A Fed Thread

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dualstow
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A Fed Thread

Post by dualstow » Sat Feb 08, 2020 10:14 am

Trump wants Judy Shelton, who likes the idea of a return to the gold standard and is supposedly for ending the Fed’s independence from the rest of government. I think that’s weird. Don’t you think that’s weird?
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Re: A Fed Thread

Post by Kriegsspiel » Sat Feb 08, 2020 2:16 pm

What do you mean by 'weird.'
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Re: A Fed Thread

Post by dualstow » Sat Feb 08, 2020 3:35 pm

Kriegsspiel wrote:
Sat Feb 08, 2020 2:16 pm
What do you mean by 'weird.'
A bad idea. Both bad ideas.
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Re: A Fed Thread

Post by boglerdude » Mon Feb 10, 2020 12:26 am

She's a trump supporter and will do a 180 on gold like Greenspan did, to keep her position of power.
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Re: A Fed Thread

Post by Tortoise » Mon Feb 10, 2020 6:24 am

boglerdude wrote:
Mon Feb 10, 2020 12:26 am
She's a trump supporter and will do a 180 on gold like Greenspan did, to keep her position of power.
Exactly. Doesn’t matter if she supports a gold standard. If she gets a position of power, she’ll get the “big girl briefing” and be forced to toe the line like everyone else.
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Re: A Fed Thread

Post by Kbg » Mon Feb 10, 2020 2:25 pm

Libertarian666 wrote:
Sun Feb 09, 2020 1:52 pm
The fed is unconstitutional and unbacked paper money is a ticking time bomb.
DO discuss both assertions, proof, evidence, rationale...and you MUST explain deflation and historically low inflation in Japan from 1990 until now and the developed world from 2008 until now as part of your response. If you are unable to, then we throw this statement into the pile of useless conspiracy theories and factual inaccuracies.

Popcorn and soda in hand...go.
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Re: A Fed Thread

Post by Xan » Mon Feb 10, 2020 2:31 pm

Kbg wrote:
Mon Feb 10, 2020 2:25 pm
Libertarian666 wrote:
Sun Feb 09, 2020 1:52 pm
The fed is unconstitutional and unbacked paper money is a ticking time bomb.
DO discuss both assertions, proof, evidence, rationale...and you MUST explain deflation and historically low inflation in Japan from 1990 until now and the developed world from 2008 until now as part of your response. If you are unable to, then we throw this statement into the pile of useless conspiracy theories and factual inaccuracies.

Popcorn and soda in hand...go.
Not sure exactly what good or bad the Fed has done in its existence, but I believe according to the 9th and 10th amendments (as well as to the tenor, purpose, and spirit of the original unamended Constitution), it's up to the Fed's proponents to prove that it IS Constitutional, not the other way around.
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Re: A Fed Thread

Post by Libertarian666 » Mon Feb 10, 2020 6:17 pm

Xan wrote:
Mon Feb 10, 2020 2:31 pm
Kbg wrote:
Mon Feb 10, 2020 2:25 pm
Libertarian666 wrote:
Sun Feb 09, 2020 1:52 pm
The fed is unconstitutional and unbacked paper money is a ticking time bomb.
DO discuss both assertions, proof, evidence, rationale...and you MUST explain deflation and historically low inflation in Japan from 1990 until now and the developed world from 2008 until now as part of your response. If you are unable to, then we throw this statement into the pile of useless conspiracy theories and factual inaccuracies.

Popcorn and soda in hand...go.
Not sure exactly what good or bad the Fed has done in its existence, but I believe according to the 9th and 10th amendments (as well as to the tenor, purpose, and spirit of the original unamended Constitution), it's up to the Fed's proponents to prove that it IS Constitutional, not the other way around.
Correct.
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Re: A Fed Thread

Post by Kbg » Mon Feb 10, 2020 8:27 pm

Actually that's not how it works at all...a law is considered constitutional by the very fact it was approved properly by the Legislative branch. It is then up to an entity to challenge said law's constitutionality and then the Supreme Court can render a decision.

Fed fans don't have to demonstrate anything, Fed haters have to get the Supreme Court to agree with them.

Here is a legal defense of the Fed

https://famguardian.org/Subjects/MoneyB ... /const.htm

To me this is the bottom line of the whole issue legally: Finally, and perhaps most importantly, Congress has the right to make any law that is 'necessary and proper' for the execution of its enumerated powers (Art. I, Sec. 8, Cl. 18).

Done.

Not to say I wouldn't like to see the Fed Governors consist of more than bankers and macro economists...I do think something this powerful should have more on the board than vested money interests.
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Re: A Fed Thread

Post by Xan » Mon Feb 10, 2020 9:36 pm

Kbg wrote:
Mon Feb 10, 2020 8:27 pm
Actually that's not how it works at all...a law is considered constitutional by the very fact it was approved properly by the Legislative branch. It is then up to an entity to challenge said law's constitutionality and then the Supreme Court can render a decision.
So it isn't unconstitutional until the Court declares it so? Or was it unconstitutional all along?
Kbg wrote:
Mon Feb 10, 2020 8:27 pm
To me this is the bottom line of the whole issue legally: Finally, and perhaps most importantly, Congress has the right to make any law that is 'necessary and proper' for the execution of its enumerated powers (Art. I, Sec. 8, Cl. 18).

Done.
I'm not saying the Fed is constitutional or not, but just which enumerated power is the Fed supporting?
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Re: A Fed Thread

Post by Kbg » Mon Feb 10, 2020 10:46 pm

If you just step back and think about the enumeration comment for just a couple of minutes you will realize what complete and utter nonsense it is. The way you are applying it is a literalist use of the term, supported by exactly no precedent, procedure or common practice.

I’ll help, there is congressional law, executive branch regulations and case law out the wazoo that you can find no direct tie to in the constitution. Yet it all exists, why? Because the constitution delegates and divides the details of actual governing to the respective branches.

And to be clear, yes, things are assumed constitutional unless challenged and overturned. No challenge or challenge and lose, constitutional end of story.

Perhaps a simple anecdote...we are watching football and a touchdown gets scored in the last second which causes your team to lose. Suddenly you start yelling at the TV/ref saying touchdowns are only worth 4 points. You can think that all you want but a TD is 6 points.
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Re: A Fed Thread

Post by Xan » Tue Feb 11, 2020 8:38 am

The accusation of "literalist" would apply when somebody takes figurative language, like "it's raining cats and dogs", and takes it literally, as in thinking animals are falling from the sky.

Figurative language has no place in law and especially in a constitution. "enumerated powers" is not figurative language: the only reason those words are there is to specifically repudiate your interpretation. Congress can NOT do anything it wants; it has specifically enumerated powers outside of which it has no authority.

If the best argument for the constitutionality of the Fed (or anything) is that the word "enumerated" should be interpreted as having the exact opposite meaning of what it actually means, then it is clearly unconstitutional. I don't know whether you're presenting the best argument for the constitutionality of the Fed, but if so, then it ain't.

I also don't understand why you're saying that nobody can say a law is unconstitutional until a court finds it unconstitutional, while simultaneously saying that the only way a court can find a law unconstitutional is after somebody says it's unconstitutional.

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?
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Re: A Fed Thread

Post by Kbg » Tue Feb 11, 2020 10:46 am

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)
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Re: A Fed Thread

Post by Mountaineer » 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.
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Re: A Fed Thread

Post by boglerdude » Thu Feb 13, 2020 1:15 am

> 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?
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Re: A Fed Thread

Post by dualstow » Thu Feb 13, 2020 7:01 am

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. O0
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Re: A Fed Thread

Post by shekels » 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?
>:D yes/no
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Re: A Fed Thread

Post by Kbg » Thu Feb 13, 2020 1:56 pm

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).
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Re: A Fed Thread

Post by Libertarian666 » Thu Feb 13, 2020 3:20 pm

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?
>:D 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.
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Re: A Fed Thread

Post by shekels » Tue Mar 17, 2020 11:30 am

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."
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