pat gilbert


This conversation is closed.

Lets talk about QE3 some more after you view this video:

Thanks to Mr. Pinter for linking this speaker. This guy is awesome a graduate of Hillsdale college so he has the non cool aid drinking credentials. IMO this talk answers the questions I was posing in my last galvanizing and riveting TED conversation about this subject

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    Oct 2 2012: Yup, this is the real financial crisis... and both Romney, and Obama, are signed on, and paid for.
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    Oct 2 2012: welcome to the rabbit hole.
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    Oct 2 2012: PART II

    Last Friday the administration issued a memo that the WARN Act does not need to be abided by. Government contractors such as Lockheed, Boeing, Martin, General Dynamic and thousands of other contractors were about to issue termination notices under the WARN Act to be effective 1 January. The letters would go out prior to the election causing serious damage to the re-election efforts. Millions will now be terminated with no notice thanks to the administration. The second half would be that it would directly impact the QE3 objective. Facing massive layoffs by Christmas more homes will go on the market. The value of the homes are about one half of original value and the fed will pay the banks prime full value with magic checks.

    This by any other name is a stimulas and is doomed to failure even before it is started.

    This information to the OWS and the 1%ers would certainly backfire on the administration and the magic kingdom of Bernanke. But then again they would never hear while drinking the coolade.

    It will be interesting to see if any of this comes up in the debates.

    All the best. Bob.
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      Oct 2 2012: With the exception of Ron Paul and a few.

      It seems to me that because the money is being spent to Freddy and Fannie that the money does not show up on Main St. And in reality has been the situation though all of the QEs'. The thing is that because the real estate is not allowed to adjust to it's true market price which as seen in Japan is a loser big time.

      Another factor is that fractional banking is a two way street in that they have to have a 10% reserve and when they don't have that because the borrower is under water and walks, leaving the bank with less than the 10% required reserve. Which it seems is the case and Benny is being bought off by the Big Banks.

      Since this money doesn't make it to Main St it doesn't stimulate growth and it makes investors skiddish which is the bigger problem.

      But if what Mr. Murphy says about Benny saying that he doesn't have to answer about where the money is being spent is infuriating and what I call a condition called TREASON, what is missing is a boot on Bennie's throat.
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        Gail .

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        Oct 2 2012: Don't forget about the tax-cheating Geitner. He's another pea in that pod. And don't forget about your own congressman, senator, and president who all know what the problem is, but are afraid to tell you because they want to get elected.

        I agree that it's treason, but so was the Supreme Court coup d'etat (McCulloch v. Maryland 1819) that made this whole mess possible. That was the decision that overturned the Constitution, calling it a guideline, but not a law, and in this way authorized the unconstitutional national bank that made today possible.

        We live in a dystopia - little different from George Orwell's "1984". We call war "peace", ignorance "strength", and slavery "freedom".

        I am so glad that many are waking up (in all areas of life). When enough discover HOW we got here, we can fix it, but not until. Too many people have been diseducated.
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          Oct 2 2012: Yup Geitner is another member of the incest. I wrote my congressman about the first Bush bailout, he replied that if it did not occur the entire banking system would have failed. Which I guess is a consequence of the fractional banking and that the 10% reserve is a two way street. Which may have been the best answer similar to taking off a band aid?

          If the 1819 decision was so important why did we have the 16th amendment?

          I think that the Keynesian meme is a big part of the thinking on this.
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      Oct 2 2012: If you think OWS, likes Bernanke, you've only ever seen OWS on Fox News... One of OWS primary issues is corporate socialism.
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        Oct 2 2012: And if you think that the Tea Party likes crony capitalism you are not listening. The Tea Party believes in a profit and loss system, so that failure is culled from the market place.

        Mean while Barney and Chris are retiring after untold havoc from the CRA and yet to be determined havoc from the Financial Reform Act. One of the things missing is a boot on both of their throats.
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    Oct 2 2012: QE3 was announced on 13 September 2012. In an 11-to-1 vote, the Federal Reserve decided to launch a new $40 billion a month, open-ended, bond purchasing program of agency mortgage-backed securities and also to continue extremely low rates policy until at least mid-2015. According to, this is effectively a stimulus program which allows the Federal Reserve to relieve $40 billion dollars per month of commercial housing market debt risk with no maximum amount or time limit. Ratings firm Egan-Jones said it believes the Fed’s decision will hurt the U.S. economy and, by extension, credit quality. As a result the firm once again slashed the U.S. bond rating bringing it down to AA-. Federal Reserve chairman Ben Bernanke aknowledged concerns about inflation.

    As in the lasty conversation I had to hit the books. You are making a old man burn the midnight oil. After learning o the Feds beginings in 1913 and how it worked for years I was terrified to learn that the Fed no longer is limitied in buying back Government debit but can write the magic checks to virtually anyone they want without the knowledge of Congress.

    The invention of Maiden I, II, and III to make all actions of the fed non transparent and the recievers to remain totally secret. Bernanke is by far the most powerful man in the universe under no restraints of Congress and a magic printing press to buy friends and influence people.

    In the last conversation some insisted that factional banking is the problem area. I now understand that FB only refers to the requirement of giving ten percent of the magic money back to the treasury. Not a player. However, the magic fed lending rate and the lack of inflation will cause the fisical cliff to bring the magic castle Bernanke has created. This is a area that congress does not truely appreciate.

    Continued in Part II. Bob.
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      Gail .

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      Oct 2 2012: I think that it would be helpful to understand fractionalized banking and the FED better. If a private bank has the authority to invent money into existence, and then lend out 9 times more than it invented into existence, and lend that newly invented money to 100 banks that are part of the Fed Reserve system, who can then each lend out 9 times more than they borrowed (ad infinitum) the value of the dollar in your pocket shrinks by the minute. But all of this money has interest attached, and that interest debt is never invented into existence.

      The dollar in your wallet is not a thing of real value. It is really an IOU. It used to mean IOU x value in gold or silver. But since we dropped the Gold/Silver standards, it is an IOU that can be exchanged only for other IOUs that are backed by nothing more than ignorance of the America people. This ignorance is sustained by the refusal of fed and state governments to fund educations that teach either economics or constitutional law.

      The fiscal cliff will probably not come from absence of inflation. It will come from inflation OR when we no longer have the money to pay the interest on our debt. That's why interest rates are so low. We're kicking the can down the road. If interest rates were not ARTIFICIALLY reduced (even to zero at times so that Goldman Sachs can borrow at 0 and lend to the govn't at 3%), we would already have run off that cliff that still looms ahead.

      Inflation is visible everywhere. Food costs, medical costs, sales taxes, property taxes, clothing, gas, electricity, employee costs, & more are up. CPI doesn't reflect this because it carefully selects those things that it reports on. So if food goes up, a cheap computer or shoe goes down to create balance. Items are chosen each year.

      Congress is well aware of how close to the cliff we are. But people don't want to hear it, so in the interests of getting elected, no one talks about the FED or $ - except Ron Paul, who'se getting out. :-(
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        Oct 2 2012: A private bank does not have the right to invent money into existence. Albeit the bail outs that have been going on come close, it appears that the big banks have an incestuous relationship with Benny, which Mr Murphy alludes to with Jekyll island and all.

        Money is a medium that requires trust, you have to trust that you can exchange this piece of paper for goods and services. I have also seen it defined as a claim on human labor. Once that trust is lost it will be replaced by something else that people trust.

        The real problem that we have correlates to the U.S. going off of the gold standard in 1971, courtesy of the illustrious Richard Nixon. But in all fairness he otherwise would have had to exchange a bunch of gold for dollars because the dollar had been inflated and debt holder countries were calling in that debt which always happens in times of war. LBJ is the gift that keeps on giving Which is another good argument not to go to war unless you have to.

        The Austrian economists say that fractional banking is immoral. But Fractional banking is as old as the economy. We do need some sort of regulation. Fractional banking and credit does create economic activity.

        It is true that the CPI cooks the books, I don't think they include housing and the cost fuel in the "consumer basket". That aside compared to how much money Benny has spent it seems we should have hyperinflation.

        I completely agree that the problem is ignorance of this subject. Look at how many dangerous memes are spewed about this subject from politicians. None the less either we get educated on this subject or we are toast.
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          Oct 2 2012: in fact, fractional reserve is few hundred years old. it was debated until some kings' courts decided in favor of them. in a real world, not this rabbit hole, fractional reserve would be equal to fraud, and treated as such on courts
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        Oct 2 2012: Yes but the gold smiths did what is tantamount to fractional banking. Can you explain further why this is fraud?
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          Gail .

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          Oct 2 2012: Let's say that U live in a remote mountain village where chickens are the medium of exchange. I come along and show you exotic shells. Some are big and some are small. Ten small shells = 1 big one = 1 chicken. I explain to the village that shells are easier to carry, do not need to be fed or housed, and do not die. I will lend you the equivalent of 10 big shells and when I come back next year, you pay me back one big shell and one little shell. The people ask how to pay the interest (the little shell) when I haven't given them enough shells to do this. I tell them to not worry about it because I will lend more shells the next year. (Pumping $ into the economy).

          The next year, after the 2nd round of loans to the successful ones, a shell is no longer worth one chicken. It's worth a little more than half a chicken and some families are now living in poverty with no chickens at all. So I introduce the notion of charity among yourselves, and lend even more dollars to the best producers. The society is in turmoil as an artificial division pits them against one another.

          Eventually, because enough $ is never invented into the economy to pay the interest that is due, and I knew this from the beginning, I own everything (call in the debt) and you get to starve to death or submit to slavery.

          Fast-forward to today: When you devalue my money by pumping money into the marketplace, you are literally stealing from me. What had $1.00 worth of value in 1934 now has 3 cents of value today, and the FED knowingly does this to you. Thus I am forced to consume quickly to get the most from my $. But when too many are no longer able to consume because they're out of work, then the whole Ponzi scheme collapses.

          What's wrong with a law that says that you can only lend what you have in your reserves? Our economy has worked best when government printed money by fiat - when debt wasn't money. Why do you think that the greenbacks were so popular. They were trusted.
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          Oct 2 2012: suppose for example that we agree on the following. you pay me some small monthly fee, and in return, you can show up at my house, and borrow my lawnmower for a day. except i don't have a lawnmower, but i hope you will not show up. is this a fraud?

          now suppose i promise, for a small monthly fee, to put out any fire around your house. except i have no equipment, nor any willingness to go anywhere near a fire. but again, i hope it will not happen. is this a fraud?

          now suppose i promise you to pay you 100 dollars at a certain date (for some service of yours). the day is coming, and i have quite an income every now and then, but i don't set your 100 aside, instead i spend all. as the day arrives, i say sorry, have no money. it is bad luck or a fraud?

          now put these together. what if we sign a contract that you have a 100 dollars in my safe, and you can show up at any time, and pay you a 100 on demand, with no delay. according to what we discussed here, it is expected that i set a 100 dollars aside for the time i expect you to show up, that is, always. but that is not what banks do. banks count on the fact that it is improbable that N people will show up at a certain day demanding their money, so they don't have to comply with their agreement. this is fraud.

          as you see, everything is in the details. if the contract clearly says that the bank might not be able to redeem on demand, but only after some time delay, or worst case not at all, everything is just fine. fractional reserve is completely reasonable if the customer is well informed and agreed to the type of service he receives.

          but be serious. how many people would agree to put money in a bank that might not pay it back, or only with a significant delay? and how many of those people would throughly check the banks investment policies and track record? unlike today.
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        Oct 2 2012: TED Lover

        I get that, remember I'm the one who posted the video?

        The bigger point is that when did the debt hockey stick? That is where the rubber meets the road. Look at this video at 9.00 minutes:
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        Oct 2 2012: Krisztián

        By that reasoning insurance could be fraud as well. The actuarial s say this is unlikely and therefore if it is agreed to by both parties then no it is not fraud of course there is also regulation that is actually done correctly and there is insurance up to 250k

        I see what you are saying and see your disposition on this.

        If there are negatives there are also positives the positives are:

        more economic activity

        To keep the fractional reserve from getting out of control there is decent regulation on the reserve rates that have to be maintained. I think you will say that Rothbard would say that this could be handled by the market, if so how would it work?

        Fractional reserve banking is a 2 way street in that the banks can be hit as hard as they are boosted. Of course the downside is that they have to take the fall no intervention like what they are doing now which genuinely is fraud.

        My main point is that fractional banking has been around for some time but the debt has not hockey sticked until lately. (see the link above) so there is no correlation between the economy collapsing and fractional banking. Ergo fractional banking is not the cause.
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          Oct 2 2012: no, because we understand (at least should) that insurance companies pay only if they can. they are liable up to their assets, but not more. we also understand that insolvency could only happen in case of massive devastation of property, not just a sudden behavior change of individuals.

          rothbard would say what i say: free market for everything. informed persons will not choose fractional banks. but if they do, it is okay for me. but if the bank promised 100% payment, and kept only fractional reserves, i would expect any court to kick their asses.

          in a free banking system, secret fractional reserve can be done to only that much extent. if a bank expands too much, redeeming will go up, and they will soon be out of specie. at this point, their papers will not any more accepted on the market. central banking and other measures (FDIC, etc) remove that risk, and so credit can expand further. the next problem is different currencies. but they are working on the "problem".
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        Oct 2 2012: Ok and to my main point of fractional banking not being the cause of so much debt?

        If there were no fractional banking it seems that the construction industry would slow down considerably. Maybe that is a good thing?

        The reason for the current and past central banks was to even out fluctuations that have occurred ostensibly because of the phenomenon you describe. But you are saying you are willing to accept the fluctuations?
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          Oct 2 2012: definitely, free market fractional reserve can not cause large scale problems to the economy.

          yes, would slow down, and it is a good thing. according to the austrian theory, construction industry just as any other industry should get funding according to their ability to bring about human satisfaction or joy. due to the law of diminishing marginal utility, there have be a balance at which point any area of the economy receives resources so they bring about equal marginal increase in human wellbeing. at that point, there is no reason to move resources from one area to another.

          any interference with the free market will shift resources from one are to another. and of course if you take the interference away, a shift back is expected. zeroing the interest rate moves resources toward investments that pay off in the long run. so too much long term investments are taking place. like construction. it also makes it more affordable to borrow. people will increase their consumption, take loans. so at the same time, we invest too much and consume too much. there are simply not enough resources in the economy to keep that going.

          when the interest rate returns to normal (fed stops creating new money), these errors reveal themselves, and we realize that it is impossible and also not desired to finish all the investments that were started. some of the finished are not profitable. and people can't pay their debt back. that is the bust.
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          Oct 2 2012: ah, and about fluctuations: the free market is exceptionally good to even out bumps. many tools do just that: money competition, insurance, saving, futures contracts, derivatives, CDS, hedging.
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        Oct 2 2012: Ostensibly though the reason for the central banks in the first place was bank instability in a free banking system in the late 1800's. See panic of 1873, 1893, 1907 which led up to the formulation of the current Fed Reserve. Why would this problem not re occur with a new free banking system? It doesn't appear the one country has a Rothbard style banking system, if it is so great why do not any countries use this system?
        • Oct 2 2012: If I remember correctly the central banks were created to exert some control on inflation and money circulation. Before there was a fixed money supply (well, until someone found a new gold vein), this could lead to the circulation of money drying up (even back then trickle down didn't work), fractional reserve banking remedies this (at least as long as banks are not allowed to go into the derivatives business). Central banks can also change the interest rate they charge, indirectly influencing the interest rate normal people pay for loans.
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      Gail .

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      Oct 2 2012: Another reason for relatively low inflation numbers is that congress is creating tax credits for the uber wealthy who own 75% of the country's wealth (the top ten percent) to encourage them to keep their money in off-shore accounts, and their businesses at that single post office box address in the Cayman Islands. Many of the nation's top 100 contractors are housed in that post office box. That's how Haliburton managed to bypass collecting some (or all?) payroll taxes for so long. Foreign corporations were (are?) not required to pay them - which came as a surprise to some very angry laid-off workers who were ineligible for workers comp but didn't know it.

      I can't find the link now, but I remember reading about one post office box that was the home of 63,000 (not sure of actuall #) businesses.

      When you take 75% of the wealth outside the country, the inflationary impact of the FED is reduced, and you are seduced into believing in the health of an economy that is on the brink of collapse. Furthermore, Freddie Mac & Fannie May losses do not hit the market as losses, so inflation/deflation figures are kept artificially managed.

      We do not live in a free market economy. If we did, the entire economy would collapse.
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        Oct 2 2012: References please.

        Yup government influence on the economy is the sole source of the current melt down. The references are regarding the CRA and are easily googled. Forget the derivatives thing it is not important.
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          Gail .

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          Oct 2 2012: I'm not sure about the derivatives thing being unimportant. There are now 87 trillion unregulated and unfunded credit default swaps out there (globally). The "Stop Too Big to Fail" legislation has enough loop holes in it to allow time for it to be rescinded. This was intentional.
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        Oct 2 2012: Actually it was not. What, amongst other things, the media fails to tell you is that derivatives require a daily posting of collateral to cover price fluctuations, similar to commodities. That in conjunction with the fact that bankers hedge their bets so that their actual exposure is not as great as the totals and the media would indicate.

        Question if the exposure really was 87 trillion dollars, 5 times the current debt, don't you think this would be in the news? the current debt sure is yet is less than 20% of what you are talking about.
        • Oct 2 2012: Their was (globally) $62 trillion of CDSes outstanding in 2007, it's now thought to have crashed to something like $25 trillion. The global derivative market has $600 trillion outstanding (that's $600 trillion of hot air crap that the banks were never supposed to engage in because that crap is not necessary to lend businesses and individuals money. The entire amount of outstanding mortgages in the US is something like $11 trillion, supbprime mortgages made up $1.3 trillion in 2007. Blaming the CRA is pathetic. Yes, it could in theory have led to a supbprime housing crisis if it had a larger scope and stronger wording, but it didn't. Fuzzy derivatives had and have a much greater impact and the banks most affected by the initial crisis were the ones that did the least with the CRA. The subprime mortgages were sold and resold in the form of derivatives (something the banks did on their own accord), that greatly amplified the impact of subprime mortgages on the economy and if there had been no subprime mortgages some other commodity would have dipped slightly at some point, causing the house of cards that is the derivative market to implode.

          Why this didn't happen before? Because most of this crap was illegal until the 1990s or early 2000s.

          Stuff like this has been in the news, just not on faux news and that won't change unless Obama were to express a fondness of derivatives, then faux news would be all over them and their negative impact.
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          Gail .

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          Oct 2 2012: The 9/28/2012 letter from the ISDA (International Swaps & Derivatives Assn) argues against proposed regulation of many credit default swaps markets. It says that the proposed margins (% collateral requirements) would withdraw between 15 & 30 trillion from the global economy. It agrees with not requiring any margins for national banks, sovereigns, and non-credit agencies. If 15-30 trillion is the estimates of a margin requirement for one segment of the economy, what do you think the total is?

          It SHOULD be in the news! But the news is heavily filtered.
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        Oct 2 2012: Don't know about international but in the U.S. they were required to post collateral. Secondly the banks hedge there investments so that even with Lehman brothers the total exposure on derivatives was something like 20 million dollars. So domestically what you are saying just isn't true.
        • Oct 8 2012: "Secondly the banks hedge there investments"

          They hedge derivatives with other derivatives...
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        Oct 8 2012: It is still a hedge, which means the exposure is not as much as the media would have you believe
        • Oct 8 2012: No, it's like having poker debt and then saying to your wife "don't worry about it, I'm hedging: I plan on winning my next poker game and then we'll be fine". The derivative market has $600 trillion outstanding, if even 10% of that evaporates it would cause a major global crisis and I can assure you no bank has collateral for 90% of their derivative trading. This trade is a ticking timebomb based on nothing but hot air.
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        Oct 8 2012: Have a nice day