21–30 of 78 posts
subtext - Keep a close eye on this situation, as it may require popcorn and a safe viewing platform.
> How did the Fed push these reserves into the system? Easy. It created them out of thin air, and used them to buy government securities from banks. This type of economic wizardry can't be good...
Why?
Well, at this point, if the Fed is not forced to raise their rates, then you might as well kiss the global economy goodbye. Downvote me if you want, but what I said needs to have been said, no matter if you personally agree with it or not.
You may want to explain more about why you feel that way for people who don't have insights into your personal viewpoint or the broad arguments for that matter :)
[1] http://www.federalreserve.gov/ [2] https://research.stlouisfed.org/fred2/
That 10% reserve number is interesting. I learned about the 10% reserve ratio in macroeconomics class, where I also learned that there's this thing called the money multiplier. See, if banks are required to hold a fraction r (10%) of their deposits in reserve, then obviously they'll lend out the rest, which will in turn be held or spent by the borrower, and one way or another it'll end up back in a bank. So a (1-r) f…
Here's a great article that describes exactly this phenomenon in more detail. http://www.theguardian.com/commentisfree/2014/mar/18/truth-m... > There's really no limit on how much [money] banks could create, provided they can find someone willing to borrow it. They will never get caught short, for the simple reason that borrowers do not, generally speaking, take the cash and put it under their mattresses; ultimately,…
That 10% reserve number is interesting. I learned about the 10% reserve ratio in macroeconomics class, where I also learned that there's this thing called the money multiplier. See, if banks are required to hold a fraction r (10%) of their deposits in reserve, then obviously they'll lend out the rest, which will in turn be held or spent by the borrower, and one way or another it'll end up back in a bank. So a (1-r) f…
There is no exit. The Fed cannot raise rates.
That 10% reserve number is interesting. I learned about the 10% reserve ratio in macroeconomics class, where I also learned that there's this thing called the money multiplier. See, if banks are required to hold a fraction r (10%) of their deposits in reserve, then obviously they'll lend out the rest, which will in turn be held or spent by the borrower, and one way or another it'll end up back in a bank. So a (1-r) f…
Well written, thank you. It's beyond my understanding why the fractional reserve banking is allowed by western societies. Why should banks be able to do this, but not other companies or even private persons?
> How did the Fed push these reserves into the system? Easy. It created them out of thin air, and used them to buy government securities from banks. This type of economic wizardry can't be good...
There's a great piece by NPR a few years ago on the topic where they explain the process:
http://www.npr.org/sections/money/2010/08/26/129451895/how-t...
> How did the Fed push these reserves into the system? Easy. It created them out of thin air, and used them to buy government securities from banks. This type of economic wizardry can't be good...
Why?
My understanding is weak and I'm still not clear whether the Zeitgeist Movement's position on the matter is correct, but I'd recommend watching the second of the Zeitgeist Movement's video on the matter to enrich your opinion.
Most central banks dictate that there should be 2% inflation, which means the economy needs to grow 2% per year. But we live in a world with linear resources so unless we talk about virtual goods the economy cannot grow that much and still be sustainable over the long run. Basically it will violate a nature law which says we cannot ventilate that much heat into space as the economic growth requires. "At that 2.3% gro…
As several people keep hammering into my head, inflation is not the same thing as what people would consider "growth". Depending on your school of economic thought, inflation represents the increase in money supply. So, if I took away every $1 bill and replaced it with a $100 bill, the willingness of everyone to now pay $100 for a coke is inflation. It seems to be an accepted principle that we want to keep people fro…
Earlier quoted context omitted.
Here's a great article that describes exactly this phenomenon in more detail. http://www.theguardian.com/commentisfree/2014/mar/18/truth-m... > There's really no limit on how much [money] banks could create, provided they can find someone willing to borrow it. They will never get caught short, for the simple reason that borrowers do not, generally speaking, take the cash and put it under their mattresses; ultimately,…
I don't see any inherent problem in having the sum of all deposits far exceed the actual amount of cash in existence. I do find it odd that the Fed and Congress permit the banks to exert strong control over the total money supply by adjusting how much cash they hold in reserve rather than having the Fed itself control the money supply.