7 ms·

The money absolutely impacts the economy and the individual. If the fed were not providing this printed money to the banks, the banks would need to do some comb

The money absolutely impacts the economy and the individual. If the fed were not providing this printed money to the banks, the banks would need to do some combination of the following to increase liquidity: 1) Increase interest rates to attract new deposits 2) Sell assets — such as foreclosed homes now in the banks possession With house prices at all time highs and interest rates at all time lows, both 1&2 sound great to me and absolutely have a direct impact on me.

turk73 7y ago
Why can't they do any of those other things? Instead they pick my pocket using inflation. Fuckers. My MM Fund was paying 2.4% for most of this year. Two rate cuts later it is 2.0% and falling. Is .4% really that big of a deal? Do they need ALL of my money? Look at the value of the dollar from 1913 (when the Fed came into being) to today and you see that it is worth a mere $.05 of what it was back then. We are being fucked over. Also, I would like to buy another house and sell the one I own and generally do things that would increase money velocity, but I can't do any of that because I'm too fearful that I'm going to lose my job and that my savings will again be cut in half in some asinine banking fiasco like we had in 2008. It is sick what we do in this country and it makes me physically ill to even play a part in it. So when I say I pray for a "revolution" each day, I mean it. It doesn't have to be the violent kind, it just has to be the "come to Jesus" kind for the jack offs doing this fuckery.
jhayward 7y ago
> If the fed were not providing this printed money to the banks I'm pretty sure you don't actually mean "printed money", since the Federal Reserve doesn't do that. No currency was created for this market operation, just balances in books kept by the Federal Reserve Bank of New York.
- mindslight 7y ago
  Yes, it is not literally "printing money" in the way that the US Mint physically does. The term is appropriate though, as the result of translating from the paradigm banks operate in into the paradigm natural persons are bound by. We can only give away what we have received - I cannot give a friend $20 in exchange for an IOU, and then transmute that IOU into a crisp new $20 bill.
- freejulian85 7y ago
  The money which the fed gave to the banks did not previously exist. The fed increased the balance sheet of the banks to indicate they had cash they would not otherwise have had. Fits my definition of “printed.”
  - jhayward 7y ago
    Currency is printed. Money is created as bits in a ledger. Money is not synonymous with currency. Thats the difference I'm pointing out.
  - joeyrideout 7y ago
    I think a more accurate phrase is "borrowed into existence", which is worse than printing because the balance created charges interest. Printing money directly rather than borrowing it is less inflationary, because more money is needed to service debt. (This is all bad so I may be splitting hairs, but I would advocate for direct currency printing over this lending scheme if given the chance.)
- deleted 7y ago
  [deleted]
- zaphod420 7y ago
  Here's a longer explanation for those interested... https://www.thebalance.com/is-the-federal-reserve-printing-money-3305842 https://www.thebalance.com/is-the-federal-reserve-printing-m...
sedeki 7y ago
I think it makes sense for the banks to wait for the Fed to do something. Banks are acting in the interest of their shareholders; the Fed for the population as a whole.
- freejulian85 7y ago
  This is no different than the manipulation that happened with LIBOR. Back then the media was quick to point out that the manipulated interest rate impacted pension funds, mortgages, and everything in between. The fed is doing the same thing by stepping in and manipulating the overnight rate. Without the fed doing this, banks would have to plan ahead and make sure they have sufficient liquidity. This means maybe offering better interest rates to earn customer deposits. With the major banks still calling 0.05% “high yield”, I don’t think it’s appropriate for the fed to continue to enable their incompetence. Furthermore, the banks hold a significant inventory of foreclosed homes on their books. They’ve been sitting on them for years. It’s time they sell that resource to people who need them.
  - sedeki 7y ago
    I mean that given that the Fed will act if the banks do nothing, and that doing something will make the banks loose money, it is inevitable that the banks will "drag their feet". As you understand, I am not commenting on the moral aspect.
  - pmart123 7y ago
    Part of the problem is the fed has tried to raise short term rates while the rest of the world has had a zero interest rate policy. Meanwhile, the US interest rate curve is inverted. So banks, who typically lend long and borrow short get squeezed. So even if the fed is targeting 2% rates, but the 10 yr is at 1.5%, a bank really shouldn’t be borrowing from you at 2% to lend it out to someone else at 1.5% on a ten year loan.
    - istrading 7y ago
      Maybe it's because the rest of the world can though. If you look at the debt to GDP ratio of Germany, Russia, China, it is much lower than the United States. Recently it was reported by AB Bernstein that the Debt-To-GDP ratio in the United States -- the real Debt-To-GDP Ratio -- is 1,832%!! https://interactiveswingtrading.com/2019/09/09/ab-bernstein-says-actual-the-debt-gdp-ratio-is-1832-cnbc-reports/ https://interactiveswingtrading.com/2019/09/09/ab-bernstein-...
dragonwriter 7y ago
You left out #3, tighten lending criteria and raise interest rates on loans to increase income per dollar lent and reduce volume of lending, which also improves liquidity. But, yeah, if you are flush with cash and don't own a home but want to, #1 & #2 sound great if you consider only their first order effects on you. #1, especially, is a huge brake on the economy (as is it's close relative #3). Which probably also has a negative impact on you, unless you are living entirely off of a pile of cash previously earned.
- freejulian85 7y ago
  I don’t believe the fed should pick winners and losers. I worked hard for my dollars. The banks should have to compete for them fairly.
- 0x445442 7y ago
  Given there's so much of this (https://en.wikipedia.org/wiki/Bullshit_Jobs https://en.wikipedia.org/wiki/Bullshit_Jobs) right now, I'm not convinced #1 would have a such a negative impact. If we broaden are thinking it could have an awesome impact long term.
  - vpmpaul 7y ago
    The problems with these types of books to me is that the researcher surgically analyizes a tiny part of the whole picture and claims this is the grand solution or something like that. This book does nothing other than highlight common knowledge but does nothing to show why or how it is that way and what can be done to begin to change it. Its the equivilant of saying well the reason the timing belt on your car breaks is it is too weak. So I made a 150kg gear system to replace it. "Wont that be too heavy for the engine to turn it?" , "Oh yeah you will have to replace the whole engine and transmission as well." Except in this instance it is all of society and humanity that would have to be changed or replaced. On example: the reason duct tapers exist is that they handle the exceptions from really, really ,really, really difficult problems to solve that are already partially solved and working good enough.
  - dragonwriter 7y ago
jigglesniggle 7y ago
No matter how many times it is explained, at the end of the day people who are not me and who have no real valid claim to free money are being given free money and allowed to profit off of it.
- geggam 7y ago
  ^ this is they key to being wealthy, counterfeiting :)
  - 0x445442 7y ago
    That and when running a business you get to keep profits but someone else pays for your losses.
- grandridge 7y ago
  I wish more people here understood this.
- 29_29 7y ago
  I was talking about the two levers the Fed has to guide the economy at work - Printing Money and Lowering interest rates (as described by Ray Dalio https://youtu.be/PHe0bXAIuk0 https://youtu.be/PHe0bXAIuk0). My coworker starry eyed, looked at me and said, "What about Quantitative Easing?". I responded that is printing money. I think the issue is, these concepts are given difficult sounding names, so people do not question their ethics. I'm not saying they are not needed - in a credit based economy it seems they are absolutely necessary, but perhaps they could be implemented in a way that doesn't so favor the rich.
  - mars4rp 7y ago
    Yes, print money and pay for student loans!
    - Fjolsvith 7y ago
      Yes! Because we can postpone that bill to our future tax payers.
LatteLazy 7y ago
The majority of people already own houses and have mortgages. That means they don't want interest rates to go up. So the Fed will not allow that. That's it, that is the reason banks were bailed out in the first place. That's the reason they're being subsidised now (plus lots of cheap money pushes up the stock market and spurs investment and looks good at election time). This isn't about economics. It's about politics.
- ls612 7y ago
  The vast majority of mortgages out there today are fixed rate, not adjustable rate. That means that the interest homeowners are paying is locked in regardless of the rates in the market today.
  - wutbrodo 7y ago
    Most homeowners still have a substantial amount of leverage though, and you can refinance every X years. On top of that, rising rates reduce house values. Most of my parents' net worth is in either residential or investment real estate, and low rates are very much good for them.
- freejulian85 7y ago
  > The majority of people already own houses and have mortgages. The majority of boomers maybe own houses. Exclude them and your claim isn’t even close to true. Regardless, this entire situation is a huge moral hazard. I think the majority of us wouldn’t approve of the fed deciding winners and losers.
BuckRogers 7y ago
It's stealing money out of everyone's pockets to keep the banks going. Devalues the existing currency already in circulation. I love the obsession with keeping the system going, if the system is cyclical and flawed for human beings, maybe we shouldn't base the system that feeds, clothes and houses humanity on a craps table. The more of this sort of news that comes up the closer I listen to Richard D. Wolff.
- throw0101a 7y ago
  > Devalues the existing currency already in circulation. Anyone with debt (e.g., mortgage, student loans) is advantaged from a future lower-value currency: > If wages increase with inflation, and if the borrower already owed money before the inflation occurred, the inflation benefits the borrower. This is because the borrower still owes the same amount of money, but now he or she has more money in his or her paycheck to pay off the debt. This results in less interest for the lender if the borrower uses the extra money to pay his or her debt early. * https://www.investopedia.com/ask/answers/111414/does-inflation-favor-lenders-or-borrowers.asp https://www.investopedia.com/ask/answers/111414/does-inflati... Provisos: > Inflation can help lenders in several ways, especially when it comes to extending new financing. First, higher prices mean that more people want credit to buy big-ticket items, especially if their wages have not increased – new customers for the lenders.
  - BuckRogers 7y ago
    I'd argue you can't "win" in any form, if you're in debt. That's like trying to lose your way to the top of a ranked competition. You never move up the ladder of life by losing. Broadly speaking, it's a position of weakness and servitude. It's a similar suggestion that if you're deep in debt, you "win" if you get hit in the head with a baseball bat. Sure, you enjoyed spending the money and now you're mentally deficient so you got away with not having to pay it off, but you've still been beaten over the head with a bat. But ultimately, even if my view is an inaccurate description of reality, what you're saying is true, but I'd argue it's still a net loss. The end-goal over a lifetime of earning is to be in the black, not red. It's difficult to lose your way to the top. Wages don't track inflation (contrary to those 2% raises a year, because salaries are suppressed from downward pressure on wages). So the relatively short time someone is in debt doesn't outweigh the time spent out of debt thus the advantage you speak of isn't worth it. All that said, debt is not inherently bad.. but that's another discussion and not in the context of this discussion.
robk 7y ago
Your mortgage rate would go up though unless you're an all cash buyer
- mindslight 7y ago
  Which is exactly what you want. Expected monthly payments are fixed, so your principle would go down. This increases your ability to pay off the loan earlier, and lowers your property taxes. (This may not sound causal until you consider the larger feedback loop that has gotten us to here in the first place.)

turk73 7y ago

Why can't they do any of those other things? Instead they pick my pocket using inflation. Fuckers. My MM Fund was paying 2.4% for most of this year. Two rate cuts later it is 2.0% and falling. Is .4% really that big of a deal? Do they need ALL of my money? Look at the value of the dollar from 1913 (when the Fed came into being) to today and you see that it is worth a mere $.05 of what it was back then. We are being fucked over. Also, I would like to buy another house and sell the one I own and generally do things that would increase money velocity, but I can't do any of that because I'm too fearful that I'm going to lose my job and that my savings will again be cut in half in some asinine banking fiasco like we had in 2008. It is sick what we do in this country and it makes me physically ill to even play a part in it. So when I say I pray for a "revolution" each day, I mean it. It doesn't have to be the violent kind, it just has to be the "come to Jesus" kind for the jack offs doing this fuckery.

jhayward 7y ago

> If the fed were not providing this printed money to the banks I'm pretty sure you don't actually mean "printed money", since the Federal Reserve doesn't do that. No currency was created for this market operation, just balances in books kept by the Federal Reserve Bank of New York.

mindslight 7y ago
Yes, it is not literally "printing money" in the way that the US Mint physically does. The term is appropriate though, as the result of translating from the paradigm banks operate in into the paradigm natural persons are bound by. We can only give away what we have received - I cannot give a friend $20 in exchange for an IOU, and then transmute that IOU into a crisp new $20 bill.
freejulian85 7y ago
The money which the fed gave to the banks did not previously exist. The fed increased the balance sheet of the banks to indicate they had cash they would not otherwise have had. Fits my definition of “printed.”
- jhayward 7y ago
  Currency is printed. Money is created as bits in a ledger. Money is not synonymous with currency. Thats the difference I'm pointing out.
- joeyrideout 7y ago
  I think a more accurate phrase is "borrowed into existence", which is worse than printing because the balance created charges interest. Printing money directly rather than borrowing it is less inflationary, because more money is needed to service debt. (This is all bad so I may be splitting hairs, but I would advocate for direct currency printing over this lending scheme if given the chance.)
deleted 7y ago
[deleted]
zaphod420 7y ago
Here's a longer explanation for those interested... https://www.thebalance.com/is-the-federal-reserve-printing-money-3305842 https://www.thebalance.com/is-the-federal-reserve-printing-m...

sedeki 7y ago

I think it makes sense for the banks to wait for the Fed to do something. Banks are acting in the interest of their shareholders; the Fed for the population as a whole.

freejulian85 7y ago
This is no different than the manipulation that happened with LIBOR. Back then the media was quick to point out that the manipulated interest rate impacted pension funds, mortgages, and everything in between. The fed is doing the same thing by stepping in and manipulating the overnight rate. Without the fed doing this, banks would have to plan ahead and make sure they have sufficient liquidity. This means maybe offering better interest rates to earn customer deposits. With the major banks still calling 0.05% “high yield”, I don’t think it’s appropriate for the fed to continue to enable their incompetence. Furthermore, the banks hold a significant inventory of foreclosed homes on their books. They’ve been sitting on them for years. It’s time they sell that resource to people who need them.
- sedeki 7y ago
  I mean that given that the Fed will act if the banks do nothing, and that doing something will make the banks loose money, it is inevitable that the banks will "drag their feet". As you understand, I am not commenting on the moral aspect.
- pmart123 7y ago
  Part of the problem is the fed has tried to raise short term rates while the rest of the world has had a zero interest rate policy. Meanwhile, the US interest rate curve is inverted. So banks, who typically lend long and borrow short get squeezed. So even if the fed is targeting 2% rates, but the 10 yr is at 1.5%, a bank really shouldn’t be borrowing from you at 2% to lend it out to someone else at 1.5% on a ten year loan.
  - istrading 7y ago
    Maybe it's because the rest of the world can though. If you look at the debt to GDP ratio of Germany, Russia, China, it is much lower than the United States. Recently it was reported by AB Bernstein that the Debt-To-GDP ratio in the United States -- the real Debt-To-GDP Ratio -- is 1,832%!! https://interactiveswingtrading.com/2019/09/09/ab-bernstein-says-actual-the-debt-gdp-ratio-is-1832-cnbc-reports/ https://interactiveswingtrading.com/2019/09/09/ab-bernstein-...

dragonwriter 7y ago

You left out #3, tighten lending criteria and raise interest rates on loans to increase income per dollar lent and reduce volume of lending, which also improves liquidity. But, yeah, if you are flush with cash and don't own a home but want to, #1 & #2 sound great if you consider only their first order effects on you. #1, especially, is a huge brake on the economy (as is it's close relative #3). Which probably also has a negative impact on you, unless you are living entirely off of a pile of cash previously earned.

freejulian85 7y ago
I don’t believe the fed should pick winners and losers. I worked hard for my dollars. The banks should have to compete for them fairly.
0x445442 7y ago
Given there's so much of this (https://en.wikipedia.org/wiki/Bullshit_Jobs https://en.wikipedia.org/wiki/Bullshit_Jobs) right now, I'm not convinced #1 would have a such a negative impact. If we broaden are thinking it could have an awesome impact long term.
- vpmpaul 7y ago
  The problems with these types of books to me is that the researcher surgically analyizes a tiny part of the whole picture and claims this is the grand solution or something like that. This book does nothing other than highlight common knowledge but does nothing to show why or how it is that way and what can be done to begin to change it. Its the equivilant of saying well the reason the timing belt on your car breaks is it is too weak. So I made a 150kg gear system to replace it. "Wont that be too heavy for the engine to turn it?" , "Oh yeah you will have to replace the whole engine and transmission as well." Except in this instance it is all of society and humanity that would have to be changed or replaced. On example: the reason duct tapers exist is that they handle the exceptions from really, really ,really, really difficult problems to solve that are already partially solved and working good enough.
- dragonwriter 7y ago

jigglesniggle 7y ago

No matter how many times it is explained, at the end of the day people who are not me and who have no real valid claim to free money are being given free money and allowed to profit off of it.

geggam 7y ago
^ this is they key to being wealthy, counterfeiting :)
- 0x445442 7y ago
  That and when running a business you get to keep profits but someone else pays for your losses.
grandridge 7y ago
I wish more people here understood this.
29_29 7y ago
I was talking about the two levers the Fed has to guide the economy at work - Printing Money and Lowering interest rates (as described by Ray Dalio https://youtu.be/PHe0bXAIuk0 https://youtu.be/PHe0bXAIuk0). My coworker starry eyed, looked at me and said, "What about Quantitative Easing?". I responded that is printing money. I think the issue is, these concepts are given difficult sounding names, so people do not question their ethics. I'm not saying they are not needed - in a credit based economy it seems they are absolutely necessary, but perhaps they could be implemented in a way that doesn't so favor the rich.
- mars4rp 7y ago
  Yes, print money and pay for student loans!
  - Fjolsvith 7y ago
    Yes! Because we can postpone that bill to our future tax payers.

LatteLazy 7y ago

The majority of people already own houses and have mortgages. That means they don't want interest rates to go up. So the Fed will not allow that. That's it, that is the reason banks were bailed out in the first place. That's the reason they're being subsidised now (plus lots of cheap money pushes up the stock market and spurs investment and looks good at election time). This isn't about economics. It's about politics.

ls612 7y ago
The vast majority of mortgages out there today are fixed rate, not adjustable rate. That means that the interest homeowners are paying is locked in regardless of the rates in the market today.
- wutbrodo 7y ago
  Most homeowners still have a substantial amount of leverage though, and you can refinance every X years. On top of that, rising rates reduce house values. Most of my parents' net worth is in either residential or investment real estate, and low rates are very much good for them.
freejulian85 7y ago
> The majority of people already own houses and have mortgages. The majority of boomers maybe own houses. Exclude them and your claim isn’t even close to true. Regardless, this entire situation is a huge moral hazard. I think the majority of us wouldn’t approve of the fed deciding winners and losers.

BuckRogers 7y ago

It's stealing money out of everyone's pockets to keep the banks going. Devalues the existing currency already in circulation. I love the obsession with keeping the system going, if the system is cyclical and flawed for human beings, maybe we shouldn't base the system that feeds, clothes and houses humanity on a craps table. The more of this sort of news that comes up the closer I listen to Richard D. Wolff.

throw0101a 7y ago
> Devalues the existing currency already in circulation. Anyone with debt (e.g., mortgage, student loans) is advantaged from a future lower-value currency: > If wages increase with inflation, and if the borrower already owed money before the inflation occurred, the inflation benefits the borrower. This is because the borrower still owes the same amount of money, but now he or she has more money in his or her paycheck to pay off the debt. This results in less interest for the lender if the borrower uses the extra money to pay his or her debt early. * https://www.investopedia.com/ask/answers/111414/does-inflation-favor-lenders-or-borrowers.asp https://www.investopedia.com/ask/answers/111414/does-inflati... Provisos: > Inflation can help lenders in several ways, especially when it comes to extending new financing. First, higher prices mean that more people want credit to buy big-ticket items, especially if their wages have not increased – new customers for the lenders.
- BuckRogers 7y ago
  I'd argue you can't "win" in any form, if you're in debt. That's like trying to lose your way to the top of a ranked competition. You never move up the ladder of life by losing. Broadly speaking, it's a position of weakness and servitude. It's a similar suggestion that if you're deep in debt, you "win" if you get hit in the head with a baseball bat. Sure, you enjoyed spending the money and now you're mentally deficient so you got away with not having to pay it off, but you've still been beaten over the head with a bat. But ultimately, even if my view is an inaccurate description of reality, what you're saying is true, but I'd argue it's still a net loss. The end-goal over a lifetime of earning is to be in the black, not red. It's difficult to lose your way to the top. Wages don't track inflation (contrary to those 2% raises a year, because salaries are suppressed from downward pressure on wages). So the relatively short time someone is in debt doesn't outweigh the time spent out of debt thus the advantage you speak of isn't worth it. All that said, debt is not inherently bad.. but that's another discussion and not in the context of this discussion.

robk 7y ago

Your mortgage rate would go up though unless you're an all cash buyer

mindslight 7y ago
Which is exactly what you want. Expected monthly payments are fixed, so your principle would go down. This increases your ability to pay off the loan earlier, and lowers your property taxes. (This may not sound causal until you consider the larger feedback loop that has gotten us to here in the first place.)