Attention Guerilla (and the politicalized horde).
- Thread starter Refrozen
- Start date
People are so dumb. It has nothing to do with rates or any of that BS, that's all surface subterfuge. It has to do with inflating the money supply without real labor. Money out of nothing is the problem. Period.
Its more how do they lower the rates = expand the money supply, but yeah; you're not disagreeing with the point at all slayerment, you're just being ragey and expressing your "omg illuminati" pop culture conspiracy shit.
which is pretty damn close to reality, though.
which is pretty damn close to reality, though.
@Refrozen, thanks. I saw it awhile ago. It's brilliant. I was going to post it, but wasn't sure there was an audience here for it.
Because it is not dogmatic it has got a lot of attention and views, and gets played in classrooms all the time now from what I understand.
That reserve credit lets the banks fractionally loan out at say, 10:1. That expands the money supply. A greater supply of money, drives down the price of money (interest rate).
So when the FED or any central bank announces rate cuts, we have two things happening.
1. They are going to increase the money supply, attempting to drive down the interest rate by flooding the market.
2. They loan at or below the target rate at the discount window, which is a short term lending facility central banks extend to the banking sector. The discount window is where banks get secretive emergency mini-bailouts, and can perform overnight balance arbitrage with different banks in different countries (the master level of the grand scam).
Keynesianism is just socialism, and the dichotomy is always socialism (control) vs liberty (freedom). Shades of socialism are no closer to real freedom then censorship of a few words are equivalent to free speech.
It's supposed to present a more balanced view, and leave it to the viewer to understand how absolutely fucking crazy and irrational Keynesian economics is, and then maybe wakeup and realize every government operates under Keynesian policies. Every government, everywhere.
Because it is not dogmatic it has got a lot of attention and views, and gets played in classrooms all the time now from what I understand.
Technically, they monetize debt, that is the government issues debt in the form of bonds, they offer to buy this debt from the banks for reserve credit. By creating a market for government debt, the central bank enables the government to grow by going deeper and deeper into indebtedness.
That reserve credit lets the banks fractionally loan out at say, 10:1. That expands the money supply. A greater supply of money, drives down the price of money (interest rate).
So when the FED or any central bank announces rate cuts, we have two things happening.
1. They are going to increase the money supply, attempting to drive down the interest rate by flooding the market.
2. They loan at or below the target rate at the discount window, which is a short term lending facility central banks extend to the banking sector. The discount window is where banks get secretive emergency mini-bailouts, and can perform overnight balance arbitrage with different banks in different countries (the master level of the grand scam).
It is a black and white choice. On the one hand, you have the belief that people operating freely in the market is the best form of economy, and on the other hand, you have the belief that a government can run an economy better than the market.
Keynesianism is just socialism, and the dichotomy is always socialism (control) vs liberty (freedom). Shades of socialism are no closer to real freedom then censorship of a few words are equivalent to free speech.
Where do they get the money to buy their own debt? I get that they can print as much debt as possible, but where do they get the money to buy their own debt? And I assume this obviously means that without the reserve credit, the money supply would grow at a much slower rate.
I was always under the impression that the main way the Fed controlled the money supply was through the fed funds rate, and that's why they always talk about Volcker raising the fed funds rate to 20%. I suppose my main point of confusion is whether they actually have tangible control on this rate or whether they can only aim for it through tactics.
So basically what you're saying is there's TWO methods for lowering the rate. One is the fed funds rate, and the other is buying their own debt in exchange for reserve credit. I still don't get where they get the money for that, though, if they're already up to their eyeballs in debt.
Likewise, some government intervention doesn't equal socialism and markets built around tariffs, subsides and tax breaks are not free.
Short of anarchy or totalitarianism we are always going to be dealing with shades of grey.
I'm not in favour of continuing to follow Keynesian economics either, but even if we were to leave things purely to the market, unless the competitive advantages gained by some over the last century or two can be wiped out then the effects of government intervention would still be felt and the market would not be free.
They sell the bonds to China. (Or is that some other part of this whole fucked up system?)
I found an awesome read on it here. It really exposes how what the U.S. government is doing is essentially what Zimbabwe did before it collapsed.
Here's the Fed buying Treasuries.
Here's a really amazing chart.
I disagree with the former, and the latter is a strawman. I am not for any subsidies, tariffs or tax breaks. Without government intervention, they are unnecessary, as they are simply more intervention piled on previous interventions.
"Some" government intervention is like "some" censorship. It's not a free market, and it's not free speech. The question we have to ask is, once the premise that the state can intervene is accepted, where is the line drawn?
But that's never my point. Yes, the world is not perfect, but the basic premise of human action is that man acts to improve his condition as he best sees possible (and sometimes acts wrong, but his motivation is always towards satisfaction).
In between anarchy and totalitarianism, we have socialism, which historically, and I believe logically leads to tyranny, not freedom.
The enemy of the good is the perfect. I have some friends who argue that it would be irresponsible to free slaves if they had no skills or property to build their new lives with.
But I say, that's up to the slaves to decide. Whether they want to be free today, or they want to inch towards self-ownership. For the slavemaster to claim that freedom can only be handed out in increments, is just an exercise of his own power, not an exercise of free will for the slaves.
Anyways, I *try* not to debate philosophy and politics online anymore. Economics is my interest. The truth, I believe, makes a more compelling and enduring case than appeals to emotion or idealism. When people are informed, they are usually safer and more fun to be around.
The government creates debt in the form of bonds. The central bank creates a market for these bonds, by offering to buy them from financial institutions, in return for reserve credit. Reserves are very valuable to banks, because they can use them to loan out up to 10 times as much new money.
Ideally, the money supply does not grow under central command but certainly not in this fashion, where it's government debt which is driving expansion.
I'm a layman, so don't take the next part as gospel. It might not be 100% right.
Say the government runs a deficit of $5. They issue a bond. You, being a patriotic sort, buy the bond. When the bond is due for redemption, the bank buys it from you, and pays you your principal plus interest. The bank then sells the bond to the central bank, in return for reserve credit. The central bank creates the credit it uses to purchase bonds, out of thin air. I then presume the bond is destroyed or redeemed with the government, but since the central bank turns over all profits to the government treasury each year, redemption is the same as destruction. It's moving the bond from one bottomless pocket to another.
The thing about the central bank is, it allows politicians to spend without taxing (by devaluing savings and slowing economic growth), and it enables banks to fractionally reserve, so they can generate massive profits from speculation with almost zero risk. The central bank itself facilitates both parties getting what they want. And in return, the central bank in any country is basically the lifeblood of the economics profession. Most "private" economists work for the central bank, or receive funding from the central bank. They have an interest in supporting the institution, because without it, they would have to chase scarce "real jobs".
Aim. And set the rate higher for the discount window.
When Volcker raised rates for the banks, they had to go to the private sector to get cheaper loanable funds. So people started saving more and more at say, 18% return, and put that money in the banks to keep the capitalized.
When the rate is very low, no one wants to save because banks won't pay any interest on savings. It is cheaper for the bank to get all new credit directly from the central bank. Low interest rates cause all sorts of mischief in the short and long term. Rates too high can slow economic growth as well. The market should set the price of money based on supply and demand.
The problem with the central bank moving rates up and down, is that they almost always reflect a political agenda, not a real indication of the amount of savings for capital investment in an economy. An economy which does not save, cannot grow. This is why GDP is a nonsense number. It includes debt, the theory being, if you can borrow, then you are growing, but when you borrow against yourself, it's just an accounting trick.
Because it is a monopoly (legal tender laws), the accounting tricks that are run can persist for decades, because no one can stop participating in the scheme.
That is why Ron Paul agitates for market money, which would undo legal tender laws, and thus give people a chance to escape the erosion of value from inflation.
They create the reserve credits out of thin air, and that credit is created to steal purchasing power from everyone holding dollars in the economy in order to pay for government spending, and bankroll the banks in the global investment casino. The theft occurs by diluting the currency as fractional reserve pyramids those reserves into lots of new money. More money chasing the same number of goods = higher aggregate prices. This is called inflation (price inflation), but it is really only a symptom of inflation (monetary inflation).
It's all fascinating stuff really. Terribly depressing when you first start to grasp how the game is stacked against the average person, but enlightening when you start to plan your investments and business to avoid harm from the system.
Let's not forget that the US government sells debt to someone else..........US via social security taxes.
It's hard to separate them really. Economics is based on concepts, which while often politicised are really philosophical ones, such as ownership, growth, desire.