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What does anyone think of this? Instead of the Fed controlling interest rates and lending, by manipulating the Fed Funds rate to control interest rates, why not just let the market control it?
Lend a set amount of money every day/week/month whatever, and have it go to different banks by way of auction. Banks would "bid" how much interest they would pay on a particular "block" of Fed lending. If the economy is skyrocketing and banks are lending at a high clip, the interest rate would get pushed up by increased demand. If the economy is tanking, perhaps the Fed might end up lending at a negative interest rate if that is all the market is willing to pay.
Thoughts?
I believe that's what they are "theoretically" doing. And when the banks are balking at borrowing money the Fed offers it to them at near ZERO interest and the banks buy federal debt with it and earn the market interest rate on it. The investment banks are the country's NUMBER ONE recipient of entitlements and by being the middle man Congress can deny that they have any involvement in dumping greenbacks to pump up the stock markets. But the game is rigged to do just that. And inflation will be the result.
I agree with you except for the very last part of your statement.
This whole rotating circus of money gives a fortune out to very, very few recipients. These people are accumulators, not consumers. If the "profits" of creating money and then chipping away percentages applied to more people, we would have tremendous inflation. But if you give a billionaire another 100M, they won't chase goods or services with it. If the wealth were spread around, we'd have devastating inflation because "normal" people would start buying things and drive up prices.
They are trying to put it in consumers' hands but just for mortgages to drive up demand in real estate and, if they are not careful, create another housing bubble. I live in po-dunk nowheresville and real estate has really taken a left-turn for the better this year. We are not quite back to 2008 volume, but it is definitely picking up.
Well, there's a long way to go before we hit anything near the 2005 bubble. Here's what's going on in Las Vegas Las Vegas Home Prices Surge in July - 8 News NOW but to give you a frame of reference, my personal residence was at about 85K in 2002 and hit $225K by 2005. I bought this in 2009 for $63K and the price dropped as low as $37K by 2011 and today, probably back to $63K. I don't see it getting much past $80K and certainly not the $225K of 2005.
I see most of this money going into the stock market as commissions are clipped as the money circles around from Ben to Bank and Bank to Ben. They pick off a few million here and there but they definitely don't get any going to Joe Average Consumer. As long as Joe doesn't get anything, we'll be safe from inflation.
I think. Maybe.
Vegas was inundated with foreclosures though--not anywhere near what most places got. Weren't most of the houses in vegas either in foreclosure or upside down at one point?
The bitter funny part is that I bought these $225K places in 2009/2011 for a song because now nobody wanted to buy them. $225K - I'll take it. $45K, ooh, I can't afford it.
Humans. Hard to figure them out
They have no money for a downpayment so they can't get financing would be my guess.
I agree with you except for the very last part of your statement.
This whole rotating circus of money gives a fortune out to very, very few recipients. These people are accumulators, not consumers. If the "profits" of creating money and then chipping away percentages applied to more people, we would have tremendous inflation. But if you give a billionaire another 100M, they won't chase goods or services with it. If the wealth were spread around, we'd have devastating inflation because "normal" people would start buying things and drive up prices.
The Fed already lends out a certain amount of money every week/month/whatever anyways. I was just suggesting that these "accumulators" should have to bid against each other for how much that lent out money costs.
Heres how it works (I think).
Ben creates a billion dollars and sells me the bonds. I sell the bonds back to Ben and take a 1% commission. That's about it. I made me an easyt million to stash with my other 99999999 million.
You just need to know the right people......
It would be a disaster akin to letting the market dictate gas prices resulting in wild fluctuations of interest rates.
As the financial crisis showed, keeping interest rates too low for too long without adjustment was a disaster. I think there needs to be some supply and demand going on here.
It does when the fed stays as far out of it as they can. They are mucking up the bond market
Here's how I think it should work. You shouldn't be the only buyer for Ben's money. That was my entire point in the first place.
As the financial crisis showed, keeping interest rates too low for too long without adjustment was a disaster. I think there needs to be some supply and demand going on here.
Well, they seem to have it now. A lot of the recent sharp price increases are due to insufficient inventory and slightly late to the table investors.
I do recognize that not everyone is able to accumulate the $20K or so you need to buy a house at 20% down. You have to work and save, work and save. It's not fun and not easy. But it's doable and there seem to be a lot of interested buyers now. I also think that there are alternatives to 20% but I'm not sure why I think I know that so definitely not a fact.
No, deregulation of the financial industry, especially allowing unregulated derivatives, like CDSs, to flood the market, caused the disaster. It was Greenspan's market evangelism that was the problem.
As the financial crisis showed, keeping interest rates too low for too long without adjustment was a disaster. I think there needs to be some supply and demand going on here.
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