Here you are an ignoramous.
I deny there is anything fundamentally wrong with credit issuance. Why would I see anything wrong with changing the number of dollars in existence?
No one said there is anything fundamentally wrong with credit issuance. The question is to what end? Who is borrowing, where is the money going, and who collects the interest.
What you forget is that when the FED creates the money out of thin air and loans it to a bank at below commercial rates (which is the point of the exercise from the banks point of view) who then lends it out at commercial rates, the Federal reserve transferred calls on goods and services to the borrower from the general public, and the financial returns on those loans go to the bank that made the loan and to some extent the federal reserve, but does not return to the general public whose pockets were picked to provide the invested goods and services in the first place.
Why do you think you have some prior right for the number of dollars in existence to remain unchanged for all time?
Now you are putting unuttered words in everyone's mouths.
Where would you acquire such a right?
I dunno, maybe like in the fundamental rights of property guaranteed by the constitution.
Dollars are the debts of the Fed - why should they be required to remain constant?
They are? Who does the FED owe the debt to? Does it may interest on this debt? I thought dollars were a medium of exhange and a store of value in return for goods and services provided.
You - "Here you are an ignoramous."
Abuse, no argument. My statement stands. It is possible you are ignorant enough about financial matters that you may not know how to position yourself so that inflation benefits you rather than being harmful, or so that you are indifferent to it for most of its likely future amounts. If so you simply need to pay a modest amount to a professional who knows such things as a matter of course. Tell him your expectations and he can prescribe the positioning to use. As with all things in finance, anything you are right about will get you paid, and any forecast error can cost you value, and you can fully control the scale or amounts, call the direction only or also the scale, etc. Perfectly garden variety, easy to do.
If you choose to adopt a position that is certain to lose value from mild inflation, then you are responsible for that positioning and the results. Since you can change it to any forecast, you pocket it not picked in the matter, one way or the other. You simply make your forecast and benefit if you are right.
"No one said there is anything fundamentally wrong with credit issuance."
Of course they have. If you don't wish to defend that proposition, fine, but plenty have, both on this thread and before it elsewhere.
"to what end? Who is borrowing, where is the money going"
Lots of independent economic actors decide such things, they do not require your approval, and they aren't robbing you when they don't show up at your door asking your permission before moving a muscle.
"loans it to a bank at below commercial rates"
Sorry, wrong answer, the Fed loans at commercial rates, not below them. In fact when the discount window is used, there is a "penalty rate" about half a point above commercial terms. In open market operations, as the very phrase "open market" implies, they are precisely on commercial terms. In auctions, obviously they are on commercial terms, that is sort of automatic in an auction format.
You continue to completely misunderstand the nature of the Fed's support for the banking system. Banks are profitable in their own right, they do not require subsidized intervention to make them so. They are profitable because their own credit is higher than that of those they extend credit to. Yes, the scale and facilities to deal directly with the Fed (and with other major money center banks) are part and parcel of that higher credit, and in that sense they benefit from the whole set up, and largely. (You are free to join them in that by owning their stock, of course). But they do not require ongoing interest subsidy concessions, remotely.
"the Federal reserve transferred calls on goods and services to the borrower from the general public"
Incorrect. "Calls on goods and services" can be made by wealth in any form, and are not restricted to money specifically, as the debt of the Federal Reserve. The assets the Fed buys are fully capable of acting as such "calls on goods and services". The total size of all the "calls on goods and services" running in favor of the banks, net, is unchanged by Fed transactions - that is the capital of the banks.
Transactions with the Fed, and simple loan issuance without dealing with the Fed, can change - increase or decrease - the size of the balance sheets of the banks, on both sides. Meaning they can have more of their own debts outstanding at one time than at another, and can own more loans and securities in direct proportion.
The only reason the banks "need" the Fed to increase reservable dollars in this is because of legal restrictions on their balance sheets, set by the Fed itself. Left entirely free of Fed influence, the banks could loan more at will, not less. The Fed restricts the size of their balance sheets as a whole by requiring deposits of dollars at the Fed, from each member bank, it is definite ratio to their total balance sheet. It is not making it possible for them to lend more when it creates new dollars, it is just loosening its legal restriction on their native and natural ability to expand their balance sheets as they like. A bank's native ability to expand its balance sheet is just any entity's freedom to decide how deep in debt to go, if others (not the Fed, the public) will willingly lend to it.
"does not return to the general public whose pockets were picked"
Nobody's pockets were picked, you haven't yet been able to point to a single way in which they would be.
Look, when money was convertible into gold, it was possible to run a "corner" in gold in a way that would increase its real value compared to bank debts, without limit. Banks "caught out" by such a corner could be forced to fail in their promise to convert all of their deposits into gold, if holders of gold were unwilling to part with it at any price. But there is no a priori right of people holding dollars to run a "dollar corner" to destroy the banks. All the Fed is doing when it issues more dollars because banks want to hold more dollars and fewer other securities, is breaking any such "corner", and removing any potential premium dollars might command during one.
This isn't picking anybody's pocket. It might be described as preventing a consortium from robbing the banks, but really it is free action not robbery either way. Banks no longer promise to convert their deposits into gold. Now they just promise you give you Federal Reserve Notes (FRNs) in physical dollar form, if you want to hold those instead of their bank deposits. The Fed can readily accomodate any demand in that direction that can possibly arise, and that suffices to make bank desposits "as good as" FRNs. It does not suffice to make either one "as good as" gold or anything else, but then they haven't promised you anything in the matter, either.
Part of what is happening here is that rhetoric invented for a previous era in which banks did make such promises is being translated into a fiat money era in which there aren't any such promises. It was possible to allege something dishonest or at least, reckless, in banks running up balance sheets so high they could be caught out in a gold "corner".
But there isn't anything remotely dishonest in the exchange value of FRNs or bank deposits changing. They simply never promised you that they wouldn't. If you hold them anyway, it is because they are useful to you without any such promise. You don't have to do so. You don't have any prior reason to think they won't change in value; they will change in value; everyone involved knows it completely. So where is there any pocket-picking?
"the fundamental rights of property"
Wrong, you can and do have rights to specific *assets*, but not to anything about the *value* of those assets remaining unchanged. The value of everything changes all the time. A demand that it never should, it a demand that all prices be fixed, and is incompatible with any form of economic freedom. You can own a bank deposit or an FRN. But you have no right to the amount of corn or whatever it will buy tomorrow being the same as today. You aren't being robbed if it changes, anymore than you are being robbed if the price of your house goes down compared to some silly price offered for it last year in different market conditions.
"They are?"
Yes. OMG, we still have to establish such an elementary point?
"Who does the FED owe the debt to?"
Whoever holds the FRN or the bank deposit denominated in FRNs. That is the whole point of the whole bleeding banking system. If you hold a $20 bill in your hand, it means the Fed owes you $20. If you have a bank deposit for $20 at Citicorp instead, Citi has agreed both with you and with the Fed to let you exchange it one for one for a physical FRN, on demand. In that case, Citicorp owes you a Federal Reserve Note with a "20" stamped on it.
"Does it may (sic) interest on this debt?"
The Fed earns "seinorage" precisely by having FRNs outstanding that do not pay interest, while itself holding mostly treasury securities that do pay interest. Along with some gold and other assets, to be sure. Every year it transfers its net interest earnings to the US treasury, as the beneficial owner of the Fed.
"I thought dollars were a medium of exhange and a store of value"
You say that as though they were mutually exclusive (lol). US dollars are the debts of the Federal Reserve. They are accepted as money by lots of people (including, as a matter of law, the US treasury in payment of income taxes, a minor point), as are checkable deposits denominated in US dollars and fully redeemable in physical FRNs on demand - and that makes both classes of item into money, in practice, in the US (and parts of the rest of the world, come to that). As for their role as a store of value, it is minor and secondary - most people use real assets or portfolio investment for that purpose, not bank deposits, let alone physical notes.
When bank deposits are used for it, typically enough interest is asked to cover inflation, though whether it will precisely or not is an empirical matter and changes over time. On the whole, since the Fed has been open in 1913, interest earning dollar deposits have kept their value in real term, but earned nothing to speak of in real terms. Financially speaking, the primary uses of "cash reserves" is for transactions balances on the one hand, and momentary "parking" between less liquid but higher paying assets, on the other.
US dollars (money generally) emphatically are not "wealth", the latter being much broader. The effects of changes in the price level of the purchasing power of any given person or company's whole *wealth*, are indeterminate and depend on their financial positioning. That is why I say there is no sense in which inflation picks your pocket or anybody else's. You might gain by it or you might lose; it depends on how you chose to invest, what assets you choose to hold (or to borrow in, a debt in dollars being in effect a "short" dollar position, etc).