Question: Where does our money come from?

[slaterd]

If you believe in conspiracy theories...1 word...Rotchschild

[decay]

The real question is:
Anyone who is busy attacking the concept of central banks care to provide an alternative?

Sure.

Fixed and finite supply (deflationary rather than inflationary, QE not possible).
Decentralized (no possibility of having an oligarchy control it).
Breaks the banks' control over forex, because it doesn't know or care what country you're from.
Gives emerging markets access to first-world buyers if they have something worthwhile to sell.

https://en.bitcoin.it/wiki/FAQ

[rwh11385]

Sure.

Fixed and finite supply (deflationary rather than inflationary, QE not possible).
Decentralized (no possibility of having an oligarchy control it).
Breaks the banks' control over forex, because it doesn't know or care what country you're from.
Gives emerging markets access to first-world buyers if they have something worthwhile to sell.

https://en.bitcoin.it/wiki/FAQ

LOL! Thanks for that.

1) Care to explain why in the world you'd want a deflationary regime?

2) Why would you want a currency that lacks a stable value such as bitcoin?

Also, you want the country or the world based on something that could be replaced and become obsolete?

A great deal of careful thought and ingenuity has gone into the development of Bitcoin, but it is the first of its breed, a prototype, and vulnerable to more highly-evolved competitors. At present, any threatening rivals have yet to rear their heads; Bitcoin remains the first and foremost private virtual currency, but we can offer no guarantees that it will retain that position. It would certainly be in keeping with internet history for a similar system built from the same principles to supersede and cast Bitcoin into obsolescence, after time had revealed its major shortcomings. Friendster and Myspace suffered similar fates at the hand of Facebook, Napster was ousted by Limeware, Bearshare and torrent applications, and Skype has all but crushed the last few disciples of the Microsoft Messenger army.

Sure, people are free to invest in it at their own risk and highly useful if you are buying heroin on Tor, but basing a country's money upon a bubble cryptocurrency....

[Fusion]

[decay]

1) Care to explain why in the world you'd want a deflationary regime?

Already answered that.

2) Why would you want a currency that lacks a stable value such as bitcoin?

All currencies lack stable value, or forex trading wouldn't be a thing.

Sure, people are free to invest in it at their own risk and highly useful if you are buying heroin on Tor, but basing a country's money upon a bubble cryptocurrency....

The number of merchants accepting Bitcoin crossed into the 5 digits in the middle of last year.

This site: https://all4btc.com/ will let you buy anything on Amazon with Bitcoin (which is kind of a lot of stuff).

I think stability will increase with continued adoption.

[rwh11385]

Already answered that.



All currencies lack stable value, or forex trading wouldn't be a thing.

Where did you explain why deflationary is good?

People seek out arbitrage of pennies, not value halving overnight. Your argument misses magnitude and ignores how volatile bitcoin is.

[mrsleeve]

Heeter, I meant no disrespect, just pointing out the 2 different strategies and the "training" used to implement them to illustrate the point that was made. Your of the newer school of thought that seems to be being taught in the education industry in recent years. George seems to me to be a little more classical in his approach.

You both seem to be doing decent with it, and thats a good thing, making money is always a good thing

[Ryan Stewart]

The funny thing is (and explained in this or another documentary, can't recall) that the modern economics classes are the sole contributor to everything that is wrong with the economy in that Bernanke's (and others') policies work great on paper, but keep failing in real life.

Actually if you look at historic trends their actions, while nowhere near perfect, have resulted in an increasingly stable and upward trend. Whether or not its sustainable is another matter. You wouldn't want to have been around for a recession/depression 100 years ago.

And, as matthuggie pointed out, its working against a market that is nowhere near perfect (despite what your low-level econ classes argued). The market is run by emotional investors and, in the short run (which could still be years) can be made volatile by those investors.

[Fusion]

I'm not necessarily saying there shouldn't be a Central Bank. The problem is that the CB also has regulatory mechanisms to prevent things like mortgage bubbles, and the failure isn't necessarily in the bubble bursting, but in the Fed being reluctant to do anything about it in advance, even though economists and even board members pointed a finger.
The market today is mainly fueled by emotion and faith. That's why QE can't work forever. As soon as there's any bad news announced, there's a huge chance the whole thing will crumble to pieces. And what can the Fed do after QE fails?

[Ryan Stewart]

Nothing in the short term, but in reality nothing you propose will work in the long term. All economies really rely on emotion and faith. Even the gold standard relies on a perceived value of gold (which is a terrible idea seeing as how gold is also a product we need for industry).

[Dozyproductions]

LOL! Thanks for that.

1) Care to explain why in the world you'd want a deflationary regime?

2) Why would you want a currency that lacks a stable value such as bitcoin?

Also, you want the country or the world based on something that could be replaced and become obsolete?


Sure, people are free to invest in it at their own risk and highly useful if you are buying heroin on Tor, but basing a country's money upon a bubble cryptocurrency....

Nothing I say will make you change your mind and thats okay and it doesn't bother me. What do you suggest for all this though? How would you solve inflation killing savings and standard of living or a too centralized power by the few who don't give a rats ass? How would you even try to do what the fed was 'meant' and has failed to do?

[Ryan Stewart]

Nothing I say will make you change your mind and thats okay and it doesn't bother me. What do you suggest for all this though? How would you solve inflation killing savings and standard of living or a too centralized power by the few who don't give a rats ass? How would you even try to do what the fed was 'meant' and has failed to do?

Not defending him but neither of your questions are really valid. There are no specific criteria and, if you take them at face value, the assumptions given in them are incorrect. For example, the idea that the fed "failed" is a bit black and white. That is like saying the firemen failed because your kitchen was ruined by a grease fire while ignoring that your house is still standing.

[rwh11385]

Nothing I say will make you change your mind and thats okay and it doesn't bother me. What do you suggest for all this though? How would you solve inflation killing savings and standard of living or a too centralized power by the few who don't give a rats ass? How would you even try to do what the fed was 'meant' and has failed to do?

Um, what? Much of this isn't based on fact as much as it is opinion and assumptions. If you want to have a quality discussion, don't ask leading questions based on bad premises.

How do I solve inflation killing savings? Invest. 1.2% YOY inflation is nothing - heck even online savings will keep you nearly on par with 0.85% interest and a high yield 3 year CD gives 1.2%. But compare 1.2% with 33% from stocks this year... inflation doesn't kill that.

The Fed has a target of 2% inflation to encourage growth, as do other central banks. Their job is to regulate the money supply to support that goal. Look at the last 30 years:



That's pretty decent. At least not failing like in the 70's, which can be blamed on many things. But a curious chart is how wrong they predicted inflation:

http://economistsview.typepad.com/economistsview/2007/04/what_caused_the.html

Anyway, back to 2% inflation killing savings and also encouraging growth. A small and steady inflation allows people to grow their money with investments which provides financing for companies to grow and invest themselves, or they motivated to spend it rather than sit on it and hoard cash. This is positive for the economy as a whole.

Contrast that to deflation where people are discouraged from spending (money not spent is worth more tomorrow) and benefit from stashing cash under the mattress even. Less money in circulation with less spending = economic slowdown = more deflation. This benefits people who own lend out money and drastically hurts people who owe, so the real value of their repayments are more than what they borrowed. (HUGE issue given our mortgages, student loans, car loans in American society) It also would require people to accept pay cuts since the $ is worth more and their salary probably won't grow at the same rate as deflation, which would upset a lot of people. This resistance is sticky wages. And that's not even considering minimum wage.

If we ditch our inflation target, or switch to a fixed quantity of money that is deflationary, then we'll have the dollar appreciate relative to our trading partners. Sure, the Chinese trinkets will be cheaper as will German BMWs imported, but our goods will be relatively more expensive and this could strongly damage our exports and global competitiveness. Which means less jobs, smaller economy, less demand for money = more deflation.


The last bit about not caring, what's that based on? Anything? You're talking about career economists who have been professors or advisors and joining the Fed is like the ultimate place for them to reach. They seem generally determined to do what's best for the country, which may seem cold to people who want them to make a single person's life better... which isn't their job. Their role is the monetary foundation of the country, not necessarily anything more than keeping that running.

More to that point, when it was determined that the country should try to get everyone in a house... it eventually blew up. There's more than enough blame to pass around to a lot of people, but the government didn't need to be pushing everyone into a mortgage. [Clinton and Bush led this]

http://www.nytimes.com/2008/12/21/business/worldbusiness/21iht-admin.4.18853088.html?pagewanted=all&_r=0

And both Paulson and his predecessor, John Snow, say the housing push went too far.

"The Bush administration took a lot of pride that home ownership had reached historic highs," Snow said during an interview. "But what we forgot in the process was that it has to be done in the context of people being able to afford their house. We now realize there was a high cost."

But as true today as it is for then, the President isn't the only person in power. There was a lot of factors, from Wall Street going hog wild on mortgage-backed securities, rating agencies obscuring these assets' risk, the Gramm-Leach-Bliley Act and a lack of satisfactory replacement of what it repealed, aggressive mortgage underwriters who cared about income rather than honesty in applications, equality lawsuits that sued over denied applications when people couldn't afford a house, the silly mortgage interest tax deduction that encourages people to go into debt to "save on taxes", 1982 allowance of adjustable-rate mortgage loans and then people not accounting for the possibility of them changing later on, 1992 FHEFSSA with goals for low-income areas even if unsound loans, Countrywide / Fannie Mae ease credit requirements in 1999 and HUD encouragement in 1999 & 2000, CFMA in 2000 which opened the door for credit default swaps, mortgage denial rates halving between 1997 and 2002, SEC lifting net capital rule in October 2004 for Goldman Sachs, Merrill Lynch, Lehman Brothers, Bears Stearns, and Morgan Stanley, and oh yeah - all the people who couldn't make their payments. People were spending more than they made, with a negative savings rate, and buying up houses in a bubble with adjustable mortgage rates.

Then the housing market slowed and it really hit the fan.

And since then, we experienced a Great Recession and touched on deflation a little, then slowly but generally surely have been recovering. While some people have been angry and looking for a target, such as Ben, others have just moved on and kept grounded in facts.

To blame all of this on the Fed is ridiculous, although they may have been able to do something more earlier about it. But then again, the focus was recovering from the early 2000s recession.

http://online.barrons.com/article/SB122246742997580395.html

2003-'07: The Federal Reserve failed to use its supervisory and regulatory authority over banks, mortgage underwriters and other lenders, who abandoned such standards as employment history, income, down payments, credit rating, assets, property loan-to-value ratio and debt-servicing ability. The borrower's ability to repay these mortgages was replaced with the lender's ability to securitize and repackage them.

Again, this also fell on the mortgage underwriters, the borrowers, the politicians that pushed home ownership, and the push for subprime loans. Wall Street which repackaged crappy assets with misleading ratings of MBSs that GSEs turned out in excess and were leveraged like whoa and connected to commercial banks holding people's savings.

I'm a chemical engineer major but I think im going to take some finance/economics classes because this is such a crazy topic.

If you really want to understand the CF that was the financial crisis, do take some econ classes for fun but might not be very informative until intermediate level stuff. It would certainly help you understand the different M1, M2, etc and physical money versus demand deposits, fractional banking, etc. It's good for overall awareness of the world, especially if you get into trade stuff, and not just being technical. Plus, warm up for MBA down the road if that's something you'd be into.


There's a lot of youtubes floating around, a lot of cartoons and quasi-information, but here's one you might enjoy:

I personally use credit unions and try to avoid big banks, besides to use them for credit card rewards. And along the lines in the video, crowdfunding has democratized money for new businesses and opportunities which is great for products available as well as the potential for new companies and jobs.


All in all, QE is tapering already (in case some people in CZ weren't aware of) so the results succeeded in bringing down unemployment and stabilizing the money supply (avoiding deflation when borrowing dried up). You can look forward to people now attacking Janet Yellen since she was confirmed today: http://www.politico.com/story/2014/0...800_Page2.html

And more scrutiny if you want that:

House Republicans plan a year long-effort to put the Fed under the microscope.

The House Financial Services Committee is celebrating the Fed’s centennial by launching an “oversight project” that will examine the Fed’s role in financial markets and the economy, with a bill making changes to how the central bank operates expected late this year.

“It will be the most rigorous examination and oversight of the Federal Reserve in its history,” committee Chairman Jeb Hensarling (R-Texas) said last month when announcing the initiative.

This “oversight project” is emblematic of conservatives’ unease with the Fed and Republican criticism that it has gone too far in recent years in trying to boost the economy, pointing to these efforts as another example of government overreach.

Dealing with congressional attention is now a bigger part of the Fed chair’s job than when Bernanke first filled the seat in 2006 — following years of lawmakers taking a more hands off approach during the long tenure of Chairman Alan Greenspan.

In recent weeks, Bernanke has acknowledged the increased role Congress plays in the life of a Fed chairman, pushing back against critics — in his polite professorial tone — while being careful to say the Fed should welcome oversight from elected officials.

Asked what advice he would offer Yellen for dealing with lawmakers, Bernanke said in a December press conference: “Congress is our boss.”

“They represent the public, and they certainly have every right to set the terms on which the Federal Reserve operates and so on,” he said.
But he’s also dismissed arguments by the central bank’s most ardent congressional critics that its monetary policy making should be made more transparent — warning that the “Audit the Fed” movement would lead to too much political pressure from Congress on an independent agency and that its critics ignore how much more transparent the Fed has become on his watch.

“The Federal Reserve routinely makes public extensive information on all aspects of its activities, and since the crisis it has greatly increased the quantity and detail of its regular reports to the Congress and the public,” Bernanke said in a Jan. 3 speech at the annual meeting of the American Economic Association.

There's a worse possibility than an independent group of economists using a great deal of data to make decisions about money supply, and that's a bunch of lobbied politicians listening to their donors and an angry mob of poorly informed people who wear tin-foil hats. Humans aren't perfect so you have to appreciate that fact and that people and investors aren't always rational. Better to have that than a computer which can freak and make crisis like in hypertrading, or a fixed amount that can't respond to cycles, or based on a commodity that can be manipulated in trading.

[matthugie]

I'm not going to quote that War and Peace length post, but that's one of the best posts I've seen in quite some time.

[Dozyproductions]

I'll do more research and really be able to understand what you said. Seriously you're objections only make me want to confirm my opinion that much more so thank you. I said opinion because of all the vast links you can post seem to be opinion translated into fact... just as much as there is just enough truth and enough people agree. As much as I suffer from my own confirmation bias, so do you.

I come a psychology and historical upbringing, and being that everything is connected with each other, those subjects have more weight into the equation of reality that it seems you'd like to admit. I assume that some glaring realities, if aren't available for you to quote from links by people you don't know, just don't connect. One of my points is that it is well known that politicians are easily corrupted for money and to stay in office. If the worlds biggest bankers created a central bank you have to look at the motivation. Sure congress approved the bill and the president appoints... but that can be just as easily a smoke screen. Money influences... and the richest people in the world can do quiet a bit of influencing. I don't know why they'd ever suggest something that would take away their own power unless they could control it.

Inflation is officially 2% but how does that translate? Higher prices without a grow in real wealth... which make the 2% rate about a 1/4 of what it really is. How many banks did we hear that made huge money in time of suffering. Injection of credit is a great think to encourage 'growth' but then as usual there is always the bust. The first to be blamed are the people. How come they can't be smart with they're money? Because of the very thing that you mentioned, growth. But so little is actually owned, it's all built on credit and that's something that the smartest money theoreticians can manipulate with simple change in interest rates, as one example. The fed was based souley on the 'stabilization' of the market and to stop the boom and bust cycle. Using the same formula for the past 100 years has got us no where near close to that. So again what's the point of the fed's existence?

Reading direct quotes and admittance from Keynes, Strong, JP morgan, Rothchilds, past presidents... there are some huge implications being nonchalantly put out for the public to hear. People like Orwell, ezra pound, eustace mullins and etc, got it...IMO

Haha I know it's hard to read what I usually say but my cognitive functions are slowly deteriorating with every seizure i have... which is often.