Posted on 08/10/2010 11:49:47 AM PDT by John W
Acknowledging that the recovery has slowed, the Federal Reserve announced Tuesday that it would use the proceeds from its huge mortgage-bond portfolio to buy long-term Treasury securities, The New York Times’s Sewell Chan reports from Washington.
By buying government debt, the Fed is taking an unmistakable step to maintain the large amount of money that it pumped into the economy, starting in 2007, to prop up the financial and housing markets.
(Excerpt) Read more at dealbook.blogs.nytimes.com ...
We don't sound like we're together on just how a "Fed fiat-creation event" happens.
There's really not all that much to it, what happens is when interest rates go down more people hock their homes and more loans are made when banks create money. fwiw, most loans are paid back and most banks cut a profit.
None of this is new; in fact it's been going on for hundreds of years most of which was with the gold standard.
The money supply expands during economic growth regardless of whether it's a gold, silver, or exchange rate based currency. Easy to see just by looking at various countries' money supply and gdp levels over the past couple centuries..
So now you've been reduced to making extreme claims to avoid the truth.
Wassamater? Didn't like the parabolic nature of the debt-curve on the link I posted?
Nope. Gold & silver-based money only increases if the supply of gold or silver increases. If the money supply increases faster than that, it usually happens by debasing the content of gold-silver currencies with lead, tin, etc.
All governments debase their currencies. The Romans did it with their coin. It's just easier in a fiat, electronic currency issued by a private bank.
Like the claim that I couldn't pay interest on my mortgage unless the fed increased the money supply? Yeah, that was a bit extreme. And wrong.
Quick question for you, if you deposit gold based money in the bank and I come to the bank and take out a loan, did the money supply increase?
Here's a link that shows Fed fiat-creation events over the past 35 years.
"There's really not all that much to it, what happens is when interest rates go down more people hock their homes and more loans are made when banks create money. fwiw, most loans are paid back and most banks cut a profit."
You didn't understand the $10B example I gave, did you. If there is only $10B in money and you owe $10.5B with interest, you either have to create $.5B to show a 'profit' or suffer $.5B of debt-destruction in which case your interest 'profit' is offset by your bad debts. That's how it works.
Never made that claim. That was your misrepresentation of what I said.
And yes it was wrong.
So where was the new money, created by buying additional debt, over the 3 year period of my graph?
Good example. Maybe you will understand this time.
If 10 oz of gold is all the gold in the world and you borrow 10 oz @ 5% interest, the total gold supply must increase by 1/2 oz or you cannot pay the gold loan plus interest one year later. Either I don't get all my gold back or the lender doesn't get his 1/2 oz of interest.
Get it now?
Cherry-picking again? Look at the long-term graph again.
Quick question for you, if you deposit gold based money in the bank and I come to the bank and take out a loan, did the money supply increase?
I paid my mortgage over the 3 year period of my graph.
What good is the long term if it's impossible to pay my debt for three years?
Sorry, maybe you missed the answer. Allow me to repeat it.
If 10 oz of gold is all the gold in the world and you borrow 10 oz @ 5% interest, the total gold supply must increase by 1/2 oz or you cannot pay the gold loan plus interest one year later. Either I don't get all my gold back or the lender doesn't get his 1/2 oz of interest.
Get it now?
Think about this one some more...
If 10 oz of gold is all the gold in the world and you borrow 10 oz @ 5% interest, the total gold supply must increase by 1/2 oz or you cannot pay the gold loan plus interest one year later. Either I don't get all my gold back or the lender doesn't get his 1/2 oz of interest.
Only because you didn't.
Try again, if I borrow gold based money, does the money supply increase?
Maybe it would help if you learned what actually makes up the money supply. I'll wait.
No new money created, yet I paid my mortgage.
Sounds like your original claim was mistaken.
Fractional reserves limits now much of the deposits can be loaned out, but no matter. Say 10 oz is deposited and 5 oz is loaned out. Now we got 15 oz of gold. That's 10 from the ground and 5 from the air.
Remember that in real live there's more than 15 oz of gold that exists, and that when push came to shove the banks more often than not came up with the gold needed to cover deposits at the end of the day. Just the same, gold got created out of thin air ever time loans were made.
Sure I did. Your failure to admit it notwithstanding.
"Maybe it would help if you learned what actually makes up the money supply. I'll wait."
Think about it some more...
If 10 oz of gold is all the gold in the world and you borrow 10 oz @ 5% interest, the total gold supply must increase by 1/2 oz or you cannot pay the gold loan plus interest one year later. Either I don't get all my gold back or the lender doesn't get his 1/2 oz of interest.
Then the new money supply is what? Come on, you can add two numbers together.
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.