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The Fed's 'hidden agenda' behind money-printing

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The Fed's 'hidden agenda' behind money-printing

The markets were surprised when the Federal Reserve did not announce a tapering of the quantitative easing bond buying program at its September meeting. Indeed, its signal to the market that it was keeping interest rates low was welcome, but there may be a hidden agenda.

Since it began in late 2008, QE has spurred a vigorous debate about its merits, both positive and negative.

On the positive side, the easy money and low interest rates resulting from quantitative easing have been a shot in the arm to the economy, fueling the stock market and helping the housing recovery. On the negative side, The Fed accomplished QE by "printing money" to buy Treasurys, and through the massive power of its purchases drove interest rates to record lows.

But in the process, the Fed accumulated an unprecedented balance sheet of more than $3.6 trillion which needs to go somewhere, someday.

But we know all this.
 

Gimmesometruth

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The Fed's 'hidden agenda' behind money-printing

The markets were surprised when the Federal Reserve did not announce a tapering of the quantitative easing bond buying program at its September meeting. Indeed, its signal to the market that it was keeping interest rates low was welcome, but there may be a hidden agenda.

Since it began in late 2008, QE has spurred a vigorous debate about its merits, both positive and negative.

On the positive side, the easy money and low interest rates resulting from quantitative easing have been a shot in the arm to the economy, fueling the stock market and helping the housing recovery. On the negative side, The Fed accomplished QE by "printing money" to buy Treasurys, and through the massive power of its purchases drove interest rates to record lows.
The Fed Purchase Test

Aha. It seems that many people don’t realize that the view that the Fed is the only thing holding down interest rates has been tested — and failed. So, a bit more.

The big test came from QE2, a program of large-scale Fed purchases of long-term government debt that began in November 2010 and ended in June 2011. You can see the program in the Fed’s holdings of such debt:

The burning question at the time was what would happen when the program ended and the Fed stopped buying more long-term debt. Many people, very much including Bill Gross, predicted a spike in rates; those of us holding the “stock view”, including both me and Ben Bernanke, disagreed. In the end, there was no spike — which constituted strong evidence against the whole notion that the Fed is what’s holding down rates.

Yet the Fed story, which came into prominence in the first half of 2011, now continues to be an article of faith among many people, showing yet again that for such people evidence that runs contrary to their prejudices doesn’t matter.
http://krugman.blogs.nytimes.com/2012/09/20/the-fed-purchase-test/
 

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Gimmesometruth;106235839 1 said:
The Fed Purchase Test

Aha. It seems that many people don’t realize that the view that the Fed is the only thing holding down interest rates has been tested — and failed. So, a bit more.

The big test came from QE2, a program of large-scale Fed purchases of long-term government debt that began in November 2010 and ended in June 2011. You can see the program in the Fed’s holdings of such debt:

The burning question at the time was what would happen when the program ended and the Fed stopped buying more long-term debt. Many people, very much including Bill Gross, predicted a spike in rates; those of us holding the “stock view”, including both me and Ben Bernanke, disagreed. In the end, there was no spike — which constituted strong evidence against the whole notion that the Fed is what’s holding down rates.

Yet the Fed story, which came into prominence in the first half of 2011, now continues to be an article of faith among many people, showing yet again that for such people evidence that runs contrary to their prejudices doesn’t matter.
http://krugman.blogs.nytimes.com/2012/09/20/the-fed-purchase-test/

WHAT ??!!

Why do you post opinions from that lunatic ?

The FED has been paying banks interest on their massive reserves ( which the FED controls ) since 2008.

That is they get money from the Cemtral bank for having the money on hand that they are mandated to have by law.

This is being done to influence the overnight rate, which is what short term interest rates typically follow not too mention the MASSIVE amount of Treasuries our Central Bank now owns.

What the Fed is doing is highly destructive and Krugman is too much of a hack to realize that. The Fed isn't stopping QE because a sell off and climbing interest rates would cast a slight pall on the Democrats chances in 2014.

Bernakes pumping is the ONLY thing holding up Obama's house of cards of a ecoonony and in 2013, as well as 2012,2011,2010,2009 and 2008, its a great time to be a bakn.


STOP poisoning these threads with these lunatics you pull out of cyberspace because you don't possess the humility to admit when you're wrong.
 

head of joaquin

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WHAT ??!!

Why do you post opinions from that lunatic ?
.

The rightwing reverso-meme in full flower. A Nobel-Prize-winning economist is a "lunatic" and the OP quotes a weirdo deficit fetishist, who predicted in one of his predictably wrong articles that it would "take eight years for the market to get back to 2007 levels". That was in 2009. BUZZZZ. He was wrong as rightwingers always are.


http://online.wsj.com/article/SB123837242096367881.html

Nothing to see here, folks. Just more conservative ranting.
 
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Gimmesometruth

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WHAT ??!!

Why do you post opinions from that lunatic ?
Oh, the irony!

The FED has been paying banks interest on their massive reserves ( which the FED controls ) since 2008.
Let me see now, private commercial banks borrow from the federal reserve banks at a set rate of interest.....and yet you think.....the private banks are paid interest by the FED?

Your postings are getting worse and worse.
 

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The rightwing reverso-meme in full flower. A Nobel-
Prize-winning economist is a "lunatic" and the OP quotes a weirdo deficit fetishist, who predicted in one of his predictably wrong articles that it would "take eight years for the market to get back to 2007 levels". That was in 2009. BUZZZZ. He was wrong as rightwingers always are.


Peter J. Tanous Says It May Take Years for Stocks to Bounce Back - WSJ.com

Nothing to see here, folks. Just more conservative ranting.

LOL !!!

Ooooh...hands off Krugman because he won a " nobel prize"...

Yea and so did Obama and Gore.

Your point ?
 

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Gimmesometruth;106236125 5 said:
Oh, the irony!



Let me see now, private commercial banks borrow from the federal reserve banks at a set rate of interest.....and yet you think.....the private banks are paid interest by the FED?

Your postings are getting worse and worse.

And your ignorance is becoming more and more apparent.

Banks that are insured under the FDIC , have been getting paid INTEREST on their MASSIVE reserves since 2008 by the Central Bank.

The FED controls the RESERVE level for a all FDIC insured banks.

It is UNPRECEDENTED, like so much of Obama's malfeasance and its being done primarily to manipulate the over night interest rate because all other short term interest rates FOLLOW the overnight rate.



You and Krugman havn't a clue do you ?

Hey its a great time to be a bank in America. Just open your doors, take the Feds free money, and then take their interest for your massive reserves while you pay your depositors SQUAT on their interest bearing accounts.

Well its Fed policy in America under Obama. What can you do ?
 
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Fenton

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The rightwing
reverso-meme in full flower. A Nobel-Prize-winning economist is a "lunatic" and the OP quotes a weirdo deficit fetishist, who predicted in one of his predictably wrong articles that it would "take eight years for the market to get back to 2007 levels". That was in 2009. BUZZZZ. He was wrong as rightwingers always are.


Peter J. Tanous Says It May Take Years for Stocks to Bounce Back - WSJ.com

Nothing to see here, folks. Just more conservative ranting.

wait, you're not seriously bragging about a stock market thats being held up exclusively with massive amounts of QE are you ?

And as far as " prediciting " its rise, it was he and just about everyone else.

Hey when the FED through perpetual and unprecedented QE removes the risk by dropping interet rates down to almost nothing, its a easy prediction.

Hey post the link of Krugman defending Fannie and Freddie by claiming they never bought crappy loans..LOL !!

Or Krugmans article where he turns down the FED chairman position THAT WAS NEVER OFFERED TO HIM.

HAHAHAHA !!!
 

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And your ignorance is becoming more and more apparent.

Banks that are inured under the FDIC , have been getting paid INTEREST on their MASSIVE reserves since 2008 by the Central Bank.
FDIC insurance is paid by member banks to the US govt.

Interest payments collected by private banks comes from investment made by the banks.

Again, you cannot bring yourself to reference what you are talking about, but you do as usual spout vague "facts" that you can't quite specify.

I'm sure at some point you will have access to a laptop and proceed to flood a post with some documentation about unrelated "facts", but you won't actually back what you claim but still do a victory dance.

Good luck with that.
 

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FDIC insurance is paid by member banks to the US govt.


Interest payments collected by private banks comes from investment made by the banks.

Again, you cannot bring yourself to reference what you are talking about, but you do as usual spout vague "facts" that you can't quite specify.

I'm sure at some point you will have access to a laptop and proceed to flood a post with some documentation about unrelated "facts", but you won't actually back what you claim but still do a victory dance.

Good luck with that.


LOL !!!

Why ? So you can go all psuedo - admin on me and report me for lifting content without permision ?

Jesus dude.

Ok, I'll post proof LATER, but you're the first to demand evidence of a FED policy thats been in full swing since 2008.
 

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Oh....I figured out what you are carrying on about....you are talking about "interest paid on EXCESS RESERVES".....say that with me Fenton...."EXCESS RESERVES".

Paying the banks interest on EXCESS RESERVES is fine when the objective is to get banks to have RESERVES on hand for....let say....having not enough cash on hand when their investments boom and bust.

Those rules were put in place in 2008, they will be dropped once the economy settles.....but what this has to do with QE and interest rates....you never made clear......and it doesn't counter the fact that interest rates were NOT being held down strictly because of QE.

But don't let that stop you from making more scattered brained posts......sigh.
 

head of joaquin

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LOL !!!

Ooooh...hands off Krugman because he won a " nobel prize"...

Yea and so did Obama and Gore.

Your point ?

That your lunatic claim that Krugman is a lunatic is lunatic?

That the OP quotes a guy who is so deep into debt fetishism that he didn't see the stock market recovery happening in front of his tea party nose?

That about wraps it up.
 

head of joaquin

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wait, you're not seriously bragging about a stock market thats being held up exclusively with massive amounts of QE are you ?

And as far as " prediciting " its rise, it was he and just about everyone else.

Hey when the FED through perpetual and unprecedented QE removes the risk by dropping interet rates down to almost nothing, its a easy prediction.

Hey post the link of Krugman defending Fannie and Freddie by claiming they never bought crappy loans..LOL !!

Or Krugmans article where he turns down the FED chairman position THAT WAS NEVER OFFERED TO HIM.

HAHAHAHA !!!

Two responses to my one post! Must have touched a nerve.

Regrettably this post reduces to "Waaaaaaaaaaaaaa a Noble Prize Winning Economist disagree with my Rightwing Talking Point".

But it's fun to watch you try
 

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Oh....I figured out what you are
carrying on about....you are talking about "interest paid on EXCESS RESERVES".....say that with me Fenton...."EXCESS RESERVES".

Paying the banks interest on EXCESS RESERVES is fine when the objective is to get banks to have RESERVES on hand for....let say....having not enough cash on hand when their investments boom and bust.

Those rules were put in place in 2008, they will be dropped once the economy settles.....but what this has to do with QE and interest rates....you never made clear......and it doesn't counter the fact that interest rates were NOT being held down strictly because of QE.

But don't let that stop you from making more scattered brained posts......sigh.

Hillarious, you're lack of general knowledge, and the fact it took you THAT long to realize what I was talking about.

And its, AGAIN, excess reserves and REQUIRED reserves.

And yes, the overnight rate influences the short term rate. Always has, always will.
 

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WHAT ??!!

Why do you post opinions from that lunatic ?

The FED has been paying banks interest on their massive reserves ( which the FED controls ) since 2008.

That is they get money from the Cemtral bank for having the money on hand that they are mandated to have by law.

This is being done to influence the overnight rate, which is what short term interest rates typically follow not too mention the MASSIVE amount of Treasuries our Central Bank now owns.

Why must i correct you so much?

The interest paid on excess reserves removes rate volatility from the overnight market due to the transparent nature of the channel-corridor system. It is the same amount that would be earned in the repo/reverse-repo market. The only difference is... well, since you are such an expert, why don't you tell me?

What happens if/when the interbank lending rate is zero?
 
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Fenton

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Why
must i correct you so much?

The interest paid on excess reserves removes rate volatility from the overnight market due to the transparent nature of the channel-corridor system. It is the same amount that would be earned in the repo/reverse-repo market. The only difference is... well, since you are such an expert, why don't you tell me?

What happens if/when the interbank lending rate is zero?


You really DONT have to "correct" me at all Kush.

You can ignore me, or respond with out being contentious and rude.

AGAIN, I get enough of that from people like HOJ, and Gimme.

I don't mind talking to you, but the lofty and disdainful overtones are getting old.
 

Kushinator

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You really DONT have to "correct" me at all Kush.

You say things that don't make much sense, or are part of the talk radio rhetoric commonly regurgitated here @ DP. The channel-corridor system is the single most effective way for the Fed to maintain control over its single most important monetary policy tool.

Now being that you are an expert on monetary economics; why is the Fed so afraid for rates to actually go to zero?
 

Fenton

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You say things that don't make much sense, or are part of the talk radio
rhetoric commonly regurgitated here @ DP. The channel-corridor system is the single most effective way for the Fed to maintain control over its single most important monetary policy tool.

Now being that you are an expert on monetary economics; why is the Fed so afraid for rates to actually go to zero?


I make perfect sense because I can post factual data without having to mitigate the failures of those currently in charge

And it would seem that's your primary function here.

I realize WHY the Fed has decided to pay banks interest on their excess and required reserves, thats a given in this economic climate.

But I don't have to pretend that their extended and unprecedented policy decisions are due to some "Great Bush Recession'', or some protracted down turn caused by anything other than its actual cause.

Most reasonable individuals would not, 5 years in, blame the previous President or the current minority party for the ensuing economic disaster. It doesn't " make sense".
 

Kushinator

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I make perfect sense because I can post factual data without having to mitigate the failures of those currently in charge.

You don't post factual data though. When have you provided anything that doesn't come from a right-wing blog or think tank? You have yet to provide ANY empirical research (because that of which supports your position does not exist).

And it would seem that's your primary function here.

My function here is to provide objective analysis with respect to political economy. Contemporary finance and economics can be intimidating for many, and therefore i strive to ensure my posts are both data dependent non-partisan. It just so happens that the economic ideology currently supported by the new wing of the GOP has a total lack of microeconomic foundations for which their macroeconomic policy initiatives are drawn. Hence, i will call bull**** when i see it.

I realize WHY the Fed has decided to pay banks interest on their excess and required reserves, thats a given in this economic climate.

Given your post history, it sure doesn't seem that way.
 

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You don't post factual data though. When
have you provided anything that
doesn't come from a right-wing blog or think tank? You have yet to provide ANY empirical research (because that of which supports your position does not exist).



My function here is to provide objective analysis with respect to political economy. Contemporary finance and economics can be intimidating for many, and therefore i strive to ensure my posts are both data dependent non-partisan. It just so happens that the economic ideology currently supported by the new wing of the GOP has a total lack of microeconomic foundations for which their macroeconomic policy initiatives are drawn. Hence, i will call bull**** when i see it.



Given your post history, it sure doesn't seem that way.

NO, your function here is to provide a subjective analysis mixed with condescension and back hand rhetorical insults as you broad brush the Conservative position.


I don't think ANY poster here views your unput as purely objective and its pretty obvious that you've taken a side here .

For example, you defend the two most corrupt financial entities involved in the Sub--Prime collapse based on their definitions of " conformity", but then you ignore out right the conclusion of the SEC investigation that found 6 of their executives guilty of securities fraud.

You DO know about the SEC investigation of Fannie and Freddie right ? I'm going to assume you know, ok ?

You post explanations of bad FED policy but ignore the fact that there is no end in site for perpetual QE.
WHEN Kush ?

Tell me again when the economy is going to turn around as you blame 5 years in the previous President.

You want to repeat the Feds explanation for paying banks interest on on their REQUIRED and EXCESS reserves and then tell me its a good way to provide " liquidity" when we're currently on QE3 !!

FFS Kush is liquidity or lack of really the problem ?

But you're " objective" right ? Nah, I don't think so.

I'm no angel when it comes down to attacking people based on their ideology, I'll admit to that, but I do try and refrain depending on the poster, even if we disagree.

If everytime I post something, ( and I don't visist "right wing sites BTW" ) you're just going to warp into broad brush anti-Conservative propaganda, then I'll just count you as another HOJ Clone.

Personally, I think you're better than that and capable of true objectivity.
 

Gimmesometruth

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But I don't have to pretend that their extended and unprecedented policy decisions are due to some "Great Bush Recession'', or some protracted down turn caused by anything other than its actual cause.
You mean the actually cause of the reserve requirement introed in 2008 to have banks increase their reserves to guard against bank runs/bank collapses.....was not as a result of the financial meltdown of 2007-09?

Have you yet tied this into why it is being discussed in a thread on how interest rates are or are not completely controlled by the Fed's QE.....other than it being a really piss poor guessing game you decided to play to somehow show what a brainiac you are?
 

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You mean the actually cause of the reserve requirement introed in 2008

to have banks increase their reserves to guard against bank runs/bank collapses.....was not as a result of the financial meltdown of 2007-09?

Have you yet tied this into why it is being discussed in a thread on how interest rates are or are not completely controlled by the Fed's QE.....other than it being a really piss poor guessing game you decided to play to somehow show what a brainiac you are?

LOL !!

Yea right. I'm supposed to give anything you say credibillity when you took two days to Google that the FED, since 2008 has been paying banks interest on their REQUIRED and excess reserves.

And now you're saying they've added all this liquidity just in case their is aa run on the banks ? 5 years in and you're claiming there still might be a run on the banks ? Because the policies are the same.

Oh and by no means are they manipulating interest rates....

If the Fed stops QE tomorrow, whats going to happen to interest rates ?

Your Bush blame's a bit pathetic so I'll dismiss it as partisan nonsense.
 
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Kushinator

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You want to repeat the Feds explanation for paying banks interest on on their REQUIRED and EXCESS reserves and then tell me its a good way to provide " liquidity" when we're currently on QE3 !!

You are mixing up your terminology. They do so to maintain control over the market (interbank lending) by eliminating volatility. Liquidity has very little to do with IOER. One would expect you to better versed in financial economics given the aggressive tone of your responses.
 

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You guys seem to forget fractional reserve banking. This method still applies to the central bank...the FDIC fees are the deposits for The Fed, and a fraction of that money needs to remain in the hands of The Fed. The remaining is lent out to the government, buying an asset (treasury bonds) and being paid by the treasury interest on those bonds by printing money. The printing of money doesn't matter, because the money is being sent to The Fed, to the banking sector. And don't forget, for every dollar that is issued to a loan money is created. The national debt is the entire money supply of the country. Therefore, the amount of money spent on treasury bonds were created from nothing. Not to mention The Fed is purchasing bonds and receiving interest payments!

The inherent system is expansionary in nature. The Fed easily has the money to pay those excess reserves. Obviously this brings an incentive to keep money in the reserves, which allows for more deposits to The Fed (because FDIC deposits are based upon reserves) which allows for more money to be lent to the government and commercial banks from The Fed (banks have leverage). Again for every loan, more money is created from thin air which could be used to acquire more wealth through not only issuing loans, but financial instruments as well (which includes treasury bonds).

The flow of money is completely sustainable. I wouldn't worry about the lending practices of the bonds. If you really think about it, the US Treasury could just print the debt to The Fed and the money would be separated from the economy. It doesn't really matter.

What matters are the bailouts and infusion of capital in 2008. This insane inflation due to the infusion of capital plus the inflationary monetary system that we are in, brews risk of hyperinflation.
 

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You guys seem to forget fractional reserve
banking. This method still applies to the central bank...the FDIC fees are the deposits for The Fed, and a fraction of that money needs to remain in the hands of The Fed. The remaining is lent out to the government, buying an asset (treasury bonds) and being paid by the treasury interest on those bonds by printing money. The printing of money doesn't matter, because the money is being sent to The Fed, to the banking sector. And don't forget, for every dollar that is issued to a loan money is created. The national debt is the entire money supply of the country. Therefore, the amount of money spent on treasury bonds were created from nothing. Not to mention The Fed is purchasing bonds and receiving interest payments!

The inherent system is expansionary in nature. The Fed easily has the money to pay those excess reserves. Obviously this brings an incentive to keep money in the reserves, which allows for more deposits to The Fed (because FDIC deposits are based upon reserves) which allows for more money to be lent to the government and commercial banks from The Fed (banks have leverage). Again for every loan, more money is created from thin air which could be used to acquire more wealth through not only issuing loans, but financial instruments as well (which includes treasury bonds).

The flow of money is completely sustainable. I wouldn't worry about the lending practices of the bonds. If you really think about it, the US Treasury could just print the debt to The Fed and the money would be separated from the economy. It doesn't really matter.

What matters are the bailouts and infusion of capital in 2008. This insane inflation due to the infusion of capital plus the inflationary monetary system that we are in, brews risk of hyperinflation.

We've had this discussion before.

" The trillion dollar coin" etc.

As long as the money stays out of the economy the US could simply declare itself debt freee.

If it were that easy, something tells me they would have done this already and I have a real hard time beliveing it would NOT have an impact on the bonds market .

In reference to the bail-outs, its chump change compared to the toxic debt we took on when we took the GSEs into Conservatorship in 2008.

5.6 TRILLION from Fannie and Freddie alone and Ginnie Mae is currently sitting on a Trillion right now in FHA loans and securities.

That is real debt with a large portion unsecured as its being transferef over to our Central Bank 40 billion dollars at a time.

Sure the Feds getting interest on their majority holding of short term bonds, but they're transfering over MBSs to their books at the same time.
 
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