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Barney Frank

 

 

 

More big Govt --more taxes fines fees costs --same insanity and inane cycle --more companies moving out overseas --fewer jobs --more decline --more lies as they pretend to "fix things" .

 

 

Barney whos only notable expereience with the free enterprise system was his gay lover running a prostitution ring out of Barney's Washington DC apartment is typical of those now running the nation and "regulating" others biz .

 

It is more control ,more power more money --more means for Govt fraud graft and corruption ,--the REAL hope n change self serving political agenda .

 

" House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) is spearheading the legislation, which aims to reduce risk across the financial system, restrict the multi-trillion dollar derivatives market and boost consumer protections, among other changes."

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House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) is spearheading the legislation, which aims to reduce risk across the financial system, restrict the multi-trillion dollar derivatives market and boost consumer protections, among other changes.

 

I don't trust the derivatives weasels any more than Frank does.

 

Congress passed a $700 billion bailout last year to support the financial industry, while the Federal Reserve has pumped trillions of dollars into the economy to stabilize markets.

 

Since the Fed began stabilizing markets, we have had some of the worst and longest crashes in history.

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Since the Fed began stabilizing markets, we have had some of the worst and longest crashes in history.

 

Oh for god's sake.

 

We've "had some of the worst and longest crashes in history" when the Fed has taken a laissez faire attitude towards financial markets.

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Since the Fed began stabilizing markets, we have had some of the worst and longest crashes in history.

 

Oh for god's sake.

 

We've "had some of the worst and longest crashes in history" when the Fed has taken a laissez faire attitude towards financial markets.

 

 

The Fed's purpose is the stabilize the value of the currency, hardly a mission compatible with the phrase laissez faire, and a mission in which they have failed almost completely. They have repeatedly enabled speculative binges by inflating the currency when speculators want to go nuts and government wants to spend, resulting in crash after crash. Remember the great crash of 1907? No one else does either, because it wasn't all that bad, and was over quickly. But it gave us the Fed, and the next crash was the Great Depression.

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Since the Fed began stabilizing markets, we have had some of the worst and longest crashes in history.

 

Oh for god's sake.

 

We've "had some of the worst and longest crashes in history" when the Fed has taken a laissez faire attitude towards financial markets.

 

 

The Fed's purpose is the stabilize the value of the currency, hardly a mission compatible with the phrase laissez faire, and a mission in which they have failed almost completely. They have repeatedly enabled speculative binges by inflating the currency when speculators want to go nuts and government wants to spend, resulting in crash after crash. Remember the great crash of 1907? No one else does either, because it wasn't all that bad, and was over quickly. But it gave us the Fed, and the next crash was the Great Depression.

 

Could you please explain how the Fed was " inflating the currency" during the timeframe before our most recent financial meltdown?

 

Thanks.

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Do you want the mechanics of open market operations, or what? They drove the interest rate down so that the dotcom collapse wouldn't become a wider collapse, and the unnaturally low rate (too much money) fueled the speculative real estate boom, which subsequently collapsed. Now they're printing money like crazy, trying to limit how bad this hangover feels, and the result will be another speculative boom (explained as a failure to sufficiently regulate once again) and yet more printing to "solve" that problem.

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Do you want the mechanics of open market operations, or what? They drove the interest rate down so that the dotcom collapse wouldn't become a wider collapse, and the unnaturally low rate (too much money) fueled the speculative real estate boom, which subsequently collapsed. Now they're printing money like crazy, trying to limit how bad this hangover feels, and the result will be another speculative boom (explained as a failure to sufficiently regulate once again) and yet more printing to "solve" that problem.

 

You said the Fed "enabled speculative binges by inflating the currency."

 

Driving interest rates down has the effect of deflating a currency.

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OK, maybe I really do have to explain open market operations. Or let these people do it.

 

The Fed has the power to control interest rates though government-backed securities. These investment instruments can be bought or sold, depending on what the Fed decides. If the central bank wants to lower interest rates, it buys a lot of securities, infusing the banking system with cash (kind of like in the old days when the Fed actually controlled the amount of money on the market). With more money available, interest rates decrease. If the Fed wants to raise interest rates, it sells securities.

 

When they print up a bunch of money and buy government debt with it, that lowers interest rates (in the short term) and the value of the dollar (in the long term) and that's inflationary. It's why a 1964 dime can buy you a gallon of gas, but no dime from later years can.

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Question for Wabbit:

 

If the Fed is lending money to banks for 0 interest, are the banks

buying a lot of T bills with it?

 

?

 

There has definitely been an increase in aggregate bank holdings of treasuries. Some of the newly minted "banks" (e.g. Goldman Sachs) are probably using it for more speculative trading activities.

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What happens is, the government wants to spend more than they take in, so they go to the Fed and say "Buy these Tbills" and the Fed prints the money and buys them, creating money from thin air. That means lower interest rates, meaning investors have incentives to invest! Wheeee! Investment is good, right?

 

Well, unless it's malinvestment that would not happen without artificially cheap interest rates...

 

Then some guy makes the malinvestment, and the herd perks up its collective head...hey, that might be a good idea, let's follow. Gee, if we all buy something, the price goes up. This whole investment thing works! Wheeee! This is lots of fun! And fun for the politicians spending our grandchildrens' money! Just a blast all around.

 

Then the bubble bursts, and everyone agrees that those silly malinvestors were evil speculators, endangering us all (PANIC!) and they must be regulated. But first, we'll have to borrow a bunch of money. So next the government wants to spend more than they take in, so they go to the Fed and say...

 

lather, rinse, repeat.

 

Or, finally, AUDIT THE FED.

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Do you want the mechanics of open market operations, or what? They drove the interest rate down so that the dotcom collapse wouldn't become a wider collapse, and the unnaturally low rate (too much money) fueled the speculative real estate boom, which subsequently collapsed. Now they're printing money like crazy, trying to limit how bad this hangover feels, and the result will be another speculative boom (explained as a failure to sufficiently regulate once again) and yet more printing to "solve" that problem.

 

You said the Fed "enabled speculative binges by inflating the currency."

 

Driving interest rates down has the effect of deflating a currency.

 

We obviously have opposite opinions on how monetary policy works, but I'm curious as to just how you think printing a bunch of money to drive down interest rates can deflate the currency?

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We obviously have opposite opinions on how monetary policy works, but I'm curious as to just how you think printing a bunch of money to drive down interest rates can deflate the currency?

 

I think you're both tlaking the same thing, from two different sides.

Printing money out of nothing deflates currency, as in makes it worth less.

As a consequence, relative prices inflate if real cost stays the same.

 

Wabbit is talking currency while you're talking price. There's really no opinion on how it works. It's fact.

The big variables are real cost and unemployment. Unemployment is acting as a drag on inflation, since it is stifling demand. At a steady rate of supply and comparatively low demand (from the unemployment and housing issues), prices fall. Goods and services have become less dear to the US right now.

 

If/once demand returns, inflation will follow and the Fed will have to raise interest rates. It's going to be a highwire act to balance any recovery from here. I wouldn't want to be the guy pulling the levers...

 

Thank god it all balances out in the long term (whatever that timeframe may be).

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Thank god it all balances out in the long term (whatever that timeframe may be).

 

Depends on how you look at balance. When you look at how the Fed has maintained the value of a dime vs the current melt value of a silver dime, it doesn't look to me like they've done their job.

 

You may be right about the difference of definitions. I was using inflate like this:

 

in·flate

v. in·flat·ed, in·flat·ing, in·flates v.tr.1. To fill (something) with air or gas so as to make it swell.2. a. To enlarge or amplify unduly or improperly; aggrandize.b. To raise or expand abnormally or improperly.3. To cause (a currency or an economy) to undergo inflation.

 

and interpreting deflate like this:

 

de·flate

v. de·flat·ed, de·flat·ing, de·flates v.tr.1. a. To release contained air or gas from.b. To collapse by releasing contained air or gas.2. To reduce or lessen the size or importance of: Losing the contest deflated my ego.3. Economics a. To reduce the amount or availability of (currency or credit), effecting a decline in prices.b. To produce deflation in (an economy).

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Thank god it all balances out in the long term (whatever that timeframe may be).

 

Depends on how you look at balance. When you look at how the Fed has maintained the value of a dime vs the current melt value of a silver dime, it doesn't look to me like they've done their job.

 

 

The average real HH income has gone up by 30% since the silver dime, so it could be argued that while the currency is worth less, you're making more than your 1965 counterpart.

Now, the fact is that real US GDP per household has doubled since then, so real HH income as a ratio against GDP has fallen is a disturbing issue. That's a can 'o worms (redistribution of wealth and all) that I'm not getting into.

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Do you want the mechanics of open market operations, or what? They drove the interest rate down so that the dotcom collapse wouldn't become a wider collapse, and the unnaturally low rate (too much money) fueled the speculative real estate boom, which subsequently collapsed. Now they're printing money like crazy, trying to limit how bad this hangover feels, and the result will be another speculative boom (explained as a failure to sufficiently regulate once again) and yet more printing to "solve" that problem.

 

You said the Fed "enabled speculative binges by inflating the currency."

 

Driving interest rates down has the effect of deflating a currency.

 

We obviously have opposite opinions on how monetary policy works, but I'm curious as to just how you think printing a bunch of money to drive down interest rates can deflate the currency?

 

Trying to have a discussion with you is like trying to wrangle a greased pig. You were originally talking about interest rates, so let's stick to that, OK?

 

Day one: 100 yen = 1 US dollar. Yen interest rate=0.5%, US dollar interest rate =1.00%

 

Now let's say the Fed lowers the discount rate and the US dollar interest rate to 0.5%. All other things being equal, this means the dollar will be less attractive because the yield on dollar-based fixed income instruments will be lower, and people will tend to sell dollars for other hard currencies, like the yen or the euro. Thus, the value of the dollar is lowered, not "inflated".

 

Now you can holler and thump your chest all you like about the Fed "inflating the currency" and causing the bubble that led the financial crisis, but if you actually look at the interest rates set by the Fed, you'll see that the Fed was continuously raising the target federal funds rate and the discount rate from 2003 to 2007. Greenspan offers his explanation of this phenomenon (the Fed's inability to affect long-term rates by hiking short-term rates) in his book. He posits that it is connected with our voracious consumerism, which put piles of dollars in the pockets of newly emerging countries, and they had to park all this cash somewhere, so they kept buying dollar instruments, which kept dollar interest rates low, even though the Fed was trying to guide them upwards.

 

In other words, the financial crisis was caused by failures in trade policy (e.g. granting China MFN status) and regulatory policy (e.g. killing Glass-Steagall and the Fed taking a laissez faire approach to overseeing financial institutions), not monetary policy.

 

800_800federalreserve21.jpg

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Day one: 100 yen = 1 US dollar. Yen interest rate=0.5%, US dollar interest rate =1.00%

 

Now let's say the Fed lowers the discount rate and the US dollar interest rate to 0.5%. All other things being equal, this means the dollar will be less attractive because the yield on dollar-based fixed income instruments will be lower, and people will tend to sell dollars for other hard currencies, like the yen or the euro. Thus, the value of the dollar is lowered, not "inflated".

 

Umm.... doesn't "inflation" generally mean that the value of the currency is reduced?

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Day one: 100 yen = 1 US dollar. Yen interest rate=0.5%, US dollar interest rate =1.00%

 

Now let's say the Fed lowers the discount rate and the US dollar interest rate to 0.5%. All other things being equal, this means the dollar will be less attractive because the yield on dollar-based fixed income instruments will be lower, and people will tend to sell dollars for other hard currencies, like the yen or the euro. Thus, the value of the dollar is lowered, not "inflated".

 

Umm.... doesn't "inflation" generally mean that the value of the currency is reduced?

 

The phrase "inflating a currency" isn't really used this way by economists, as it is misleading. It makes it sound like the value of the currency is being increased, not decreased. Real economists talk about currencies appreciating and depreciating.

They talk about inflation and deflation with regards to prices (consumer and wholesale), not currencies. You tend to find this misapplication of the word "inflate" in anti-central-bank, conspiracy kook screeds. It's not something you find in mainstream finance and economic publications. It's a pretty good indicator of where someone is getting his information.

 

And in this case, Tom Ray is flat wrong, since the Fed was actually tightening monetary policy throughout the period that the bubble was growing. So his attributing the bubble to the Fed's monetary policy is ludicrous.

 

Like I said, the bubble was caused mainly by bad trade policy and regulatory policy, not monetary policy.

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Day one: 100 yen = 1 US dollar. Yen interest rate=0.5%, US dollar interest rate =1.00%

 

Now let's say the Fed lowers the discount rate and the US dollar interest rate to 0.5%. All other things being equal, this means the dollar will be less attractive because the yield on dollar-based fixed income instruments will be lower, and people will tend to sell dollars for other hard currencies, like the yen or the euro. Thus, the value of the dollar is lowered, not "inflated".

 

Umm.... doesn't "inflation" generally mean that the value of the currency is reduced?

 

The phrase "inflating a currency" isn't really used this way by economists, as it is misleading. It makes it sound like the value of the currency is being increased, not decreased. Real economists talk about currencies appreciating and depreciating.

They talk about inflation and deflation with regards to prices (consumer and wholesale), not currencies. You tend to find this misapplication of the word "inflate" in anti-central-bank, conspiracy kook screeds. It's not something you find in mainstream finance and economic publications. It's a pretty good indicator of where someone is getting his information.

 

And in this case, Tom Ray is flat wrong, since the Fed was actually tightening monetary policy throughout the period that the bubble was growing. So his attributing the bubble to the Fed's monetary policy is ludicrous.

 

Like I said, the bubble was caused mainly by bad trade policy and regulatory policy, not monetary policy.

 

 

The term is used that way in the dictionary, as I posted above. I guess fringe definitions that don't make the dictionary haven't entered my lexicon. ;)

 

Your chart shows what I said, that the Fed majorly goosed the dollar after the dotcom bust, going all the way down to 1% as they printed money out of thin air. Something like that takes a while to have inflationary effects, and they were intervening less just prior to the most recent crash, but the damage was already on the way.

 

Now, as the chart shows, they're intervening again, driving interest rates down by printing money. Even if they back off again, this latest round will spark more speculation and result in further devaluation of the dollar in years to come.

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Day one: 100 yen = 1 US dollar. Yen interest rate=0.5%, US dollar interest rate =1.00%

 

Now let's say the Fed lowers the discount rate and the US dollar interest rate to 0.5%. All other things being equal, this means the dollar will be less attractive because the yield on dollar-based fixed income instruments will be lower, and people will tend to sell dollars for other hard currencies, like the yen or the euro. Thus, the value of the dollar is lowered, not "inflated".

 

Umm.... doesn't "inflation" generally mean that the value of the currency is reduced?

 

The phrase "inflating a currency" isn't really used this way by economists, as it is misleading. It makes it sound like the value of the currency is being increased, not decreased. Real economists talk about currencies appreciating and depreciating.

They talk about inflation and deflation with regards to prices (consumer and wholesale), not currencies. You tend to find this misapplication of the word "inflate" in anti-central-bank, conspiracy kook screeds. It's not something you find in mainstream finance and economic publications. It's a pretty good indicator of where someone is getting his information.

 

And in this case, Tom Ray is flat wrong, since the Fed was actually tightening monetary policy throughout the period that the bubble was growing. So his attributing the bubble to the Fed's monetary policy is ludicrous.

 

Like I said, the bubble was caused mainly by bad trade policy and regulatory policy, not monetary policy.

 

 

The term is used that way in the dictionary, as I posted above. I guess fringe definitions that don't make the dictionary haven't entered my lexicon. ;)

 

Your chart shows what I said, that the Fed majorly goosed the dollar after the dotcom bust, going all the way down to 1% as they printed money out of thin air. Something like that takes a while to have inflationary effects, and they were intervening less just prior to the most recent crash, but the damage was already on the way.

 

Now, as the chart shows, they're intervening again, driving interest rates down by printing money. Even if they back off again, this latest round will spark more speculation and result in further devaluation of the dollar in years to come.

 

Congratulations. You've managed to get things exactly backwards yet again. The money supply is expanded by lowering interest rates and reserve requirements, not the other way around.

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Congratulations. You've managed to get things exactly backwards yet again. The money supply is expanded by lowering interest rates and reserve requirements, not the other way around.

 

How is the interest rate lowered? By printing up new money and using it to outbid the market for Tbills. Aren't we saying the same thing, only I'm using words like the dictionary and you're using them the opposite way?

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Congratulations. You've managed to get things exactly backwards yet again. The money supply is expanded by lowering interest rates and reserve requirements, not the other way around.

 

How is the interest rate lowered? By printing up new money and using it to outbid the market for Tbills. Aren't we saying the same thing, only I'm using words like the dictionary and you're using them the opposite way?

 

 

The Federal Reserve doesn't have the power to print money. That's the Treasury Department.

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The Treasury dept says:

 

Federal Reserve notes are legal tender currency notes. The twelve Federal Reserve Banks issue them into circulation pursuant to the Federal Reserve Act of 1913. A commercial bank belonging to the Federal Reserve System can obtain Federal Reserve notes from the Federal Reserve Bank in its district whenever it wishes. It must pay for them in full, dollar for dollar, by drawing down its account with its district Federal Reserve Bank.

 

Federal Reserve Banks obtain the notes from our Bureau of Engraving and Printing (BEP). It pays the BEP for the cost of producing the notes, which then become liabilities of the Federal Reserve Banks, and obligations of the United States Government.

 

So while you're right that the government, not the Federal Reserve, runs the actual printing presses, my point was about controlling the money supply, as in putting money in circulation. I suppose I should have said "circulating new money" rather than "printing up new money" but I like the sound of the latter one better. :P

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Thank god it all balances out in the long term (whatever that timeframe may be).

 

Depends on how you look at balance. When you look at how the Fed has maintained the value of a dime vs the current melt value of a silver dime, it doesn't look to me like they've done their job.

 

 

The average real HH income has gone up by 30% since the silver dime, so it could be argued that while the currency is worth less, you're making more than your 1965 counterpart.

Now, the fact is that real US GDP per household has doubled since then, so real HH income as a ratio against GDP has fallen is a disturbing issue. That's a can 'o worms (redistribution of wealth and all) that I'm not getting into.

 

A whole 30%? A 1965 dime is worth a dime. The melt value of a 1964 silver one is $1.33. That's a bit more than 30% difference...

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Congratulations. You've managed to get things exactly backwards yet again. The money supply is expanded by lowering interest rates and reserve requirements, not the other way around.

 

How is the interest rate lowered? By printing up new money and using it to outbid the market for Tbills. Aren't we saying the same thing, only I'm using words like the dictionary and you're using them the opposite way?

 

 

The Federal Reserve doesn't have the power to print money. That's the Treasury Department.

 

In this context, when people use the phrase "print money", they don't generally mean literally applying ink to paper, they mean controlling the money supply. You are literally correct in the sense that the Treasury Department controls the physical printing of money, but the Federal Reserve Bank, through the operation of the FOMC and the setting of the reserve rate, has enormous power over the money supply.

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Thank god it all balances out in the long term (whatever that timeframe may be).

 

Depends on how you look at balance. When you look at how the Fed has maintained the value of a dime vs the current melt value of a silver dime, it doesn't look to me like they've done their job.

 

 

The average real HH income has gone up by 30% since the silver dime, so it could be argued that while the currency is worth less, you're making more than your 1965 counterpart.

Now, the fact is that real US GDP per household has doubled since then, so real HH income as a ratio against GDP has fallen is a disturbing issue. That's a can 'o worms (redistribution of wealth and all) that I'm not getting into.

 

A whole 30%? A 1965 dime is worth a dime. The melt value of a 1964 silver one is $1.33. That's a bit more than 30% difference...

 

What was the melt value of a 1964 silver dime in 1964? A 1964 dime was never intended as an instrument for owning silver; it's value wasn't based on the underlying value of silver, it was simply a coin that happened to be minted in silver. There have been plenty of times in history (1980 copper price spike, for example) when the melt value of coins has exceeded their monetary worth.

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Thank god it all balances out in the long term (whatever that timeframe may be).

 

Depends on how you look at balance. When you look at how the Fed has maintained the value of a dime vs the current melt value of a silver dime, it doesn't look to me like they've done their job.

 

 

The average real HH income has gone up by 30% since the silver dime, so it could be argued that while the currency is worth less, you're making more than your 1965 counterpart.

Now, the fact is that real US GDP per household has doubled since then, so real HH income as a ratio against GDP has fallen is a disturbing issue. That's a can 'o worms (redistribution of wealth and all) that I'm not getting into.

 

A whole 30%? A 1965 dime is worth a dime. The melt value of a 1964 silver one is $1.33. That's a bit more than 30% difference...

 

What was the melt value of a 1964 silver dime in 1964? A 1964 dime was never intended as an instrument for owning silver; it's value wasn't based on the underlying value of silver, it was simply a coin that happened to be minted in silver. There have been plenty of times in history (1980 copper price spike, for example) when the melt value of coins has exceeded their monetary worth.

 

 

 

About a dime, depending on which price you use to represent the price of silver for that year. You can get the equation from this thread. That, of course, explains the switch that year.

 

Coins in circulation that are worth melting down won't remain in circulation for long, and get darn expensive to make. It's an unstable and rare situation, and usually causes a switch to a cheaper metal so that the value of the currency can continue to be diluted.

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Coins in circulation that are worth melting down won't remain in circulation for long, and get darn expensive to make. It's an unstable and rare situation, and usually causes a switch to a cheaper metal so that the value of the currency can continue to be diluted.

 

So?

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