How Does The Money Supply Decrease?

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How does the Money Supply contract? Apart from Dan Aykroyd as Jimmy Carter burning dollar bills in the fireplace? (Season 3 episode 17 I can't figure out how to play it or link it.)

http://www.nbc.com/saturday-night-live/recaps/#cat=3&mea=89&ima=31267

chilidog
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Jul. 31, 2007 4:01 pm

Comments

The Federal Reserve's primary method of reducing the money supply is to sell Treasury securities; more simply put, they sell government bonds. This is often referred to as contractionary monetary policy. By selling bonds to the public (including commericial banks, financial institutions, and the average citizen/investor) the Federal Reserve sells a bond and takes cash out of circulation. Essentially, they are selling an IOU. They give you a piece a paper (the bond) stating that they owe you a certain ammount of money in 10 years or 30 years plus interest ( depending upon if they sell 10 year or 30 year Treasury bonds) in exchnage for your cash. They give you a slip a paper and take your cash, effectivelly reducing the ammount of cash in circulation. This is they primary method for reducing the money supply. It is typically done in conjunction with a change in monetary policy, when the Federal Reserve raises interest rates. This process requires a much more detailed explanation...

The Federal Reserve can also reduce the money supply by raising what's called the reserve requirement. This is VERY uncommon, especially in recent decades. The reserve requirement is a percentage of deposits that commercial banks are required to hold on hand at any given time. Suppose your local bank has $100 million in deposits. If the reserve requirement is 10%, that bank must have at least $10 million in cash on hand at any given time. The remaining 90% of deposits ($90 million) can be loaned out. If the Federal Reserve raises the reserve requirement on banks (from say 10% to 20%), then banks cannot loan out as much cash, and this reduces the ammount of cash in circulation and reduces the money supply

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Capital1
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Jul. 31, 2012 7:38 am

Capital1 -- Neat.

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chuckle8
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Jul. 31, 2007 4:01 pm
Quote Capital1:
The Federal Reserve's primary method of reducing the money supply is to sell Treasury securities; more simply put, they sell government bonds. This is often referred to as contractionary monetary policy. By selling bonds to the public (including commericial banks, financial institutions, and the average citizen/investor) the Federal Reserve sells a bond and takes cash out of circulation. Essentially, they are selling an IOU. They give you a piece a paper (the bond) stating that they owe you a certain ammount of money in 10 years or 30 years plus interest ( depending upon if they sell 10 year or 30 year Treasury bonds) in exchnage for your cash. They give you a slip a paper and take your cash, effectivelly reducing the ammount of cash in circulation. This is they primary method for reducing the money supply. It is typically done in conjunction with a change in monetary policy, when the Federal Reserve raises interest rates. This process requires a much more detailed explanation...

The Federal Reserve can also reduce the money supply by raising what's called the reserve requirement. This is VERY uncommon, especially in recent decades. The reserve requirement is a percentage of deposits that commercial banks are required to hold on hand at any given time. Suppose your local bank has $100 million in deposits. If the reserve requirement is 10%, that bank must have at least $10 million in cash on hand at any given time. The remaining 90% of deposits ($90 million) can be loaned out. If the Federal Reserve raises the reserve requirement on banks (from say 10% to 20%), then banks cannot loan out as much cash, and this reduces the ammount of cash in circulation and reduces the money supply

What are the positive and negative effects of taking money out of circulation?

drbjmn
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Jul. 22, 2013 5:52 am

More Money

Suppose, for example, that the Federal Reserve System decides to undertake expansionary monetary policy. Fearing an impending recession on the business-cycle horizon, it decides to expand the money supply. With extra money circulating about the economy, the purchasing power of all four sectors--household, business, government, and foreign--is enhanced. Everyone is willing and able to buy more real production--at the existing price level. Consumption expenditures, investment expenditures, government purchases, even net exports, all increase, resulting in an increase in aggregate demand.

To see how an increase in the money supply affects the aggregate demand curve, click the [More Money] button. The boost in the money supply triggers an increase in aggregate demand, which is a rightward shift of the aggregate demand curve.

Less Money

Alternatively, the Federal Reserve System could decide to implement contractionary monetary policy. Fearing the onset of higher inflation, the "Fed" might decide to reduce the money supply. With less money circulating about the economy, the purchasing power of all four sectors--household, business, government, and foreign--is restricted. Everyone is willing and able to buy less real production--at the existing price level. Consumption expenditures, investment expenditures, government purchases, even net exports, all decrease, resulting in a decrease in aggregate demand.

To see how a decrease in the money supply affects the aggregate demand curve, click the [Less Money] button. The drop in the money supply triggers a decrease in aggregate demand, which is a leftward shift of the aggregate demand curve

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Capital1
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Jul. 31, 2012 7:38 am

Positive and negatives? Contractions in the money supply could work in flood conditions, but not when drought is drying up the fields. More money than the economy can back up would be flood conditions were that money "in" the real economy instead of in the wealth glut of unproductive capital. Instead of flooding Main St. with available credit, the money has been siphoned off and taken away.

The answer for us is not learning how to become desert dwellers, it is to get our cashflow back so we can till the fields and create value. We can use some of the skills of desert dwellers, but "austerity" is not a virtue.

drc2
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Apr. 26, 2012 12:15 pm

Basically, the Fed raises interest rates to reduce the number of loans people take which decreases the circulating money supply, or it reduces interest rates to encourage more borrowing which increases the circulating money supply.

The money supply is a function of debt. Increase loans, increase the money supply. Decrease loans, decrease the money supply. The Fed attempts to do that through interest rates to encourage or discourage borrowing.

When the economy is in the toilet, as now, even near zero interest at the Fed isn't enough to stimulate private borrowing to increase the money supply. The circulating money supply continues to shrink relative to the population. Raising/lowering interest rates has its limitations.

The circulating money supply can also be reduced through taxation as a damper on inflation if taxes are retained by government rather than spent..

The ideal is for the circulating money supply to equal the productive output of the country so everything produced can be bought. It has to be sufficient to maintain the circular flow of the production/exchange of goods and services.

Money withdrawn from the economy and thrown into financial markets has the effect of reducing the circulating money supply. As loans are repaid, money not loaned back out into the economy remains in finance...reducing the circulating money supply..

Retired Monk - "Ideology is a disease"

polycarp2
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Jul. 31, 2007 4:01 pm
Quote drbjmn:
Quote Capital1:
The Federal Reserve's primary method of reducing the money supply is to sell Treasury securities; more simply put, they sell government bonds. This is often referred to as contractionary monetary policy. By selling bonds to the public (including commericial banks, financial institutions, and the average citizen/investor) the Federal Reserve sells a bond and takes cash out of circulation. Essentially, they are selling an IOU. They give you a piece a paper (the bond) stating that they owe you a certain ammount of money in 10 years or 30 years plus interest ( depending upon if they sell 10 year or 30 year Treasury bonds) in exchnage for your cash. They give you a slip a paper and take your cash, effectivelly reducing the ammount of cash in circulation. This is they primary method for reducing the money supply. It is typically done in conjunction with a change in monetary policy, when the Federal Reserve raises interest rates. This process requires a much more detailed explanation...

The Federal Reserve can also reduce the money supply by raising what's called the reserve requirement. This is VERY uncommon, especially in recent decades. The reserve requirement is a percentage of deposits that commercial banks are required to hold on hand at any given time. Suppose your local bank has $100 million in deposits. If the reserve requirement is 10%, that bank must have at least $10 million in cash on hand at any given time. The remaining 90% of deposits ($90 million) can be loaned out. If the Federal Reserve raises the reserve requirement on banks (from say 10% to 20%), then banks cannot loan out as much cash, and this reduces the ammount of cash in circulation and reduces the money supply

What are the positive and negative effects of taking money out of circulation?

But If the money used to buy those securities comes from savings, i.e. money that wasn't in circulation to begin with, it negates the desired effect. Can the gov restrict who is allowed to purchase those securities?

drbjmn
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Jul. 22, 2013 5:52 am
Quote drbjmn:

But If the money used to buy those securities comes from savings, i.e. money that wasn't in circulation to begin with, it negates the desired effect. Can the gov restrict who is allowed to purchase those securities?

Circulation doesn't mean Not moving. Money in savings is in circulation as banks are accepting loans based on the money in your savings. Banks are only required to retain x% of the amount in your own saving account.

You have the money, you can buy anything.

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Capital1
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Quote Capital1:
Quote drbjmn:

But If the money used to buy those securities comes from savings, i.e. money that wasn't in circulation to begin with, it negates the desired effect. Can the gov restrict who is allowed to purchase those securities?

Circulation doesn't mean Not moving. Money in savings is in circulation as banks are accepting loans based on the money in your savings. Banks are only required to retain x% of the amount in your own saving account.

You have the money, you can buy anything.

So, banks loaning money that gets paid back with interest, willeventually collapse the economy. The counter to that is for gov to borrow at interest in the form of securities. But it can never be balanced because the bank loan side syphons off money to proifts to the banks, fractional reserve itself is built in profit, and the so called "non profit" Fed, which skirts around calling it "profit" by calling it expenses that are payments to individuals that have a stake in the fed(for lack of a better term), and thn giving the gov back the leftovers as like a token thank you for allowing fed to make money for nothing.

So is it correct to say, a "capitalist" is opposed to getting rid of the FED, because then the gov wouldn't have to provide so many investment vehicles for them to invest in, by a futile attempt to keep up with the negative effects the FED has on the economy?

drbjmn
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Jul. 22, 2013 5:52 am

Eventually, all debt, public/private exceed the economy's ability to pay it back.

All money in circulation other than coins is generated by a loan. As loans are paid back, the money is withdrawn from circulation and placed in finance. The only way it gets back into circulation is through another loan.

Problem: the principle of the loan is injected into the money supply. The interest isn't. There is always a shortfall in the money supply to pay back the debt. Debt has to continually increase to pay back the interest. It's a dog chasing it's tail.

The only beneficiaries of our wacked out monetary system are banksters and financiers. Everyone else is saddled with perpetual, increasing private/government debt or the whole thing unravels.

When debt exceeds the economy's ability to pay it back, the party is over.

Retired Monk - "Ideology is a disease"

polycarp2
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Jul. 31, 2007 4:01 pm
Quote polycarp2:

Eventually, all debt, public/private exceed the economy's ability to pay it back.

I love it.. You advocate to the lowest base human flaw. The sheer lack of self control, personal responsibility and the foregone conclusion that people and gov will continue unabated until the inevitable self destruction.

Then you guy Bitch and Whine against those you have self control and try and save humanity from themselves.

Problem: the principle of the loan is injected into the money supply. The interest isn't.

You are actually wrong. Interest represents revenue to pay wages and expenses.

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Capital1
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Quote drbjmn:

So, banks loaning money that gets paid back with interest, willeventually collapse the economy. The counter to that is for gov to borrow at interest in the form of securities. But it can never be balanced because the bank loan side syphons off money to proifts to the banks, fractional reserve itself is built in profit, and the so called "non profit" Fed, which skirts around calling it "profit" by calling it expenses that are payments to individuals that have a stake in the fed(for lack of a better term), and thn giving the gov back the leftovers as like a token thank you for allowing fed to make money for nothing.

So is it correct to say, a "capitalist" is opposed to getting rid of the FED, because then the gov wouldn't have to provide so many investment vehicles for them to invest in, by a futile attempt to keep up with the negative effects the FED has on the economy?

Unfortuneately.... topics are starting to bleed together. There are 2 area's of Debt. Household (to which I do not give a shit about) and Gov. (Which I do care about)

Household debt represents consenting adults entering into a mutually beneficial contract.

Gov debt represents a very small group of people pretending to do the right thing with other people's money.

This whole circulation talk started when Poly beleives Falsely paying down the federal debt removes money from circulation. It doesn't. In fact, there should be no change in circulation. As the people/countries that hold treasuries will inturn reinvest the money into other projects. Even puting the money in a bank account is more beneficial than accumulating more debt.

The one thing Poly is correct about. At some point Debt becomes overwhelming. This year "INTEREST" on the national debt is over $400B. Think of all the things the country can do with $400B. It's call landsliding. We've been taking loans from the same people just so we can play them the interest owed.

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Capital1
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Quote Capital1:
Quote drbjmn:

So, banks loaning money that gets paid back with interest, willeventually collapse the economy. The counter to that is for gov to borrow at interest in the form of securities. But it can never be balanced because the bank loan side syphons off money to proifts to the banks, fractional reserve itself is built in profit, and the so called "non profit" Fed, which skirts around calling it "profit" by calling it expenses that are payments to individuals that have a stake in the fed(for lack of a better term), and thn giving the gov back the leftovers as like a token thank you for allowing fed to make money for nothing.

So is it correct to say, a "capitalist" is opposed to getting rid of the FED, because then the gov wouldn't have to provide so many investment vehicles for them to invest in, by a futile attempt to keep up with the negative effects the FED has on the economy?

Unfortuneately.... topics are starting to bleed together. There are 2 area's of Debt. Household (to which I do not give a shit about) and Gov. (Which I do care about)

Household debt represents consenting adults entering into a mutually beneficial contract.

Gov debt represents a very small group of people pretending to do the right thing with other people's money.

This whole circulation talk started when Poly beleives Falsely paying down the federal debt removes money from circulation. It doesn't. In fact, there should be no change in circulation. As the people/countries that hold treasuries will inturn reinvest the money into other projects. Even puting the money in a bank account is more beneficial than accumulating more debt.

The one thing Poly is correct about. At some point Debt becomes overwhelming. This year "INTEREST" on the national debt is over $400B. Think of all the things the country can do with $400B. It's call landsliding. We've been taking loans from the same people just so we can play them the interest owed.

It seems to me, which I believe Poly says, is if you spend money on the principal of the debt, you don't have any money to spend on infrastructure, which puts money into circulation. I don't think he ever said paying down debt was a bad thing. I think he just means he disagrees with others on their proposed WAY to pay down the debt, by cutting social programs , not raising taxes on the welthy, not cutting cap gains tax, and not cutting the MIC funding. If that is incorrect, he will surely let me know. But that's what I believe thus far.

But it seems to me, the best way to accomodate both views is to get rid of the fed. if the gov didn't have to pay fed i, and peole didn't have to funnel their money back up the food chain to the fed, then we all would money to spend on all the programs we agree with., no?

So, sorry if off topic, but what do you see as the need for the FED?

drbjmn
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Jul. 22, 2013 5:52 am

What I take Poly's point about the Fed to be is that we should own our own money instead of borrowing it from the banksters.

The basic rules for deficit reduction is to get unemployed assets back into productive employment. for people, this means job creation where we need work done. For money, it means gettting waste and luxury bubbles back into the mainstream so the whole economy is energized. It means smart spending called investment and smart cutting meaning real luxury, waste and trivia. It does not mean reducing the human services budgets at a time when there is more need than normal.

drc2
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Apr. 26, 2012 12:15 pm
Quote drbjmn:

It seems to me, which I believe Poly says, is if you spend money on the principal of the debt, you don't have any money to spend on infrastructure, which puts money into circulation.

How much of the current federal budget is spent on "infrastructure" The problem you are concerned about is insignificant. Contray to Poly's opinion. Money spent paying off Treasuries does in fact go back into circulation to some extent as the Treasury revenue goes to Gov General fund to be spent as they see fit.

The point is. The US economy is artifically overinflated by $17T. Now figure the money multiplier effect of $17T floating about the world. It is extremely substanial. Fast forward to Poly's doomsday senerio where debt exceeds out ability to pay for it. Look to greece or former Soviet union. Realize that when the worlds largest economy implodes, everyone goes with it.

I have no problem with the FED. Fed is merely a symptom of the overall problem. And you wouldn't want Dick Cheney running the FED anymore than I want Obama. I have for years heard Poly touting the virtues of the Bank of North Dakata. Of course he never tells you the second part of that success story. Liberals can't touch it. It has always been in majority control of fiscal conservitives. You all want to convert to fical conservitism, I'll let you nationalize the bank system. Catch 22. If you were all fically conservative we wouldn't be having this problem.

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Capital1
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Quote Capital1:
Quote drbjmn:

It seems to me, which I believe Poly says, is if you spend money on the principal of the debt, you don't have any money to spend on infrastructure, which puts money into circulation.

How much of the current federal budget is spent on "infrastructure" The problem you are concerned about is insignificant. Contray to Poly's opinion. Money spent paying off Treasuries does in fact go back into circulation to some extent as the Treasury revenue goes to Gov General fund to be spent as they see fit.

The point is. The US economy is artifically overinflated by $17T. Now figure the money multiplier effect of $17T floating about the world. It is extremely substanial. Fast forward to Poly's doomsday senerio where debt exceeds out ability to pay for it. Look to greece or former Soviet union. Realize that when the worlds largest economy implodes, everyone goes with it.

I have no problem with the FED. Fed is merely a symptom of the overall problem. And you wouldn't want Dick Cheney running the FED anymore than I want Obama. I have for years heard Poly touting the virtues of the Bank of North Dakata. Of course he never tells you the second part of that success story. Liberals can't touch it. It has always been in majority control of fiscal conservitives. You all want to convert to fical conservitism, I'll let you nationalize the bank system. Catch 22. If you were all fically conservative we wouldn't be having this problem.

Fine, let's cut gov spending. But before we do that, why don't we see how much we actually need to cut, after among other things, auditing the FED and figuring out where all our money is going?

drbjmn
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Jul. 22, 2013 5:52 am

1. Coinage issued by the Treasury to pay off debt held by the Fed doesn't enter the general circulation. The Fed isn't empowered to spend it into the general economy. It's merely an accounting entry to reduce federal debt. That's the idea behind the trillion dollar coins.

2. If the federal government doesn''t take up the slack in our wacked out monetary system when private borrowing fails, the monetary system collapses. If you want to reduce government debt, then you'd best address a nutty monetary system that requires it.

3. I'm not the one who came up with the crazy system. It began with the establishment of the Bank of England by private shareholders. The king took his cut of the proceeds. Pariament had cut his income. Prior to that, governments didn't borrow money into being. They issued it...and spent it into the general economy...most with great success..

4. An audit of the Fed showed it pumped nearly $17 trillion into finance (not into the general economy). It can only address financial markets. The money stays there.

National governmentrs can do the same...simply spend money into the general economy as long as it doesn't exceed the productive capacity of the nation.

Hitler's brilliant Finance Minister did just that... enabling der Fuhrer to re-arm and nearly conquor the world while the rest of the globe was mired in a Depression and spiraling debt. Germany merely applied what is now called Modern Monetary Theory. There is nothing modern about it...just a greater understanding of how it functions. It existed prior to the present predatory system that requires perpetual, expanding debt to avoid collapse..

Retired Monk - "Ideology is a disease".

polycarp2
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Jul. 31, 2007 4:01 pm
Quote drbjmn:

Fine, let's cut gov spending. But before we do that, why don't we see how much we actually need to cut, after among other things, auditing the FED and figuring out where all our money is going?

Do you have any bases to beleive the FED is doing something wrong? I heard for years Audit the FED!!!! Never really understood Why... The GAO and OIG already audit the FED. The FED post weekly Balance sheets and the annual reports publish by the FED are very comprehensive. Yet, nobody has ever found the FED doing wrong enough to warrant crawling up thier ass with gov auditors.

Is it merely a feel good proposal?

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Capital1
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Quote polycarp2:

1. Coinage issued by the Treasury to pay off debt held by the Fed doesn't enter the general circulation. The Fed isn't empowered to spend it into the general economy. It's merely an accounting entry to reduce federal debt. That's the idea behind the trillion dollar coins.

Trillion dollar coin = dumbest idea in history.

You are talking only the Intra-gov debt.. NOT the public debt. Public debt is people holding treasuries. The buy back of treasuries from Mom & Pop or even China does in fact put money back into the economy.

2. If the federal government doesn''t take up the slack in our wacked out monetary system when private borrowing fails, the monetary system collapses. If you want to reduce government debt, then you'd best address a nutty monetary system that requires it.

OR.... Work to pay of the Debt and manage the negative effects of a defating economy.

4. An audit of the Fed showed it pumped nearly $17 trillion into finance (not into the general economy). It can only address financial markets. The money stays there.

Absolute Bullshit.

Hitler's brilliant Finance Minister did just that

The irony of you wanting to emulate Nazi germany is not lost me.

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Capital1
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Quote Capital1:
Quote drbjmn:

Fine, let's cut gov spending. But before we do that, why don't we see how much we actually need to cut, after among other things, auditing the FED and figuring out where all our money is going?

Do you have any bases to beleive the FED is doing something wrong? I heard for years Audit the FED!!!! Never really understood Why... The GAO and OIG already audit the FED. The FED post weekly Balance sheets and the annual reports publish by the FED are very comprehensive. Yet, nobody has ever found the FED doing wrong enough to warrant crawling up thier ass with gov auditors.

Is it merely a feel good proposal?

Would you calm down.

I'm not asking you these questions because I'm trying to lure you into something. I'm asking because I'm an idiot and never bothered to understand this stuff before.

I read somewhere the FED has never been audited. I forget where. Also, the fed is a "non profit", and does return it's "profit" back to the gov. But where exactly does all it's money go as far as "operating" costs that aren't considered "profit"?

If you don't want to answer, then don't answer. I'm not twisting your arm.

drbjmn
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Jul. 22, 2013 5:52 am
Quote drbjmn:

Would you calm down.

I don't recall being excited..

If you don't want to answer, then don't answer. I'm not twisting your arm.

My answer was... still is.. I don't see the reason. They are already audited like any other Corporation and I haven't seen anything to indicate there needs to be a higher level of scrutiny. I even tried looking for a history. I Googled "Federal reserve scandals" nothing of any note.

Annual Report Budget Review 2012

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Capital1
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Quote Capital1:
Quote drbjmn:

Would you calm down.

I don't recall being excited..

If you don't want to answer, then don't answer. I'm not twisting your arm.

My answer was... still is.. I don't see the reason. They are already audited like any other Corporation and I haven't seen anything to indicate there needs to be a higher level of scrutiny. I even tried looking for a history. I Googled "Federal reserve scandals" nothing of any note.

Annual Report Budget Review 2012

Ok, three exclamation marks about auditing the fed wasn't being excited...

It wasn't a scandal, per se, it was just about how the fed is structured, and it still pays , i don't england, and descendants of the original investors or something. I can't locate the document.

drbjmn
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Jul. 22, 2013 5:52 am
Quote drbjmn:

Ok, three exclamation marks about auditing the fed wasn't being excited...

Sorry... that was to empathize the shilling Pro-Ron Paul that brings up the topic repeatedly.

It wasn't a scandal, per se, it was just about how the fed is structured, and it still pays , i don't england, and descendants of the original investors or something. I can't locate the document.

easy... peazy..

http://www.usagold.com/federalreserve.html

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Capital1
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Jul. 31, 2012 7:38 am
Quote Capital1:
Quote drbjmn:

Ok, three exclamation marks about auditing the fed wasn't being excited...

Sorry... that was to empathize the shilling Pro-Ron Paul that brings up the topic repeatedly.

It wasn't a scandal, per se, it was just about how the fed is structured, and it still pays , i don't england, and descendants of the original investors or something. I can't locate the document.

easy... peazy..

http://www.usagold.com/federalreserve.html

I just cruised through it, of not claiming to fully understand. For the sake of argument, my spidy sense tells me when a bunch of rich guys get together to give "advice", but it is prominantly proclaimed they don't have a "vote", sounds earily similar to a lobbyist...So I suspect there's more to it than that. But ok, for now, no conspiracy theories. But how much do all these banks keep for their SG&A?

drbjmn
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Jul. 22, 2013 5:52 am

Try to notice that Poly is praising the financial genius who enabled Hitler to avoid a "broken" German economy has absolutely nothing to do with "emulating" the Nazis, much less with the Holocaust.

Your "Absolute Bullshit" to facts you don't like ought to be your handle. Phantom Wealth v. the Real Economy is the correct analysis of the banksters and what they do.

drc2
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Apr. 26, 2012 12:15 pm
Quote drbjmn:

But how much do all these banks keep for their SG&A?

It's friday and I don't really feel like combing through the Federal reserve annual reports. Booooorrrrrinnnnngggg

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Capital1
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Quote drc2:

Try to notice that Poly is praising the financial genius who enabled Hitler to avoid a "broken" German economy has absolutely nothing to do with "emulating" the Nazis, much less with the Holocaust.

I'll "try" but do not hold out hope.

Your "Absolute Bullshit" to facts you don't like ought to be your handle. Phantom Wealth v. the Real Economy is the correct analysis of the banksters and what they do.

I'll eat some crow... Keeps me humble.

16.1T of financing available though various programs.

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Capital1
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Quote Capital1:
Quote drbjmn:

But how much do all these banks keep for their SG&A?

It's friday and I don't really feel like combing through the Federal reserve annual reports. Booooorrrrrinnnnngggg

I was thinking you had a rough idea handy.

So, it seems to me the whole idea of fractional reserve lending, has buit in "profit" even if no interest were charged. Do the "profits" that the fed returns to the gov, after subtracting their"expenses", include the gains from lending more money than they actually have?

drbjmn
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Jul. 22, 2013 5:52 am
Quote Capital1:
Quote polycarp2:

1. Coinage issued by the Treasury to pay off debt held by the Fed doesn't enter the general circulation. The Fed isn't empowered to spend it into the general economy. It's merely an accounting entry to reduce federal debt. That's the idea behind the trillion dollar coins.

Trillion dollar coin = dumbest idea in history.

You are talking only the Intra-gov debt.. NOT the public debt. Public debt is people holding treasuries. The buy back of treasuries from Mom & Pop or even China does in fact put money back into the economy.

Why? Intra-gov debt, is debt.

And why can't we just print money to pay the public debt, and not pay it back to the fed, with, or without, interest?

What would happen?

drbjmn
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Jul. 22, 2013 5:52 am
Quote drbjmn:

Why? Intra-gov debt, is debt.

And why can't we just print money to pay the public debt, and not pay it back to the fed, with, or without, interest?

What would happen?

Intra-gov debt is eventually debt with a purpose. A Trillion dollar coin is useless when sending out Social security checks. Printing such stupid coins would be a glactic flag waving of just how stupid the US has become. Sparking a global financial meltdown.

The value of money is currently based entirely on Supply and Demand. Anything on that scale could trigger Hyperinflation .

BTW... It would take 72 years to print $1T in $1 bills.

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Capital1
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Quote Capital1:
Quote drbjmn:

Why? Intra-gov debt, is debt.

And why can't we just print money to pay the public debt, and not pay it back to the fed, with, or without, interest?

What would happen?

Intra-gov debt is eventually debt with a purpose. A Trillion dollar coin is useless when sending out Social security checks. Printing such stupid coins would be a glactic flag waving of just how stupid the US has become. Sparking a global financial meltdown.

The value of money is currently based entirely on Supply and Demand. Anything on that scale could trigger Hyperinflation .

BTW... It would take 72 years to print $1T in $1 bills.

You're gonna have to elaborate.

SS checks aren't the "debt" I was suggesting be paid with a Trillion dollar coin.

What does the world currently think about us, that is worse than doing something simple that we could do? I'll give you that it may have an effect that I am not aware of, but can you elighten me please?

Who said $1 bills?

I understand your political stoicness, and personal preference, but can you help me see your point of view as being good in general???

P.S. Why can't we get started? 72 years will come faster than those around then will have thought.......

I remember sitting around the kitchen table in the '80's thinking about how old I would be in the year 2000.

It seemed inconceivably far away. Now it's 13 years gone...

drbjmn
Joined:
Jul. 22, 2013 5:52 am
Quote drbjmn:
Quote Capital1:
Quote polycarp2:

1. Coinage issued by the Treasury to pay off debt held by the Fed doesn't enter the general circulation. The Fed isn't empowered to spend it into the general economy. It's merely an accounting entry to reduce federal debt. That's the idea behind the trillion dollar coins.

Trillion dollar coin = dumbest idea in history.

You are talking only the Intra-gov debt.. NOT the public debt. Public debt is people holding treasuries. The buy back of treasuries from Mom & Pop or even China does in fact put money back into the economy.

Why? Intra-gov debt, is debt.

And why can't we just print money to pay the public debt, and not pay it back to the fed, with, or without, interest?

What would happen?

Please do note that the coins would only be utilized to pay debt held by the Fed. It wouldn't enter the economy. the Fed isn't empowered to spend them. It's just an accounting proceedure required by our wacky system.

Perhaps had the rest of the world taken its cue from Germany's brilliant Finance Minister, der Fuherer wouldn't have been so inclined to take on an impoverished world brought to its knees by the borrow to play system. The powerful German economy would have faced foes on an equal footing.

Attempting to reduce debt within a monetary system that requires it to avoid collapse is self-defeating. The smaller the circulating money supply gets, the greater the amount of debt required to correct it. The circulating money supply essential for the exchange of goods/services disappears. It's continuing to shrink. Eventually, debt exceeds the economic capacity to pay it back.

It's a damned if you do, damned if you don't monetary system. We should dump it prior to an inevitable collapse...and probably won't. The several century run of having to continually increase debt to avoid monetary collapse will come to a chaotic end.

We should never have adopted the system in the first place. Its prime beneficiaries are banksters and financiers. New beneficiaries are outsourcing transnationals. We import their products on the national credit card.

Retired Monk - "Ideology is a disease"

polycarp2
Joined:
Jul. 31, 2007 4:01 pm

QE3 has created $1Trillion in new money over the last year. The Fed gave it all to bankers: $500 billion for mortgage-backed securities and $500 billion dollars as premiums above par to tempt the exchange of short-term bonds for long-term bonds. Sooooo.... while most of Congress (and you Capital1) fulminate about the imaginary horrors of government debt, the Fed continues to create a $Trillion dollar coin every year. They spend half of it to extend the debt - the other half is spent on the junk that precipitated the failures of 2008-9.

My point: Even if you are a gold bug who hates the idea of a fiat curency, minting a trillion dollar coin to reduce the public sector debt can't be the stupidest idea ever. Using the government's power to create money to buy crap, or worse, using the power to create money just to go deeper in debt - those have to be stupider... by far!

LeMoyne's picture
LeMoyne
Joined:
Jul. 31, 2007 4:01 pm
Quote drbjmn:

...

I'm not asking you these questions because I'm trying to lure you into something. I'm asking because I'm an idiot and never bothered to understand this stuff before.

...

Well, join the club. Thing to remember about libertarians is that in libertarianland if you buy this product:

http://www.stupid.com/crackheads-candy.html

you would actually be buying crack. That goes for your children as well, although they would have to buy it from their friend's older siblings.

Then, when you die, your family can sue the candy company just to hear a judge say "Well, you should have known better than to eat all that crack." The important thing though is that no-one will be getting any free crack, because people who work for a living should not be forced at the point of a gun to buy crack for other people who haven't earned it.

Hope that helps.

Also, I think the libertarian argument that if you don't tax businesses they will hire everybody is bogus because there is an interest in hoarding money (taking it out of circulation and thereby making it more scarce so that others will give you more for it). So the basic concept of enlightened self-interest only works when the wealth that labor produces is redistributed (wages are a form of redistribution) through democratically accountable (directly or indirectly) offices. I am not doing the erudite conversation here justice, but from what I have seen there is a real danger that investors in derivatives, credit-default swaps, and so forth are using quantitative easing to acquire assets which will leave them as owners of all the real wealth once they decide they are in a position to further downsize the economy and reduce the overhead costs of maintaining the Empire.

nimblecivet
Joined:
Jul. 31, 2007 4:01 pm
Quote polycarp2:

Please do note that the coins would only be utilized to pay debt held by the Fed. It wouldn't enter the economy. the Fed isn't empowered to spend them. It's just an accounting proceedure required by our wacky system.

Since you long ago proclaimed to be in a secret High level Economist group. You know where all the High brow Economist talk. Why don't you explain to the good people the full ramifications to the Constitution, Economy and montary policy That wold therotically happen the second such a coin was printed and recogized. You are full of crap if you believe "It wouldn't enter the economy" since the entire premise of the exercise was to allow the Gov to start writing check based on it to circumvent the cebt ceiling.

It's a damned if you do, damned if you don't monetary system. We should dump it prior to an inevitable collapse...and probably won't. The several century run of having to continually increase debt to avoid monetary collapse will come to a chaotic end.

your nihilistic approach is always helpful. Perhaps you should get out of the way for those who actually wants to try and avoid economic armagadon

Capital1's picture
Capital1
Joined:
Jul. 31, 2012 7:38 am

Most nations recognize that the monetary system requires continual and expanding debt to avoid collapse. The U.S. is the only one that imposes a debt ceiling on itself that has to continually be raised.

It's a damned if you do, damned if you don't monetary system. It collapses without expanding debt. It collapses when it reaches the point where debt can't be repaid. I didn't set up the screwy system. The Bank of England did in 1694, We've imitated their model.

The prime beneficiaries.are banksters. We issue them an I.O.U. so we can print our own currency. If you were a bankster, you could do the same. You could give the Treasury authority to print non-existent money in exchange for a Treasury Bond instead of buying the Treasury Bond with cash.

Probably trillion dollar coins paid to the Fed to buy back debt held by the Fed is preferable to paying them interest. It's also a way to prevent government from being held hostage over a debt ceiling limitation by right wing nuts. I'm just passing on an idea proposed by world class economists...including the one that saved Iceland's fanny from collapse, Prof. Michael Hudson.

The U.S. economy is functioning 25% below capacity. That translates into several trillions being spent into it by government without inflation. Government needn't borrow the money to do that. It can siimply create it and spend it into the economy as the American Colonies once did.

The American Colonies didn't borrow money into being. They simply created it and spent it in amounts sufficient to maintain maximum economic functioning. When England stopped the practice, it generated a major Depression.The money supply disappeared. We responded with the Revolutionary War. Perhaps you should read Benjamin Franklin's memoirs.

Probably the elites will maintain current structures/polices and continue to foment a revolutionary tinder-box. When it explodes, as always, they'll be taken by surprise. The idiots never see it coming. "At some point the battle occurring below the surface will explode." - Hedges

http://www.truthdig.com/report/item/our_invisible_revolution_20131028

If you're going to maintain the current system, probably the wisest course would be to shut down your schools and libraries and use the money to double your police force..

Retired Monk - "Ideology is a disease"

polycarp2
Joined:
Jul. 31, 2007 4:01 pm
Quote nimblecivet:

Well, join the club. Thing to remember about libertarians is that in libertarianland if you buy this product:

http://www.stupid.com/crackheads-candy.html

you would actually be buying crack. That goes for your children as well, although they would have to buy it from their friend's older siblings.

Then, when you die, your family can sue the candy company just to hear a judge say "Well, you should have known better than to eat all that crack." The important thing though is that no-one will be getting any free crack, because people who work for a living should not be forced at the point of a gun to buy crack for other people who haven't earned it.

Hope that helps.

Also, I think the libertarian argument that if you don't tax businesses they will hire everybody is bogus because there is an interest in hoarding money (taking it out of circulation and thereby making it more scarce so that others will give you more for it). So the basic concept of enlightened self-interest only works when the wealth that labor produces is redistributed (wages are a form of redistribution) through democratically accountable (directly or indirectly) offices. I am not doing the erudite conversation here justice, but from what I have seen there is a real danger that investors in derivatives, credit-default swaps, and so forth are using quantitative easing to acquire assets which will leave them as owners of all the real wealth once they decide they are in a position to further downsize the economy and reduce the overhead costs of maintaining the Empire.

You are correct until the QE issue. The Federal Reserve Bank is using QE to buy assets from the banksters. See, in the 4th qtr of 2008 nobody wanted to hold mortgage backed securities. Why? Because through innovative financial magic nobody knew what was in them. "What you got? Is this nice, Chicago sweet A paper, or SoCal-subprime-skunkweed?"

Nobody knew what they were being sold, therefore no transactions would occur. Which meant the credit markets were frozen. If nobody is a buyer, then the value of your assets is worthless, or nearly so. Now, in libertarian paradise that works. Except then all the banks shutdown because their assets lose 80% of their value, we lose about 1.5 million more jobs in banking in 2009, and another 3 million spread across the economy (construction, restaurant, etc) and those people cannot pay their mortgage, wind up homeless, etc etc.

So QE is a way for the Fed to buy assets (in this case mortgage backed securities) at face value, taking the toxic loans off the hands of FDIC insured banks, and allowing the abks to remain sovent, and the Fed holds assets that over the long term are going to be very stable and profitable.

The trouble the Fed faces now is the same as the crazy girlfriend issue. There is never a goodtime to break up that she won't break all records, and burn your clothes. To get out of the QE asset buying relationship the Fed is signaling they are out, rates are going up, and home values will not be supported any longer. Which, if the economy was strong again, good job growth, low unemployment, and business felt that govt policy was stable and dependable then great. But job growth sucks, unemployment is still hovering around 8%, and the Teabaggers are making sure there is no reason for stability or confidence in the market.

If QE ends now, mortgage rates will shoot up 2pts, and home prices will fall, and gdp growth will take another hit.

Phaedrus76's picture
Phaedrus76
Joined:
Sep. 14, 2010 8:21 pm

The real unemployment rate is about 14%. When unemployment benefits expire, the former recipients are removed from the unemployment rolls.

First time job seekers, about 100,000 a month, are considered statistically employed.

Those giving up looking for work are considered statistically employed.

Those able to only find part-time work are considered statistically fully employed.

Probably ignoring the tinder box with false data is a rather stupid governmental policy.

Retired Monk - "Ideology is a disease"

polycarp2
Joined:
Jul. 31, 2007 4:01 pm
Quote polycarp2:

The U.S. is the only one that imposes a debt ceiling on itself that has to continually be raised.

Australia to raise debt limit by two-thirds to A$500bn

That took exactly 5 seconds to disprove.

It's a damned if you do, damned if you don't monetary system. It collapses without expanding debt. It collapses when it reaches the point where debt can't be repaid. I didn't set up the screwy system. The Bank of England did in 1694, We've imitated their model.

LOL... Virtually Zero household debt prior to 1950's. Federal debt was "virtually" paid off in 1835.

Don't take this wrong Poly. But it seems like you really want it to collapse. Means to an end I take it. You see Utopia just over the apocalypse.

It's all just Post New Deal stupity...

A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy

The liberal way... It's just not going fast enough for you.

Capital1's picture
Capital1
Joined:
Jul. 31, 2012 7:38 am
Quote polycarp2:
Quote drbjmn:
Quote Capital1:
Quote polycarp2:

1. Coinage issued by the Treasury to pay off debt held by the Fed doesn't enter the general circulation. The Fed isn't empowered to spend it into the general economy. It's merely an accounting entry to reduce federal debt. That's the idea behind the trillion dollar coins.

Trillion dollar coin = dumbest idea in history.

You are talking only the Intra-gov debt.. NOT the public debt. Public debt is people holding treasuries. The buy back of treasuries from Mom & Pop or even China does in fact put money back into the economy.

Why? Intra-gov debt, is debt.

And why can't we just print money to pay the public debt, and not pay it back to the fed, with, or without, interest?

What would happen?

Please do note that the coins would only be utilized to pay debt held by the Fed. It wouldn't enter the economy. the Fed isn't empowered to spend them. It's just an accounting proceedure required by our wacky system.

Perhaps had the rest of the world taken its cue from Germany's brilliant Finance Minister, der Fuherer wouldn't have been so inclined to take on an impoverished world brought to its knees by the borrow to play system. The powerful German economy would have faced foes on an equal footing.

Attempting to reduce debt within a monetary system that requires it to avoid collapse is self-defeating. The smaller the circulating money supply gets, the greater the amount of debt required to correct it. The circulating money supply essential for the exchange of goods/services disappears. It's continuing to shrink. Eventually, debt exceeds the economic capacity to pay it back.

It's a damned if you do, damned if you don't monetary system. We should dump it prior to an inevitable collapse...and probably won't. The several century run of having to continually increase debt to avoid monetary collapse will come to a chaotic end.

We should never have adopted the system in the first place. Its prime beneficiaries are banksters and financiers. New beneficiaries are outsourcing transnationals. We import their products on the national credit card.

Retired Monk - "Ideology is a disease"

What then happens after the gov gives the coins to the FED to pay on debt held by the FED? Doesn't it free up more money the FED can lend out to other entities?

drbjmn
Joined:
Jul. 22, 2013 5:52 am
Quote Capital1:

Virtually Zero household debt prior to 1950's.

"Zero." You keep using that word. I do not think it means what you think it means.

chilidog
Joined:
Jul. 31, 2007 4:01 pm
Quote chilidog:

"Zero." You keep using that word. I do not think it means what you think it means.

Wow... you really engaged on that on Chili.

U.S. household debt rose from nearly zero in the 1950s to $13.8 trillion in 2008, before declining to $12.9 trillion by Q2 2012.[

Feel free to try again....

Capital1's picture
Capital1
Joined:
Jul. 31, 2012 7:38 am
Quote Capital1:
Quote polycarp2:

The U.S. is the only one that imposes a debt ceiling on itself that has to continually be raised.

Australia to raise debt limit by two-thirds to A$500bn

That took exactly 5 seconds to disprove.

It's a damned if you do, damned if you don't monetary system. It collapses without expanding debt. It collapses when it reaches the point where debt can't be repaid. I didn't set up the screwy system. The Bank of England did in 1694, We've imitated their model.

LOL... Virtually Zero household debt prior to 1950's. Federal debt was "virtually" paid off in 1835.

Don't take this wrong Poly. But it seems like you really want it to collapse. Means to an end I take it. You see Utopia just over the apocalypse.

It's all just Post New Deal stupity...

A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy

The liberal way... It's just not going fast enough for you.

Interesting. I wasn't aware another nation had adopted the U.S. model of debt ceilings. The EU adopted the model of debt vs. GDP for its member countries. It didn't have the force of sovereign law behind it.

Probably the reduction in the money supply wasn't a good thing. We had an 8-year Depression....1837-44.

Are you suggesting that the U.S. should dump what remains of democratic functioning and become just another totalitarian state?

You should probably note that when Rome became a dictatorship, it bankrupted itself with the "dole" to keep from being overthrown. So much wealth was concentrated in so few hands, economic functioning came to a standstill.

The democratic Iroquois Confederation didn't seem to have the problem you're so concerned about. Of course, they had a different economic system. If our lllusory democracy lasts as long as their real democracy did, we'll be doing well.

Our monetary system of damned if we borrow and damned if we don't will come to its own end. It seems to be conservatives pushing for the collapse by retaining it, and liberals trying to avoid the collapse by altering the structures.

Former Chief Economist of the IMF Simon Johnson noted, the U.S. government has been captured by a financial oligarchy...so probably the current failing system will remain in place. Conservatives win. Congratulations. Wave on the way down.

Retired Monk - "Ideology is a disease"

polycarp2
Joined:
Jul. 31, 2007 4:01 pm
Quote polycarp2: The real unemployment rate is about 14%. When unemployment benefits expire, the former recipients are removed from the unemployment rolls.

Reciept of unemployment bennefits has nothing to do with the count of the unemployment rate.

Quote polycarp2: ...Those giving up looking for work are considered statistically employed.

Since they are not looking for work, they are not in the labor force, and not counted as part of the unemployment rate. There are, of course, other statistics they fall into if you want to count them. They are not counted as 'employed'.

The unemployment rate is:

1) People activily seeking work and not having a job pver
2) People activitly seeking work

Dr. Econ's picture
Dr. Econ
Joined:
Jul. 31, 2007 4:01 pm

'Tis semantics. They are either unemployed and are reflected in the unemployment rate...or they are employed and are not counted in the unemployment rate.

The third option, counted as neither, is a statistical limbo....existing in the real world, but not in the statistical world. It has economic and social consequences. The available work force is either working, or it isn't. I go by the pre-Clinton era when the real world was reflected in the unemployment statistics.

If we used the same criteria utilized during the Great Depression, the unemployment rate would be 14%. If the same criteria we use today was utilized in the Great Depression, the maximum unemployment rate would have been closer to 18% rather than 25% and an average of 14%. Not a whole lot different than it is today.

Probably if the remaining safety nets weren't still in place, we'd be just as close to open rebellion now as we were when Roosevelt took office. He squelched it with reforms. The right doesn't comprehend that.

They seem to think we should have waited for markets to correct themselves while the government was overthrown...giving way to a Fascist or Communist dictatorship. It could have gone either way in that time period. We'd have been in our Second Civil War.. FDR opted for aspects of a social democracy.

Retired Monk - "Ideology is a disease"

polycarp2
Joined:
Jul. 31, 2007 4:01 pm
Quote polycarp2:

Interesting. I wasn't aware another nation had adopted the U.S. model of debt ceilings. The EU adopted the model of debt vs. GDP for its member countries. It didn't have the force of sovereign law behind it.

Did they?

Spain follows Germany, France and writes debt ceiling in constitution

Are you suggesting that the U.S. should dump what remains of democratic functioning and become just another totalitarian state?

Yea.... That sounds just like something I would advocate.

The democratic Iroquois Confederation didn't seem to have the problem you're so concerned about. Of course, they had a different economic system. If our lllusory democracy lasts as long as their real democracy did, we'll be doing well.

Sorry... didn't we kick the shit out the the Iroquois? Clearly their economic system sucked and was unable to adapt to changing times.

Our monetary system of damned if we borrow and damned if we don't will come to its own end. It seems to be conservatives pushing for the collapse by retaining it, and liberals trying to avoid the collapse by altering the structures.

How that working for you?

Capital1's picture
Capital1
Joined:
Jul. 31, 2012 7:38 am

Well, I suppose under the Euro, that makes sense.

Since they've reduced their monetary sovereignties between themselves and the EU Central bank to the same relationship of our states to the Federal Government, I suppose it makes sense.

European countries adhering to the Euro aren't monetarily sovereign just as our states aren't monetarily sovereign. They don't issue their own currencies anymore.

They can't use domestic monetary policy within their own economies. Their monetary systems are under the control of the EU Central Bank. Their money supply is in the hands of the EU Central Bank...same as defunct Greece, Spain and Portugal where the money supply is shrinking.

Equating a market economic system with conquest rather than how well it serves the people within a democracy?

Which economic system won World War I. The market economic system or the market economic system? Which economic system won World War II, the market economic system or the market economic system?

Who provided the means for the Brits to begin their conquests? The Chinese. It's called gunpowder. Did a superior economic system discover it? Some nations gear their economies to war and weapons development....some don't. The U.S. has been in almost perpetual war during my entire life. A record matched by few.

Is trying to avoid collapse working? No. Banksters are still gambling and the banksters bank, the Fed, is still covering their losses every month while the circulating money supply continues to shrink. We're in the midst of a slow-moving collapse that can accelerate rapidly when the next bubble pops.

Retired Monk -"Ideology is a disease"

polycarp2
Joined:
Jul. 31, 2007 4:01 pm

Its not so much a question of "collapse" as controlled demolition. Liberalism has been dead for quite some time now. The police state will make sure that the neo-Hooverites don't give way to the neo-Rooseveltians this time. The next step will probably be bank downsizing as business bankruptcies pick up the pace to match with home foreclosures. The actual unemployment rate may go up to 20%-25% within the next five to ten years.

nimblecivet
Joined:
Jul. 31, 2007 4:01 pm
Quote Capital1:
Quote chilidog:

"Zero." You keep using that word. I do not think it means what you think it means.

Wow... you really engaged on that on Chili.

U.S. household debt rose from nearly zero in the 1950s to $13.8 trillion in 2008, before declining to $12.9 trillion by Q2 2012.[

Feel free to try again....

No matter how many times you repeat it (four times now by my count) it doesn't make it true.

It's absurd on its face. And we already covered it in another thread.

chilidog
Joined:
Jul. 31, 2007 4:01 pm
Quote chilidog:

No matter how many times you repeat it (four times now by my count) it doesn't make it true.

It's absurd on its face. And we already covered it in another thread.

Well... I guess that makes it true. Gee... mind if I use you as a Source. Why don't use your little legs and walk on over to Wiki and correct that shit and footnote yourself while you are at it.

I think i'm pretty confident in using FRED over CHILI.

Hey.... "U.S. household debt rose from nearly zero in the 1950s to $13.8 trillion in 2008, before declining to $12.9 trillion by Q2 2012."

Make it a Fifth time..

Capital1's picture
Capital1
Joined:
Jul. 31, 2012 7:38 am

Trump's Lies Are Killing Us

Thom plus logo Donald Trump keeps insisting in his rallies, as he did last night, that he has lowered prescription drug prices, is protecting people with pre-existing conditions, and is improving Medicare. While everybody knows that he lies a lot, these are among the most pernicious lies.
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