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...Uncle Sam is like a caring uncle who baby sits his nephew and punishes him if he misbehaves...
Except the Federal Reserve is NOT Uncle Sam. It is NOT "federal" and it has no "reserves". THAT is the problem.
The Federal Reserve is a private, profit-making corporation whose shares are owned by large banks. You and I cannot buy shares in it. The actual owners are a well-guarded secret. It was also birthed in secrecy. The Federal Reserve Act of 1913 was passed by a skeleton Congress on Christmas Eve, after most other congress critters had gone home for the holidays. Why did they do this? You tell me. Immediately after that, the Income Tax (16th Amendment) and Internal Revenue Service was established, as a result of the Federal Reserve Act.
The US Treasury is supposed to print our currency. It does not. The Fed does.
Before anyone takes to their keyboard to contradict me, PLEASE look this stuff up. It's not hard to find. You will see that this is all true.
There are no actual economic cycles. A lot of time and money have been spent in trying to identify cycles somewhere, but none have yet been found. It is the nature of many variables that they can only do one of three things -- go up, go down, or stay about the same. That they actually do so is evidence of nothing at all.
You will of course hear references to something called "the business cycle". It doesn't exist. The name has simply been handed down from an archaic time when people actually did believe in such cycles. These are of no meaning or consequence.
Right Im saying we can create cycles. Our monetary system is artificial and man made. We artificially create inflation, we can artificially create deflation. We should cycle it.
You realize that every measureable national economy either has its own central bank or utilizes the services of a nearby country's central bank? The 19th century was a financial nightmare. No one would enjoy returning to those thrilling days of yesteryear.
The so-called "bailouts" put badly needed liquidity back into a financial system starved for it, thus keeping the wolf of global depression away from the door. QE is meanwhile a mildly expansionary monetary tool. There would have been more benefit from some expansionary fiscal policy, but Republicans on Capitol Hill used every means at their disposal to keep any of that from occurring. The Fed was left to support the recovery alone.
The bailouts were only about preserving certain financial institutions and growing their power. The "too big to fail" banks only grew to control more of our economy post 2008. Those institutions should have been allowed to fail and people should have been bailed out especially considering that consumer spending constitutes something like 70% of our GDP.
QE only serves to promote investment in the stock market.
There's a voluble and almost shrill viewpoint claiming that in normal times, it should be readily possible to grow one's money risk-free.
I don't understand how this is possible. If I can grow my money risk-free, then why would I ever bother investing in risky assets? If I can afford to eschew risk, and if my behavior is not rare or aberrant, then in the aggregate risk will be eschewed, and the economy comes to a standstill.
Look, I'd love to deposit my money into some ironclad guaranteed account that pays me 2% annually, after-taxes and after inflation. That would double my money, in real terms, in 36 years. I'm not trying to become a billionaire, and 2% real annual return is plenty for me. Why diddle with stocks or bonds? Who needs to bother with venture-capital, with entanglement in the corporate world and so forth, with price/earnings ratios and municipal bond ratings and so forth, if I can get a good return risk-free, perennially and forever? But if I could do that, and if the other guy could do that, and the other and the other, then we'd have no more corporate world. We'd have no more stock market or bond market. We'd have no market-based economy, no growth and no prosperity. We'd have feudalism.
Risk is the lifeblood of any sustainable growth. Any system that rewards non-risk with sustainable returns is a doomed system.
I'm not a glutton for risk. I hate it! I hate the recent correction that we've had. I was – no kidding – almost suicidal during the collapse of 2007-2009, watching the essence of what I'd labored a lifetime to achieve be drained and destroyed day after day. But what is the alternative? Either we have to countenance risk, however much we hate it; or we accept relentless decline in real-terms of our portfolios. There is no stable third option.
Those who hate the FED are convinced that such a stable third option exists. But unfortunately it doesn't exist.
Except the Federal Reserve is NOT Uncle Sam. It is NOT "federal" and it has no "reserves". THAT is the problem.
Both wrong. Everyone who works at the Fed is a federal employee. This is not true however for those at the twelve regional Federal Reserve Banks that act as agents for the Fed.
Quote:
Originally Posted by Nor'Eastah
The Federal Reserve is a private, profit-making corporation whose shares are owned by large banks.
These shares cannot be sold, traded, or pledged as collateral. They are not stock in the ordinary sense of the word and definitely do not constitute evidence of ownership.
Quote:
Originally Posted by Nor'Eastah
The US Treasury is supposed to print our currency. It does not. The Fed does.
Wrong again. Currency is printed by the Bureau of Engraving and Printing, an agency of the Treasury Department. What the Fed does is influence the money supply, but that includes much more than simply currency.
Quote:
Originally Posted by Nor'Eastah
Before anyone takes to their keyboard to contradict me, PLEASE look this stuff up. It's not hard to find. You will see that this is all true.
No, people would quite quickly find that these assertions are almost all just a jumbled mass of confusion.
Right Im saying we can create cycles. Our monetary system is artificial and man made. We artificially create inflation, we can artificially create deflation. We should cycle it.
To what end? The natural state of an economy is slow, steady growth. Save for wars and other calamities, there is no reason to depart from that.
The bailouts were only about preserving certain financial institutions and growing their power. The "too big to fail" banks only grew to control more of our economy post 2008.
The bailouts were about restoring liquidity to the global financial system as a whole -- the big, the little, and every size in between.
Quote:
Originally Posted by 2e1m5a
Those institutions should have been allowed to fail...
That would have been terrible policy. Untold millions of jobs would have gone down with them. It would have been a long cold winter that a great many would not have survived.
Quote:
Originally Posted by 2e1m5a
...and people should have been bailed out especially considering that consumer spending constitutes something like 70% of our GDP.
Hmmm. There are only four components -- personal consumption expenditures, gross private domestic investment, government expenditures and investment, and net exports. Trying to find production? It's on the income side of the accounts, not the product side.
Quote:
Originally Posted by 2e1m5a
QE only serves to promote investment in the stock market.
Stock prices influence a broad range of consumption and investment decisions. Avoiding large or long-term stock price declines is a good idea, But QE also keeps people from bidding up interest rates. This too has an expansionary effect.
Both wrong. Everyone who works at the Fed is a federal employee. This is not true however for those at the twelve regional Federal Reserve Banks that act as agents for the Fed.
"The Federal Reserve system is essentially dominated and controlled by private financiers, not our government; and to the extent that there is ownership of it, it is entirely private. Therefore despite the ambiguity – and confusion – the Fed is more accurately seen as a private, not a governmental institution, though with substantial governmental ties." - American Monetary Institute
If you'd been a good CD'er and looked it up as I'd suggested (before attacking me with your keyboard), you would have not made such a fool of yourself.
If you'd been a good CD'er and looked it up as I'd suggested (before attacking me with your keyboard), you would have not made such a fool of yourself.
The crackpot American Monetary Institute should have checked with me first. I could have prevented them from looking like such a bunch of disinformed donkeys.
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