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We could go China style and just get rid of the fed and have the government print its own money. That would be way too easy though. Edit: The difference is w
by narrator 8y ago
We could go China style and just get rid of the fed and have the government print its own money. That would be way too easy though.
Edit: The difference is when China bails out its banks it doesn't loan the money into existence to do it. The U.S government must borrow the money from the fed and the interest rate is paid back by the taxpayers. Yes, the interest paid back to the fed goes back to the government, minus expenses. However, those with very large amounts of money, trillions in aggregate, can piggyback on this system and earn enormous risk free returns where they would otherwise have to carefully invest in non-risk free instruments. These risk free assets are unavailable to chinese investors forcing these large savings into various productive (or non-productive based on their investing skill) investments in the economy. They can't go into T-Bills either because of strict currency controls. In the U.S the risk-free trillions invested are guaranteed by the power of taxation of the rest of the productive economy. This austerity to pay the bondholders and ensuing liquidation is what trashes the rest of the economy on a regular basis in Western economies. This doesn't happen in China because the banks get bailed out with printed money and they keep on lending without putting the government in debt or requiring taxes to be raised or austerity.
That China has not had a Japanese style prolonged credit bust even though it has been predicted by "The Economist" and other supposedly learned publications on a regular basis for the last 30 years is a sublime mystery that defines explanation because there is a stubborn refusal to objectively understand and analyze the Chinese financial system. I'd say it's a new paradigm in human organization that really defies western understanding because our financial system is so enormously politically protected by all that trillions in passive capital that gets risk free returns.
- mandelbrotwurst 8y agoThe Federal Reserve is part of the government.
- brokensegue 8y agoand the federal reserve doesn't (literally) print the money...
- gammateam 8y agoAt their discretion they can buy an asset and the person they bought from now has money that didnt previously exist This is what is being referred to as printing, but yes its just an unlimited asset issuance function in the currency class of a program
- labster 8y agoYes, but every bank can create money through lending, you don't need a to be a government agency to do that. The Fed just has less limits because it can just add arbitrary amounts of currency to its balance sheets.
- taysic 8y agoBanks in theory have consequences for lending more than is reasonably available to them. The Fed really can create money out of thin air. That's a big difference.
- deleted 8y ago[deleted]
- brianpgordon 8y agoAs long as they satisfy their capital requirements, banks can lend as they please. They tend not to make really bad loans because directors are legally beholden to shareholders to ensure management is appropriately managing risk. The Fed doesn't tend to print trillions of dollars for no particular reason because it is legally beholden to its dual mandate. It's not that different. Yes the Fed can create "reserve currency" and banks can only create "commercial currency" but the distinction is a technical one and doesn't have a whole lot of macroeconomic impact.
- taysic 8y agoThe Fed has mandate that has nothing to do with the motivation of the banks. That's a huge difference - they create money for entirely different reasons. And yes, the Fed has an enormous macroeconomic impact obviously.
- JohnWilcox 8y agoSorry to be the one to break it to you, but that is the biggest lie and ruse and deception about the Federal Reserve. The Federal Reserve is a privately owned entity that controls our money, owned by nebulous owners that are not at all clear, but hopefully at the very least owned by American banks like JPM and WF. Seriously, you should look into it, but be prepared to be utterly stunned to find out the reality of matter and how a private banking cartel controls our fiat, aka, made up fantasy currency. It will shake everything you have been trained to believe like a good slave.
- miles 8y ago> The Federal Reserve is part of the government. Not exactly: The Federal Reserve is not an Agency of the Federal Government https://www.youtube.com/watch?v=n9zpBCFe_k8 https://www.youtube.com/watch?v=n9zpBCFe_k8 May be one of the few things that those on the far right and left agree on: Dennis Kucinich: The Federal Reserve is no more Federal than Federal Express http://www.youtube.com/watch?v=J0-oxd7CdU8&t=3m42s http://www.youtube.com/watch?v=J0-oxd7CdU8&t=3m42s Democrats Kill Rand Paul's Audit the Fed Bill, Though Sanders Votes Yes https://www.usnews.com/news/articles/2016-01-12/democrats-kill-rand-pauls-audit-the-fed-bill-though-sanders-votes-yes https://www.usnews.com/news/articles/2016-01-12/democrats-ki... Glenn Beck: The Federal Reserve Is Destroying America https://www.glennbeck.com/2017/06/02/the-federal-reserve-is-destroying-america/ https://www.glennbeck.com/2017/06/02/the-federal-reserve-is-... "End the Fed", book by Ron Paul https://en.wikipedia.org/wiki/End_the_Fed https://en.wikipedia.org/wiki/End_the_Fed
- mandelbrotwurst 8y agoI know they're considered "independent", that said they're still a central authority created by Congress to control the money supply whose members are presidentially appointed, with a .gov domain name to boot.
- rapsey 8y agoFed Board of Governors are appointed and a part of the government. The actual Fed banks themselves are owned by commercial banks.
- godzilla82 8y agoBut do they report to the government?
- edoo 8y agoWhen you understand this the obvious question becomes why are we paying interest on our own money to a multinational organization.
- 8y ago