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Monopoly Men

JonnyFive said:
sickmint79 said:
please correct this as i'm sure it needs it:

creation of money

step 1. board of governors (7 president appointed members) decides to increase money supply.
step 2. federal open market comittee (board of governors + 5 heads of banks - heads are bank employees not government(true? if gov, how chosen?)) executes the creation of what the board stated.
step 3. fed creates money (federal reserve notes) out of nothing (as line item) and buys us securities - $100
step 4. not sure on this part but let's just say it's given to the ny fed reserve - $100
step 5. ny fed reserve loans out $1,000 to 10 banks @ $100 each
step 6. 10 banks each loan out $1,000 to individuals

so now the $100 bond was purchased, with nothing (aka the strength of the american economy) and has turned into $10,000 in the hands of 10 individuals (who will spend it and have it end up in other banks)

step 7. during whatever time the bond is still owned by the fed, the us government (from federal income tax?) is paying interest to the fed. the fed keeps a portion of this interest to cover operational costs (how is this defined? are the privately owned parts not able to give eachother raises and such?) and the remaining portion (what %?) is given back to the us government, to the treasury.
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(All employees of the Federal Reserve branch banks are government employees, I'm not sure of the exact process of appointment for the Presidents of the banks)

The major break is at number 5. The issue is twofold:

1) The loans from the Fed are only short-term, and must be paid back in full with interest.

2) Private banks generally don't use loans from the Fed to lend money, choosing instead to borrow from other private banks or institutions. There have been exceptions to this at times, but generally they seem to avoid it.
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for #1 - what does it matter that it is a short term loan; what impact does that have?

#2 - why not lend out the fed money? what do they use it for instead?
 
regardless of being government employees, it is not implausible today for any board members to be outside the influence of private banking right? corporate america does not appear to have any trouble finding political friends.

why such a fight in our history to rid ourselves of prior central banks? were they architected so differently?

gold, gold, gold!
www dot minneapolisfed.org/pubs/region/93-09/int939.cfm
www dot goldensextant.com/library.html
p. 12

what do you think of the claims that current policy/fractional reserve is the cause for the boom-bust cycle?

that it is helping/the cause of destroying the middle class?

the solution i think was offered earlier in this thread though seemed sound to me; is it what was done in the past? a bank that merely stored your money (and even charge you for the service) and a separate savings and loan, which operated more like a place where you would nail your money down into a 5 year cd and expect 3% back while they lent out that money for 7%.
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To some extent, this is what we have now. There are places you can simply park your money (if nothing else, you could put it all in cash and get a safety deposit box ), although most places to put your money will either loan or invest it (which is really loaning anyway).
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my assumption in the original quote is under a full reserve system. certainly putting my cash in a saftey deposity box today would not benefit me with the fractional system. (perhaps some bullion would however!)

here is a little more context around the greenspan statement (1997)
www dot itulip.com/forums/archive/index.php?t-101.html

check out ron paul - en.wikipedia.org/wiki/Ron_paul
even if you disagree with him on things i absolutely trust him to be 1000 times more honest than any other politician! he is very by the book on matters of the constitution as well.
 
sickmint79 said:
for #1 - what does it matter that it is a short term loan; what impact does that have?
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Because if the loan is called in quickly, the impact of the increased money supply is somewhat diminished. If a bank has in fact lent from its reserves, then it does have the effect of expanding the currency supply (at least temporarily), but not as dramatic an impact as if it were to both lend from reserves and also be able to lend on a long-term money borrowed from the Fed or other banks.

#2 - why not lend out the fed money? what do they use it for instead?
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They don't use it, the banks don't automatically get issued money from the Federal Reserves or anything. If they want to issue new notes, they need to decrease their reserves held with the Fed, while still satisfying the fractional requirements. I'm talking about the ability of them to use the "discount window" here, as that's the only situation in which the bank is really receiving a loan from "The Fed" directly.

The banks can borrow Federal funds from each other too, which they do more often. Those loans are basically used to ensure that the banks have enough money in reserve to satisfy the fractional requirements. The two banks will work out an interest rate between themselves, and this allows one bank to lend more than it otherwise could if another bank has the excess reserve to cover it.
 
any comments on my post 162?

economically, in the end it seems like the current system is a delicate balance between growing the economy vs. creation of inflation. theoretically full reserve should work, but the current system allows for greater growth, at the risk of greater inflation. we just hope the smart guys are making all the good decisions.

from a conspiracy point of view, it seems like if private bankers had the ear of those in the fed, they could still influence them to make decisions which would allow them to become more profitable (decreasing fractional reserve required or manipulating total money supply), although there's no strong evidence of this today.
 
sickmint79 said:
any comments on my post 162?

economically, in the end it seems like the current system is a delicate balance between growing the economy vs. creation of inflation. theoretically full reserve should work, but the current system allows for greater growth, at the risk of greater inflation. we just hope the smart guys are making all the good decisions.

from a conspiracy point of view, it seems like if private bankers had the ear of those in the fed, they could still influence them to make decisions which would allow them to become more profitable (decreasing fractional reserve required or manipulating total money supply), although there's no strong evidence of this today.
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Private bankers have a strong financial incentive to promote a stable economy. Bankers are long-haul investors. They see more clearly than the average joe that tinkering with the economy for short-term gains would ultimately be a losing proposition. The profit motive is what drives the interests of private bankers towards being a stabilizing influence on the economy, rather than a destabilizing one.

There's nothing inherently wrong with self-interest. John Nash proved (through games theory) that an economy based on self-interest produces more winners than losers, which means that the economy is not a zero-sum game.
 
chipmunk stew said:
Private bankers have a strong financial incentive to promote a stable economy. Bankers are long-haul investors. They see more clearly than the average joe that tinkering with the economy for short-term gains would ultimately be a losing proposition. The profit motive is what drives the interests of private bankers towards being a stabilizing influence on the economy, rather than a destabilizing one.

There's nothing inherently wrong with self-interest. John Nash proved (through games theory) that an economy based on self-interest produces more winners than losers, which means that the economy is not a zero-sum game.
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This is one thing I have never got, they claim that the elite bankers want inflation. Uhh, think about it people, those who lend money (the rich investor class) suffer from inflation, because the money they get back in return is worth less. Those who borrow money (the poor) benefit from inflation, because the money they pay back costs them less. So why exactly would rich bankers want their investments devalued?
 
JamesB said:
This is one thing I have never got, they claim that the elite bankers want inflation. Uhh, think about it people, those who lend money (the rich investor class) suffer from inflation, because the money they get back in return is worth less. Those who borrow money (the poor) benefit from inflation, because the money they pay back costs them less. So why exactly would rich bankers want their investments devalued?
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In fact, historically, those lending money have wanted to support things like gold-backed currency that help to control inflation and keep their loans valuable. It was often those that borrowed money that wanted currency to be issued so that their loans would be worth less, cash would be more abundant, and it would be easier to pay off their debts.

It's also probably worth pointing out that the "rich bankers" of today are often corporations run largely by salaried employees whose main goal is to maintain stability and turn a healthy profit in a variety of economic conditions. As was just pointed out, their investments are devalued by inflation, and on an even larger scale than most individual investors.
 
sickmint79 said:
what do you think of the claims that current policy/fractional reserve is the cause for the boom-bust cycle?
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Mostly garbage. The boom-bust cycle existed prior to the current system, and indeed was worse then than it is now. The current system certainly plays a role in the boom/bust cycle, as it plays a role in pretty much all economic matters, but to say it's the cause is inaccurate, IMO.
 
sickmint79 said:
do you guys have any thoughts on the supposedly incoming burst of the "dollar bubble" ?
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Could you supply a few more details? Like where you heard about this? Or what exactly the nature of this bubble is supposed to be? I haven't heard any worries about anything like this from any of the news sources I regularly consult.
 
I read or heard that because the US economy tends to work pretty well so we attract dollars from overseas to invest in our debt instruments. So the overseas investors are financing our deficit (or something). Once the US economy is not seen to be a good investment, the flow of dollars will reverse which will change the situation.
 
sickmint79 said:
no no comments?
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Sorry, I don't generally check the forums over the weekend.

I don't know. There hasn't been any major "pop" in the US position in the global economy yet in 2007, which some of those sites seem to be suggesting. This one you linked to - http://dissidentnews.wordpress.com/...7-economic-forecast-dollar-decline-recession/ - also has some somewhat bizarre comments about Iran choosing to hold Euros being a reason for us to attack them. The same source appears to be trying to forecast '07 in the beginning of '07, but I don't think any of their predictions have come true.

There's also a touch of gold nuttery at the end, which seems kind of off, and they appear to conflate "the dollar is weakening against the Euro" with "the US economy is in the crapper," which is kind of silly to assume with currency as the only measure. They're going to have to look at more than the Forex if they want to make assumptions about the state of any economy.

The third source links back to the first source, so I'll address that one. I see two things there: the same stuff about the relative value of the dollar, and some things comparing the dollar to the high tech industry, and also to the housing market.

It's kind of an odd comparison. The dotcom bubble existed and popped because, at the time, companies that did literally nothing other than sell their image were being given outrageous valuation by investors that were unfamiliar with the industry and saw the lure of big money. After things settled down and people started to realize that no one was going to pay a red cent for "image," the valuation meant nothing, and the bubble popped. It was a market built entirely on speculation.

With a national economy, there is some underlying the valuation. It has to do with relative national economic strength, production, economic stability, national trade, political stability, and economic growth. Although there is always the possibility of over valuation (due to an inflated prediction about some growth factor, or an unexpected downturn), there is still something real underlying the economy being invested in. The dotcom bubble, on the other hand, was largely fictional. The investors were putting their money in companies that were purely speculative, and never were going to produce anything of value. That was a true bubble, where no value existed to underwrite the investments being made.

Housing is another market where the term "bubble" gets tossed around, but again, housing is something where something of value actually exists. The issue in the housing market is that, in some ways, it resembles a game of chicken. In some markets where housing construction is not a viable option (like, say, in much of New York City, where I live), there tends to be a trend of constantly creeping prices as demand for the housing far outstrips supply. However, there is the risk that eventually the prices paid by housing speculators will reach a market equillibrium, and they won't be able to make as much of a profit on the sale, or may begin to suffer losses.

The common theme in all three cases is that they will ultimately seek the equillibirum price - the point at which the supply and demand curves (measures of amount supplied or demanded at a given price point) intersect. For many of the dotcom companies, that price was zero, so the "bubble" burst suddenly and dramatically. With housing and national economies, a decline is more likely to be more gradual, unless something catastrophic happens.
 
you will find this a more credible resource regarding our economy: WWW d0t newsmax.com/money/archives/st/2007/6/25/154818.cfm?promo_code=2A89-1&s=la

here is a speech ron paul (have you heard any more buzz about him yet?) gave on petrodollars and petroeuro. WWW d0t leg2capital.com/ron_paul.html
 
TruthSeeker1234 said:
I have not seen the video, but the Fed is certainly a monopoly. Money evolved on the free market, and is a commodity. Many commodities were used as money, and precious metals emerged on the market as the best functioning money. Gold and silver are money, according to the market. Paper notes only became traded as money because they were redeemable in gold or silver. There is essentially no demand on the market for little slips of paper, while there is tremendous demand for gold and silver. The production of money was a private, competitive enterprise. Names like "dollar" and "pound" were nothing more than a name for a specific weight of gold or silver.

So called fractional reserve banking is the fraudulent practice of printing up additional paper money that is not backed by gold or silver.

Governments, in partnership with the large commercial banks, forcibly took over and monopolized the production of money. In the U.S., this occurred in 1913 when the Fed was created, and refusing to accept Fed notes in payment of debt was made a felony. Money was still redeemable in gold.

The conspiracy continued in 1933, when FDR's gang confiscated all of the monetary gold from U.S. citizens, and made its possession a felony also.
Large banks and foreign governments could still redeem in gold.

In 1971, Nixon "closed the gold window", meaning not even banks and governments could redeem dollars for gold.

Today, the U.S. government in partnership with the Fed, simply print money to their hearts content, spending and lending it as they wish. In olden days, this was known as "counterfeiting", and was a crime, because it is an effective way to steal real wealth away from innocent people. Now, it is known as "monetary policy".
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Gosh, Ace. Is there ANY conspiracy theory that you do NOT believe ?
 
sickmint79 said:
you can't just keep making it, possibly recklessly
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That may help to define it's effectiveness, or its properties as a currency, but it doesn't change the fact that it's fairly arbitrary. People picked certain precious metals as currency because they tend not to corrode, they look nice, they're rare enough to disallow the free-wheeling creation of currency by anyone, and they're common enough that we can actually put them into circulation on some level.

As we've discussed before, one of the possible problems with currencies like gold is the inability to create more of them as the economy expands, or in response to harmful deflationary trends.

I'll take a look at the articles you linked to, sickmint.
 
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