Gyroscopic Investing

Yes, to a large extent this is yelling at the TV and expecting something to change. But isn't that a big part of what we do here?

Awesome, I loved this. It should go down in the board's hall of great quotes!

I little more yelling...I'm no lawyer nor do I pretend to have any insight into constitutionality....but getting back to the Fed.

I do have a fair bit of the social sciences under my belt as well as economics and I have just never understood what the big issue is with the fed; my argument is as a follows:

1. Pure and simple, money is whatever people believe it is. If they accept something as a store of value that isn't the actual thing then its money. This has always been the case throughout history. Copper disks, seashells, tulips, silver, gold, wheat, clay tablets...there's been a lot of things that have been money. In today's world it's not even paper dollars, it's computer 1s and 0s.

2. In my experience hard money enthusiasts really only look at part of the actual behavior of the stuff. They are all over it's benefits when it comes to constraining inflation, but historically it just has not performed that way for a very simple reason...you can take gold (for example) and add a bunch of other metal to it or mint a much smaller piece of it and stick the same number on it...and governments have done that repeatedly. And, in more recent history no one in their right minds will go back to a gold standard because in a shrinking economy a fixed money standard exacerbates liquidity shortages sometimes to an amazing degree. Such behavior is just plain harmful and counterproductive.

3. Finally, why have most "smart" countries walled of their Fed's from their political processes...see paragraph 2 above. Surprise, politicians will simply do what is best for them and that often ends up being "really" turning on the printing presses. (However, what is really weird is turning on the printing presses isn't doing what it used to...as I've noted before on the board, there is probably a Nobel in Economics to whomever explains what is going on now...historically, this is truly weird stuff)

Money just makes a barter system easier for those who are not completely self-sufficient in producing their own needs. Free money, in all of its various government sponsored forms, just rewards those who would starve to death in a true barter system.

> what the big issue is with the fed

Billions created with a keystroke, daily. Are we allowed to see who's getting the repo money?

Mountaineer wrote: ↑Wed Feb 12, 2020 8:56 am Money just makes a barter system easier for those who are not completely self-sufficient in producing their own needs. Free money, in all of its various government sponsored forms, just rewards those who would starve to death in a true barter system.

I was going to raise my own cows and make my own shoes and smelt my own metal, install my own plumbing, and build my own clean room, and fabricate my own semiconductors, but...money seems convenient.

Without opening a can of worms.
In the U.S. debt-based money system, can we all agree that Money is Loaned in existence? yes/no

I think a more accurate description is US money is seeded into existence and depending on what is happening in "the environment" money grows or shrinks.

Who is getting the repo money, large financial institutions of course. However, by definition repos are fully collateralized (and the underlying way more liquid).

Let's imagine I have a 4 week note at Treasury Direct that doesn't expire for two more weeks and I need that cash tonight or for the next week. I turn that note over to boglerdude and he let's me have his note that just matured to use. In exchange I agreed to give him my note + a little interest. He's good, I'm good, boglerdude makes a little extra money at no serious risk.

Wah lah, a repo.

But let's say Russia invades some other country and kbg sounds way too much like kgb and BD just doesn't trust me...well then BD is going to get my note anyway and charge kgb way more interest to do so.

It's of course a bit more complex but the two key points are...

1. Fully collateralized

2. It's not the amount it's the risk that matters; and therefore, what people should watch is what is going on with the associated repo loan spread(s).

shekels wrote: ↑Thu Feb 13, 2020 9:28 am Without opening a can of worms.
In the U.S. debt-based money system, can we all agree that Money is Loaned in existence? yes/no

Almost all money in the current system is lent into existence. There’s a tiny amount of legal tender money in this country that isn’t. You may have even held a little of it in your hands.

OK I had a WTF... moment.
Over the past several weeks the Fed has lower the interest rate to ZERO.
They have just Screwed savers in CD's/t-Bills /interest bearing accounts.
Then They created 700 Billion and counting out of thin air and put it on the Feds balance sheet.
It you created Billion with a computer then why the F... did you lower short term interest rates?
You plan on Bailing out Business then why Lower rates? You have robbed Peter and giving it to Paul.
I think the Stock Market has had it Injections of Liquidity long enough.
When you have share buybacks from company's with excess cash at the top of the market,
they may deserve what they get when the market goes south.
Maybe they should of held on to the cash for when the time comes that they need it.
So we have a Monetary system that the Fed can and will trash anything it touches.
Like Currency, Treasury Bills/Bonds, Stock Markets.
Whats left Real Estate, Gold well they have there fingers in that too.
end rant for now.

In the crisis, Bernanke had freedom to act immediately - he doesn't need permission from Congress or the president. While they debated on Capitol Hill, Bernanke cut interest rates nearly to zero; then he used Depression-era emergency powers to launch a dozen rescue programs of his own. There was support for money market funds, mortgages, short term lending to small business, and support for auto loans, student loans and small business loans - commitments of a trillion dollars, doubling the size of the Fed's balance sheet.

Asked if it's tax money the Fed is spending, Bernanke said, "It's not tax money. The banks have accounts with the Fed, much the same way that you have an account in a commercial bank. So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed. It's much more akin to printing money than it is to borrowing."

"You've been printing money?" Pelley asked.

"Well, effectively," Bernanke said. "And we need to do that, because our economy is very weak and inflation is very low. When the economy begins to recover, that will be the time that we need to unwind those programs, raise interest rates, reduce the money supply, and make sure that we have a recovery that does not involve inflation."