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Old 01-09-2019, 09:04 AM   #1
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Our monetary system is insane

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For years critics of U.S. central-bank policy have been dismissed as Negative Nellies, but the ugly truth is staring us in the face: Stock-market advances remain a game of artificial liquidity and central-bank jawboning, not organic growth. And now the jig is up.
...
What’s the larger message here? Free-market price discovery would require a full accounting of market bubbles and the realities of structural problems, which remain unresolved. Central banks exist to prevent the consequences of excess to come to fruition and give license to politicians to avoid addressing structural problems. And by preventing these market forces from playing out at each sign of trouble, the can gets kicked further and further down the road. Each successive recovery keeps the illusion alive, but “accommodation” requires ever-lower rates before the monsters return. In the meantime, debt keeps expanding, while each recovery produces less and less organically driven growth, and ever-higher wealth inequality. This is what this system produces.
...
https://www.marketwatch.com/story/st...uth-2019-01-05
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Old 01-16-2019, 12:05 PM   #2
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Between this and the saga of The Narrow Bank, I can only shake my head...

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...
The Fed earns interest income on the huge pile of securities it holds. After covering operating expenses, interest expenses, and some other items, it is required to remit the rest to the Treasury Department – to the taxpayer.

Therefore, the amounts in interest expense the Fed pays the banks on their “Excess Reserves” and “Required Reserves” comes out of the taxpayer’s pocket and its transferred to the banks to become bank profits, and thereby bank executive bonuses and stock holder dividends, funded by the dear taxpayers. And this amount was huge in 2018: $38.5 billion!

Here is what the Fed reported: ...
More: https://wolfstreet.com/2019/01/10/fe...yers-to-banks/
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Old 01-22-2019, 07:58 AM   #3
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Originally Posted by Ron Paul :
President Trump’s frustration with the Federal Reserve’s (minuscule) interest rate increases that he blames for the downturn in the stock market has reportedly led him to inquire if he has the authority to remove Fed Chairman Jerome Powell. Chairman Powell has stated that he would not comply with a presidential request for his resignation, meaning President Trump would have to fire Powell if Trump was serious about removing him.

The law creating the Federal Reserve gives the president power to remove members of the Federal Reserve Board — including the chairman — “for cause.” The law is silent on what does, and does not, constitute a justifiable cause for removal. So, President Trump may be able to fire Powell for not tailoring monetary policy to the president’s liking.

By firing Powell, President Trump would once and for all dispel the myth that the Federal Reserve is free from political interference. All modern presidents have tried to influence the Federal Reserve’s policies. Is Trump’s threatening to fire Powell worse than President Lyndon Johnson shoving a Fed chairman against a wall after the Federal Reserve increased interest rates? Or worse than President Carter “promoting” an uncooperative Fed chairman to Treasury secretary?

Yet, until President Trump began attacking the Fed on Twitter, the only individuals expressing concerns about political interference with the Federal Reserve in recent years were those claiming the Audit the Fed bill politicizes monetary policy. The truth is that the audit bill, which was recently reintroduced in the House of Representatives by Rep. Thomas Massie (R-KY) and will soon be reintroduced in the Senate by Sen. Rand Paul (R-KY), does not in any way expand Congress’ authority over the Fed. The bill simply authorizes the General Accountability Office to perform a full audit of the Fed’s conduct of monetary policy, including the Fed’s dealings with Wall Street and foreign central banks and governments.

Many Audit he Fed supporters have no desire to give Congress or the president authority over any aspect of monetary policy, including the ability to set interest rates. Interest rates are the price of money. Like all prices, interest rates should be set by the market, not by central planners. It is amazing that even many economists who generally support free markets and oppose central planning support allowing a government-created central bank to influence something as fundamental as the price of money.

Those who claim that auditing the Fed will jeopardize the economy are implicitly saying that the current system is flawed. After all, how stable can a system be if it is threatened by transparency?

Auditing the Fed is supported by nearly 75 percent of Americans. In Congress, the bill has been supported not just by conservatives and libertarians, but by progressives in Congress like Dennis Kucinich, Bernie Sanders, and Peter DeFazio. President Trump championed auditing the Federal Reserve during his 2016 campaign. But, despite his recent criticism of the Fed, he has not promoted the legislation since his election.

As the US economy falls into another Federal Reserve-caused economic downturn, support for auditing the Fed will grow among Americans of all political ideologies. Congress and the president can and must come together to tear down the wall of secrecy around the central bank. Auditing the Fed is the first step in changing the monetary policy that has created a debt-and-bubble-based economy; facilitated the rise of the welfare-warfare state; and burdened Americans with a hidden, constantly increasing, and regressive inflation tax.
http://www.ronpaulinstitute.org/arch.../fire-the-fed/
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Old 01-22-2019, 11:46 AM   #4
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Pretty succinct summary:
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...
Since the global financial crisis, the business cycle has been suspended, and replaced by only a credit cycle. Credit, credit and more credit crowded out productivity and inflated asset prices while doing little for the real economy and driving the worst inequality in generations. The mis-pricing of money and credit has also driven a terrible misallocation of capital and kept unproductive zombie debtors alive for too long.
...
https://www.home.saxo/-/media/docume...eport-2019.pdf
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Old 01-22-2019, 03:47 PM   #5
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Watching the insane vacillations in the market recently, I am nervously reminded of 2008, early 2009. When this mother blows up again, and it will, there simply isn't enough money to print our way out of the ball of flames this time around. There will be blood in the streets all over the world. The US will not be able to sell another bond for a very long time indeed.

We will take a host of other nations out with us as well, because the giant vampire squids that are our banking system are incestuously intertwined with the rest of the insanely over indebted banks around the world. They all think that by selling each other CDS that they have their collective asses covered, but they are just fooling themselves. If an idiot layman like myself can see right through the farce, then surely the regulators already know.

The columns of smoke will be visible for miles. The ultimate death toll......unimaginable.
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Old 01-23-2019, 02:12 PM   #6
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printing isnt the problem now its pretty much all just computer code, its a loss of confidence in a currency and it no longer being the choice of people.

Because we ( mostly) have no choice, the game can continue indefinately.

Johnny foreigner and other countries can exercise a bit more choice but because the central banks are in cahoots its not really much of a choice.

The entire world has to have reason to stop using fiat.
Even if we can all see the fraud perpetrated by banks and gov we are obliged ( by force if necessary) to continue using fiat.
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Old 01-24-2019, 03:28 PM   #7
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Henry Ford said ~ It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.

Debt is the biggest problem. When the banks fail again (like Deutsche bank is right now) the government can't bail them out again, because that would collapse the currency.

https://libertyleak.com/2019/01/22/w...od-investment/
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Old 02-19-2019, 10:37 AM   #8
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Harvard’s recent two-day conference, “Money as a Democratic Medium,” challenged its participants to re-examine the history of money in America, and to redefine its future. The event was jointly sponsored by the Harvard Program on the Study of Capitalism, the Murphy Institute at Tulane University, the Harvard Law Forum and Harvard Law School, bringing a diverse group of lawyers, economists, academics and scholars to the HLS campus.
...
Gerald Epstein, of the University of Massachusetts—Amherst, said that the rise of finance coincided with that of inequality, creating a system that favors some citizens over others. “Underlying all of this is a process by which wealth generates political power, to further this wealth and equality.” The country, he said, is now run by a “bankers’ club” that includes elected officials who get campaign contributions from banks, central banks that make decisions on whom to bail out, and regulatory authorities and lawyers “who do the bidding of these elites to try and rewrite rules.” ...
More: https://today.law.harvard.edu/money-...cratic-medium/

Some absurd stuff in there, but what really hit me as I read this was the fact that the conference happened at all and who was participating. Just based upon the folks mentioned, it seems to have been a mix of the Davos/G20 crowd with folks one or two degrees removed from it.
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Old 04-23-2019, 08:15 AM   #9
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Originally Posted by Judy Shelton :
... it is wholly legitimate, and entirely prudent, to question the infallibility of the Federal Reserve in calibrating the money supply to the needs of the economy. No other government institution had more influence over the creation of money and credit in the lead-up to the devastating 2008 global meltdown. And the Fed's response to the meltdown may have exacerbated the damage by lowering the incentive for banks to fund private-sector growth.

What began as an emergency decision in the wake of the financial crisis to pay interest to commercial banks on excess reserves has become the Fed's main mechanism for conducting monetary policy. To raise interest rates, the Fed increases the rate it pays banks to keep their $1.5 trillion in excess reserves -- eight times what is required—parked in accounts at Federal Reserve district banks. Rewarding banks for holding excess reserves in sterile depository accounts at the Fed rather than making loans to the public does not help create business or spur job creation.

Meanwhile, for all the talk of a "rules-based" system for international trade, there are no rules when it comes to ensuring a level monetary playing field. The classical gold standard established an international benchmark for currency values, consistent with free-trade principles. Today's arrangements permit governments to manipulate their currencies to gain an export advantage.

No wonder advocates of pro-growth economic policies feel compelled to question the vaunted status of central bankers, even as currency speculators track their every utterance. Stable money is a prerequisite for genuine economic growth and shared prosperity. The increasing financialization of gross domestic product is unhealthy because the growing size and profitability of the finance sector come at the expense of the rest of the economy and increase income inequality. When the value of money is fixed, as under a gold standard, economic growth reflects higher levels of productive output.

Fed Gov. Lael Brainard, who was appointed by President Obama, told Bloomberg Television last week that new Trump administration nominees will be expected to put forward "fact-based, intellectually coherent arguments that are based on evidence, that are consistent over time" if they would participate meaningfully in the Fed's deliberations.

She's certainly right that the Fed should act based on the best studies and evidence. It could start with the 2011 paper "Reform of the International Monetary and Financial System," published by the Bank of England, which analyzed the performance of the gold standard (1870-1913) and the Bretton Woods gold-exchange system (1948-72) relative to current monetary practices. The report concludes that today's system has performed poorly relative to prior monetary regimes, "with the key failure being the system's inability to maintain financial stability and minimise the incidence of disruptive sudden changes in global capital flows." Trade and investment flows are distorted as the world's major central banks engage in subtle exchange-rate competition.
...
More: https://www.wsj.com/articles/the-cas...ge-11555873621

(non-paywall copy here): http://gata.org/node/19015
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Old 04-23-2019, 09:28 AM   #10
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Yeah

they are all gold bugs at heart but when they become Fed govenors they are obliged to prop up the giant fiat con.
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Old 04-23-2019, 09:40 AM   #11
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I want to see Herman Caine on the Fed Board.
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Old 04-23-2019, 09:56 AM   #12
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Originally Posted by ancona View Post:
I want to see Herman Caine on the Fed Board.
Not going to happen. He just withdrew after a 4th GOP Senator said he would not support him.
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Old 04-29-2019, 08:21 AM   #13
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I read through the following and probably understood about 10% of it. ZH has a history of injecting a strong bias to their reporting, so I don't take everything I read there at face value, but this post includes a lot of source references to analysts from big banks. It would appear that the financial system is not in equilibrium.

Quote :
... as JPM puts it, the liquidity conditions in the US banking system are perhaps close to their tightest in a decade. ...
More (long): https://www.zerohedge.com/news/2019-...-out-liquidity
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Old 05-01-2019, 09:43 AM   #14
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I mentioned this Bloomberg report in the Narrow Bank thread, but I'm quoting a different part of it here. Does our monetary system depend upon an illusion?

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... I want to make two points. First, I say sometimes that banking is a public-private partnership, and that banks are not pure private companies competing in the free market. This Fed notice is a particularly clear illustration of that: The Fed just gets to decide who gets to compete in the banking business, and how that competition will work, and what their business models can be, by virtue of its control of access to reserve accounts. I don’t mean that one decision (allowing narrow banks, or not allowing them) would be pro-competitive and free-market-y while the opposite decision wouldn’t be; I mean that, either way, the central fact of that competition is about access to government money accounts. There is no modern banking that is independent of the sovereign’s power to control money, 6 and the question is just who the sovereign shares that power with.

Second, I say sometimes that banking rests on an illusion, in which banks transform risky assets (loans, securities trading) into risk-free liabilities (deposits, repo): People give money to banks expecting the money to be absolutely safe, and then the banks go and do risky things with it. There are really good arguments that this is good, essential even, that it is how a society can take risks and build things while people still feel confident in their savings. But there are arguments the other way, that illusions are bad, that this system is unnecessarily crisis-prone and that we should only fund risky activities with risky investments and keep the safe investments truly safe. Narrow banking is an attempt to do that, to offer safe investments that don’t fund risky activities, to separate pure money accounts from loans and trading and the rest of the asset side of the bank balance sheet. And the Fed says: No thanks; sure that would be safer for depositors, but it would make the risky banks riskier. People who deposit their money with banks because that’s the closest they can get to a risk-free money account would no longer think that, and might move their money to narrow banks because those are risk-free money accounts. The illusion would be punctured, and the Fed, at some level, likes the illusion.
https://www.bloomberg.com/opinion/ar...he-narrow-bank
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Old 05-02-2019, 05:41 AM   #15
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Of course its an illusion.

And if you deposit the non existent 'money' you have accrued by effort with a bank, you become an unsecured creditor and the bank can treat that 'money' as its property.

Firstly it can loan it out many times over ( according to banking rules) then it can collateralise it into a complex group of loans and sell the package to a Pension company ( that is supposedly looking after more of your 'money') then loan it out all over again several times over.

The only security we have with bank deposits is a government guarantee up to £/$ 100k in the event a single bank fails. Not possible to honour this if theres a cascade of bank failures, so TBTF became the mantra.

The only thing that really underwrites modern money is that its rigidly enforced as the only lawful form of payment, so ultimately an illusion that is backed up by a man with a gun.
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Old 05-06-2019, 10:36 AM   #16
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The Netherlands Central Bank has just published a fascinating new paper, titled "Monetary policy and the top one percent: Evidence from a century of modern economic history". Authored by Mehdi El Herradi and Aurélien Leroy, (Working Paper No. 632, De Nederlandsche Bank NV: https://www.dnb.nl/en/binaries/Worki...m47-383633.pdf ), the paper "examines the distributional implications of monetary policy from a long-run perspective with data spanning a century of modern economic history in 12 advanced economies between 1920 and 2015, ...estimating the dynamic responses of the top 1% income share to a monetary policy shock." ...

They find that "loose monetary conditions strongly increase the top one percent’s income ...

In other words, accommodative monetary policies accommodate primarily those with significant starting wealth, and they do so via asset price inflation. ...
https://trueeconomics.blogspot.com/2...ral-banks.html
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Old 05-10-2019, 05:59 AM   #17
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Old 05-14-2019, 09:28 AM   #18
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lulz...

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Having backed themselves into a corner — flooding the world with debt to solve a series of crises caused by debt — our leaders now are preparing to jettison almost every rule in the economics texts.
...
https://www.abc.net.au/news/2019-05-...slide/11105916
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Old 05-14-2019, 01:13 PM   #19
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Reckon on MMT being rolled out soon.
It will be very popular with Politicians who will happily buy votes with printed money.

Send us a photograph of your vote slip ( in a selfie, so we know its you) and you could all win fantastic prizes !
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Old 10-01-2019, 10:08 AM   #20
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A radical world of “helicopter money” - where central banks fund government spending - is “inevitable” as policymakers run out of ammunition ahead of the next recession, top economists have warned.

Central banks are likely to “explore more unconventional policies” in the next downturn and blur the lines between fiscal and monetary policy with radical new tools, such as monetary financing, Deutsche Bank argued.
...
https://www.telegraph.co.uk/business...ext-recession/

h/t: http://gata.org/node/19488
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