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Is it time for the FED to restore interest rates?

Discussion in 'Economics, Business, and Taxes' started by Days, Oct 14, 2015.

  1. Days

    Days Governor

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    ... because after all, the economy is burning up and inflation is out of control?

    A long time ago (about 10 years) I predicted the dollar would go into a flat spin and bottom out. At the time, I was a mortgage banker and what I was talking about was the governor for lending rates on real estate... the discount rate. The discount rate was held too low by Greenspan and it created the housing bubble, then Bernanke raised it by a 1/4% each quarterly meeting for 3 years which popped the housing bubble, then the rate collapsed again. Today, there is scant housing activity apart from foreclosures, so no one is even thinking about touching the discount rate.

    The other governor for lending rates is the federal funds rate, which literally prices the cost of money to the banks. After the market collapses of 2008, the federal funds rate collapsed with the economic collapse that followed the market collapse. The slow recovery of investment in the stock market for the past five years has been the direct result of leaving the federal funds rate untouched. Now the head of the FED (Yellen) wants to look at raising that rate, which will only have one result; cut off the price rise in stocks. She is wanting to do to the stock bubble what Bernanke did to the housing bubble; pop it.

    There is no reason in the world to mess with the federal funds rate on main street. people are out of work, living in poverty, and even college graduates can't find a job. Keeping the price of money low, extremely low, hasn't changed that. We have no problem with inflation on the street, just the opposite; even the oil companies can't pry enough blood from a rock to raise oil prices. The economy is not supposed to inflate slower than 3% per year, but it has been around 1-2% all through this 'recovery' ... the only thing recovering is stock prices. Hence, the stock bubble. Stocks are way over valued again, even more than they were when the market collapsed in 2008. Get ready for the double dip we predicted six years back, but it didn't happen because the FED countered with dropping the Federal Funds rate.

    Governors on the Board are revolting against raising the Federal Funds rate, a couple of them say, there's no need to raise the rate, not just yet; why? Uhm, because it will pop the stock bubble and the market will collapse again... and it could be just as tough to find a new bottom as it was in the Fall of 2008. (pun intended, Autumn of 2008) Why another panic, you ask? because we have not recovered the infrastructure at all, there just isn't any justification for any stock price when you look at the health of the nation.

    They will pop the bubble, count on it. I'm not saying there will be another recovery. Even if there is, it will be, at best, the same slow slog this one was. What no one has factored in is the bond maturation schedule for the Treasury. I don't know what it is, but it is sure to be a bitch, once they pop the stock bubble. Revenues will plummet, we may see deficits as high as $2 Trillion handed off to the next president. And as I said, there might not be any recovery, we might just spiral into deflation. With housing already in the toilet, and the manufacturing base gone overseas, the next smoke and mirrors act will be hard pressed to fool anyone.

     
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    Last edited: Oct 14, 2015
  2. Days

    Days Governor

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    We're looking at the collapse of the money supply (again) and possibly the collapse of the government with it, this time. This was bound to happen, in fact, it has to happen, the machinery is designed to fail. Fiat money systems that rely on fractional banking for money creation have to collapse, it's like blowing up a balloon until it pops, the balloon is going to pop, no maybe about it.

    The US Constitution authorized Congress to take out loans, but it did so in synchronization with authorizing Congress to manage the money creation. Along came the robber barons and they stole the money creation, leaving Congress no way to raise money except through taxes and loans. Worse, all real money was taken out of circulation and only debt currency is used for money. So all the money in circulation is debt.

    this insanity collapses on us over and over. There's no question whether another bubble will pop, the only question is when? Eventually the bond bubble will pop and the nation goes down the drain, same as the USSR did. Again, the pop is inevitable, the only question is... when? This top post is asking if it isn't right around the corner? Funny enough, the world bank is set to recognize the Chinese currency as another world reserve currency next year... why would the world need a back up reserve currency?

    Ten years ago I predicted the coming housing industry collapse would make the great depression look like a picnic. In the past decade we've seen something like ten million homes seized in foreclosure, with another ten million forfeited to the filing process (short sales, whatever, they had to get out of those homes). When I predicted the collapse people thought I was nuts, after the collapse, people forget that it will happen again, and again, because this system does that.

     
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  3. ObamacareForever

    ObamacareForever Governor

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    You are right. it's a good thing Americans are terrible savers and Susie Q. fixed income is a myth.
     
  4. Days

    Days Governor

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    Americans are terrible savers because this money system stripped wages down to bare survival incomes. We live in a totally controlled system... everything is controlled; the market, the money, the opportunities, prices, technology, it all is carefully monitored.
     
  5. ObamacareForever

    ObamacareForever Governor

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    Are you votin for the Bern?
     
  6. Days

    Days Governor

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    I haven't bothered to register to vote since my last move 8 years ago. I've never heard a presidential candidate say word one about what needs to be done to save the nation's currency. What has Sanders said? Is he returning to the Constitution? anything remotely close to that? Will he pay off synthetic debt with synthetic issue? Or will more taxes fix everything?

    By and large, folks in DC, just don't get it, when it comes to debt and taxes...

    Treasury Considers Plan to Help Puerto Rico
     
    Last edited: Oct 14, 2015
  7. Days

    Days Governor

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    Stronger Economy Cited as U.S. Reports Lowest Budget Deficit of Obama’s Tenure
    Maya MacGuineas, the leader of the Campaign to Fix the Debt, called Thursday’s report “good news,” adding, “Now the bad news: This may well be the lowest it will be for a long time.”


    The article explains that the deficit was only 2.5% of the nation's GDP. This is the wrong way to measure the deficit. This is how stunningly ignorant Americans are of their own system. The journalists reporting on the deficit do not understand it, and it is not hard at all to understand.

    Let's say you are running a business. If you had to borrow $439 billion in the 2015 fiscal year, what would you measure that against? The size of your industry or your own gross income in that industry? If you are running a business, you look at how much you bring in, that's what matters. So the article - and all these articles - should be measuring the deficit against revenues... not GDP.

    I quoted the headline and the last sentence; the article gives you no clue why the guy says this is the lowest it will be for a long time. But my top post here told you why. The next bubble the FED will pop is the stock bubble and that will finally bring the double dip we've been predicting and waiting to happen. And sure, that will hurt the GDP, but more importantly, it will lower revenues while all these bonds are rolling in to be redeemed. $439 billion in new debt is not a low amount of debt, people. When GWBush hit that mark, it was the highest deficit in history.

    What happens is a false sense of safety because the bond market is so strong, we have no problem selling bonds. But what gets forgotten is the nation still has to redeem those bonds. Bernanke, for all his cockiness and refusal to admit we had a problem on our hands in early 2006 with the collapse of housing lenders, did purchase about a trillion dollars of 40 year bonds, maybe he did it to gain the higher interest, but it represents the only breather in the redemption schedule. Now, all we have to worry about is the other $12 trillion floating around the market.

    The national debt is purely synthetic money, every dollar of it was printed up out of thin air... by the banks, through fractional banking. So why not print million dollar United States Notes in the Treasury, to pay off the bonds? Synthetic for synthetic. Why are we paying for these notes through the totally illegal income tax? Let's ask these worthless presidential candidates if they have the balls to discontinue the income tax and start redeeming Treasury bonds with Treasury issue (currency created by the Treasury versus currency created in the Treasury by the banks)?

    I have not heard one single American ask this question yet, not of a candidate, not even of themselves. How in the hell can an entire nation be this bone headed stupid? The system should be taught in 8th grade as a civics course. By now, we don't even have any educators that could write the syllabus, and the teachers have no clue without a syllabus. LeRoy teaches economics in college, but in the ten years I've posted with him, I'm not sure he understands this; mysteriously, all Americans have a great big blind spot when it comes to their own money and how it is created, managed, and budgeted.
     
  8. Woolleybugger

    Woolleybugger Mayor

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    Say your business can print it's own money if and when it wanted with the only brake being inflation. Now what do you say? Comparing a macro economy such as ours with a business is absurd. It appears that you are likely a Mizes Institute guy. No one takes them seriously but for conspiracy theorists.
     
  9. Days

    Days Governor

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    [​IMG]

    Ron Paul took them serious. I'm only familiar through Mr Paul's tenure in the House.

    I didn't compare a macro economy with a business, I compared the federal govt with a business. And then, only for the sake of understanding what the deficit should be compared to.

    However, let's pause for a moment on that idea of money inflation. In a synthetic currency such as ours, the money supply is created by the federal government writing debt. That's not exactly correct, I should say it is triggered by the debt, because the actual creation of the currency happens when the banks create loans. The first loan the banks create is the buying of Treasury bonds. Then the banks use those bonds as asset reserve to make commercial loans.

    As long as the bond is in circulation, it is part of the currency. When the bond is redeemed, it ceases to exist anymore, the IOU Note is tore up. The same is true of all bonds (mortgages are bonds). This is why government bond redemption and home refinance do not inflate the money supply. You can say that the printing of new issue to replace the bond has added new money, but the removal of the bond is reducing ten times the amount of the bond, because the banks lose the asset/reserve that they loan against. So it was always a Lie... there is no inflation happening when a bond is redeemed, just the opposite, the money supply is severely contracted. If we printed new issue through the Treasury, it would ease the contraction of the money supply by 10%, but the money supply still contracts.

    The Federal Reserve system drew up this currency, it is their currency, they understand how it works. But they don't want us to understand how it works, so we go right on taking the screwing. It's not enough for them to have hijacked the currency, you need to pay a "tax" on income to boot. The term income tax is an oxymoron. Taxes are paid on goods or services... attacking your income is theft, not taxation.

    To date, I still haven't read a single word from the Austrian school of economics, I was a mortgage banker in Illinois, remember?
     
  10. Woolleybugger

    Woolleybugger Mayor

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    The federal goverment is intimately tied to the macro economy, in essence, it is the only thing attempting to manage the macro economy and it uses policy, monetary and fiscal policy to do so. Some say that the Fed is not part of the government but in fact, it is. Rarely does the Fed not coordinate with the Treasury to insure close cooperation between the two forms of managing the money supply. It is only by law that the Fed is the sole source of new funding (and through credit issued by banks), that could change with a change in law at any time, there is no magic here, it can all be changed if needed.

    The federal budget is nothing like an income statement. The federal government doesn't even have a balance sheet for Chrissakes. If it did, it would be gigantic. Want to put a dollar price on Yosemite, the Grand Canyon, the assets in the military, airports, ports, roads and so on? Anyone who thinks the federal government should operate like a business is thinking about the Gold Standard prior to 1934. Since then, we have loosened up the constraints on the money supply to allow the federal gov to do what it needs to do to keep our macro economy functioning. As for Ron and Rand Paul, they are fiscal nut jobs like their buddy Lew Rockwell. No one takes them seriously. NO ONE.
     
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  11. Days

    Days Governor

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    The FED is another GSE, while it is not part of the government, it is an integral part of the function of the government. The FED handles the Treasury bond auctions; there is like a dozen and a half corporations who are authorized to take part in that auction. The rest of the planet has to buy their treasuries through those participants at the auction. For this reason, I have never advocated disbanding the FED... which is also why NO ONE (among serious economists) takes Ron Paul serious. The problem with the FED is they are too influential, our Treasury is run to suit the desire of our bankers instead of the good of our people.

    You are dead on (as usual) about the difference between the GDP of the nation versus an industrial or commercial spreadsheet showing net worth. The federal government is not a business, it is not even a part of the commercial sector; so why think of it as a business? What I was doing was trying to get business minded people to understand why the deficit should be compared with revenues, not the GDP. The entire debt should be compared to GDP, as it is done by the EU to provide a metric for measuring performance of the member states (nations?).
     
  12. justoffal

    justoffal Senator

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    NOW THAT IS WHAT I"M TAlKIN"BOUT WILLIS! GREAT PIECE OF FINANCIAL WRITING BIG GUY!

    Nice to see somebody looking straight at the root causes instead of politicizing our money problems. About real estate.....it's so true.....the only real movement out there is an insurrection at the bottom end trying to re-inflate the bubble. Let's hope they can't for everyone's sake. Even now the prices of the new sales are 300 to 500% above what the ambient local income levels will support....I don't know how anybody is selling anything at this rate...there has to be more hanky panky going on in the ledning industry to make any kind of sale at all.

    JO
     
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  13. justoffal

    justoffal Senator

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    Not much to argue with there. I am going to caution on one thing however....while it is true that our government does not operate like a business I'm not so sure it's all a good thing.

    By avoiding any real examination of the total asset picture the money changers who run the Valuation game are free to do almost any kind of criminal action whenever it suits them that destroys the value of the mandated currency. This in turn places the entire nation at their mercy depending on what they decide to do. I know that Wooley complains about a Government Balance sheet that is too big to handle in a practical sense, but I don't buy it. Nothing is too big to handle when it comes to the real economy....if that was the case we couldn't function on a day to day basis even to fill the cash draws in the local supermarket with enough paper and metal to start the day's transactions because no one would know what belonged there.

    I don't have any problem with a real balance sheet...IMO it's the only way to keep an eye on the thieves that raid the personal earnings of tax paying citizens. lack of such a real value system is what allows the likes of Rothschild and Rockefeller to piss on our legs and tell us that it is raining out.
     
  14. justoffal

    justoffal Senator

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    Probably the most truthful and revealing video about out natioin and out times that I have ever watched.

    I notice the total absence of comments from lefty.

    Hmmmm...

    JO
     
  15. justoffal

    justoffal Senator

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    [​IMG]
     
  16. Days

    Days Governor

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    This is a must see film. Not because of the conspiracy, but because he visits the Law, every American should know that the income tax is by definition a corporate tax on profit; NOT A TAX ON PRIVATE INCOME. The Supreme Court ruled in 1895 that levying an income tax on wages is unconstitutional. After the 16th Amendment was supposedly ratified (it wasn't) the Supreme Court ruled that the 16th Amendment imposes no new tax on Americans... hence, it was still Unconstitutional to levy an income tax on wages or other forms of personal income.

     
  17. Days

    Days Governor

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    Remember my posts about perceived value becoming value? And how I predicted the dollar would go into a flat spin and devalue to nothing? Did that happen? Almost everyone here would say NO, but it actually did happen, and not only so, I also predicted that once the dollar collapsed it would be unable to rise again, that it would remain broken as a currency.

    It happened dramatically. The discussion was about interest rates and someone asked me how many cycles did I think the dollar had left before rates would totally collapse and not be able to rise again. And I said, "one cycle, then it collapses to zero and stays there." That was ten years ago. and that was exactly what happened, Bernanke rose the rates 1/4% at a time for like 14 straight meetings and then POW rates collapsed in dramatic fashion right to zero for both target rates and have stayed there for both target rates. Being able to predict that; when it had never happened before, and nailing the cycle for it to happen in, and predicting the aftermath on top of that... okay, I think that says I knew the system and the times we lived in better than all the idiots in BOTF that claimed to understand it better than me. Eventually Cicero posted, "Days got it right"... but none of my foes ever admitted it.

    Let's explain what the value of our synthetic money is comprised of:

    The FED has two target rates; the FED fund rate (FFR) and the Discount rate. This is the cost of the synthetic dollar. As such, the price of money is the value of money. Just like the price you pay for a home is the value of the home. Okay, the FFR is exactly that; the interest rate the FED charges the top banks for funds, it is the cost of capital, aka cash. The Discount Rate is the interest rate the FED charges top mortgage banks for funding mortgages, again, this is capital as utilized for real estate... aka home equity loans. So these two target rates together comprise the cost of our synthetic money; it is what the banks pay to draw capital into the system; this is how the FED dollar is created. Both these TARGET rates survived one more cycle, then totally collapsed to zero. If I got anything wrong, it was the flat spin; they didn't do that, they plummeted. And they have remained at zero, they haven't budged, not even 1/8%, both of them... for what? some 5 years now. That was the collapse of the dollar. And the fact that the obama recovery was unable to pull either rate up from zero shows that the economic engine that drives the rates is still konked, we can't get up any steam at all, zero, zip, nada.
     
    Last edited: Oct 25, 2015
  18. georgephillip

    georgephillip Governor

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    Some are suggesting public finance would be better served if it came from public utilities instead of private investment banks?o_O
    "... Commerce needs big banks. But they don't necessarily need big banks the way they are. And you talked about banking as a public utility. So what does that look like?

    "LEO PANITCH: Well you know, the alternative is, you know, do you go back to the American dream, the liberal dream, the neoclassical economist dream, Adam Smith's dream, that you can have a hidden hand of the market that will produce equilibrium if you have a lot of small actors in it? And you know, you aren't allowing two or three to collude together to set price. That's the traditional American model advanced by sometimes radicals in the United States and often on the right by the most rabid inegalitarians. The other way to look at this is in terms of this is indeed very, very concentrated power. But you're not going to get any stabilization or you're not going to get a return to the small being eaten up by those who are, you know, either better at engaging in fraud or more efficient, or have more links to the state or what have you. That that will all happen again."
    http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=14985
    "Leo Panitch is the Canada Research Chair in Comparative Political Economy and a distinguished research professor of political science at York University in Toronto. He is the author of many books, the most recent of which include UK Deutscher Memorial Prize winner The Making of Global Capitalism: The Political Economy of American Empire and In and Out of Crisis: The Global Financial Meltdown and Left Alternatives. He is also a co-editor of the Socialist Register, whose 2013 volume is entitled The Question of Strategy."
     
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  19. Days

    Days Governor

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    The real question of strategy is WHO are they strategizing for? America is run by a handful of very large corporations. Most economists are trying to figure out how to make it possible for start-ups and small companies/corps to compete again. The government is owned by the banks and the banks are literally tools of the devil; how can anyone truly expect to get these players to produce anything good for the country? Let's be realistic; they not only don't care about the common good/wealth, they have business models that pray on the common good. Their whole way of making money is to take it from you.

    My advice to this nation is save yourself. Pay off the synthetic debt with synthetic issue. Forget the invisible hand, it died with the free market, it's high time we used visible hands in the Treasury. Stop collecting the totally unconstitutional private income tax (its a corporate tax on corporate profits) and start paying the nation's debt with the other side of the economic equation; simply issue synthetic credits for all the synthetic debts previously issued... aka, print our own damn money in our mints.

    the banks took over all the nations (add Libya to the list) and they run them as if the nations are their customer base... which, if you think about it, is exactly the case. Our politicians need to stop taking back the nation from the other political party and start taking back the nation from the banks. Originally, the govt was supposed to be ruling over the banks... it never really happened, but that was the plan.
     
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  20. georgephillip

    georgephillip Governor

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    That sounds like what Lincoln had in mind:
    "'The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.' -Abraham Lincoln"
    http://www.themoneymasters.com/the-money-masters/famous-quotations-on-banking/
     
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