Posted on 07/22/2010 5:47:02 PM PDT by Kaslin
Prosperity: Federal Reserve Chairman Ben Bernanke can talk all day about doing everything possible to sweeten a sour economy. Monetary policy is pretty much exhausted. It's Congress that could act — but won't.
'We remain prepared to take further policy actions as needed to foster a return to full utilization of our nation's productive potential in a context of price stability." Those were the words the Fed chief hoped would have a healing effect on an economy battered by years of housing and lending policies hijacked for ideological purposes.
But what more can Ben Bernanke do?
The interest rate elevator doesn't have a button for going lower than the subbasement. Other proposed steps — cutting bank reserve rates, buying mortgage securities, simply printing billions more of money and so on — are about as useful as an aspirin after running the gantlet.
And in spite of the godlike aura that surrounds whoever sits as chairman of the Fed, Bernanke can't control Congress' fiscal policy.
The private economy isn't fooled; it knows that the executive and legislative branches of government are controlled by forces hostile to economic freedom. The Federal Reserve has reported that 500 firms are sitting on $1.8 trillion in cash, a situation that hasn't happened in decades.
These companies are doing what rational individuals do when they see that the long-term forecast makes no mention of sunshine — saving for all those rainy days.
They just saw a financial overhaul enacted that maintains the too-big-to-fail policies that helped get us into this mess, discourages orderly bankruptcy, and prevents the creative destruction that capitalism needs to thrive.
(Excerpt) Read more at investors.com ...
The interest rate elevator doesn’t have a button for going lower than the subbasement. Other proposed steps — cutting bank reserve rates, buying mortgage securities, simply printing billions more of money and so on — are about as useful as an aspirin after running the gantlet.
____________________________________________________________
But it does! If a currency has 10% inflation, and a bank borrows that currency today at 0% from the government the government is paying the equivalent of 10% a year to the bank to borrow money. Someone explain to me how I’m wrong. Money today is more valuable than money tomorrow. Presto. Government is giving money to the banks with their lending rates and the government can go infinitely lower than the subbasement.
While the majority of Americans sleep.
Reboot on last best program hit F1.
Stick a fork in the economy, it’s done.
I will rake a crack at it. They are losing the ability to create inflation. They are stuck with 0 intrest rates because of all the arm’s due to reset.
I will rake a crack at it. They are losing the ability to create inflation. They are stuck with 0 intrest rates because of all the arm’s due to reset.
I am not a money guru but I did stay at a Holiday Inn Express last night so, ... it looks the opposite to me. If the bank borrowed money from the government and just held it, which banks cannot do and stay in business, and the money loses 10% of its value it is the bank who has lost and the government who has won. The government dumped money worth X and the bank is now holding money worth X-10%. Who came out ahead at this stage? It seems to me the government did.
However, when the bank pays the government back they are paying back with money worth 10% less. Now it is a wash. Right? Wrong?
I think you’re wrong. If you could borrow 1 million dollars at 0% interest with 10% inflation and pay it back in a year . . . you would pay it back with money that was worth 900,000 and you’d be up 100,000.
I will rake a crack at it. They are losing the ability to create inflation. They are stuck with 0 intrest rates because of all the arm’s due to reset.
___________________________________________________________
I don’t understand.
That's why Obama is giving the money away. If that doesn't fix the economy Obama is then going to try paying people to take the money...
Up $100,000 of what? Worthless money? The bank loaned me money that would have bought $100,000 worth of stuff. When I paid the bank back they could only buy $900,000 worth of stuff.
What is really happening, and on purpose, is the Fed loans money to the banks, say at zero interest, and rather than lending the money the banks use the money to buy Treasury notes which pay interest. So, in that way the government is basically laundering its debt through the banks and paying them for it.
However, that has nothing to do with inflation.
Are You Looking For A Job?
http://www.freerepublic.com/focus/chat/2525821/posts
This thread has been updated.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.