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| What's the deal with the fed?; I keep bumping up with vague theories | |
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| Tweet Topic Started: Oct 28 2008, 05:52 AM (890 Views) | |
| FreeCriticalThinker | Oct 28 2008, 05:52 AM Post #1 |
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Hi all, I'm a studying corporate finance at Wharton and I would like to know what's the deal with the Federal Reserve and these type of alternative media/news sites. I was browsing around for information about the target funds rate and kept bumping into vague info and a lot of quotes that by themselves don't prove any sort of conspiracy, just the bias of the person towards a banking system. In this post I would like to discuss why some of you consider the Federal Reserve as some sort of an evil institution or a part of a grander conspiracy. |
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| esopxe | Oct 28 2008, 06:02 AM Post #2 |
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Give this a listen. Edit by JFK - Resized Video Edited by JFK, Oct 28 2008, 07:35 AM.
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| FreeCriticalThinker | Oct 28 2008, 06:30 AM Post #3 |
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Thanks man, but is it ok with you if we keep the academic level of this discussion as high as possible. That means that youtube and out of context quote don't represent a primary/first reference or argument. This is because it becomes a bit tedious to go through an hour of video just find a few relevant pieces of information that merit any sort of discussion. If there is a specific part of that video that illustrates your point, please bring up. Thanks. |
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| JFK | Oct 28 2008, 07:31 AM Post #4 |
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Well since you refuse to listen to the author, perhaps you should buy his book and read it. http://www.amazon.com/Creature-Jekyll-Island-Federal-Reserve/dp/0912986212 |
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| FreeCriticalThinker | Oct 28 2008, 09:42 AM Post #5 |
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Hi JFK, I think you misunderstood the post you are quoting. It's not that I refuse to listen, it's that if we try to have this discussion according to a minimum of academic standards, an entire video is not the first reference you'd toss around. It's a bit unrealistic to make a reference to an entire book, would you mind quoting an excerpt so we can discuss it and see if it really conforms to the facts it tries to portray? |
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| JFK | Oct 28 2008, 09:45 AM Post #6 |
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The entire book/video is relavent. How about you listen to it and provide a quote ? |
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| FreeCriticalThinker | Oct 28 2008, 09:52 AM Post #7 |
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JFK why the attitude? All I did was start a polite intelligent discussion in the hope that by the end of it everyone involved, specially me, would have learned something. Yet your attitude is far from being one of welcoming such a discussion and seem to be trying to force me into reading an entire book or watch an online video. Can't you just put forward the argument (or arguments) supporting your position without a vague reference to a source without pointing anything in specific? If that's the case you'll have to excuse me, since you and I have very different academic standards. |
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| JFK | Oct 28 2008, 09:55 AM Post #8 |
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So your answer is that you won't listen to that clip and put forth a question. That is fine by me, as I have no time for your games. |
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| FreeCriticalThinker | Oct 28 2008, 10:09 AM Post #9 |
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Again, why the attitude? For the sake of a discussion pointing to an entire video borders on the absurd. Do you imagine a presidential debate working in this away? For the sake of acquiring more knowledge I already bookmarked the link so I can watch the video when I get home, but for the sake of an intelligent discussion pointing to an entire video or book just doesn't make any sense. And please man, drop that attitude. |
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| mynameis | Oct 28 2008, 10:24 AM Post #10 |
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Internet Jujitsu
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Is it such a simple benign concept that people should live within their means. The FED allows the FED to control the issuance and balance of currency in the United States on order by Congress. Thus this ability of the banks destroys through debt making on the Federal level, the economic means by which to control the decision making policies of the United States. Such position leaves the people in an inequitable position to pay what's owed when the bill collectors come calling. When spending and taxes are unjust and un-apportioned directly on the majority and not the minority of those winning income, when a non-entity or its appendages are unable to be held responsible for crime, we get anarchy instead of the rule of law. It is in my opinion that the FED festers and enhances lawlessness, period. |
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| Andoo Inc. | Oct 28 2008, 02:15 PM Post #11 |
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Sir finds a lot
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freecriticalthinker I gave you the courtesy by not responding yesterday with some blanket statement. You seem to want the absolute answer in a sentence. The Fed is a very complicated matter. Believe me JFK has spent much more time on the federal reserve than you could hope to dream of since you are merely in college like I am. I don't think it's as simple as to have a few statements lolly gagged around. If we want to have an actual intellectual debate, which I think all of us here enjoy, then maybe we should start off with aspects of the fed we would wish to articulate and dissect. Lets restart and section this conversation off. |
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| mr freedom | Oct 28 2008, 02:46 PM Post #12 |
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freecriticalthinker, you raise an interesting question. The FED is the elephant in the room, we are all deeply suspicious, but it is hard to discuss something when you have little understanding. I think Andoo is right, the Fed is a very complicated matter. A good place to start might be with the owners. What we do know is that the FED is privately owned. Does anyone have information on who the owners are? Secondly, how do the owners benefit from ownership? My feeling is that the FED is collectively owned, by commercial banks, perhaps individuals and groups of individuals. It sits at the center of a financial system which keeps money away from the majority, and pours it into the pockets of the weathy. Edited by mr freedom, Oct 28 2008, 02:48 PM.
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| FreeCriticalThinker | Oct 28 2008, 04:20 PM Post #13 |
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Mynameis what you are basically saying is that by allowing people to spend beyond their means by borrowing money the fed is creating some sort of anarchy. I do agree with you that conscious spending is the only sustainable option, but lending institutions/individuals existed long before the first central bank was created, which kind of destroy your whole premise. Andoo, thanks for the courtesy but please don't assume any level of expertise in someone else before you actually have the chance to discuss the subject with that person. mr freedom, the fed is not privately owned its member banks are. As you said it yourself, it is a complex quasi-public/quasi-private system. Those member banks don't make a profit for just being part of the system, what they do have is access to privileged information that, in my view, gives them an unfair advantage against smaller local banks.
Would you please explain how does this mechanism work? I would like to answer the statement as it is but I rather wait for your explanation to be sure I got it right. |
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| mr freedom | Oct 28 2008, 04:50 PM Post #14 |
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Please explain why the premise is destroyed, perhaps you could set the standard for the academic level you desire, thanks.
Let us not be too pedantic.
I did not say that.
Please elaborate at the same academic level as your answer to the above question.
I do not refer to a mechanism, but to the financial/monetary system. I'm not going to write a thesis on the subject, I am in no position to, that is why I speek of my feeling for the situation, rather than my deep understanding of it. Edited by mr freedom, Oct 28 2008, 04:52 PM.
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| Andoo Inc. | Oct 28 2008, 04:54 PM Post #15 |
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Sir finds a lot
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I may be presumptuous, but you aren't being very courteous. You asked "In this post I would like to discuss why some of you consider the Federal Reserve as some sort of an evil institution or a part of a grander conspiracy." And this can't be answered in just a sentence's worth of response. Do you understand at this rate how many back-and-forth conversations that would take place with this type of communication. We would all like to say a few things why we think it's evil, but surely you will find a more encompassing reason why we aren't right. This is why I have suggested to break the concept down into parts? If you don't agree you are wasting your efforts and brain power when you could be spending time reading up on the subject. I do have a question for you though. What is your understanding of banking history? I saw how fast you knocked down mynameis statement while you are suggesting that, off her premise, it was the central bank who first discovered these tricks of monetary policy. Edited by Andoo Inc., Oct 28 2008, 04:55 PM.
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| FreeCriticalThinker | Oct 29 2008, 06:21 AM Post #16 |
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It's true mr freedom, you did not say exactly like that. You said it was a complex institution, I add that the fact that it is quasi-public and quasi-private makes it even more complex. Mynameis' point was based on the fact that the fed allows people (and the government) to spend beyond their means by allowing them to borrow money, but if people were doing this way before the first central bank ever existed then it is safe to say that this particular issue does not depend on the existence of the fed because without it, people would still be able to lend and borrow money. I won't argue your point about the system taking money from the poor and putting into rich people's pockets since, as you said it yourself, it is based on a personal belief (or feeling) and there is no way to argue against a deep rooted belief system. I agree with you Andoo, there is no way to explain that with just a few lines so that's why I'm interested in having a discussion instead of posting a video or a few quotes.
I can say I've done quite a deal of research in the subject, when I got my current job at Deloitte I had to make my fair share of presentations about monetary theory and the history of money.
I am actually saying the exact opposite, lending and borrowing existed long before the first central bank was ever created. |
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| mynameis | Oct 29 2008, 12:50 PM Post #17 |
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Internet Jujitsu
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Yes, but did they lend and borrow with fictitious 1s and 0s world wide, trade stock derivatives, or buy and sell based on the predicted price of commodities far in advance? Edited by mynameis, Oct 29 2008, 12:51 PM.
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| Andoo Inc. | Oct 29 2008, 12:59 PM Post #18 |
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Sir finds a lot
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yeah I went retarded or something at the end of my last post. I retract that garbage last sentence. Brain fart. |
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| FreeCriticalThinker | Oct 29 2008, 01:05 PM Post #19 |
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Hi again mynameis, those financial instruments you mention can be traded with or without a central bank. In fact, in the specific case of the fed, it has no authority over this market. But to answer you question: yes, forward contracts can be dated back to the grain lending that occured on babylonian temples (Futures, Options, and Swaps , page 3 "derivatives defined"). About "fictional 1 and 0's" I would like you to elaborate a bit more on that particular point as I am kinda lost on what you meant by that. |
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| mr freedom | Oct 29 2008, 01:29 PM Post #20 |
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You claim that reckless lending took place before central banks, and therefore reckless lending should be tolerated from central banks? I don't agree.
I was not making a point. Nor did I speek of a deep rooted belief. If you are not capable of interpreting my posts with a basic level of honesty, then I will bow out of this disappointing discussion. You forgot to answer this:
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| FreeCriticalThinker | Oct 29 2008, 01:56 PM Post #21 |
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I think you misunderstood what I said. In no place in my post you will find even an implication that central banks should tolerate reckless lending. Put it in the context of mynameis' post and see that what I mean is that since lending and borrowing existed long before central banks, then the issue mynameis was pointing out does not depend on the fed.
My apologies, from your post one can easily be misled into thinking that while you believe that the monetary and financial system takes money out of poor people to give it to the poor you don't know how this mechanism work ... the standard definition of a belief system (faith in a god for example). Can you please explain how, in your view, the financial system takes money away from the poor to give it to the rich?
I thought you were referring to the quote above that, sorry. By being a member of the Federal Reserve a bank does not make a profit and the stocks they own cannot be traded. They do, however, have access to privileged information (such as plans for a rate cut) that could be used as an unfair advantage while competing with non-member banks. |
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| mr freedom | Oct 29 2008, 02:52 PM Post #22 |
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Be it deliberate or not, I think you are wasting everyones time FreeCriticalThinker. |
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| FreeCriticalThinker | Oct 29 2008, 03:05 PM Post #23 |
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Why do you say that? I believe you are making quite a harsh accusation there without giving any explanations. I have answered all the questions that have been directed at me, so why am I wasting everyone's time here? And please, do explain how does the monetary system takes away money from the poor to give it to the rich as I am very interested in reading how does that work. |
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| mynameis | Oct 29 2008, 05:01 PM Post #24 |
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Internet Jujitsu
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Nobody suggested this. The poor are taxed by government for a debt that is becoming a greater excess in the interest than the principal amounts owed. A cycle one cannot escape once started, the only options are limited bankruptcy and refinancing; both attempts have been made. Publically owned assets by the government can easily become privatized or nationalized on these schemes depending on which way the wind blows in the party leader's direction. When the largest income earners do not pay taxes equal to the poor, the process only accelerates. Those banks who already earned and have back up currency in other monetary denominations can buy up cheap public goods at bargain pricing, thus cheating the public twice. This latest bailout is another example of these practices at work. Edited by mynameis, Oct 29 2008, 05:26 PM.
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| FreeCriticalThinker | Oct 30 2008, 08:36 AM Post #25 |
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Mynameis, I think you are moving further from the topic with each post. Still your opinions are very interesting and, at the sake of derailing this thread, I'm pleased to have and continue this discussion with you. Before I start replying to your latest post, I'd like to know if we are clear with the issue you raised your previous ones: lending and borrowing existed way before the fed and so did forward contracts. There is one point I would like you to clarify tho, it's the one about "fictional 1's and 0's" as I still don't know for sure what you meant by that. Moving on to your last post ... First I have to point out that none of the issues you raise are dependent on the Federal Reserve, for example you talk about taxation on the poor as a, supposed, result of the government incurring into debt. Both of these actions are particular to fiscal policy (the government finances less than 3% of its deficit through seigniorage), but since your points interest me I would like to answer to them anyway. And yes, mr freedom suggested in his first post that the monetary system takes away money from the majority and puts into the pockets of the wealthy.
The poor, and everybody else, are taxed not only to pay for debt. In fact, debt service only accounts for less than 20% of the government expenditures. Your figures don't match the reality, interest payments servicing the debt are around 400 billion US$ which would be approx. 4% of the total debt (the principal as you referred to it), which is far from being even close to the total amount the government owes and even further from your assertion that the interest is becoming greater than the principal. On a final note, while the debt has been rising, tax brackets and rates for the income tax and VAT (the ones that affect the poor the most) have not grown at the same pace.
I think you made a typo, public assets are already nationalized.
What do you mean by this? Shouldn't you pay a larger fraction of your income as it grows?
You are assuming that banks are going to incur in transaction costs and the risk of liquidity. That does not happen very often, and banks usually don't "buy" public goods as one of the main characteristics of public goods is the fact that they are provided by the government and not bought in an open market.
I fail to see how, would you mind explaining a bit more? |
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