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3. Every functioning economy on Earth has a central bank.
But whether or not that central bank has to be controlled by a secret and exclusive cabal for the enrichment of themselves, in order for the functioning economy to be functional is up for debate.
What is this repo or quantitative easing? Some thing is wrong with the stock market?
Why????????? To try to save the stock market. Is that the job of the FED? If it is, then something may be amiss.
The problem with the FED pursuing a PERPETUAL GROWTH POLICY is that it contradicts the natural rhythms of the BUSINESS CYCLE. Deflation must also have its day. It is like sleep. Try doing without sleep perpetually. It is very similar.
The FED SHOULD have begun to raise rates in 2001 and should have continued with higher rates through 2019. The FED did not do its job from 2001-2019, which involves higher rates to reduce total debt vs gdp from 360% back to 130%, which is the bottom level. Instead, the FED protected debt, ecouraged more debt, and created the VIAGRA ECONOMY.
There are two sides to deflation. We all now the negative side, and it frightens the hell out of us. But the positive side is:
1) reduces the cost of everything, price deflation, which will solve the homeless issue, solve the healthcare issue, solve the higher education is unaffordable issue....solve the problem of two parent workers which leaves no discipline at home and turns our children into monsters carrying guns
2) reduces the debt load, so we can afford to take on more debt when the next BUSINESS CYCLE expansion hits
3) rewards savers, who become the source of investment growth (savings first, then debt) when the next expansion comes
4) buoys the local currency, which generates investment interest, first in bonds, and then, when the Business Cycle hits, increasingly in stocks.
Politically, it is very hard, impossible, to support higher interest rates, because a weak economy threatens one's electability. No president calls on the FED to tighten rates. But the economy NEEDS a periodical deflation of prices and a strengthening of saving and currency. We want perpetual growth of stocks because it is easy to sell to voters. If stocks are gaining, everything is good. (Cheap money is ALWAYS good, right? WRONG.)
We need a good dose of real deflation. Every generation in American history has had 1/2 of their lives in economic want and 1/2 in economic splendor. This is how it is supposed to be. Too much money makes a society spoiled and criminal. Too little money makes a society desperate and criminal. But these are NATURE'S cycles. Food in Autumn; hunger in Spring. Destruction of matter in Winter; recreation of matter in Summer. We need to learn from these patterns.
When we were farmers we understood because we lived in these patterns, we were nature. Now that we live in cities and don't know what Nature does and thinks (yes, Nature thinks -- we are not the only species in Nature that thinks.
What should the FED do today? The FED is propping up a monster. But it is much more painful to let the monster fall now that it is so big. Do I favor FED weakening here, and slipping toward ZIRP? No. Never. ZIRP is a sickness in thinking; and itis an attempt to transfer wealth from the rich to The poor, surreptitiously. It is an attempt to punish banks and establish a de-facto fiscal socialism and a destruction of the Dollar.
Sometimes we have to face pain, poverty, fear, darkness in order to get through to the next Dawn. Every generation does it. We can too. When did the FED get into the business of protecting stocks? Of using taxpayer money to protect stocks. Is that socialism for the rich?
The problem with LOW RATES (engineered not by supply and demand but by political expedience) is that it increases debt, which is already a gigantic bubble that ends in one of two ways, debt forgiveness and destruction of the banking system) or in massive low-to-high default. The poor will get crushed first in the second scenario.
ZIRP is qucksand, which destroys the integrity of the economic system. Show me any country that has returned to growth through the miracle of ZIRP??????????
Why????????? To try to save the stock market. Is that the job of the FED? If it is, then something may be amiss.
The problem with the FED pursuing a PERPETUAL GROWTH POLICY is that it contradicts the natural rhythms of the BUSINESS CYCLE. Deflation must also have its day. It is like sleep. Try doing without sleep perpetually. It is very similar.
The FED SHOULD have begun to raise rates in 2001 and should have continued with higher rates through 2019. The FED did not do its job from 2001-2019, which involves higher rates to reduce total debt vs gdp from 360% back to 130%, which is the bottom level. Instead, the FED protected debt, ecouraged more debt, and created the VIAGRA ECONOMY.
Good Luck!
Well from what I was reading on the internet today the problem may be debt problem. People are debt, government is in major debt and lot of business are in debt .
And the mass media, government and economic adviser for the media and government are down playing the debt problem so not to trigger economic recession.
And banks don't want to give out loans to other banks and investors if they think it is toxic loan. So the repo gives them money they need for those loans to keep the system going.
But from what I was reading CNN and FOX news is down playing the debt problem so not to trigger a economic recession. Because if the mass media, government and economic adviser say we have debt problem it could trigger a economic recession.
There are two sides to deflation. We all now the negative side, and it frightens the hell out of us. But the positive side is:
1) reduces the cost of everything, price deflation, which will solve the homeless issue, solve the healthcare issue, solve the higher education is unaffordable issue....solve the problem of two parent workers which leaves no discipline at home and turns our children into monsters carrying guns
This is not economic problem but a social problem the government cannot fix housing cost if the demand for homes are higher than the supply.
Increasing people their wages will be increasing the price of homes because the demand for homes are higher than the supply.
Most of the people moving to cities the cities are overcrowded. We are not building new cities just making the cities we have bigger.
There is lots and lots of land it just no one is building new cities what is going on is people are moving to the the overcrowded cities.
No one is stopping you from moving to Mississippi , Alabama or Tennessee and living in a $40,000 trailer park than in a tent or cardboard box on the streets in New York, San Francisco or Los Angeles because $40,000 trailer park would be Million dollars in New York, San Francisco or Los Angeles of land being really costly.
Politically, it is very hard, impossible, to support higher interest rates, because a weak economy threatens one's electability. No president calls on the FED to tighten rates. But the economy NEEDS a periodical deflation of prices and a strengthening of saving and currency. We want perpetual growth of stocks because it is easy to sell to voters. If stocks are gaining, everything is good. (Cheap money is ALWAYS good, right? WRONG.)
But if people are in debt or have little money than people will not buy things and you will have economic recession if the interest rates go up.
Well 30 years to pay off your house mortgage or 8 to 10 years to pay off a vehicle loan is laughable.
We need a good dose of real deflation. Every generation in American history has had 1/2 of their lives in economic want and 1/2 in economic splendor. This is how it is supposed to be. Too much money makes a society spoiled and criminal.
But this will not work if there is no middle class in the US any more. If Mommy and Daddy say when you turn age 18 you leave the home and go and buy house or pay rent like we did. And stop leaching of Mommy and Daddy and leave the home when you turn age 18.
And do away with credit cards and 8 to 10 years to pay off a vehicle.
Yes C2BP because if we have major debt problem or even borderline debt problem where you have just really little money but not in debt would be major problem.
The banks are not going give money to other banks, people or investors if people are in debt or having such little money to work with it could be close to being in debt soon. So they what this repo.
The banks what to make sure they get the loan paid off not lead to the 2008 problem where people could not pay their loan off.
One important function of the Repo Market is to provide short term loans to entities whose maturity ranges from 24 hours to one year. Lets say I own a widget manufacturing plant that makes widgets. The buyers of my widgets have a 60 day period to pay me. I have 30 days to pay my suppliers of raw materials . I also have to pay for electricity, water, payroll every month or bi-weekly. That means I have a 30 to 45 day gap where I am paying money out for expenses but money due to me has not yet came in yet from my customers.
The money markets provides the liquidity or cash to tide me over for that 30 to 45 day gap. If those money markets freeze up then I cannot keep the plant running, meet payroll, let alone expand production if the opportunity arises due to increased demand. Multiply this nationwide then Industry suddenly collapses and the end result is economic stagnation, recession or depression.
If banks fear there is going to be a recession or depression they will not want to loan their money to entities that may be bankrupt in the near future for fear of getting wiped out by bad loans. Interest rates rise and credit gets restricted because of increased risks and fears. This could start a chain reaction that leads to a self fulfilling prophecy. This is an important reason why the Fed directly intervenes in the Repo Market as to be a lender of last resort.
What are you worried about? It’s not your money.
...it’s your grandkids’.
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