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#81
05-29-2007, 02:20 AM
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Re: Could Someone Please Explain the Money Supply?
[ QUOTE ]
In what ways is it quasi-governmental as opposed to private or fully-governmental? [/ QUOTE ] It is governmental to the extent that it exists by an Act of Congress and its function can be changed or terminated by legislation. Members of the Board are Presidential appointees with Senate ratification. It is non-governmental in that its day to day decisions are not overseen or ratified by anyone outside the agency and it isnt publically funded. I am trying to come up with a simple analogy to show why there is no "free lunch", but will have to get back to it later. 
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#82
05-29-2007, 02:32 AM
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Re: Could Someone Please Explain the Money Supply?
The dollar is considered a hard currency because a hard currency refers to a currency in which investors have confidence, such as that of a politically stable country with low inflation and consistent monetary and fiscal policies.
If Ron Paul were elected the latter part of that statement, "consistent monetary and fiscal policies" would go flying out the window and there could possibly be a disaster waiting to happen. However, people who declare the USD a fiat currency do not take into account that a dollar can be returned to the issuing bank in exchange for a dollar’s worth of the bank’s assets.
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#83
05-29-2007, 02:45 AM
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Re: Could Someone Please Explain the Money Supply?
[ QUOTE ]
However, people who declare the USD a fiat currency do not take into account that a dollar can be returned to the issuing bank in exchange for a dollar’s worth of the bank’s assets. [/ QUOTE ] Could you please explain this in more detail? Thanks.
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#84
05-29-2007, 02:28 PM
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Re: Could Someone Please Explain the Money Supply?
[ QUOTE ]
[ QUOTE ] As far as I understand banks create money, out of nothing, by lending. They must keep a certain percentage on hand, mandated by the Fed. So let's say a bank has $10,000 and has to keep 10%, they loan the remainding $9,000 and viola new money exists. Now where this 9k comes from is beyond me--I assume the Fed loans it to banks? Not sure. Don't think anyone covered this yet. Anybody care to explain further or correct me? [/ QUOTE ] This is not quite correct. If they have $10k on hand, they can make loans for $100k. [/ QUOTE ] Neither of these is correct. Banks can make loans for any amount regardless of their reserves. Loans these days are usually made by writing large CDs. CDs, savings accounts, and money market accounts all have no reserve requirements.
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#85
05-29-2007, 03:14 PM
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Re: Could Someone Please Explain the Money Supply?
[ QUOTE ]
[ QUOTE ] [ QUOTE ] As far as I understand banks create money, out of nothing, by lending. They must keep a certain percentage on hand, mandated by the Fed. So let's say a bank has $10,000 and has to keep 10%, they loan the remainding $9,000 and viola new money exists. Now where this 9k comes from is beyond me--I assume the Fed loans it to banks? Not sure. Don't think anyone covered this yet. Anybody care to explain further or correct me? [/ QUOTE ] This is not quite correct. If they have $10k on hand, they can make loans for $100k. [/ QUOTE ] Neither of these is correct. Banks can make loans for any amount regardless of their reserves. Loans these days are usually made by writing large CDs. CDs, savings accounts, and money market accounts all have no reserve requirements. [/ QUOTE ] Yes, I am a moron. I'm still trying to remember how the money was actually created out of thin air from my econ class.
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#86
05-30-2007, 01:47 PM
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Re: Could Someone Please Explain the Money Supply?
[ QUOTE ]
[ QUOTE ] However, people who declare the USD a fiat currency do not take into account that a dollar can be returned to the issuing bank in exchange for a dollar’s worth of the bank’s assets. [/ QUOTE ] Could you please explain this in more detail? Thanks. [/ QUOTE ] Please...I'd like to hear this.
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#87
05-31-2007, 12:21 PM
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Re: Could Someone Please Explain the Money Supply?
[ QUOTE ]
[ QUOTE ] [ QUOTE ] However, people who declare the USD a fiat currency do not take into account that a dollar can be returned to the issuing bank in exchange for a dollar’s worth of the bank’s assets. [/ QUOTE ] Could you please explain this in more detail? Thanks. [/ QUOTE ] Please...I'd like to hear this. [/ QUOTE ] "Currency Collateral Section 16 of the Federal Reserve Act requires the Federal Reserve to collateralize Federal Reserve notes when they are issued. The list of eligible collateral includes Treasury and federal agency securities, gold certificates, Special Drawing Right certificates, and foreign currencies, the items in bold print on the left side of the balance sheet in appendix A. In addition, the legally eligible backing for currency includes discount window loans made under Section 13 of the Federal Reserve Act. Over the years sections have been added to the Act that permit lending by the Federal Reserve to depository institutions under provisions other than Section 13 and against a broader range of collateral than is allowed under Section 13. However, the currency collateralization requirement of Section 16 has not been similarly amended, thus limiting the types of loans the Federal Reserve can use to back the currency. " from here
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#88
05-31-2007, 01:44 PM
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Re: Could Someone Please Explain the Money Supply?
[ QUOTE ]
[ QUOTE ] [ QUOTE ] [ QUOTE ] However, people who declare the USD a fiat currency do not take into account that a dollar can be returned to the issuing bank in exchange for a dollar’s worth of the bank’s assets. [/ QUOTE ] Could you please explain this in more detail? Thanks. [/ QUOTE ] Please...I'd like to hear this. [/ QUOTE ] "Currency Collateral Section 16 of the Federal Reserve Act requires the Federal Reserve to collateralize Federal Reserve notes when they are issued. The list of eligible collateral includes Treasury and federal agency securities, gold certificates, Special Drawing Right certificates, and foreign currencies, the items in bold print on the left side of the balance sheet in appendix A. In addition, the legally eligible backing for currency includes discount window loans made under Section 13 of the Federal Reserve Act. Over the years sections have been added to the Act that permit lending by the Federal Reserve to depository institutions under provisions other than Section 13 and against a broader range of collateral than is allowed under Section 13. However, the currency collateralization requirement of Section 16 has not been similarly amended, thus limiting the types of loans the Federal Reserve can use to back the currency. " from here [/ QUOTE ] OK, but doesn't that mean I'm still getting a dollar's worth of whatever it is? If I request gold certificates, my money still gets traded based on the current price of gold instead of a fixed amount, right? If so, how does this protect against inflation?
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#89
05-31-2007, 08:12 PM
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Re: Could Someone Please Explain the Money Supply?
[ QUOTE ]
[ QUOTE ] This is not quite correct. If they have $10k on hand, they can make loans for $100k. [/ QUOTE ] Does the money just exist in a checking account? The part I don't understand is... uh. New money just exists because the banks say it does (on the balance sheet)? Is that right? [/ QUOTE ] Sounds pretty [censored] ridiculous, doesn't it?
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