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

quote:

---

I realize that Banks have money to lend at low interest rates

---

This is exactly true and because they are not lending it the massive QE has not had the impact Keyensian would predict. (They are not lending it because the demand for loans is not there for one thing. Other thing is they are happy with the tiny margins they are making on holding the reserves.)

Now that banks have their balance sheets in order the Fed should end it's rate setting and let interest rates trade freely.

No question the feds bailed out investment banks at the expense of the economy.

None of the assets that were real on the balances sheets of those investment banks would have disappeared had the fed not intervened. They would have simply changed hands to more financially stable owners. Ironically I believe Bear Sterns would still be with us today had there been no Fed but others still in business would be gone. Bear Sterns had a better portfolio of assets than many other but could not access liquidity in the overnight markets. If those markets were free the liquidity would have been there at higher cost.

quote:

---

the massive QE has not had the impact Keyensian would predict

---

point of clarification: Keynesian models in fact predict no effect, because we were at-or-near the zero/lower bound. if you don't want to take my word for it, take the old-keynesian champion, Krugman's.

quote:

---

The topic is what, if anything, monetary policy can do when interest rates are up against the zero lower bound (or the near-zero lower bound — it doesn’t matter exactly what the minimum is). Under these conditions, conventional monetary policy — just buying up short-term debt with newly created bank reserves — has no traction.

...[edit to quote everything relevant]...So his answer is yes, the Fed could boost the economy by making a commitment to hold off on raising interest rates when recovery finally kicks in.

But that isn’t what the Fed has mainly done, at least not explicitly. Instead, it has relied on purchases of nonconventional assets (misleadingly billed as quantitative easing or QE), especially long-term debt. Has this been effective? Woodford parses the evidence, and concludes tentatively that most of the apparent effects of QE actually come through the expectations channel — that is, that QE works, to the extent it does, largely because markets see it as a form of forward guidance.

So what should the Fed be doing? Woodford concludes that it needs to make a change in its basic policy pronouncements, so as to make them “history-dependent” — that is, it needs to promulgate a view of its intentions that would lead it to be slower to raise rates following a big slump than it would in other circumstances. And let me repeat the past tense: following a big slump, not just when you’re in it.

---

Also see here in early 2013, which he calls a "test of market monetarism". LINK

quote:

---

Sorry guys, but as a practical matter the Fed – while it should be doing more – can’t make up for contractionary fiscal policy in the face of a depressed economy.

---

quote:

---

Ironically I believe Bear Sterns would still be with us today had there been no Fed but others still in business would be gone.

---

You need to stick to ranting about movie credits and stay away from making stupid statements related to banking.

LSURussian you offer nothing but insults in every thread you participate in.

We own the most t-bills we have ever had on the books at the community bank I own stock in because we are paying nothing for deposits and need overnight funds on very rare occasions. When the discount rate is .25 why pay depositors any more than that? Oh we pay for CDs at rates higher than that because it is longer term and we get nice spreads on that too buying longer treasury notes.

You have a much higher regard for yourself than does any intelligent reader of your crap.

Since you brought it up--do you still believe film tax credits are not subsidies?????? Looked stupid on that one didn't you?

quote:

---

LSURussian you offer nothing but insults in every thread you participate in.

---

No, just in your threads where you prove you don't have a clue what you're talking about.

For example.....

quote:

---

When the discount rate is .25 why pay depositors any more than that?

---

You're clueless even to financial terminology.

The current 'discount rate' is .75% and it is the rate banks pay to borrow money from the Fed's discount window. I think you're trying to refer to the 'fed funds rate' which is totally different from the 'discount rate.' Any small credibility you had is gone, forever, if you don't know the basic difference between the discount rate and the Fed funds rate.

And the Federal Reserve's TARGETED Fed funds rate is .25% but the actual rate has been closer to .10% for quite some time now, so you're even wrong about that.

quote:

---

We own the most t-bills we have ever had on the books at the community bank I own stock in because we are paying nothing for deposits and need overnight funds on very rare occasions.

---

So what? When loan demand is slack, banks always put their excess liquidity into other assets such as treasury securities. And I highly doubt your bank has a record amount of t-bills. It is probably holding a larger portfolio of treasury bonds, not bills but you, with your limited knowledge, think t-bonds and t-bills are the same thing.

And, if your bank is that liquid, as are most community banks across the country, it doesn't borrow overnight, it net LENDS Fed funds overnight. That was a really stupid statement on your part.

quote:

---

Gold has real worth.

---

No, gold, just like any asset, has worth only because people are willing to pay something for it.

Unlike what was believed in medieval times, gold does not emit magical, invisible rays that make people want it which gives it a special value.

Gold is a malleable, shiny, rust-proof element and those characteristics can be utilized in the production of certain goods, just like with aluminum. It's just that gold is rarer than aluminum so its price is influenced by the available supply of it.

quote:

---

I'll take the gold.

---

I like gold, too. But it's impractical to carry around gold bars in my pocket.

And as far as returning to a gold standard, there isn't enough gold in the world's gold reserves to support the output of just the U.S. economy much less the world's economy. So there's that.....

quote:

---

We need competing currencies with at least one backed by something of real value...not perceived value.

---

Why? And what would you propose to have backing it?

quote:

---

An in regard to ending QE...how can they? Does not the Stock Market - even disregarding real MARKET value, based on the REAL street observations to which I report - support all manner of Retirement portfolios (private and state) to a degree that any great fall in it's (even manufactured) value...would have a calamitous effect on the economy?

---

Because there are operational risks for the Fed continuing QE. At the end of the year, the Fed owned between 35% - 50% (back of the napkin, haven't ran the balance sheet figures) of all Treasuries maturing over 3 years. Treasuries are very important for market operations across the globe. They are a primary source of collateral for repurchase agreements, OTC derivatives, forward agreements, and now they are in high demand for centrally cleared collateral. Also, if a credit trader wants to just go long credit spread, they can either sell a CDS/CDX or they can buy the cash bond and sell a like-duration Treasury.

There has been a wedge between the economy and markets since QE started, essentially making the markets opposite land. Bad news was good news for markets because it meant more QE, and good news was bad news for the opposite reason. Now we are winding back to where the markets and economy go more hand in hand.

quote:

---

I think the bottom line is that we are now living beyond our means. More consumption of goods and services by too many folk, with the old economic model of a profit/merit-based motivation for productivity...being undermined by a polar (Egalitarian/Marxist/Fascist/etc.) Ideological view.

---

We're actually in much better shape leverage wise (aka living beyond our means) than we were in '03-'06 where consumers had a negative savings rate. There are some big structural problems with the US in terms of entitlements and education. However, even though these are big and serious, our problems are a lot less significant than other parts of the world. Europe has huge issues because southern European countries are strangled from the euro since it can't depreciate to the point to boost their exports and tourism, and northern European countries are reaping the benefit of a weaker currency than it would be if their country had its own. Also politically, these are 17 very different member states so if you think our political landscape is a mess just go watch an EU summit. Japan is pumping monetary stimulus per their GDP over 10x what the US has done to get out of 2 lost decades. China has a shadow banking system that the CBoC has no idea how to handle on top of their extremely rampant corruption and populist unhappiness. Emerging markets are feeling the huge brunt of the flip side of "hot money" when it actually flows back out, and they wasted (outside of Mexico) some serious boom years to do structural reforms.

All in all when you look at it, the US is sitting pretty well right now.