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Originally posted by Combat Ingrid
Somehow this thread reminds me of the Monty Python argument sketch
Somehow this thread reminds me of the Monty Python argument sketch
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And we've once again come into the wrong door. This is abuse.He's got the Midas touch.
But he touched it too much!
Hey Goldmember, Hey Goldmember! -
no its notSpace is big. You just won't believe how vastly, hugely, mind- bogglingly big it is. I mean, you may think it's a long way down the road to the chemist's, but that's just peanuts to space.
Douglas Adams (Influential author)Comment
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This is the perfect sig for you. It neatly explains how someone who got their BA in economics became a Marxist.Originally posted by Kidicious
Let's just change the thread to 'Why people are blind to economic truth, no matter how plainly it is spelled out to them, because of their political prejudice.'He's got the Midas touch.
But he touched it too much!
Hey Goldmember, Hey Goldmember!Comment
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Originally posted by TheStinger
no its not
He's got the Midas touch.
But he touched it too much!
Hey Goldmember, Hey Goldmember!Comment
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1. What is the secured/unsecured part mean and which is done? And does the effect differ depending on which is done.Originally posted by HershOstropoler
Spikey:
"Trust me, a touch of reading and you'll be able to run macroweenie rings around Roland, who has some grasp of economic statistics without the backbone of understanding he needs to use his knowledge well."
Oooh, cutie. But instead of debating with you, let's just wait for the US easy money boom you predicted, shall we.
GP:
"How. I'm not being a ****. Well not on purpose. I need to understand it more tactically to have any idea what is going on. What do they physically do. How does the money move?"
Just consider what a CB usually does in its relations with commercial banks. The CB lends to the banks at a certain interest rate (secured or unsecured), and the banks lend to borrowers. At the CB and the banks, this shows up as bookkeeping entries. Bank X owes Y to the CB, and bank X has Y to lend around. The lower the rate, the higher the demand. The CB can pre- or refund bank lending.
This does not have to be, but can be converted to cash. In a fiat money system, the claim the bank has against the CB is that CB accounts are converted to paper money.
Another factor is the money multiplier. If you pay 100 $ cash into a bank account, and the bank lends the 100 $ to someone else, the money supply is 200 $ (100 $ held in cash, 100 $ held in short term accounts by the non-banking sector). This can be repeated infinately unless there is a minimum reserve requirement. (at say 10 %, this would mean that the bank could only lend 90 $ of the 100 $ it recieved).
One way to inject money directly is for the CB to buy securities.
Of course Spiky will desperately try to find a hair in that soup.
2. Let's say they make all these loans to commercial banks. If the banks ask for currency, how do they produce it? Do they have a mint?
3. How do they choose which banks to loan money to?Comment
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"1. What is the secured/unsecured part mean and which is done? And does the effect differ depending on which is done."
Secured is when the CB lends against securities, like the discount and lombard operations. I think the Fed Funds are being done unsecured (?). The ECB has a flexible policy towards what it accepts as collateral, but it has changed its policy framework somewhat (variable rates) since I was looking closer into this.
"2. Let's say they make all these loans to commercial banks. If the banks ask for currency, how do they produce it? Do they have a mint?"
That's the case for the ESCB, where the NCBs provide notes. In the US it's up to the treasury, I think. How this is exactly regulated there, no idea.
"3. How do they choose which banks to loan money to?"
In a fixed rate system, every commercial bank that meets the criteria can borrow. In the ECB's variable rate tenders, those bidding the highest rates.“Now we declare… that the law-making power or the first and real effective source of law is the people or the body of citizens or the prevailing part of the people according to its election or its will expressed in general convention by vote, commanding or deciding that something be done or omitted in regard to human civil acts under penalty or temporal punishment….” (Marsilius of Padua, „Defensor Pacis“, AD 1324)Comment
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This is extremely annoying. Anyway, the US doesn't have to worry about the negative effects of loose monetary policy as much as the world because of its key currency status. I already showed you that from a internet source and you agreed Dr. Dumb.Originally posted by DrSpike
Read the whole article............the parargraph you quote is sound, but the article by no means suggests that loss of key currency status means that monetary policy can no longer be used..........which is precisely what you suggested on more than one occasion.I drank beer. I like beer. I still like beer. ... Do you like beer Senator?
- Justice Brett KavanaughComment
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What are the implications of them lending at below the CPI? Wouldn't that mean that demand would go through the roof as the banks now have a riskless way to earn money?Originally posted by HershOstropoler
"1. What is the secured/unsecured part mean and which is done? And does the effect differ depending on which is done."
Secured is when the CB lends against securities, like the discount and lombard operations. I think the Fed Funds are being done unsecured (?). The ECB has a flexible policy towards what it accepts as collateral, but it has changed its policy framework somewhat (variable rates) since I was looking closer into this.
"2. Let's say they make all these loans to commercial banks. If the banks ask for currency, how do they produce it? Do they have a mint?"
That's the case for the ESCB, where the NCBs provide notes. In the US it's up to the treasury, I think. How this is exactly regulated there, no idea.
"3. How do they choose which banks to loan money to?"
In a fixed rate system, every commercial bank that meets the criteria can borrow. In the ECB's variable rate tenders, those bidding the highest rates.Comment
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Only if the low real rates create a sufficient demand for lending by people who are willing and able to pay interest. The bank demand is no "independent" part of that. If they have no borrowers, borrowing from the CB is of no use to them.
One avenue is to buy bonds, so the banks can reak in the interest rate difference.“Now we declare… that the law-making power or the first and real effective source of law is the people or the body of citizens or the prevailing part of the people according to its election or its will expressed in general convention by vote, commanding or deciding that something be done or omitted in regard to human civil acts under penalty or temporal punishment….” (Marsilius of Padua, „Defensor Pacis“, AD 1324)Comment
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I'm losing something in your comments. Maybe I am tired or it is a language thing. Could you say it again, simpler?Originally posted by HershOstropoler
Only if the low real rates create a sufficient demand for lending by people who are willing and able to pay interest. The bank demand is no "independent" part of that. If they have no borrowers, borrowing from the CB is of no use to them.
One avenue is to buy bonds, so the banks can reak in the interest rate difference.
If the real rate is negative, than there should be infinite demand. Or why not?Comment
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Which demand? Banks or non-banking sector?
For a bank, if it borrows 100 from the CB, it has 100 available and owes 100. Extra borrowing does not help them unless they can put the money to work.
For the non-banking sector, how many are eligable for negative real rates? Even if the real CB rate is say -2%, even real prime rates would be slightly positive (I think the gap was 2.5-3 % or so vs Fed Funds).“Now we declare… that the law-making power or the first and real effective source of law is the people or the body of citizens or the prevailing part of the people according to its election or its will expressed in general convention by vote, commanding or deciding that something be done or omitted in regard to human civil acts under penalty or temporal punishment….” (Marsilius of Padua, „Defensor Pacis“, AD 1324)Comment
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There is always a risk when you loan money.I drank beer. I like beer. I still like beer. ... Do you like beer Senator?
- Justice Brett KavanaughComment
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I am too tired from roller-blading away from a thunderstorm. Need to have more explicit explaing. First para was style I want.Originally posted by HershOstropoler
Which demand? Banks or non-banking sector?
For a bank, if it borrows 100 from the CB, it has 100 available and owes 100. Extra borrowing does not help them unless they can put the money to work.
For the non-banking sector, how many are eligable for negative real rates? Even if the real CB rate is say -2%, even real prime rates would be slightly positive (I think the gap was 2.5-3 % or so vs Fed Funds).
Couldn't they buy gold (this is caveat-protected GP gold). So they get a loan for 100 dollars. Payable in one year, with a 2% interest rate. (CPI at 4%.) Then they buy ideal gold. (includes zero cost of wharehousing...so don't start with me.) One year later, they sell their gold and get $104 for it. They pay the Fed $102 and pocket 2$ for their shareholders. Expand ad infinitum. Obviously this doesn't happen so there is some logical flaw. But I'm not noodling it out now.Comment
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He wants to know how the target rate is reached.I drank beer. I like beer. I still like beer. ... Do you like beer Senator?
- Justice Brett KavanaughComment
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Or gold falls to 90 $. What's "caveat-protected GP gold"? One that has no price volatility? (if it is more private, I don't want to know)
Also, it would take an infinite supply of your super-gold to "expand ad infinitum". Way more interesting to buy government bonds at 4 % - but their supply is finite too (for the moment, the current fiscal policy might change that...
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Ok, US CPI is about 2 % now. Say I offer you a 100 $ loan at 1 %. Where do you invest it? Then check how many of those options remain for "Where do you invest an infinite loan"?“Now we declare… that the law-making power or the first and real effective source of law is the people or the body of citizens or the prevailing part of the people according to its election or its will expressed in general convention by vote, commanding or deciding that something be done or omitted in regard to human civil acts under penalty or temporal punishment….” (Marsilius of Padua, „Defensor Pacis“, AD 1324)Comment
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