5 years ago, oil was about $112, two months before that, it hit $147. Today it popped almost $3 to $108.
Posted on 09/18/2013 11:13:08 AM PDT by Hojczyk
Edited on 09/18/2013 11:17:36 AM PDT by Admin Moderator. [history]
An economy still stumbling toward recovery was not enough to sway the Federal Reserve, which defied market expectations Wednesday and said it will not begin pulling back on its monthly asset-purchasing program. Stocks surged on the news but bond yields were flat.
(Excerpt) Read more at cnbc.com ...
5 years ago, oil was about $112, two months before that, it hit $147. Today it popped almost $3 to $108.
I was also in Pittsburgh at the time. What a difference a little more time made; after 3 1/2 years most were "Reagan Democrats"!
Or, at least until after the 2014 election.
Fed: No Taper Bernanke Caves
There. Fixed it.
They need to go back and read Chapter One of their economics textbooks.
Economic growth does not come from fiat money being pumped into the economy. It comes from the chance to make a profit.
Right now, with the coming of draconian environmental regulations and Obamcare, there’s absolutely no chance to make a profit.
That was my first thought too.
Barnake worships at the feet of Keynes.
No, I don't believe the Fed ever has to pay the money back. My understanding is that the Fed has been given the power by Congress to print money out of thin air at their own discretion with a dual mandate to "control inflation" and "maximize employment." This is how the system works.
Let's say that the US government wants a billion dollars of cash to spend and no private investors want to buy Treasury bonds. How does the US government get the cash they want if their are no private investors who want to buy? Well, the government won't want to raise taxes because that is politically unpopular. So where does the money come from?
Well, of course! The Government goes to the Federal Reserve Bank and asks for a LOAN of a billion dollars. The Fed does not actually have a billion dollars to give the government, but that's not a problem. The Fed will create the money out of thin air, by creating a bank account and electronically saying that it has a billion dollars in it. And just like that *poof*, the government has a billion dollars to spend. Because the computer says that the government now has a billion dollars in their account.
In exchange for this newly created billion dollars of cash, the US Treasury Department will usually give the Fed a billion dollars of US Treasury bonds. Since these treasury bonds are on interest. The US government will owe the Fed a billion dollars plus the interest on the treasury bonds. This is a problem though, because the US government will owe more money to the Fed than the Fed actually printed, so it will be essentially impossible to ever pay off the National Debt in full.
In short, the Fed is basically a legalized counterfeiting operation. They can create as much money as they like for free, but they loan that money out to the US government and other banks on interest.
The Fed doesn't have to pay anyone back. It's not the Fed borrowing from the Treasury. It's the Treasury borrowing from the Fed. Thus it's the government who has to pay the Fed back. Unfortunately, this means that ultimately, the taxpayers who will get the short end of the stick because they have to pay the Fed all of the money they created plus interest. Quite a racket, isn't it?
Now the US government could cut out the middleman and issue money to itself directly interest free like it used to do, but I don't think that the big banks would be very found of that idea.
If you want a hedge for inflation, by Gold.
It becomes an accounting game.
Yes, the money will stay in the system, the only thing that can heal the economy is a massive contraction (a bust), which will allow prices to drop and clean up the malinvestment.
The Fed. government won't allow it to happen so the economy is going to be get worse and worse until the Government cannot prevent a crash and the dollar destroyed.
Most Pittsburghers are socially pretty conservative and would have seen eye-to-eye with Reagan.
Unfortunately on economics, most believe the BS being put out there in union newsletters.
But I doubt even a Republican would take the needed steps to heal the economy and stop inflating.
The Fed doesn't buy buildings and land, bonds only.
The Fed doesn't buy bonds from the Treasury.
The US government will owe the Fed a billion dollars plus the interest on the treasury bonds. This is a problem though, because the US government will owe more money to the Fed than the Fed actually printed, so it will be essentially impossible to ever pay off the National Debt in full.
Is that why you can never pay off your mortgage, the Fed didn't print enough money? LOL!
In short, the Fed is basically a legalized counterfeiting operation. They can create as much money as they like for free
If it's legal, it's not counterfeiting. And of course central banks can create money for free.
but they loan that money out to the US government and other banks on interest.
Yes, the Fed earns interest on their bonds and loans.
the taxpayers who will get the short end of the stick because they have to pay the Fed all of the money they created plus interest. Quite a racket, isn't it?
Yes, the taxpayer is on the hook for Treasury borrowing and government spending. Quite a racket, isn't it?
Now the US government could cut out the middleman and issue money to itself directly interest free
What do you feel that would do?
but I don't think that the big banks would be very found of that idea.
Why not?
Crude was at $41. in late ‘08: http://www.indexmundi.com/commodities/?commodity=crude-oil&months=60
Meanwhile, the contents of my Cheerios box gets lighter & lighter and the price goes up & up! Bernanke is hammering the middle class & savers. Not going to be pretty when this equity/Fed unwinding/low interest rate bubble bursts! I loathe Bernanke.
I disagree with your assessment on the point that congress has control of the fed. Perhaps that is what they say but I think reality is different.
Do they believe the union or just willing to accept anythi g they say
Yeah, that's kind of a technical way of putting it. The Fed doesn't buy the bonds from the Treasury directly, but the Fed does buy the bonds from the treasury, albeit in an indirect way. Instead of buying the Treasuries directly, it has a bunch of its member banks buy the bonds on their behalf. Those member banks are still buying the bonds from the treasury effectively on behalf of the Federal reserve. The Fed then pays for the bonds buy issuing a line of credit for them. Regardless, all of those US Treasuries all end up on the Feds balance sheet anyway. So it is in effect, the Fed doing the buying, albeit in a roundabout way.
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