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Interesting how the banks are allowed to sell "securities" to the Federal Reserve.

by cheez 16y ago

wtn 16y ago
Presumably the author meant US Treasury marketable securities, but of course The Atlantic doesn't want to intimidate its readers with more than one idea at a time. The Atlantic is a very average and annoyingly centerist publication. Tons of mildly interesting articles like this that are basically ancillary to how the world works.
rayiner 16y ago
It's a pretty clever idea. It's always surprising to me that technology-saavy people are so skeptical of the monetary system. Corruption aside (which undoubtedly exists), it's a neat solution to a complex real-world problem. Put simply: Money is just a level of indirection. You could have a barter-based economy based on goods and services, but you introduce money as a proxy to simplify transactions. The problem is: how much money do you have in the system? You want enough so it serves as an efficient proxy for the actual value of the goods and services. If you deviate from that amount, you're in trouble. The problem is complicated by two things: 1) the amount of goods and services which money must proxy for is constantly increasing; 2) money must proxy not just actual goods and services, but enforceable promises to provide goods and services (ie: debt). (2) is the most complicated issue to deal with, because it's highly dynamic. As society becomes more stable and secure people are willing to commit to obligations that are further in the future. There must be enough money to serve as an accurate proxy for those commitments. The fractional reserve system is actually a fairly elegant solution to this problem: money is dynamically created when loans are made, and destroyed when loans are repaid.
- cheez 16y ago
  What bothers me personally about the system is that it is not fair. When I am forced to participate in a system, it should at least be objectively fair. One point of unfairness is that certain entities, and therefore people, are guaranteed a profit. This is not fair. I can't take loans from the central bank at 0%, why? Saving is also no longer an option. That, I feel, is unfair. We have already taken risks to create the wealth and now we have to take even more risks just to keep the value of the money. Of course, The Bernank and his successors don't have to worry, they just increase their own salaries and retirements. I actually like fiat money because it decouples resources from wealth. In an economy that increasingly depends on ideas, that is good. It's the implementation which needs an overhaul before it destroys the entire world. I'm still connecting the dots in my head.

Interesting how the banks are allowed to sell "securities" to the Federal Reserve.

by cheez 16y ago

Interesting how the banks are allowed to sell "securities" to the Federal Reserve.

wtn 16y ago

Presumably the author meant US Treasury marketable securities, but of course The Atlantic doesn't want to intimidate its readers with more than one idea at a time. The Atlantic is a very average and annoyingly centerist publication. Tons of mildly interesting articles like this that are basically ancillary to how the world works.

rayiner 16y ago

It's a pretty clever idea. It's always surprising to me that technology-saavy people are so skeptical of the monetary system. Corruption aside (which undoubtedly exists), it's a neat solution to a complex real-world problem. Put simply: Money is just a level of indirection. You could have a barter-based economy based on goods and services, but you introduce money as a proxy to simplify transactions. The problem is: how much money do you have in the system? You want enough so it serves as an efficient proxy for the actual value of the goods and services. If you deviate from that amount, you're in trouble. The problem is complicated by two things: 1) the amount of goods and services which money must proxy for is constantly increasing; 2) money must proxy not just actual goods and services, but enforceable promises to provide goods and services (ie: debt). (2) is the most complicated issue to deal with, because it's highly dynamic. As society becomes more stable and secure people are willing to commit to obligations that are further in the future. There must be enough money to serve as an accurate proxy for those commitments. The fractional reserve system is actually a fairly elegant solution to this problem: money is dynamically created when loans are made, and destroyed when loans are repaid.

cheez 16y ago
What bothers me personally about the system is that it is not fair. When I am forced to participate in a system, it should at least be objectively fair. One point of unfairness is that certain entities, and therefore people, are guaranteed a profit. This is not fair. I can't take loans from the central bank at 0%, why? Saving is also no longer an option. That, I feel, is unfair. We have already taken risks to create the wealth and now we have to take even more risks just to keep the value of the money. Of course, The Bernank and his successors don't have to worry, they just increase their own salaries and retirements. I actually like fiat money because it decouples resources from wealth. In an economy that increasingly depends on ideas, that is good. It's the implementation which needs an overhaul before it destroys the entire world. I'm still connecting the dots in my head.