Who's to blame for the slow recovery?

[LibDave]

First of all, currency is debt. And what is preventing it is first of all inflation. Inflation is nothing more than another form of taxation. And a particularly nasty one at that. You liberals claim you don't want to tax the poor??? Inflation is a regressive tax rate. It taxes the poor at a higher rate than it does the rich. You cannot print wealth. Someone always has to pay the price. Learn ALL THE EFFECTS of what you propose first before you just assume their is some free lunch to be had. You keep assuming you have figured out some magical means of creating wealth out of thin air. You are dead wrong. You cannot create wealth by printing dollars. All it does is shift the purchasing power one group to another at best. In reality once you figure that out you will find even more negative effects you failed to account for. And these make it painfully obvious you not only haven't figured out some magical means of creating wealth, the net effect is absolute destruction of wealth.

Lets narrow it down to these two, one at a time.
1. What are the effects of the government giving bonds to the Federal Reserve (as the buyer of last resort) in exchange for currency.
2. What are the effects of the government auctioning off bonds to the public.

Determine who ALL the winners and losers are in the process. What is the overall net effect on the winners and losers. To do the analysis it helps to always force both paths to the same end point so you can therefore rule out all but the effects of your policy.

 

[Critter7r]

Deficit spending is not an addition to the economy.

Of course it is.

When investors buy the bonds the funds are removed from the investors [savings] accounts and placed in the US governments accounts. No increase in funds to the economy have occurred since the funds removed exactly match the funds received. This is called accounting and you are again dead wrong.

Well, that depends on what you're calling the "economy". The number of dollars in existence hasn't increased, but the number of dollars being spent, has. Investors don't buy bonds with money they were going to spend or invest elsewhere.

In fact so dead wrong as to give the impression you are attempting to lie about the facts as no one is THAT stupid. According to your line of thinking if I go and take all the money out of your wife's purse and then empty out your banks accounts and I go spend it then I have added to the economy. How is my spending your money any different to the economy than having you spend it?

The difference is the how that money was going to be "used". Was John's wife going to park that money in a savings account? Then yes, you've helped the economy by spending the money that she wasn't going to spend.

In fact deficit spending isn't even a break even situation as when the bonds mature there is interest which must be paid over and above the change in value of the currency. Again you fall victim to another "Broken Window" fallacy. Retarded.

Pathetic, unnecessary douchebaggery on your part.

If you instead pretend the money is printed, then all you have succeeded in doing is reducing the buying power of all the dollars currently in circulation by the exact same amount of buying power these new dollars possess. Again no net increase in terms of real dollars has occurred. The government has succeeded in coming into your home and bank account, stealing a certain percentage of your money then spending it instead of you. Wealth cannot be created out of thin air. Accept it, it is fact. Fact is this isn't even a zero-sum game as there are other negative impacts to you having had your money stolen.

You're leaving out the increased production spurred by the deficit spending.

 

[LibDave]

Of course it is.



Well, that depends on what you're calling the "economy". The number of dollars in existence hasn't increased, but the number of dollars being spent, has. Investors don't buy bonds with money they were going to spend or invest elsewhere.



The difference is the how that money was going to be "used". Was John's wife going to park that money in a savings account? Then yes, you've helped the economy by spending the money that she wasn't going to spend.



Pathetic, unnecessary douchebaggery on your part.



You're leaving out the increased production spurred by the deficit spending.

LOL. No it doesn't depend. Even dollars in a bank are spent. They are just loaned out to someone else to invest. In fact they are loaned out at a 10 to 1 ratio or higher depending on what the Federal Reserve Ratio is. So savings in a bank are in many ways more of a boon to the economy than going out and spending it. Just so you are aware, banks don't loan out the $10,000 in your savings account and charge someone say 5% to borrow it giving you 2% in return. They would only make 3% that way. They log the $10,000 in their books and the Federal Reserve allows them to loan out 10, 20, 30 times that much (whatever the reserve ratio is). If banks only loaned out what you gave them they couldn't afford all those nice buildings. With a reserve ratio of 10:1 they loan out $100,000 using your $10,000 worth of reserve. So they charge 5% per year on the $100,000 loaned out and make $5,000 in interest. They then pay you 2% of $10,000 and you get to keep $200 of that. Banks don't let their reserve ratio just sit idle. They loan out every bit of it (normally-see QE1,2,3). If they don't manage to loan every bit of it then other banks borrow it overnight at the prime rate to cover any deficiencies they have in their reserves.

I'm not leaving it out. I pointed out selling bonds does not increase the money supply whatsoever. Dollars are only moved from one account to the other. The reason this is the preferred method (selling bonds to the public instead of printing the dollars) is the effects of printing the dollars are worse. When they sell bonds to the public there is still a negative impact when the bonds must be repaid with interest and also due to the fact there is less money available in banks for private industry to invest. This drives up the interest rates and slows private sector investment by the same amount the government borrowed times the reserve ratio (10:1 ratio in Private Sector decline in investment). This wouldn't necessarily be a good thing or a bad thing. Whether it is good or bad depends on whether the money is spent efficiently. We do after all need some roads and unexpected defense needs must be covered at times. But do we need 30 lane highways or will 3 lanes be sufficient. In the case of government efficiency is rarely the case. Private sector often creates jobs with the same funds at a 10:1 ratio for just that reason. Regardless, all you have done is reduce Private Sector investment by a ratio of 10:1 for every dollar the government spends. The overall impact after all is said and done is highly negative.

Yet it takes time for the larger negative impacts to effect the economy. Depending on the amount of deficit spending performed it can take 1 to 3 years for the negative effects to materialize whether they be higher interest rates and reduction in private investment combined with the eventual repayment with interest or whether we print the money and let inflation do worse. When the bonds are sold to the Federal Reserve dollars are added to the economy but no increase in wealth occurs. Again all you have done is transfer some of the buying power from the public to the federal government. This means the public has less ability to buy clothes and food and what have you. The inflation caused by this printing will decrease the average value of a dollar such that the buying power of the entire money supply remains the same. Again, it does take time for the larger negative impacts to hit the economy. So for a short time it will tend to increase the level of activity in the economy. Long-term (1-3 years out) the negative effects far outweigh the positive effects and to compensate you often need another round of deficit spending to cover the negative impacts of deficit spending 3 years prior. But politicians don't care, it buys them votes from the naive today and they can kick the can down the road to the next Congress.

 

[LibDave]

Inflation is worse because it taxes the poor and the middle class at a higher rate than the rich. What happens is the money is of course initially given to the government. Until it is spent the economy of course feels no effects from the increase in money supply. So the person who spends the extra currency first (in this case the government) gets to purchase things with it while it still retains the initial value they stole from the buying power of the currency previously in circulation. So the person who spends it first (who is also the person who stole the buying power in the printing process) also benefits most from each dollar. As the dollars filter down from the government to the corporations to the wealthy each person in the chain will experience a gradual decrease in it's buying power until after 1 to 3 years the theft is now complete and the inflation is fully felt. It is the poor who receive the money last and therefore it is they who experience the brunt of the theft. Inflation truly is a Trickle Down tax. The poor and the middle class also have a larger percentage of their wealth tied up in the value of the dollar spending as much as 80-90 on basic necessities. Whereas the wealthy have a much lower percentage of their wealth in cash. Instead the bulk of their wealth is in assets whose price goes up with inflation making them even more profit.

What I find amazing is Supply Side Economics is referred to as Trickle Down Economics (by people who wish to condemn the theory) and these same people propose all sorts or inflationary measures which truly are Trickle Down. Inflation is the true trickle down tax and turds roll downhill to the poor. Supply Side Economics couldn't be further from the mindset Trickle Down implies. When companies invest money in an effort to increase later profits they don't get the money first. Take a company whose tax rate is reduced to encourage them to invest. They get say 10,000,000 in loans to invest in whatever they do since the lower tax rate and interest rates make the venture more feasible and likely to result in increased future profits. So they buy some land, build a new building, pay a bunch of painters, and construction workers, buy equipment, then they hire workers. The workers then produce some goods getting paid along the way. finally the company sells the goods and makes a profit (hopefully). The company and it's stock holders are the last to get paid. The first people paid are all the workers as they progress towards that final profitable sale. Supply side is the opposite of trickle down.

 

[Gimmesometruth]

The first people paid are all the workers

It thinks the timing of when a worker gets paid relative to investors/owners is the issue, when everyone and their dog understands that it is the level of payment, the distribution of the wealth, that is the issue with supply side/trickle down "economics".

 

[Critter7r]

LOL. No it doesn't depend. Even dollars in a bank are spent. They are just loaned out to someone else to invest. In fact they are loaned out at a 10 to 1 ratio or higher depending on what the Federal Reserve Ratio is.

No, they are the "1" - that banks need to keep in reserve - in that 10:1 ratio you mention.

So savings in a bank are in many ways more of a boon to the economy than going out and spending it.

No, they're not. They're not being spent, how can they benefit the economy?

Just so you are aware,

Please school me ... :roll:

banks don't loan out the $10,000 in your savings account and charge someone say 5% to borrow it giving you 2% in return. They would only make 3% that way. They log the $10,000 in their books and the Federal Reserve allows them to loan out 10, 20, 30 times that much (whatever the reserve ratio is). If banks only loaned out what you gave them they couldn't afford all those nice buildings. With a reserve ratio of 10:1 they loan out $100,000 using your $10,000 worth of reserve.

If you know that my $10,000 is KEPT IN RESERVE, why did you insist just 3 sentences ago that savings is loaned out into the economy?

So they charge 5% per year on the $100,000 loaned out and make $5,000 in interest. They then pay you 2% of $10,000 and you get to keep $200 of that. Banks don't let their reserve ratio just sit idle. They loan out every bit of it (normally-see QE1,2,3). If they don't manage to loan every bit of it then other banks borrow it overnight at the prime rate to cover any deficiencies they have in their reserves.

And now you're back to saying reserves get loaned out ... Reserves do not get loaned out. That's why they're call "reserves" in the first place, because they're kept in reserve.

I'm not leaving it out. I pointed out selling bonds does not increase the money supply whatsoever. Dollars are only moved from one account to the other. The reason this is the preferred method (selling bonds to the public instead of printing the dollars) is the effects of printing the dollars are worse. When they sell bonds to the public there is still a negative impact when the bonds must be repaid with interest and also due to the fact there is less money available in banks for private industry to invest. This drives up the interest rates and slows private sector investment by the same amount the government borrowed times the reserve ratio (10:1 ratio in Private Sector decline in investment). This wouldn't necessarily be a good thing or a bad thing. Whether it is good or bad depends on whether the money is spent efficiently. We do after all need some roads and unexpected defense needs must be covered at times. But do we need 30 lane highways or will 3 lanes be sufficient. In the case of government efficiency is rarely the case. Private sector often creates jobs with the same funds at a 10:1 ratio for just that reason. Regardless, all you have done is reduce Private Sector investment by a ratio of 10:1 for every dollar the government spends. The overall impact after all is said and done is highly negative.

this is kinda all over the place, but ... the gov't spends the money in the private sector. There isn't some government road building crew that is staffed by government workers.

 

[Gimmesometruth]

Subprime disaster Clinton takes credit for Community Reinvestment Act


Yeah, let's be generous and kind and just say that everyone was on the wrong side of the law on this one.

What I notice, and find odd, is that not a single person in all of these videos takes the position that F&F'd default rate isn't the problem.

I'm trying to understand this last sentence, to remove the negatives and make it coherent. "Not a single person says the default rates are not the problem"....is a non-statement, it says nothing at all. It is not defining what the problem is as far as the CRA is concerned. Further, as I already showed, defaults as a whole in F/F were nearly insignificant as a percent of their total mortgage holding, and the CRA lending within their holding was small fraction of their total holdings......and those CRA loans defaulted at even lower rates that the non-CRA holdings did.

So...what in the hell IS your point on CRA lending related to the housing crisis? Can you formulate an argument that actually has a point, that is not nonsense?

 

[LibDave]

It thinks the timing of when a worker gets paid relative to investors/owners is the issue, when everyone and their dog understands that it is the level of payment, the distribution of the wealth, that is the issue with supply side/trickle down "economics".

You forget that wages and all other aspects of labor are negotiated freely in a competitive environment. Companies cannot dictate what they pay their employees. It is a market just like any other. No different than companies can control what price is paid for their products. There is intense competition for skilled labor. Workers will move to those who offer higher pay or other favorable facets of a job. Even safer working conditions. Deep water welders make nutty amounts of money. It's only when you look at how dangerous a job they do where you realize you may not want the increase in pay. Regardless, it is a free market and very competitive. In the end when an agreement is reached all parties involved must feel they got a good deal otherwise they would go elsewhere for work or workers. When government steps in and attempts to favor one side or another they inevitably succeed in merely reducing the number of agreements. If the favoritism reaches a point where the employer is no longer benefiting from the arrangement they don't hire and you end up hurting everyone since neither the employee or the employer benefits. There is normally a fine line met by the market in which both parties benefit. The market does it best, why try anything else.

 

[Gimmesometruth]

You forget that wages and all other aspects of labor are negotiated freely in a competitive environment.

"Freely"="Truthy".

Companies cannot dictate what they pay their employees. It is a market just like any other. No different than companies can control what price is paid for their products. There is intense competition for skilled labor. Workers will move to those who offer higher pay or other favorable facets of a job. Even safer working conditions. Deep water welders make nutty amounts of money. It's only when you look at how dangerous a job they do where you realize you may not want the increase in pay. Regardless, it is a free market and very competitive. In the end when an agreement is reached all parties involved must feel they got a good deal otherwise they would go elsewhere for work or workers. When government steps in and attempts to favor one side or another they inevitably succeed in merely reducing the number of agreements. If the favoritism reaches a point where the employer is no longer benefiting from the arrangement they don't hire and you end up hurting everyone since neither the employee or the employer benefits. There is normally a fine line met by the market in which both parties benefit. The market does it best, why try anything else.

Thats a cool story, brah, like the one about Canadian MRI companies who are certified for animals being allowed to carry out procedures on humans, but the truth of the matter is that the influence on wages/wage gains by workers has declined....but then yer the first one to deny wage gain statistics, especially for post 1980. I have no idea why you think you can make any sort of macro argument while denying data and only rely on rhetoric. Besides the rhetoric, you didn't even competently define trickle down, everyone with a fair bit of understanding knows it was another name for S-S economics, the lowering of taxation/regulation to benefit the investment class, a neoliberal ideology. You tried to make a connection to inflation, whereas inflation has declined to near zero....and it is a function of demand......and yer "theft" is trivial and in decline. You have very conflated definitions that you cannot articulate with much success.

 

[LibDave]

No, they are the "1" - that banks need to keep in reserve - in that 10:1 ratio you mention.



No, they're not. They're not being spent, how can they benefit the economy?

Please school me ... :roll:

If you know that my $10,000 is KEPT IN RESERVE, why did you insist just 3 sentences ago that savings is loaned out into the economy?



And now you're back to saying reserves get loaned out ... Reserves do not get loaned out. That's why they're call "reserves" in the first place, because they're kept in reserve.



this is kinda all over the place, but ... the gov't spends the money in the private sector. There isn't some government road building crew that is staffed by government workers.

I know it seems confusing. You aren't unique in this matter. People often find the Federal Reserve System confusing. The reserve ratio is the amount of dollars a bank is allowed to lend out compared to how much they have in deposits. Lets say you walk into a bank and place $10,000 into an account (and just leave it there). With a reserve ratio of 10:1 the Federal Reserve allows the bank to loan out 10 dollars for every 1 dollar you just deposited. So they place your 10,000 in reserve and are allowed to loan out 100,000. These are just numbers in a computer (or in the old days on a ledger). So they immediately know they can legally loan out up to another $100,000. So someone else comes into the bank later that day and says, I would like a loan for $100,000. They give him the loan at 5% and put 100,000 into the computer. After one year the bank pays you 2% on your $10,000 which is $200. But they receive $5,000 due to the extra home loan of $100,000. So they make $5000 - 200 = $4800. Pretty slick huh. That's why banks freak out if you come in an say I'm not happy with your f'd up teller. I'm going to take my $10,000 and go to another bank. You aren't costing them $200 you are costing them $4800 and they are going to have to explain to corporate why they have to cut back on there outstanding loans by the end of the day by $100,000 because you Mr. Bank Manager pissed off a customer. At the end of the day if their balance sheets show they have more than 10 times as many loans as they have in accounts then they must borrow money from another bank who does have excess Reserves at the prime rate. If they do this too much the auditors will come in and place restrictions on the bank preventing them from any additional loans until they get their reserve ratio back in line. If there is a run on the bank the Federal Reserve will just print the currency and hand it to the account holders (10% of the outstanding loans in total). The Federal Reserve will then audit the bank to decide whether or not to take over the banks outstanding loans. This way depositors feel confident they can always get their money back even though the bank has loaned out 10 times what you put in.

 

[eohrnberger]

I'm trying to understand this last sentence, to remove the negatives and make it coherent. "Not a single person says the default rates are not the problem"....is a non-statement, it says nothing at all. It is not defining what the problem is as far as the CRA is concerned. Further, as I already showed, defaults as a whole in F/F were nearly insignificant as a percent of their total mortgage holding, and the CRA lending within their holding was small fraction of their total holdings......and those CRA loans defaulted at even lower rates that the non-CRA holdings did.

So...what in the hell IS your point on CRA lending related to the housing crisis? Can you formulate an argument that actually has a point, that is not nonsense?

The point I'm trying to make here, and perhaps not that well, is that in all the video posted earlier of various government officials, not a single one of them, not left, not right, not center, put forth the position that F&F's default rate was OK. You'd think that if F&F's default rate was so much better than the rest of the mortgage lending industry they'd have crowed about it, but none of them did.

 

[Critter7r]

I know it seems confusing. You aren't unique in this matter.

Thanks, Coach.

People often find the Federal Reserve System confusing. The reserve ratio is the amount of dollars a bank is allowed to lend out compared to how much they have in deposits. Lets say you walk into a bank and place $10,000 into an account (and just leave it there). With a reserve ratio of 10:1 the Federal Reserve allows the bank to loan out 10 dollars for every 1 dollar you just deposited. So they place your 10,000 in reserve ...

...without loaning it out ...

... and are allowed to loan out 100,000. These are just numbers in a computer (or in the old days on a ledger). So they immediately know they can legally loan out up to another $100,000. So someone else comes into the bank later that day and says, I would like a loan for $100,000. They give him the loan at 5% and put 100,000 into the computer. After one year the bank pays you 2% on your $10,000 which is $200. But they receive $5,000 due to the extra home loan of $100,000. So they make $5000 - 200 = $4800. Pretty slick huh. That's why banks freak out if you come in an say I'm not happy with your f'd up teller. I'm going to take my $10,000 and go to another bank. You aren't costing them $200 you are costing them $4800 and they are going to have to explain to corporate why they have to cut back on there outstanding loans by the end of the day by $100,000 because you Mr. Bank Manager pissed off a customer. At the end of the day if their balance sheets show they have more than 10 times as many loans as they have in accounts then they must borrow money from another bank who does have excess Reserves at the prime rate....

Which means it won't cost them $4800 after all.

... If they do this too much the auditors will come in and place restrictions on the bank preventing them from any additional loans until they get their reserve ratio back in line.

Which costs them only slightly more than paying interest on savings accounts.

Savings deposits are not procedurally necessary for banks to lend out money. However, it is slightly more profitable for them to do so.

 

[Gimmesometruth]

The point I'm trying to make here, and perhaps not that well, is that in all the video posted earlier of various government officials, not a single one of them, not left, not right, not center, put forth the position that F&F's default rate was OK. You'd think that if F&F's default rate was so much better than the rest of the mortgage lending industry they'd have crowed about it, but none of them did.

Yeah, you can't express it well, and it gets worse when you post a vid from 1998 where Clinton was speaking BEFORE THE COLLAPSE. Good gawd. What were the other dates for the rest of yer sources? And again, yer making argument based on what they did not say....a rhetorical fallacy to begin with. What's next? Yer argument is that it is their fault that they did not travel forward in time, see that the CRA or F/F defaults were NOT THE PROBLEM....and then NOT SAY it was NOT the problem?


Look, cut the crap, the CRA myth is a myth, the problem that you keep avoiding like all the other cons is the originators of the crap loans, circa 2003-06.

 

[JohnfrmClevelan]

There is no one more partisan than you.

Yeah, that's why I have my ideological lean right there in my screen name, because it's most of my identity. Oh, wait - that's you, Conservative, and LibDave.

BTW, do you understand that when you reply with your stupid red letters, we can't just hit "reply with quote"?

 

[LibDave]

Thanks, Coach.



...without loaning it out ...



Which means it won't cost them $4800 after all.



Which costs them only slightly more than paying interest on savings accounts.

Savings deposits are not procedurally necessary for banks to lend out money. However, it is slightly more profitable for them to do so.

Well yes it does. They aren't allowed to run more than 10:1. As loans are continuously being repaid they normally replace them with new loans. If they don't have the reserves they must hold off any more lending until they get down to 10:1. The regulations on banks are very strict and they are expected to not go over their reserves. It's just here I simplified it with an example of a single depositor and borrower. And if they get caught lying about their accounts or pulling fraudulent accounting tricks their careers are over and they do send people to prison for long stints. That is unless your name is Hillary and Bill Clinton (e.g. WhiteWater). hehe.

This is only a small part of it. You could spend years figuring out all of it. I'm not all that stupid. My IQ is at least 70 And I still find some of it confusing and have to review.

 

[JohnfrmClevelan]

by conducting your search in a manner which doesn't already include your conclusion. Like instead of "causes and affects of inflation" you search for "why is inflation not a problem".

I did read them. Including the one by the history professor. And as i stated it is a "red flagged" site. And his economics is flawed. There are idiots in every profession. Take klugman as another example. You see i read and understand the arguments for and against socialism. I also understand those of capitalism. When you do this you inevitably come to the realization socialism doesn't work and capitalism does. The difference is i understand both, you only study the socialism. And you get your information from people who aren't trying to inform you, they are deliberately trying to sway you and mislead. These propaganda sites goal is to take the truth and twist it in an attempt to sway you to their cause and have no concern for the truth. The ends justifies their means. Take the time to actually learn economics and more importantly study and read up on capitalism. Read authors like thomas sowell, f.a.hayek, freidmann, adam smith (hard read as the english isn't quite modern), von mises. Even people like keynes whose overall theories have been disproved. Keynes although wrong in his general theories was correct in some of his more basic theories. He was also very instrumental in developing the tools we use to analyze economics. Things like unemployment rate, and inflation rate, and employment rate, and money supply. If nothing else, for historical reasons as keynes was considered the preeminent economist of his day until his theories were shown to have several fatal flaws in the last half of the 20th century.

It isn't necessary to pay off the debt entirely although it should be normal thing to occur. Running deficits gives you the ability to react to certain unexpected situations. On average a nation should run without one. Take the case of the individual who makes $50k per year and normally runs about $1000 in their bank account. Every now and then when the engine blows on your car you might need to dip into a credit card, then pay it off in a month or so. That's completely different than increasing your debt year after year to the point were the interest is getting to be a noticeable chunk of your overall income. We are the later, spending at times 200% of our salary. Worse is we spend it in ways that hurt not help us.

The us, uk, germany. Again you don't have to pay it off, you do have to keep it in reason and a debt 10 times the size of government revenues is just not reasonable. Debt should never be anywhere near that high. That's just irresponsible spending. If you are in debt to the tune of 10 years of your salary that's not smart. Something more along the lines of a few months maybe and in good times it should be paid off.

You still haven't made an economic argument. Not one shred of evidence, either. You talk about how capitalism is great and socialism is not, then you drop a few Austrian names, and you think you are making a convincing point? Who is being swayed and misled again?

You obviously can't demonstrate your claims with data. You lose this one.

 

[JohnfrmClevelan]

Well yes it does. They aren't allowed to run more than 10:1. As loans are continuously being repaid they normally replace them with new loans. If they don't have the reserves they must hold off any more lending until they get down to 10:1. The regulations on banks are very strict and they are expected to not go over their reserves. It's just here I simplified it with an example of a single depositor and borrower. And if they get caught lying about their accounts or pulling fraudulent accounting tricks their careers are over and they do send people to prison for long stints. That is unless your name is Hillary and Bill Clinton (e.g. WhiteWater). hehe.

This is only a small part of it. You could spend years figuring out all of it. I'm not all that stupid. My IQ is at least 70 And I still find some of it confusing and have to review.

Yes, you do need a review. When is the last time a bank held off on lending because they didn't have enough reserves?

 

[LibDave]

You still haven't made an economic argument. Not one shred of evidence, either. You talk about how capitalism is great and socialism is not, then you drop a few Austrian names, and you think you are making a convincing point? Who is being swayed and misled again?

You obviously can't demonstrate your claims with data. You lose this one.

Who needs data? I purposefully avoided the complex mathematical equations used in the study of economics. You wouldn't be able to follow them. Instead I used logical examples which CANNOT be disputed to point out fallacies in your arguments. For instance when you claim the government can sell bonds (debt/deficit) to the public and thereby increase the amount of money to stimulate economic activity I point out, not so because the same exact amount of money placed in the governments accounts was removed from the accounts of those purchasing the bonds. Therefore it is logically undeniable to a 3rd grader that if you add 5000 and then subtract 5000 you have no net increase in economic activity. You are merely moving money from one place to another. No net increase in money. I then point out the government has now borrowed the money that was in the bank accounts of the bond purchasers so now there is less money for private enterprises to borrow and invest. If you understand supply and demand this logically indicates interest rates will go up. Since government doesn't create jobs with anywhere near the efficiency of the private sector unemployment rates go up as well. It is a logical argument without need for data. I am merely pointing out all the effects which you seem to not be aware of or choose to ignore. And in every case where you proclaim you have found some miracle way to obtain a socialist free lunch and get something for nothing, I show there is at least an equal cost that you chose to ignore. Wealth cannot be created out of thin air. It requires effort to produce wealth.

 

[LibDave]

Yes, you do need a review. When is the last time a bank held off on lending because they didn't have enough reserves?

Every single day. When you go in for a loan someone, somewhere is looking at the numbers trying to decide whether to loan you the money they have available, or some other guy, both of you or neither. The aggregate amounts don't change all that dramatically and since loans are constantly being paid they can and do keep it right on the numbers. It's rare that at the end of the day they miss their number by much. If you catch them on a good day they may give you that loan even though your credit rating may not be quite up to snuff. When reserves dwindle they can dramatically decrease their lending and only renew half or fewer of the loans being paid off. That's the chain of folks the bank manager calls to get approval. All of it is fed into a computer and knowing how much they have they will be more or less likely to give you the loan.

 

[Critter7r]

Well yes it does. They aren't allowed to run more than 10:1.

But that restriction doesn't apply *immediately*. If Comerica is short on reserves for the amount of loans they have out on Monday, they don't stop making loans on Tuesday!! They borrow reserves from the Fed Monday night and continue on their merry way. They don't have to wait for Mr. Trump to make a deposit before they start making loans again ... smh

As loans are continuously being repaid they normally replace them with new loans. If they don't have the reserves they must hold off any more lending until they get down to 10:1.

No, they borrow from the Fed (or interbank funds) at the end of the business day.

The regulations on banks are very strict and they are expected to not go over their reserves. It's just here I simplified it with an example of a single depositor and borrower. And if they get caught lying about their accounts or pulling fraudulent accounting tricks their careers are over and they do send people to prison for long stints. That is unless your name is Hillary and Bill Clinton (e.g. WhiteWater). hehe.

This is only a small part of it. You could spend years figuring out all of it. I'm not all that stupid. My IQ is at least 70 And I still find some of it confusing and have to review.

But it's not rocket surgery, so most people can get the gist of it after a few dozen explanations.

 

[JohnfrmClevelan]

Every single day. When you go in for a loan someone, somewhere is looking at the numbers trying to decide whether to loan you the money they have available, or some other guy, both of you or neither. The aggregate amounts don't change all that dramatically and since loans are constantly being paid they can and do keep it right on the numbers. It's rare that at the end of the day they miss their number by much. If you catch them on a good day they may give you that loan even though your credit rating may not be quite up to snuff. When reserves dwindle they can dramatically decrease their lending and only renew half or fewer of the loans being paid off. That's the chain of folks the bank manager calls to get approval. All of it is fed into a computer and knowing how much they have they will be more or less likely to give you the loan.

Absolutely, 100% WRONG. Banks are not reserve constrained. They don't even have to check for sufficient reserves, because they only have to meet reserve requirements days after the fact. That is, a bank's required reserves, as calculated Tuesday, don't have to be in place until Friday, well after the loan has been completed.

There are only two circumstances under which a bank will refuse to lend - a capital crisis, a la 2007-2008, and a lack of creditworthy customers. Reserves don't even come into play. There are tons of excess reserves in the system ever since QE, and before that, the Fed always kept enough reserves in the system by buying and selling bonds. Otherwise, they would lose control of interest rates.

 

[Kushinator]

Absolutely, 100% WRONG. Banks are not reserve constrained. They don't even have to check for sufficient reserves, because they only have to meet reserve requirements days after the fact. That is, a bank's required reserves, as calculated Tuesday, don't have to be in place until Friday, well after the loan has been completed.

There are only two circumstances under which a bank will refuse to lend - a capital crisis, a la 2007-2008, and a lack of creditworthy customers. Reserves don't even come into play. There are tons of excess reserves in the system ever since QE, and before that, the Fed always kept enough reserves in the system by buying and selling bonds. Otherwise, they would lose control of interest rates.

Correct!

An instance of a reserve shortage would accompany an interest rate increase; 1. in the form of higher cost for banks to obtain reserves and 2. in the form of higher cost for borrowers in general. When the banking system as a whole experiences a reserve shortage... the fed funds rate will respond accordingly as it acts as an equilibrium point for reserve supply and demand. Only the Fed can step in and provide additional reserves necessary to keep the FFR from pushing upward.

 

[Kushinator]

Well yes it does. They aren't allowed to run more than 10:1. As loans are continuously being repaid they normally replace them with new loans. If they don't have the reserves they must hold off any more lending until they get down to 10:1. The regulations on banks are very strict and they are expected to not go over their reserves. It's just here I simplified it with an example of a single depositor and borrower. And if they get caught lying about their accounts or pulling fraudulent accounting tricks their careers are over and they do send people to prison for long stints. That is unless your name is Hillary and Bill Clinton (e.g. WhiteWater). hehe.

This is only a small part of it. You could spend years figuring out all of it. I'm not all that stupid. My IQ is at least 70 And I still find some of it confusing and have to review.

Not only does your posting structure exhibit severe attention deficit disorder... you really don't know what the **** you are talking about.

 

[LibDave]

But that restriction doesn't apply *immediately*. If Comerica is short on reserves for the amount of loans they have out on Monday, they don't stop making loans on Tuesday!! They borrow reserves from the Fed Monday night and continue on their merry way. They don't have to wait for Mr. Trump to make a deposit before they start making loans again ... smh



No, they borrow from the Fed (or interbank funds) at the end of the business day.



But it's not rocket surgery, so most people can get the gist of it after a few dozen explanations.

You bring up a good point. I know they are required by law to make the number every single night. Otherwise they have to go to the overnight window. I'll have to refresh my memory at the Federal Reserve site. But I believe it actually ends up disadvantaging them in some way. For instance they would only pay Mr. D 200 in interest but it costs them 100,000 X Prime = $250-500 for using the overnight window. Normally its even higher than that since prime is near as low as Obama can put it. If you like you can go to the Federal Reserve and they have a pdf booklet which explains it. it's been awhile since I read it. It's not too bad but one of those things thats just complicated enough you can't keep it all in your head.

 

[Critter7r]

Who needs data? I purposefully avoided the complex mathematical equations used in the study of economics. You wouldn't be able to follow them. Instead I used logical examples which CANNOT be disputed to point out fallacies in your arguments. For instance when you claim the government can sell bonds (debt/deficit) to the public and thereby increase the amount of money to stimulate economic activity I point out, not so because the same exact amount of money placed in the governments accounts was removed from the accounts of those purchasing the bonds.

But you're taking money that is inactive and loaning to the government to spend. The person loaning money to the government was creating no economic activity prior to loaning it to the gov't.

Therefore it is logically undeniable to a 3rd grader that if you add 5000 and then subtract 5000 you have no net increase in economic activity.

Unless of course, you subtract that 5000 from an account that was doing nothing except providing reserves to a bank (which don't get loaned out) and add it to the account from which the gov't spends money, you HAVE created 5000 worth of economic activity that otherwise wouldn't have occurred.

You are merely moving money from one place to another. No net increase in money.

Yet an increase in economic activity

I then point out the government has now borrowed the money that was in the bank accounts of the bond purchasers so now there is less money for private enterprises to borrow and invest.

money spent buying bonds was not going to be used anywhere else. Because if there were anywhere else that would earn a greater return than the paltry returns garnered by T-bills, it would be used there.

If you understand supply and demand this logically indicates interest rates will go up. Since government doesn't create jobs with anywhere near the efficiency of the private sector unemployment rates go up as well. It is a logical argument without need for data. I am merely pointing out all the effects which you seem to not be aware of or choose to ignore. And in every case where you proclaim you have found some miracle way to obtain a socialist free lunch and get something for nothing, I show there is at least an equal cost that you chose to ignore. Wealth cannot be created out of thin air. It requires effort to produce wealth.

rabble rant drivel