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Old 09-10-2016, 01:07 PM
 
1,766 posts, read 1,215,178 times
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Quote:
Originally Posted by Hoonose View Post
The Fed can create money out of thin air, so they have no need to borrow. In fact the Fed currently owns about $2.5T in US Treasuries, purchased with conjured USD. The Fed created money for much of the bailout.
You can't create money out of thin air, that is a crazy talk. All this money created or stolen from the future earnings will have to be paid back, every penny + interest. If not by your generation, then your kids will be paying it back. No such a thing as a free lunch.

No wonder we are in such a mess today. I guess it's ok to cheat and steal, it's ok to borrow money and not pay it back or pay it back with devaluated currency, cheat the creditors.

 
Old 09-10-2016, 01:42 PM
 
Location: not normal, IL
776 posts, read 577,420 times
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Quote:
Originally Posted by Hoonose View Post
Credit runs the world. Easy credit has the potential to run it on a higher burner.

The USD is not backed by gold anywhere or globally. China might own some our debt as Treasuries, or they might have USD. They are free to interchange and choose to their own desires. i.e. they get USD and only USD from the USA as interest and principle payments on any Treasury debt they hold. They get no gold from the US out of it.

Low interest rates tend to inflate assets like stocks. That creates more demand for stocks and tends to raise their price. Businesses love it because it makes it easier for them to grow and profit, so the stock in their business tends to rise. Investors love it!
Credit, IMO, is like collateral. It is not a physical thing of value, but a history of paying for things. Easy credit is bad, credit is for those that paid they're bills and on time, you are giving credit to those that don't deserve it. This is the idea at least. I really don't think the interest rates has to do with credit, that is the banks personal choice. Interest rates have to do with the amount of interest on a loan, so it makes for a smaller loan, not better credit. I was wrong about the gold thing, but common sense should say, if one nation makes all these dollar bills out of nowhere they can't exchange them for the same rate as another. So there still is a standard of asset to each countries currency. Investors, the good ones, like the stock market low. If you put your money in when it is high, the value will mostlikely drop and you loose the value. The good and continuing vestors like to invest in the stock market when it is low. The stock of a company doesn't depend on the shape of the business, it depends on what investers think of that business.
Low interest rates tend to inflate assets like stocks1
1.People are barrowing money to pay for stock.
2.Companies can barrow more, so they spend more. They show growth and people want to invest, hoping they are low and have really taken off yet. Bad investors, I know a few, ride this wave and doesn't work as good as they think.

Last edited by Nothere1; 09-10-2016 at 01:44 PM.. Reason: spelling
 
Old 09-10-2016, 01:46 PM
 
Location: not normal, IL
776 posts, read 577,420 times
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Quote:
Originally Posted by C2BP View Post
You can't create money out of thin air, that is a crazy talk. All this money created or stolen from the future earnings will have to be paid back, every penny + interest. If not by your generation, then your kids will be paying it back. No such a thing as a free lunch.

No wonder we are in such a mess today. I guess it's ok to cheat and steal, it's ok to borrow money and not pay it back or pay it back with devaluated currency, cheat the creditors.
Thank you! I'm still learning on how this all works, but you are just clearly stating the obvious. If your wrong, I will never work for money again.
 
Old 09-10-2016, 02:03 PM
 
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Borrowed money is almost always paid back with devalued money.
 
Old 09-10-2016, 03:08 PM
 
18,792 posts, read 8,409,237 times
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Quote:
Originally Posted by Nothere1 View Post
Creating money out thin air, dose this not cause inflation? You pump too much "made money" into the system that has normal people's "earned money".
https://en.wikipedia.org/wiki/Inflation
That Fed $2.5T was exchanged for paper debt in banks. Net in banking system = 0 change. These moneys sit today as bank reserves. And the problem has been that not enough borrowing on these funds has taken place. i.e. we have not had enough inflation.
 
Old 09-10-2016, 03:29 PM
 
18,792 posts, read 8,409,237 times
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Quote:
Originally Posted by C2BP View Post
You can't create money out of thin air, that is a crazy talk. All this money created or stolen from the future earnings will have to be paid back, every penny + interest. If not by your generation, then your kids will be paying it back. No such a thing as a free lunch.

No wonder we are in such a mess today. I guess it's ok to cheat and steal, it's ok to borrow money and not pay it back or pay it back with devaluated currency, cheat the creditors.
You are correct in that 'I' cannot create money. That would be called counterfeiting.

However as in QE, the money used to purchase paper debt from member banks by the Fed was created by the Fed with a few simple computer keystrokes. For instance the member bank might send over a $B worth of Treasuries to the Fed, and the Fed credits that bank's account with $1B USD. These are new USD's that didn't exist 1 second ago.

What Is Quantitative Easing? - Business Insider

And as by our laws, the interest on that Treasury debt goes back to the Treasury. So the interest on the $2.5T worth of Treasuries that the Fed holds today goes back to the taxpayer.
 
Old 09-10-2016, 03:57 PM
 
Location: not normal, IL
776 posts, read 577,420 times
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Quote:
Originally Posted by Hoonose View Post
That Fed $2.5T was exchanged for paper debt in banks. Net in banking system = 0 change. These moneys sit today as bank reserves. And the problem has been that not enough borrowing on these funds has taken place. i.e. we have not had enough inflation.
I'm still not seeing it. To the working person, inflation is bad, the value of our money goes down, your dollar can't go as far. I am extra happy that people aren't borrowing this debt. I understand money as debt to a point. In debt you usually have collateral, house or whatever. So people using collateral as money like a mortgage on a house. But just like a guy with 3 mortgages on his house, his money(debt) is not backed up by anything but his word to repay now. Banks don't trust this and close on these people all the time. So why should we trust banks or the gov. when their money(debt) isn't backed up by anything of value. What I'm hearing is we are backing up debt with debt.
 
Old 09-11-2016, 07:43 AM
 
Location: Metro Detroit, Michigan
29,694 posts, read 24,763,642 times
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Quote:
Originally Posted by jrkliny View Post
Borrowed money is almost always paid back with devalued money.
That's the hope anyways. Fed has not been hitting inflation targets. It's a wonder we did not experience deflation.
 
Old 09-12-2016, 09:31 AM
 
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TRUMP: Janet Yellen should be ‘ashamed’ of what she’s doing to the country

GOP presidential nominee Donald Trump told CNBC on Monday the Federal Reserve is doing what President Barack Obama wants by keeping interest rates low.
Fed Chair Janet Yellen and central bank policymakers are very political, and Yellen should be "ashamed" of what she's doing to the country, Trump said, adding the Fed is not even close to being independent.

By keeping interest rates low, the Fed has created a "false stock market," Trump argued in a wide-ranging interview in which he also talked about Democratic nominee Hillary Clinton's health problems.
Trump said rates are being kept lower to bolster Obama's legacy. "Any increase at all will be a very, very small increase because they want to keep the market up so Obama goes out and let the new guy ... raise interest rates ... and watch what happens in the stock market."

American savers are the worst hit by the Fed's easy monetary policies, Trump said. "The ones who did it right — they saved their money [and] they cut down on their mortgages, ... and now they're practically getting zero interest on the money.

Trump says Fed chief Yellen should be ashamed
 
Old 09-12-2016, 09:36 AM
 
7,898 posts, read 7,088,773 times
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Of course savers are not doing well. The whole idea of low rates is to stimulate investment and buying and borrowing. Borrowing is a great deal. You can borrow at very low rates, enjoy the money or put it to work for you, and then pay it back years or decades later with dollars that are worth much less.
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