It's been close to a year... Thoughts on Obama

IamAlejo · 04-19-2010, 07:03 PM

Quote:

Originally Posted by duga

Ok, so you obviously know what I am talking about then...OMO's determine the base money in our economy, which is at the discretion of the Fed. So if you also know how a fractional reserve works, how can you possibly say it isn't increasing our national debt? Anytime the Fed puts more money into circulation, it is through a loan. A loan the American people have to pay back. This results in a higher national debt.

I didn't say that this was the main reason for our current situation. I do think it contributed (in multiple ways), however, I simply was commenting on how a central bank combined with the way we manage our money is a horrible way to run a country. And it most definitely runs the country. Even the name of our system implies money, and if we plan on keeping it that way then we should really rethink the whole central bank idea.

Because the banks can't "borrow" money through OMO's, it's fully up to the Federal Reserve whether to purchase treasuries or sell them. OMO's also aren't loans at all.

duga · 04-19-2010, 07:06 PM

Quote:

Originally Posted by IamAlejo

Because the banks can't "borrow" money through OMO's, it's fully up to the Federal Reserve whether to purchase treasuries or sell them. OMO's also aren't loans at all.

I didn't say they were...but they do influence the amount of money in circulation and subsequently inflation...which in turn influences the loans people need and the amount of debt we have.

You really aren't doing much to show me how a central bank is actually a good thing, nor showing me how they don't produce a ton of our national debt.

IamAlejo · 04-19-2010, 08:19 PM

Quote:

Originally Posted by duga

I didn't say they were...but they do influence the amount of money in circulation and subsequently inflation...which in turn influences the loans people need and the amount of debt we have.

You really aren't doing much to show me how a central bank is actually a good thing, nor showing me how they don't produce a ton of our national debt.

Yeah, you've never stated it was loaning from the Fed......

Quote:

Anytime the Fed puts more money into circulation, it is through a loan. A loan the American people have to pay back. This results in a higher national debt.

Quote:

More money is put into circulation based solely off "borrowing" from the Fed.

Quote:

If I have to explain how borrowing money from the Fed increases the national debt (they don't just give it out for circulation)

You really mix yourself up sometimes, and it's starting to mix me up. I can't tell if you are referencing the national debt of the government or debt of the American people?

duga · 04-19-2010, 09:01 PM

Quote:

Originally Posted by IamAlejo

You really mix yourself up sometimes, and it's starting to mix me up. I can't tell if you are referencing the national debt of the government or debt of the American people?

Well, sorry, I guess...you keep making me backtrack and repeat myself. The national debt is the debt of the American people. Yeah, the government spent it but we pay it. I guess you might have confused what I meant with an individual's debt to a bank, but when I said debt of the American people I did mean the nation in general. Their debt is our debt, in other words.

Look, it's getting really tiring having to explain every line. I apologize if you don't get what I'm trying to say. OMO's determine the base money. This is determined by the Federal Reserve. The Federal Reserve controls how much money is in circulation as well as the loans that are given out to the banks and the government in general. The fractional reserve increases inflation by its very nature, pretty much guaranteeing increased spending and debt every time the amount of money in circulation is increased. Since all of our money originated from a loan from the Federal Reserve, every single dollar bill we have is debt we owe to them. Considering the Federal Reserve is autonomous (as in, not controlled directly by the government), anything we take from them contributes to the national debt.

I hope that made sense. Now, if you have some points as to why a central bank and a fractional reserve and everything I just mentioned might be good instead of just picking at my posts, I will be glad to hear it.

Edit: I never said an OMO was a loan. An OMO is the way the bank figures out how to operate. I said the Fed loans...because they do...that is the whole basis of their existence.

IamAlejo · 04-19-2010, 09:32 PM

Sure a fractional reserve messes with inflation, but the whole purpose of the Federal Reserve is to regulate that inflation through OMO, the discount window, etc. It doesn't add on to that, it's supposed to regulate that. They are supposed to balance each other when working properly, not go with each other to increase inflation.

The rest of what you said really makes little sense. Do you even know what you're talking about or just repeating what your macro professor said?

duga · 04-19-2010, 09:45 PM

Ok even simpler.

Money in circulation = loan from the Federal Reserve = debt to the Federal Reserve amongst the American people and the government = every time more money is dumped into circulation, our national debt increases

Due to the fractional reserve system, the more we spend and the more loans the Fed has to give out, the less our money is worth. The less our money is worth, the more we spend. This contributes to our economy failing. By all means, explain to me how this is a good thing.

That has been my criticism of this system from the beginning.

I could really give two ****s whether or not the OMO works, I know what it is meant to do but that is not really what I am criticizing. I only got into it because you started picking on that aspect of my posts.

IamAlejo · 04-19-2010, 09:49 PM

The federal reserve doesn't give out loans through omo's, if they do they do it through the discount window and that is typically on an overnight basis. Get over the "when money is put into circulation, we owe it back to the Reserve". No we don't. Stop with that. Who is teaching you this?

Also the more we spend, the more money is kept in circulation, the economy is liquid, and the government doesn't need to go about putting more money into circulation. You get problems when those with money stop spending and stop lending. Our entire economy is based on people spending their earnings, otherwise we might as well go ahead and use a VAT.

duga · 04-19-2010, 10:04 PM

Ok, this has stalled long enough.

So, you think we have a good system set up, then? If you do, I seriously want to know what you think about it. I find it hard to believe that you think it doesn't even need improvements.

IamAlejo · 04-19-2010, 10:13 PM

Quote:

Originally Posted by duga

Ok, this has stalled long enough.

So, you think we have a good system set up, then? If you do, I seriously want to know what you think about it. I find it hard to believe that you think it doesn't even need improvements.

Do I think we have a perfect system? No. But I'm not going to go about and change it for the sake of changing it. That sounds like our healthcare reform. I'm not meaning to harp on your economic knowledge, but it just seems off base/don't know where you are getting your information from.

It works for us for the most part with few exceptions (raising the Reserve Ratio too quickly when coming out of the recession, a few other bubbles), and I don't think it plays much of a role in our national debt.

duga · 04-19-2010, 10:16 PM

Changing it now would not be for "the sake of changing it". Our economy has failed. Several times. I'd say that's pretty good evidence of it not working and that we should probably rethink it.

04-19-2010, 09:32 PM	#75 (permalink)
IamAlejo Muck Fusic Join Date: Dec 2003 Location: Virginia Beach Posts: 1,575	Sure a fractional reserve messes with inflation, but the whole purpose of the Federal Reserve is to regulate that inflation through OMO, the discount window, etc. It doesn't add on to that, it's supposed to regulate that. They are supposed to balance each other when working properly, not go with each other to increase inflation. The rest of what you said really makes little sense. Do you even know what you're talking about or just repeating what your macro professor said? __________________ a man, a plan, a canal, panama

04-19-2010, 09:45 PM	#76 (permalink)
duga MB quadrant's JM Vincent Join Date: Dec 2009 Location: Washington, DC Posts: 3,762	Ok even simpler. Money in circulation = loan from the Federal Reserve = debt to the Federal Reserve amongst the American people and the government = every time more money is dumped into circulation, our national debt increases Due to the fractional reserve system, the more we spend and the more loans the Fed has to give out, the less our money is worth. The less our money is worth, the more we spend. This contributes to our economy failing. By all means, explain to me how this is a good thing. That has been my criticism of this system from the beginning. I could really give two ****s whether or not the OMO works, I know what it is meant to do but that is not really what I am criticizing. I only got into it because you started picking on that aspect of my posts. __________________ Confusion will be my epitaph...

04-19-2010, 09:49 PM	#77 (permalink)
IamAlejo Muck Fusic Join Date: Dec 2003 Location: Virginia Beach Posts: 1,575	The federal reserve doesn't give out loans through omo's, if they do they do it through the discount window and that is typically on an overnight basis. Get over the "when money is put into circulation, we owe it back to the Reserve". No we don't. Stop with that. Who is teaching you this? Also the more we spend, the more money is kept in circulation, the economy is liquid, and the government doesn't need to go about putting more money into circulation. You get problems when those with money stop spending and stop lending. Our entire economy is based on people spending their earnings, otherwise we might as well go ahead and use a VAT. __________________ a man, a plan, a canal, panama

04-19-2010, 10:04 PM	#78 (permalink)
duga MB quadrant's JM Vincent Join Date: Dec 2009 Location: Washington, DC Posts: 3,762	Ok, this has stalled long enough. So, you think we have a good system set up, then? If you do, I seriously want to know what you think about it. I find it hard to believe that you think it doesn't even need improvements. __________________ Confusion will be my epitaph...

04-19-2010, 10:16 PM	#80 (permalink)
duga MB quadrant's JM Vincent Join Date: Dec 2009 Location: Washington, DC Posts: 3,762	Changing it now would not be for "the sake of changing it". Our economy has failed. Several times. I'd say that's pretty good evidence of it not working and that we should probably rethink it. __________________ Confusion will be my epitaph...