What if no bailout happens?

rjwould said:
Get this - the new bailout agreement says that banks no longer need to keep any reserve. At all. None.

The extent to which banks can create money through fractional reserve banking is limited by the reserve requirement.

Money creation - Wikipedia, the free encyclopedia

A zero reserve requirement implies an undefined money multiplier. Banks can essentially create as much money as they want.
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Care to give the reference, the entire draft bill is 106 pages...
 
rjwould said:
Good take, and I agree. ASSETS not PAPER!
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Not a bad speech. I don't agree completely, mostly because she doesn't seem to be showing a distinction between the assets and the paper she's talking about, and she gets a little far into the realm of conspiracy theorizing in her accusations-- which is a pity, because I think there's some basis inside those accusations throughout.

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Francesca R said:
That reminds me of the joke: "How can you tell if a politician is lying? -- Their lips move". But neither of those two faced election to their posts, so it appears that you fear that anyone whose services are retained by the Bush administration is tarred with the same charge. Is that correct?
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I think that, considering the last near decade of cronyism and questionable delegation of responsibility, there's some merit to being highly skeptical of rush-job proposal being championed for just such a reason, especially due to the incredible size of the prospective costs.
 
Francesca R said:
No it doesn't--no assurance necessary from my POV anyway.
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I appreciate that. I've been seeing a lot of typical woo-laden schadenfreude in some CT sites out there, claiming that they've predicted this (just like they predicted every other financial crisis... after the fact). I've seen some mistake my skepticism for Paulson's proposal with that of the incredulous rantings by those like Ron Paul and some of the more woo-ish conspiracy theorists out there, conflating the criticisms into one mindset. I prefer to keep myself distanced from that.
 
Francesca R said:
Where does it say that?
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Current Law would allow Zero percent reserves on Oct 1 2011. Bailout Moves that to Oct 1 2008.

CNNMoney.com


TITLE 12 > CHAPTER 3 > SUBCHAPTER XIV > § 461

Amendment of Subsections (b) and (c)

Pub. L. 109–351, title II, §§ 201–203, Oct. 13, 2006, §§ 201–203, 120 Stat. 1968, provided that, effective Oct. 1, 2011, this section is amended— (1) in subsection (b)(2)(A), by striking “the ratio of 3 per centum” and inserting “a ratio of not greater than 3 percent (and which may be zero)” in clause (i) and by striking “and not less than 8 per centum,” and inserting “(and which may be zero),” in clause (ii); (2) in subsection (b)


Look in section 128 Acceleration of effective date. Changes date to Oct 1 2008
 
You have missed the other provision of that section of the 2006 (Financial Services Regulatory Relief) Act which is about the Fed paying interest on reserve deposits, also being brought forward. Is that because this part doesn't help the goldbug conspiracy?
 
Francesca R said:
That reminds me of the joke: "How can you tell if a politician is lying? -- Their lips move".
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Yes, I'm familiar with that old joke. Frankly, not inappropriate to any politician of any party IMO.
But neither of those two faced election to their posts, so it appears that you fear that anyone whose services are retained by the Bush administration is tarred with the same charge. Is that correct?
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Pretty much. Can you blame me after the news reports of scandal after scandal in this administration? In so many different areas, his people have broken the law and deceived the public about what they were doing and why. They say in the news this is a crises of confidence. Whether or not this administration is the cause of that I can't say, but they are ill equipped to remedy it as they have little to no credibility with much of the American public at this point.
 
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It's not whether I "blame you" that matters much, but whether that view ("every politican and civil servant can set themselves up to amass a personal fortune from their political activity so none of them can be trusted") helps with critical evaluation of policy, or not.
 
There you go again, attacking ones credibility when it doesn't match what you want to pontificate. This is a discussion forum, not a place where you get to play king Georgette.

You've obviously worked real hard double talking people into thinking your an authority on finance, when all I've seen you do is extrapolate, accuse others of being conspiracy theorist and refuse to prove your points.

And now you'll accuse me of making this personal, when its you who did it first.

I made a point-you asked a question-I answered your question-you accused.

If you'd like to somehow link what I've said to what you've said, have at it. Are you making the claim that the two offset one another?
 
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Francesca R said:
It's not whether I "blame you" that matters much, but whether that view ("every politican and civil servant can set themselves up to amass a personal fortune from their political activity so none of them can be trusted") helps with critical evaluation of policy, or not.
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Doesn't help with a critical evaluation of policy at all. But I can't base my opinion on the facts of the matter as I discern them because I simply don't have the background knowledge to make a good critical evaluation. Instead, I have to base my opinion on how much I trust the various sources I get my information in. That is based on their track record. The Bush administration has a pathetic track record. They have demonstrated over and over again that they cannot be trusted to a) tell the truth about a situation if the truth is not what the administration wants us to believe and b) they can't seem to handle a serious problem competently.

This thread has been helpful in that I'm now convinced a very real and serious problem exists. What I'm not convinced about is that this approach is a good one. While the oversight provisions added to the bill make it more palatable, the scandal du jour a couple of weeks ago was about the lax oversight this administration has been providing to the oil companies. This does not give me confidence that oversight will be enough to fix the potential problems with this bailout bill.

BTW, this ("every politican and civil servant can set themselves up to amass a personal fortune from their political activity so none of them can be trusted") is NOT my view. I'm quite certain that many of them can be trusted. I simply don't know which ones and don't feel I can trust any Bush appointees at this point.
 
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Beth said:
Doesn't help with a critical evaluation of policy at all. But I can't base my opinion on the facts of the matter as I discern them because I simply don't have the background knowledge to make a good critical evaluation. Instead, I have to base my opinion on how much I trust the various sources I get my information in. That is based on their track record. The Bush administration has a pathetic track record. They have demonstrated over and over again that they cannot be trusted to a) tell the truth about a situation if the truth is not what the administration wants us to believe and b) they can't seem to handle a serious problem competently.

This thread has been helpful in that I'm now convinced a very real and serious problem exists. What I'm not convinced about is that this approach is a good one. While the oversight provisions added to the bill make it more palatable, the scandal du jour a couple of weeks ago was about the lax oversight this administration has been providing to the oil companies. This does not give me confidence that oversight will be enough to fix the potential problems with this bailout bill.

BTW, this ("every politican and civil servant can set themselves up to amass a personal fortune from their political activity so none of them can be trusted") is NOT my view. I'm quite certain that many of them can be trusted. I simply don't know which ones and don't feel I can trust any Bush appointees at this point.
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Good post! I've read the entire bill, and the oversight is more of a facade than anything else. There are all these committees and boards this bill sets up which cost more of our children's money by borrowing against the debt. This entire thing is a joke. Paulson got exactly what he wanted with some political cover for those that wanted to support it from the get go.

The bill is mostly rhetorical.
 
Francesca R said:
Yes--the Fed paying interest on reserves gives banks an incentive to deposit reserves. Doesn't it?
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Why should the Fed pay interest to banking institutions on reserves as an incentive? Where is the Fed going to now find this money?

Some people seem to think money should grow on trees and the supply should be endless. This idea of someone will pick it up and someone else will pay it is what got us into this mess, and what I see in this bill is more of the same with some new ways of doing it.
 
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So, in other words, you're saying that the banking industry has no self responsibility except where the fed entices them through reward? The Fed should not be using such methods to get desired results. Instead, let the banks fail.
 
rjwould said:
Get this - the new bailout agreement says that banks no longer need to keep any reserve. At all. None.
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It says that the Financial Services Regulatory Relief Act of 2006 becomes effective earlier than it would have. That act says lots of things, one of which is that the Fed is allowed to reduce reserve requirements as low as it wants to. It's not going to happen automatically.
 
rjwould said:
So, in other words, you're saying that the banking industry has no self responsibility except where the fed entices them through reward? The Fed should not be using such methods to get desired results. Instead, let the banks fail.
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No I am pointing out that your characterisation: "Banks can essentially create as much money as they want" is, in fact, a misrepresentation.

Why did you post that? Is it a coincidence that it is also flagged up on a number of anti-FRB pro-gold-standard communities?
 
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Francesca R said:
No I am pointing out that your characterisation: "Banks can essentially create as much money as they want" is, in fact, a misrepresentation.

Why did you post that? Is it a coincidence that it is also flagged up on a number of anti-FRB pro-gold-standard communities?
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Why are you changing the conversation? Lets stay on topic.
 
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