Since the Fed has confirmed it will print forever, what can be done to stop it? (2013, borrowing)

[ntwrkguy1]

Originally Posted by hnsq

no...simple basic economics. Time value of money. Advantage of building savings when a person is young. Dangers of variable interest rates. How markets work. How a bond is priced. Just basic thing that every person should know to run their lives.

And teaching an economic theory that I disagree with is preferable to not teaching any at all.

I've often wondered this as well. The public education system gets so fixated on testing, college prep, etc, that they forget that kids need to know what I call "life basics" to survive. Any money skills are certainly at the top of the list.

My wife and I both have finance backgrounds, and we started teaching our kids what we thought were the "fundamentals" at a very early age. It's a mystery to me why this isn't taught somewhere around 7th/8th grade, and then repeated before high school graduation.

The problem is that without the basics (and then some), the average 18 year-old high school grad isn't going to be very successful attempting to make it on his own. Of course, I suppose that this could be an intentional oversight by the DoEd, because it turns out my father, who graduated from high school in the 1940's, DID have a couple of classes related to this topic both in high school and junior high.

Credit card companies, banks, mortgage companies, and insurance companies make billions of dollars on uneducated consumers, so they certainly would have something to gain by keeping the masses in the dark.

[DSOs]

Originally Posted by tallrick

Are there things we can to to try and collapse the Fed?

Vastly limit credit card use; that'll put a stop to their bread & butter 'spreads' (12%~29% yields).

Originally Posted by hnsq

One of the biggest problems I see from my perspective is the unbelievable lack of education among the middle class when it comes to finances and economics.

A growing segment of the working/so-called middle class has abandoned the fundamentals of finance/economics; instead they VOTE/live with the deficits don't matter to them lifestyles.

Originally Posted by ntwrkguy1

Credit card companies, banks, mortgage companies, and insurance companies make billions of dollars on uneducated consumers, so they certainly would have something to gain by keeping the masses in the dark.

The savvy masses are not in the dark; some are powerless to do anything, while many others have colluded/jumped-on the moral hazard bandwagon.

[MTAtech]

Reading these rants and one would think that the Fed is on a mission to destroy the economy when in fact it is largely responsible for preventing a depression.

[tallrick]

Originally Posted by MTAtech

Reading these rants and one would think that the Fed is on a mission to destroy the economy when in fact it is largely responsible for preventing a depression.

The first part of your sentence is correct. The Fed has a 100% success rate of damaging the economy. The US dollar has lost 98% of its value as long as the Fed has been in existance. The Fed is totally worthless to those of us who produce, but is a gravy train for parasites.

[augiedogie]

Looks like I will go back to buying gold and silver spoon. I don't intend to be caught flat footed when the SHTF.

[MTAtech]

Originally Posted by tallrick

The first part of your sentence is correct. The Fed has a 100% success rate of damaging the economy. The US dollar has lost 98% of its value as long as the Fed has been in existance. The Fed is totally worthless to those of us who produce, but is a gravy train for parasites.

The top graph is the money base. Notice how there was a sharp increase in the money supply since the great recession?



The bottom graph is the Value of the Dollar:



Where is the big drop in the dollar since the Fed massively increasing the money stock? It sure looks like the largest fall when the Fed wasn't increasing the money supply much.

[tallrick]

It takes time for the damage to be done once the fire starts. The new money is being hoarded by banks to build "reserves". However, when confidence is lost through endless printing those dollars will flood back in and bury us.

[andywire]

The fed is just trying to help the U.S. (in vain) to compete with the limited options at their disposal. We are a developed nation, and developing nations naturally grow at a slower pace. Worse yet, there is always the possibility of contraction. Look at nations like China who are heavily dependent on credit. People believe they are kicking our butts and will rule the world, yet they are essentially spending $6 to make $1. Their corporations are top heavy in debt and many are heavily subsidized by the centrally planning government. Regardless, we have to compete in a global market with these types of countries, and the fed is doing the only thing it knows how to do in response.

So how does the fed help the U.S. to compete? Doing what China would do if it could. Printing money. It's either that or contraction. As soon as the tapering is initiated, the market and the economy will respond. All that delayed pain will begin to set in. We are printing billions to produce miniscule growth. Once you stop this, where is the growth going to come from? Nowhere, because it won't occur. The point of the money printing was to stabilize the economy and buy the market time. Well, those two objectives have been accomplished, and the hope is that we are in a better position to deal with the pain. Money printing cannot go on indefinitely, just like China cannot borrow $6 to make $1 forever.

Originally Posted by chuckmann

It is no coincidence that anytime the Fed hints at tapering QE, the markets fall, and when the Fed backs off or announces another round, the markets rally. Wall Street LOVES all that QE money.

The markets simply react to the facts. The market does not exhibit human emotions, although it is influenced by them, particularly short term. The job of the trader is to make money in their given environment. The amount of money they make says nothing about their belief pattern.

Originally Posted by hnsq

The big question I keep asking is why aren't 2-3 finance courses mandatory curriculum in every high school in the country? Imposing that requirement alone would solve a lot of our problems.

Because teaching practical skills in HS would make too much sense. That, and the average parent would be incapable of helping their children with the homework.

[GJJG2012]

Originally Posted by Linda_d

^^^

Europe had Libertarianism a while ago. It was called the Dark Ages. I'll pass.

Libertarianism is the belief that all people are considered equal, & that everyone should have all their Constitutional rights returned. The belief Federal govt should be smaller is part of this. They are called fiscal conservatives (don't spend if you don't have to) but social liberals (let people be individuals).

The Middle Ages were referred as the Dark Ages because 95% of the people were forbidden to read or write, with the penalty often being death, when the Roman Catholic Church & The Roman Catholic govt teamed up to have more power over the people. People only had their candles burning after dark if they were reading or writing. They said people did not have a right to read their Holy Bible.

The Libertarian Party is not like that, it's about equal status for all people, do your own thing as long as it doesn't harm or seriously endanger another person or their property. Libertarians are not control freaks.

Some partly fake Libertarians tried to invade the party, like in 2008 when Bob Barr was running, wanted low or no taxes for rich, but never talked about rights of individuals, AFAIK. Best wishes.

[Mircea]

Originally Posted by tallrick

The Fed's balance sheet will grow forever, they are leveraged more than 50:1. Everything they do hurts the productive in the economy. We suffer as the few speculate. What are the best strategies to protect the wealth of the worker/saver/productive investor? Are there things we can to to try and collapse the Fed?

The national bank is merely attempting to fix the problems you keep creating.

If you want to stop it, then man-up for starters. That would help a lot. Take responsibility for your continual failure to elect good government, and your failure to live within your means.

Originally Posted by Linda_d

Really? Which economic theories should people be taught?

Preferably anything non-Keynesian.

Originally Posted by WSPHXPELON

IMO - A "taper" or an end to QE may very well result in many hard years to come or a possible complete economic crash. Unfortunately though, the alternative is much worse: Never ending QE will ultimately lead us to hyperinflation followed by the guarantee of a complete economic crash.

I already said that 3 years ago. ~2025 or so. The global economy can absorb about $9 TRILLION to $13 TRILLION in "excess" US Dollars -- based on global conditions extant in 2010 (when I crunched the numbers).

You ain't there yet, and you won't be for a few more years...ball-park guesstimate, about 6 more years.

Originally Posted by chuckmann

...I have concluded that the real problems began with the CEOs of Big Banks and Wall Street, and certain areas such as Investment Banking, trading desks, and certain product lines (collateralized mortgages are a great example of that).

Uh-huh....and which government policy or policies directly led to the crisis that caused a collapse in the housing market?

Originally Posted by White House Press Briefing, Office of the Press Secretary (Dec. 8, 1993)

MR. RUBIN: Hi. I'm Bob Rubin, the Assistant to the President for Economic Policy, and I'm going to introduce today's topic.

The President, as you know, has a broad, comprehensive strategy for dealing with the economic problems of the country for putting the country back on the right track for the long-term. A lot of the legislative and executive actions that have taken place in 1993 have been pursuant to that long-term economic strategy of the President's.

An important component of that strategy is to deal with the problems of the inner city and distressed rural communities -- pursuant to his belief that we must make real progress in those areas if this country is going to be successful in the future for all of us. The reform of the Community Reinvestment Act is an essential building block in the efforts I've just mentioned. In July the President asked the four banking regulators to reform CRA, to reduce paperwork in process and reward performance, and to get that done by January 1, 1994

SECRETARY BENTSEN: In a nutshell, what we're proposing to do is to make it easier for lenders to show how they're complying with the Community Reinvestment Act. For those who aren't familiar with the area of banking law, the changes we're proposing are important because banks now have a very clear, quantitative standard by which their compliance can be judged.

MR. LUDWIG: Ken, you know that it's hard to give a hard and fast rule, particularly on a system where we want to be flexible, we don't want to have credit allocation or quotas.

At the same time, the CRA, for all its flaws, since 1977 it is generally agreed has increased lending in low and moderate income areas by tens of billions of dollars. We're all convinced that this is a material step forward. So it's very safe to say billions of dollars.

The entire CRA reform is very much built on rebuttable presumptions, so that you don't have odd anomalous cases which we found around the country, where a bank had done a good job but somehow got rated poorly, or vice versa.

Q Will you be gathering information just on loans, or on applications, as well, for small business?

MR. LUDWIG: We will be gathering data as proposed on the basis of applications, denials and actual loans.

Q Does this mean that if I am a banker with branches in the inner city, I no longer have to have an employee keeping pins on the map of town to show where the loans are, that it's now going to be judged on dollars and cents and how much money goes where?

MR. LUDWIG: Dollars and cents, and we'll keep the pins. The data will be publicly available and the banker will not have to have a crazy map with pins all over it, which has just characterized this whole process, and spending huge amounts of time documenting every time it meets with a community group and being judged on how many documents it has. It will be judged on where the loans are.

[Emphasis Mine -- and that's just one part of one press conference -- I can play this game all the live long day.]

Anyway, it would seem they lightened the paper-work burden just a wee bit too much.

Collaterialized debt obligations and structured investment vehicles were created in response to Clinton's demand to issue more mortgages or be financially penalized and suffer legal action and scrutiny at the federal and State level, and also in the Media.

Just a reminder.

Originally Posted by tallrick

If the Fed could be eliminated and not replaced with a similar scheme there would be no depression, only progress. We are in a depression now and have been since 2009.

All national banks do the same thing.

Again, the national bank is only attempting to fix the problems you keep creating. You insist that government spend more money than it collects in revenues, necessitating the need for government to borrow money, which necessitates selling treasury securities.

The simple truth is that you all stepped on it (repeatedly), making the same mistakes over and over for the last 18 years, and now you don't want to take responsibility for the mess you made.

Blame is definitely easier to give than receive.

Originally Posted by MTAtech

We are in an economic slow growth environment with unemployment at 7.5%. Reducing unemployment is a goal of the Fed and it s using loose monetary policy to achieve that goal.

That is a stupid policy. You lost jobs due to the fact that your global work-force is grotesquely over-paid and cannot compete against global workers in other countries, in particular against 2nd and 3rd World States.

There are no policies that would ever counter that, except waiting about 30-40 years for the rest of the world to catch up.

Originally Posted by MTAtech

The results are low mortgage rates that drive home sales -- a major force in the economy; and low rates for businesses.

Another incredibly stupid policy.

If your economy revolves around home sales, then effectively you have no economy. You can't even name another stable economy that relies solely on home sales.

For those who don't get it, artificially low interest rates cause Interest Inflation, meaning that the value of those things tied to interest rates become artificially inflated, ultimately collapsing.

Artificially depressing interest rates for mortgages to spur home sales so that people can use the artificial equity created by artificially high housing prices to drive the economy is a disaster. It failed once, it will fail again, and again and again.

Originally Posted by MTAtech

There hasn't been any negative effects from this policy. Inflation is low, rates are low and the dollar hasn't been debased, as conservatives have even warning for five years.

Which inflation? Real Inflation may be low, but Cost Inflation and Interest Inflation are high, and causing economic damage.

Originally Posted by tallrick

The US dollar has lost 98% of its value as long as the Fed has been in existance. The Fed is totally worthless to those of us who produce, but is a gravy train for parasites.

I get the distinct impression you have no idea what a national/central bank is.

You cannot prove the US Dollar has lost 98% of its value either.

Originally Posted by andywire

The fed is just trying to help the U.S. (in vain) to compete with the limited options at their disposal.

Wow! I'm blown away. Someone actually got it right.

Originally Posted by andywire

We are a developed nation, and developing nations naturally grow at a slower pace.

Yes, that's true. I've actually proven that repeatedly here. Once the US became a full-fledged 100% post-Industrialized State --- about 1964 or so -- growth started to slowly decline over the next several decades. 3% is respectable.

I believe it's actually a Bell Curve. We have several thousand years of data on Zero Level Economies, about 2,000 years on 1st Level Economies and a few centuries on 2nd Level Economies. However, for 3rd Level Economies, we only have a few decades of data, and for 4th Level Economies we have not even 20 years yet.

Mainstream economists made the mistake of assuming continued growth at higher levels of Economies, but that hasn't panned out.

What's really sad, is that if you read the Social Security and Medicare Trustee reports, they are still going on economic growth of 6% or better for the next several decades, and that just ain't gonna happen.

Originally Posted by andywire

Worse yet, there is always the possibility of contraction.

Tentatively, about 2nd Quarter 2014.

The Obama Administration has delayed implementation of key parts of the ACA and that might stave off a recession until the 3rd or 4th Quarter.

Originally Posted by andywire

Look at nations like China who are heavily dependent on credit. People believe they are kicking our butts and will rule the world, yet they are essentially spending $6 to make $1.

You have that backwards, and in about 15 years it won't matter, since China will a Billion people to replace the 300 Million Americans buying things.

Remember, $42 price less $37 cost yields $5 in profit......$6 in price less $1 in cost yields a $5 profit.

A lot of people on this thread cannot grasp that very simple reality.

Originally Posted by andywire

Regardless, we have to compete in a global market with these types of countries, and the fed is doing the only thing it knows how to do in response.

So how does the fed help the U.S. to compete?

It doesn't.

The only thing that will help the US compete is lower wages for Americans, who are over-paid in the first place.

Originally Posted by andywire

Money printing cannot go on indefinitely, just like China cannot borrow $6 to make $1 forever.

But that isn't happening. How much money does the US owe China?

Leveraging....

Mircea