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Lets talk about QE3 some more after you view this video:
http://www.youtube.com/watch?v=BARmYUkdQUE
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
David Hamilton 50+
Krisztián Pintér 200+
Robert Winner 50+
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.
pat gilbert 50+
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.
Gail . 50+
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.
pat gilbert 50+
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.
David Hamilton 50+
pat gilbert 50+
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.
Robert Winner 50+
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.
Gail . 50+
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. :-(
pat gilbert 50+
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.
Krisztián Pintér 200+
pat gilbert 50+
Gail . 50+
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.
Krisztián Pintér 200+
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.
pat gilbert 50+
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:
http://www.youtube.com/watch?v=afWqKcqntfs
pat gilbert 50+
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.
Krisztián Pintér 200+
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".
pat gilbert 50+
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?
Krisztián Pintér 200+
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.
Krisztián Pintér 200+
pat gilbert 50+
http://www.minneapolisfed.org/community_education/student/centralbankhistory/bank.cfm
John Smith 30+
Gail . 50+
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.
pat gilbert 50+
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.
Gail . 50+
pat gilbert 50+
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.
John Smith 30+
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.
Gail . 50+
It SHOULD be in the news! But the news is heavily filtered.
pat gilbert 50+
John Smith 30+
They hedge derivatives with other derivatives...
pat gilbert 50+
John Smith 30+
pat gilbert 50+