re: Is there anyone here who supports fiat curreny/the Federal Reserve?

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The reason the dollar is the reserve currency is due to the overall relative strength of the US economy

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Even Russian knows better than that.

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it's backed by the full strength of the U.S. military.

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The reason the dollar is the reserve currency is due to the overall relative strength of the US economy, the depth and breadth of the US financial markets, and the relative stability of the US dollar.




Because we'll kick in your door and drop bombs if your don't want to use the dollar would be equally accurate.

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Let's ask Saddam Hussein...Oh, wait...

I RA'd.

I RA'd again.

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Don't start lying, mo. We went through your silly and false statements several times when you were posting under your mograyback screen name. You never came close to substantiating your incorrect understanding of money and how the Treasury Dept authorizes the release of Federal Reserve Notes.

There's no need to repeat that exercise just because you are now posting using an alter.

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You're a liar and a disgusting man.

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liar and a disgusting man.

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it appears a nerve has been struck

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You're a liar and a disgusting man.

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Was it something I said?

How's the wine making business doing in Missouri these days, mo? All the snow makes it tough to stomp grapes, doesn't it?

Russian...somewhat off topic, but will get your astute economic mind back to fertile ground ...I'd like for you to define in economics talk...just what the following scenario represents.

I know that the cost of energy and related commodities is rising (inflation)...yet...a lot of prices in the market are NECESSARILY, falling. Example: I have lowered the price of my product (reproductions of my artwork) even though production cost have risen. The Rent-All business in my small town has LOWERED it's prices on rentals; a lift was going for $150/day last year...this year it's $90. My brother has lowered the price on his services (sign painter); says that people just don't have the expendable income.

So, given the above scenario...would such come under the economic definition of 'stagflation'? Deflation? Is such as scenario the logical progression of a predictable/historically validated economic scenario? And if so, where (what Fed policy) is the progression likely to be go, what Fed policy is likely to be implemented; and with what expected results?

It seems they've been easing out the wazoo...and still...no money out there. Could it be that the expendable income that used to be available for stuff like art...has no been redirected (by Obama) into taking care of poor folk...and as such, there is none for 'toys', or even to open business or take care of basic property maintenance?

I know this is a lot...if you have the time or interest; I respect your opinion, and would like to understand this if possible. TIA.

Thanks for the kind words.

First of all, I'm not an economist so I don't get emotionally attached to words like "stagflation." I don't know if the situation you described fits the definition of stagflation or not.

But on to your main question, I personally don't think the Fed can do much more to influence the economy. There is plenty of money supply and rates are still bumping off of historical lows. I never hear any business saying they can't afford to borrow because interest rates are too high.

As Bernanke said in one of his congressional testimonies a year or so ago, the ball is in congress' court to get the deficit under control and stop passing unfavorable laws to employers.

I'd add, it's also up to the bureaucrats in the regulatory agencies who are issuing extra-legal regulations which both discourage hiring and increase costs of production....the EPA's carbon limit tax is an example. All of the insurance cost issues from the Unaffordable Care Act is another.

I think we will continue to bump along the bottom economically for several more years. The unemployment rate is a fantasy because it ignores the number of workers who are no longer counted as unemployed just because they've quit looking for work. They are still unemployed but they don't show up in the stats. Like magic!!

So, all I can advise you is for you to run your business, as I'm doing mine, with the idea that we won't see a marked improvement in sales growth anytime soon.

I don't think I've helped you but it's my best guess as to the situation.

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So, given the above scenario...would such come under the economic definition of 'stagflation'? Deflation? Is such as scenario the logical progression of a predictable/historically validated economic scenario? And if so, where (what Fed policy) is the progression likely to be go, what Fed policy is likely to be implemented; and with what expected results?

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I know this was for Russian but I can chime in here. I wouldn't call this either of the inflationary scenarios you provided, just very low levels of inflation. Due to us still running PCE at 1.1%-1.2%, well below the Fed's 2% inflation target, you can expect rates to be lower for longer. They will end QE simply because the costs outweigh the benefits on a number of fronts, including just sheer supply of "safe" assets in the marketplace.

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It seems they've been easing out the wazoo...and still...no money out there. Could it be that the expendable income that used to be available for stuff like art...has no been redirected (by Obama) into taking care of poor folk...and as such, there is none for 'toys', or even to open business or take care of basic property maintenance?

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If you look at a chart of excess reserves on bank balance sheets or financial asset price levels, that is where the liquidity is. The populist response is that the "Fed is just taking care of the big institutions and the wealthy". My response would be, well yea, that's the only part they can directly reach via their tools. They try to indirectly influence the economy via these but the idea of a "transmission mechanism" between the financial economy and the real economy changes over time. It used to be mortgage rates, but now that is broken. Everybody worries about hyperinflation if the economy picks up but that is the last thing I'm worried about, the Fed has the tools (and they just made a new one) to combat any sort of inflation from these reserves.

The historical context of the Fed is important to keep in mind. Before 1990, they influenced monetary policy by the amount of excess reserves they required banks to keep on balance sheet. From '90 - '08 it was the Fed Funds target rate (to which they actually didn't announce the levels till '95). From '08 to now it was QE and forward guidance. Now, I fully believe the Fed's most powerful tool going forward will be this. This is a separate topic for the money board which I'll probably start a thread on soon, but I really think the new Fixed-Rate Full Allotment Reverse Repo facility could be the most powerful tool in the Fed's arsenal going forward. They actually get to use their massive balance sheet that they acquired to influence short-term rates across all counterparties, not just banks anymore.