A fun story for the "Shut down the Fed's" crowd (Congress, stats)
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Below is a little anecdote for those who refute the necessity of expansionary monetary policy in the face of a downturn. This is a great comparison to the US economy, albeit a small example. The creators of the club are in effect autonomous currency issuers, they noticed a recession, and they fixed it via *gasp* monetary expansion.
Quote:
About 150 congressional staffers in Washington,DC created a babysitting club. No money was used. Members were paid in coupons for babysitting. Each member of the club was initially issued a set number of babysitting coupons. When a couple ran low on coupons, they did more babysitting. When they had excess coupons, they just used them to spend more nights going out on the town. Babysitting story reveals path to economic recovery | Midwest Voices
Last edited by Ibginnie; 11-26-2013 at 01:25 PM..
Reason: Copyright violation
The Fed is concerned that too many are saving and not spending.
They are thinking of lowering interest rates they pay the banks to 0% for reserves the banks keep with them.
This is something they are thinking of doing when tapering off this $80 billion a month QE.
The banks turned around and said they would then impose a negative rate on their customer deposits to make up the difference because the 0.25% they are getting now keeps them from operating at a loss..there is no profit at all with that rate.
The 64K question the Fed is grappling with..will savers take out their money if their rate became -0.25% ?
But it would not be advertised as a negative rate..a "deposit fee" would be imposed on accounts that offset what ever little interest they do get to net out to a -0.25%. Which means you lose a little bit of money each month by doing absolutely nothing.
The Fed does not know how Americans would react to this.
But savings are too high and "investment" (read that as spending) is too low.
Since I don't see a "spoiler" type button, stop reading if you don't want the plot given away.
When bartering doesn't work out for a group of workers, they decide to "invent" a currency as a means of representing their labor. When currency would run short, Burt would print more thus decreasing the value. In the end, even menial tasks costs thousands of Burt Bucks and the only one that profited from this scheme was the Chinese guy that owned the print shop.
Since I don't see a "spoiler" type button, stop reading if you don't want the plot given away.
When bartering doesn't work out for a group of workers, they decide to "invent" a currency as a means of representing their labor. When currency would run short, Burt would print more thus decreasing the value. In the end, even menial tasks costs thousands of Burt Bucks and the only one that profited from this scheme was the Chinese guy that owned the print shop.
The Fed is concerned that too many are saving and not spending.
They are thinking of lowering interest rates they pay the banks to 0% for reserves the banks keep with them.
This is something they are thinking of doing when tapering off this $80 billion a month QE.
The banks turned around and said they would then impose a negative rate on their customer deposits to make up the difference because the 0.25% they are getting now keeps them from operating at a loss..there is no profit at all with that rate.
The 64K question the Fed is grappling with..will savers take out their money if their rate became -0.25% ?
But it would not be advertised as a negative rate..a "deposit fee" would be imposed on accounts that offset what ever little interest they do get to net out to a -0.25%. Which means you lose a little bit of money each month by doing absolutely nothing.
The Fed does not know how Americans would react to this.
But savings are too high and "investment" (read that as spending) is too low.
If you want to go out and can't find a babysitter, you stay home. The idea that because you want something and you want it now and you deserve to have it now is only an example of a destructive belief system.
AZcardinal402..the way they calculate inflation changed in 1980 and again in 1990.
Your charts are not comparing apples to apples.
Using 1980 calculations we are at 10% inflation.
Using 1990 calculations we are at 5% inflation.
You can only use 1991 up to today for a valid apples to apples comparison.
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