made in favor of profits & capitalism, they just refuse to accept them.

    What's interesting is that you conspiracy-theorists call me "banker-apologist" for pointing out government created Fed for its own benefit, ok, let's assume I am, & let's assume that bankers did create Fed & grossly benefit from it but if that were the case then why would I support ending the Fed?

    But again, conspiracy-theorists fail miserably at logic....
    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

  6. #245

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    Quote Originally Posted by Zippyjuan View Post
    I have no idea where you are getting the notion that the Fed does not still own the securities they have purchased. Yes- they are listed on their balance sheet. See this link:
    http://www.federalreserve.gov/releas...urrent/h41.htm

    Securities held Outright: $2.583 trillion

    US Treasury Securities: $1.650 trillion
    Federal Agency Debt Securities: $81 billion
    Mortgage Backed Securities: $852 billion
    As I've said, conspiracy-theorists fail miserably at logic.......most often they gravitate to conspiracy-theories to explain away things that they don't know or don't understand or can't understand.
    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

  7. #246

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    Simplest way of looking at Fed, its money-creation & surreptitious theft of people's purchasing-power would be like this.

    For a long time, until the recent crisis, by far the biggest item on Fed's B/S was U.S. Treasuries/debt. Now, one just needs to ask what if Fed, right from its inception, had NEVER bought Treasuries? Well, that would have meant that the biggest item on Fed's B/S would probably have been gold & the money in the economy would have been close to government-owned reserves of gold, so money in the economy would have been significantly lower & the purchasing-power of each dollar would have been significantly higher. So again, where has that purchasing-power gone? Well, Fed has been creating money to continuously buy & increase its stockpile of Treasuries/debt, all that money is free money to the government so that's where the people's stolen purchasing-power has been going!

    Again, this is just one aspect of how Fed benefits Treasury/government, there are other aspects like driving down the interest on debt & such which greatly benefit Treasury but this one lays down things in a relatively simple way.
    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

  8. #247
    Member bxm042's Avatar
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    Quote Originally Posted by Zippyjuan View Post
    I have no idea where you are getting the notion that the Fed does not still own the securities they have purchased. Yes- they are listed on their balance sheet. See this link:
    http://www.federalreserve.gov/releas...urrent/h41.htm

    Securities held Outright: $2.583 trillion

    US Treasury Securities: $1.650 trillion
    Federal Agency Debt Securities: $81 billion
    Mortgage Backed Securities: $852 billion
    Assets - Liabilities, Zippy. You're again forgetting the liabilities. If I take out $1 trillion in liabilities its very easy to own $1 trillion in securities.

    Another way to look at it is this: If the Fed wanted to sell all of its assets to contract the monetary base back to 0, could it do it?

    No, they could not...
    It's all about taking action and not being lazy. So you do the work, whether it's fitness or whatever. It's about getting up, motivating yourself and just doing it.
    - Kim Kardashian

  9. #248

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    Quote Originally Posted by Paul Or Nothing II View Post
    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.
    That is not money PONII. That is currency. There is a great deal of difference between the two.

  10. #249
    Member Zippyjuan's Avatar
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    Quote Originally Posted by bxm042 View Post
    Assets - Liabilities, Zippy. You're again forgetting the liabilities. If I take out $1 trillion in liabilities its very easy to own $1 trillion in securities.

    Another way to look at it is this: If the Fed wanted to sell all of its assets to contract the monetary base back to 0, could it do it?

    No, they could not...
    Why couldn't they sell them?

    You are right it would not bring the monetary base to zero. What is in the monetary base:
    http://research.stlouisfed.org/fred2/series/BASE/
    The Adjusted Monetary Base is the sum of currency (including coin) in circulation outside Federal Reserve Banks and the U.S. Treasury, plus deposits held by depository institutions at Federal Reserve Banks. These data are adjusted for the effects of changes in statutory reserve requirements on the quantity of base money held by depositories.
    I am Zippy and I approve of this message. But you don't have to.

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