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  • MORE POWER TO THE FED Brad Seltzer writes about the Federal Reserve 8 comments
    Jun 20, 2009 10:20 AM

     

    What? they are giving more power to the Fed?

    Brad Seltzer writes

    I have found the Federal Reserve extremely eager and anxious to explain how it intends to unwind the large increase in the money supply when monetary velocity starts to recover. The basic problem, I learned back in my first year of graduate school, is that the central bank's ability to soak up excess liquidity in an economy and reduce the supply of "monnaie" is limited by its balance sheet: it needs to be able to induce banks to part with their cash by offering them something else to hold, and the Fed cannot offer what it does not itself have to trade. The solution the Federal Reserve is proposing is to allow it to create additional kinds of liabilities on its balance sheet. If congress grants the Federal Reserve the power to accept not just interest-free but interest-paying reserve deposits (which it has) and the power to issue and sell its own interest-bearing bonds (which I hope it will), then the Federal Reserve will have no trouble reducing the transactions balances that make up our monetary base when it wishes to do so. Once again, we have already been told the plan--and it is unfair to claim that Bernanke and company have not told us.

    L4D's Comments:

    This makes sense. The Federal Reserve has the most bloated balance sheet of any time in its history. The Federal Government is the most indebted than it has been at any time in its history. The solution to this problem is to let the Federal Reserve issue and sell it's own type of debt. We will shrink the balance sheet by first expanding the balance sheet.

     

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Comments (8)
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  • Huxley
    , contributor
    Comment (1) | Send Message
     
    "If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. IT IS THE MOST IMPORTANT SUBJECT intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon."

     

    - Robert H. Hemphill, Credit Manager of the Federal Reserve Bank of Atlanta Georgia
    ----------------------...
    "Permit me to issue and control the money of a nation, and I care not who makes its laws."

     

    ~ Mayer Amschel Rothschild
    20 Jun 2009, 01:40 PM Reply Like
  • Living4Dividends
    , contributor
    Comments (1220) | Send Message
     
    Author’s reply » Thanks Huxley. What are your specific thoughts on what I wrote?

     

    On Jun 20 01:40 PM Huxley wrote:

     

    > "If all the bank loans were paid, no one could have a bank deposit,
    > and there would not be a dollar of coin or currency in circulation.
    > This is a staggering thought. We are completely dependent on the
    > commercial Banks. Someone has to borrow every dollar we have in circulation,
    > cash or credit. If the Banks create ample synthetic money we are
    > prosperous; if not, we starve. We are absolutely without a permanent
    > money system. When one gets a complete grasp of the picture, the
    > tragic absurdity of our hopeless position is almost incredible, but
    > there it is. IT IS THE MOST IMPORTANT SUBJECT intelligent persons
    > can investigate and reflect upon. It is so important that our present
    > civilization may collapse unless it becomes widely understood and
    > the defects remedied very soon."
    >
    > - Robert H. Hemphill, Credit Manager of the Federal Reserve Bank
    > of Atlanta Georgia
    > ----------------------...
    > "Permit me to issue and control the money of a nation, and I care
    > not who makes its laws."
    >
    > ~ Mayer Amschel Rothschild
    20 Jun 2009, 02:37 PM Reply Like
  • Smarty_Pants
    , contributor
    Comments (2845) | Send Message
     
    Let's assume the FED starts issuing their own debt in the amount of multi-billions necessary to soak up the 'excess' liquidity.

     

    Everyone flocks to buy the new FED bonds. Who is going to buy the multi-trillions in US Treasury/Agency debt that will need to be issued at the same time?

     

    I read recently that the average maturation on all US Treasury debt is less than 6 months. That means there is going to be so much government debt rolling over continually that the FED may have difficultly finding buyers for its new debt without biting the (US Treasury's) hand which feeds it.

     

    Unless you're going to rely on having the banksters buying up the new FED debt and perpetuating the fleecing of the public. Here's the plan:

     

    1) FED prints gobs of money.
    2) FED 'lends' the money to the banksters at 0.25% via discount window.
    3) Banksters buy FED notes at 2%.
    4) FED prints more gobs of money.
    5) FED buys gobs of US debt at 3% (or higher) to support deficits.
    6) FED collects 3% interest on US debt and 0.25% at discount window, pays 2% interest on FED debt.
    7) FED collects 1.25% on trillions of printed money.
    8) Banksters collect 1.75% on billions of borrowed money.
    9) Taxpayer gets the the IOU for 3% of all that printed money.

     

    Do I need to point out that the effects of step 5) offset the effects of step 3) with regards to circulating money? Rather than "remove the punchbowl" the FED is replacing it with a swimming pool.

     

    Moral of the story is that you don't fix a hangover by drinking ever-increasing amounts of booze.
    20 Jun 2009, 08:37 PM Reply Like
  • BigJT
    , contributor
    Comment (1) | Send Message
     
    I don't see how this is any better than the offering of USGov debt. Banks can buy that too, but why would they want to? Where is the incentive? Rate of return on Fed debt is going to be better than the recovering private sector? If so, things are still going to be pretty bad and back to square one.

     

    The bottom line is this situation is absurd; history has not seen this scenario before, and no one knows if it will work. To say "See.. the Fed knows what they are doing, they even said so!" is nothing short of blind faith in our godlike leaders.
    20 Jun 2009, 08:42 PM Reply Like
  • Living4Dividends
    , contributor
    Comments (1220) | Send Message
     
    Author’s reply » Thanks, Smarty_Pants - I like the way you think.

     

    On Jun 20 08:37 PM Smarty_Pants wrote:

     

    > Let's assume the FED starts issuing their own debt in the amount
    > of multi-billions necessary to soak up the 'excess' liquidity.<br/>
    >
    > Everyone flocks to buy the new FED bonds. Who is going to buy the
    > multi-trillions in US Treasury/Agency debt that will need to be issued
    > at the same time?
    >
    > I read recently that the average maturation on all US Treasury debt
    > is less than 6 months. That means there is going to be so much government
    > debt rolling over continually that the FED may have difficultly finding
    > buyers for its new debt without biting the (US Treasury's) hand which
    > feeds it.
    >
    > Unless you're going to rely on having the banksters buying up the
    > new FED debt and perpetuating the fleecing of the public. Here's
    > the plan:
    >
    > 1) FED prints gobs of money.
    > 2) FED 'lends' the money to the banksters at 0.25% via discount window.
    >
    > 3) Banksters buy FED notes at 2%.
    > 4) FED prints more gobs of money.
    > 5) FED buys gobs of US debt at 3% (or higher) to support deficits.
    >
    > 6) FED collects 3% interest on US debt and 0.25% at discount window,
    > pays 2% interest on FED debt.
    > 7) FED collects 1.25% on trillions of printed money.
    > 8) Banksters collect 1.75% on billions of borrowed money.
    > 9) Taxpayer gets the the IOU for 3% of all that printed money.<br/>
    >
    > Do I need to point out that the effects of step 5) offset the effects
    > of step 3) with regards to circulating money? Rather than "remove
    > the punchbowl" the FED is replacing it with a swimming pool.
    >
    > Moral of the story is that you don't fix a hangover by drinking ever-increasing
    > amounts of booze.
    20 Jun 2009, 08:43 PM Reply Like
  • Pumpkin
    , contributor
    Comment (1) | Send Message
     
    “To understand how unwise it is to have the Federal Reserve, one must first understand the magnitude of the privileges they have. They have been given the power to create money, by the trillions, and to give it to their friends, under any terms they wish, with little or no meaningful oversight or accountability. Thus the loudest arguments against greater transparency are likely to come from those friends, and understandably so.”
    - Ron Paul

     

    The Fed has refused requests for details about TARP from almost every news agency. And they can. Remember: The Federal Reserve is an arm of the banking industry, not the Federal government. Bloomberg and Fox have sued. A lawsuit arguing that the federal bailout of American International Group Inc. is unconstitutional will be allowed to proceed in a federal court in Michigan.

     

    Giving the Federal Reserve more authority "is like a parent giving his son a bigger, faster car right after he crashed the family station wagon," said Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat.

     

    Bills HR 1207 and S 604 (to audit the Federal Reserve) are making progress. The American people need to stop taking it in the rear and take their country back.
    20 Jun 2009, 09:27 PM Reply Like
  • Living4Dividends
    , contributor
    Comments (1220) | Send Message
     
    Author’s reply » Nice comment, Pumpkin
    20 Jun 2009, 09:44 PM Reply Like
  • DISSOLVETHEFED
    , contributor
    Comment (1) | Send Message
     
    This is more realpolitik. . . The Federal Reserve is responsible for the nations money supply. During the expansion of bank credit, the Fed had absolute knowledge, being the clearinghouse for all checks written by banks at closing and deposited at other financial institutions.

     

    This is the Fed's Motis Operandi it expands bank credit in order to satisfy Wall Street Bankers, then sits back until the bust cycle kicks in.

     

    Look at Bernake, a thinker and not a wall street banker. He is struggling with the lie he keeps inside of his head. ..
    22 Jun 2009, 09:15 AM Reply Like
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