Posted on 12/09/2010 10:57:02 AM PST by speciallybland
You think that they can value bonds at more than their actual value and then loan out that fake value?
Do you have a link that explains this claim?
the dollars will decrease in purchasing power. If a dollar gets you 100X of gas (or any other consumable) this year and the dollar next year gets you 99X of gas (or any other consumable) no matter how many dollars you have they are worth less. You are confusing PERSONAL purchasing power with the Dollar's purchasing power. (Ergo if you have more dollars than you did last year then you personally have more purchasing power.)
"So, if it takes 40 dollars to FILL my gas tank each week and next year it takes $40.40 each week then I've lost 40 cents on the value of my transportation asset."
Are you asserting the above statement is NOT true?
"You bet. The oil company shares I own should keep their value because they can sell the oil for more, right?"
Which has what to do with the valuation of the dollar?
No one denies this.
no matter how many dollars you have they are worth less.
Each dollar is worth less.
You are confusing PERSONAL purchasing power with the Dollar's purchasing power.
No I'm not.
Are you asserting the above statement is NOT true?
When I said, "You bet", that was me agreeing with you.
Which has what to do with the valuation of the dollar?
You said "any asset that is valued in Dollars suffers the same loss"
My oil stocks are priced in dollars but would increase in price if inflation allows them to sell their oil for more dollars. When I sell my $100 in stock next year for $101, you can see that my asset "that is valued in Dollars" did not suffer the same loss.
Perfect job for Ron Paul.
End the Fed!
Preach it, brother!
**********
The Fed increases the money supply via selling T-Bills The Fed buys T-Bills. and attaches an interest rate to the increase in money.
So what?
Well, considering the interest rate we are paying on our debt about $400 BILLION dollars a year, that is added to the debt, I’d say there are more than a billion reasons why it’s bad.
Do you realize the treasury could simply print the money without any interest attached
Lincoln did that and it led to massive inflation.
Well, instead we owe 13.8 trillion at this moment ($125,000 per taxpeyer that we owe now) - and I think the inflation really was from the issue of fighting a civil war in this country (not a typical occurence I think). I’m suprised we financially survived that one at all.
Do you understand the scam the Fed represents?
How much interest do you feel the Treasury pays to the Fed each year?
Not the point really, it’s the interest that is added to the debt albatross each year as we continue to bury ourselves in debt. BTW that interest on that debt (thanks Fed!) per year is approx $400 billion per year. US defense costs us about $ 533 billion a year. That is disturbing!!!!! Besides we are paying a good amount of that money to Chinese communists - not what I consider a good thing. We didn’t ever have to have the debt - except the bankers got in there via Woodrow Wilson and the democrat progressives and jammed that one through. It also began the income tax which american had been free from since the founding! I know you wouldn’t want to argue that Woodrow Wilson’s policies were a good idea??
Another fun fact, the interest per year we pay - partially to chinese communists- thanks to the Fed, would buy us about 88 Nimitz Class Aircraft Carriers per year! (ie. USS Ronald Reagan x 88)
I’m going back to my drink and a nice dinner! I can’t defend a Fed that will destroy my grandchildren. I can't defend a progressive agenda of financial slavery. Sorry, I just can’t.
hahahah OK Todd seriously? Have you NOT been paying attention these past few years?
You want links? http://en.wikipedia.org/wiki/High-yield_debt
At the link:
Debt repackaging and subprime crisisHigh-yield bonds can also be repackaged into collateralized debt obligations (CDO), thereby raising the credit rating of the senior tranches above the rating of the original debt. The senior tranches of high-yield CDOs can thus meet the minimum credit rating requirements of pension funds and other institutional investors despite the significant risk in the original high-yield debt.
The New York City headquarters of Barclays. In background, the AXA Center, headquarters of AXA, first worldwide insurance company.When such CDOs are backed by assets of dubious value, such as subprime mortgage loans, and lose market liquidity, the bonds and their derivatives are also referred to as toxic debt. Holding such "toxic" assets has led to the demise of several investment banks such as Lehman Brothers and other financial institutions during the subprime mortgage crisis of 2007-09 and led the US Treasury to seek congressional appropriations to buy those assets in September 2008 to prevent a systemic crisis of the banks.
And that is just ONE of the shenanigans that went on as far as allowing banks to lend on fudged assets.
The Fed buys T-Bills that already exist, because the Treasury already borrowed the money. The fact that the Fed buys them after they're issued doesn't increase the interest on the debt by one cent.
Well, instead we owe 13.8 trillion at this moment
The Fed owns $937 billion in Treasuries. Not even enough to cover last years deficit.
Not the point really
LOL! You complain about the number and now it's not the point? That's funny.
BTW that interest on that debt (thanks Fed!) per year is approx $400 billion per year.
Congress spends too much, not the Fed.
We didn’t ever have to have the debt
Has nothing to do with the Fed.
Enjoy your drink and come back with some real numbers.
You're changing the subject. We were talking about Fractional Reserve Banking.
That's when a bank accepts deposits, say $100, and loans out some and reserves the rest.
If the reserve requirement is 10%, they can loan $90 of the $100 deposit and reserve the rest, $10.
I don't know where your claim, "Corporate bonds are valued at 1000 per while Municpals are valued at 5000 per and Federal are valued at 10,000 per" came from, but I've never seen anything like that. If you have a site you took that from, please provide it.
By the way, if a bank securitizes and sells a loan, it doesn't have to hold a reserve against it, so it has nothing to do with FRB.
OK these must be special dollars you exchanged your stocks for. Let us test the premise.
Back to our example of the tank of gas. Will your dollars change the equation of $40 Bucks for one tank of gas for 2010 and $40.40 for one tank of gas for 2011 (with regards to 1% inflation)?
Further if you have a job that pays you 40K a year in 2010 and the same in 2011 and you have no other income or investments and inflation increases 1% across the board will you have more or less purchasing power? Will you be able to get the same amount of gas, food etc. you did last year using the same amount of dollars?
Notice the above question require Yes or No answers.
Nope, just regular dollars.
Will your dollars change the equation of $40 Bucks for one tank of gas for 2010 and $40.40 for one tank of gas for 2011 (with regards to 1% inflation)?
Nope. But if the value of my stock also increases, I can buy the same amount of gas for the same number of shares.
Further if you have a job that pays you 40K a year in 2010 and the same in 2011 and you have no other income or investments and inflation increases 1% across the board will you have more or less purchasing power?
I'm not talking about incomes, just your claim that any asset valued in dollars will suffer the same loss in value as the dollar will suffer.
OK except banks don't ONLY loan on Cash Deposits they also loan on bank assets further Depositors can also complicate the issue by using these REVALUED assets as collateral for loans thus inflating the amount the are allowed to lend. (If I take as collateral a REVALUED asset that is worth 100 but actually is worth only 10 dollars then presto 90 Bucks was created out of thin air and its all Okey Dokey with the FED)
"By the way, if a bank securitizes and sells a loan, it doesn't have to hold a reserve against it, so it has nothing to do with FRB."
hahahahah OK who buys the new higher valued asset? (Answer Another Bank)
And Now that Bank who purchased that repackaged asset CAN LEND MORE MONEY based on an asset that had its underlying value changed yet nothing really happened except they put a new coat of paint on that lemon of a car.
Either the dollar decreases in value or it doesn't, Investing dollars does not increase the value of a dollar no matter how hard you try.
I've never said anything different.
Banks need cash to lend cash. If a bank has a $100 bond and no cash, they can't lend out $90. And they certainly can't pretend the bond is worth more, based on the formula you provided and loan more than $90.
Depositors can also complicate the issue by using these REVALUED assets as collateral for loans
A depositor cannot use any of the bank's assets as collateral for anything.
(If I take as collateral a REVALUED asset that is worth 100 but actually is worth only 10 dollars then presto 90 Bucks was created out of thin air and its all Okey Dokey with the FED)
You are incorrect. I can value my $10 bond at $1,000,000 and the money supply stays exactly the same.
We already agreed that the dollar in your example decreases in value by 1%. Our disagreement is with your claim that all assets priced in dollars will also decrease in value by 1%.
Try this example. I have one share, the only share, in a company whose only asset is one tank of gas, currently priced at $40. Next year, the tank (and my share) are now worth $40.40.
My asset did not drop in value even though it is priced in dollars.
Yes, each and every dollar will decrease in value, I've never claimed otherwise.
"My asset did not drop in value even though it is priced in dollars."
Show me where I claimed otherwise...
Show me where I claimed otherwise...
Post #85
two problems with your attempted gloss over of the built in loss on owning American Dollars...
1. Trying to separate out CASH from REAL assets in attempt to show less of a monetary loss is not only mildly amusing it would give any CPA worth his salt a severe case of the giggles being that any asset that is valued in Dollars suffers the same loss (and I notice you conveniently left out the devastating effects of compounding being such also works when you compound a loss over time.)
So then you are claiming that each of those dollars did not lose 1% purchasing power?
I’m claiming that my asset, valued in dollars, did not suffer the same loss.
Define loss and understand when you try to use statements out of context you are making the error.
My "Loss" consistant all along. When a Dollar loses 1% purchasing power no matter how you try to spin it ALL of the Dollars in any investment lose 1% purchasing power. All dollars are equal as far as concern for legal tender value!
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