Sanky Panky
Banned
I know I speak with conviction, but they are not my interpretations. I'll take that as a compliment.
US Federal Government Shutdown | Shutdown Shutdown, Debt Ceiling Raised
- Thread starter Jarmel
- Start date
- Status
I know I speak with conviction, but they are not my interpretations. I'll take that as a compliment.
Their 'victory' will be them crying to the media for the next few weeks how the dems refuse to compromise and blah blah almost destroyed the country because of Obama.
I have faith they will cave before we default. They just want to waste a bunch of time beforehand. I just hope that afterwards they won't put up a fuss about paying furloughed workers. They've already reached their idiocy quota for the year and then some on this; no need to add more on top.
davepoobond
you can't put a price on sparks
No. This is the new normal until we get sensible people in the senate and house to fix this so that it never happens again
Aka never.
eBay Huckster
Member
Whatever keeps your confirmation bias going (to say nothing about the bolded)
GutsOfThor
Member
Fuck! I just put my two weeks in at my job last week!
Anyone have any experience with taking your two weeks back?
DR2K
Banned
Open your mouth and accept whatever goes in it.
empty vessel
Member
Don't let Sanky hear that.
Since when are US Treasury bonds less liquid than most other securities? Exchanging a US bond for cash does indeed leave the money supply unchanged. But that's irrelevant. Not everybody tries to spend all of their money all the time, i.e., people save. Your argument that governments issue bonds because they are concerned about the immediate and short term inflationary impacts of their spending is silly.
Do you think that the very existence of government bond issuance itself changes the savings patterns of domestic residents? That without the government selling bonds, a person otherwise looking to be saving his money would decide to spend it instead? And that so many people would do so that the economy shoots past full unemployment creating demand pull inflation? If not, and if that sounds silly, then you might have a silly argument on your hands. A person who cannot buy a bond will not decide to spend his money in the economy because he cannot buy one. He will rather save it another way. Bond issuance is more inflationary than direct deficit spending because it requires a higher level of spending than otherwise necessary to achieve the public purpose intended by the spending. Full stop.
Sanky Panky
Banned
He's right... it won't happen suddenly.
RoninChaos
Member
WTF is a shadow banking system? It's not exactly a mystery what happened in 2008 that crashed the economy.
Sanky Panky
Banned
Here is a quick summary:
The shadow banking system consists of a web of specialized financial institutions that conduct credit, maturity, and liquidity transformation without direct, explicit access to public backstops. The lack of such access to sources of government liquidity and credit backstops makes shadow banks inherently fragile. Much of shadow banking activities is intertwined with the operations of core regulated institutions such as bank holding companies and insurance companies, thus creating a source of systemic risk for the financial system at large.
http://www.newyorkfed.org/research/staff_reports/sr580.pdf
The size of this financialized "shadow" economy (based on cross-collateralized pieces of paper that depend on cash flows from the real economy) was estimated at $60 TRILLION back in 2007.
This is where the 2008 crash happened, and where QE money goes, and why we have seen no true recovery in the real economy.
Problem is that even in your original post you aren't even arguing anything, you're just saying that shadow banking exists, without proving why it's relevant in this context.
It's not even hard to argue, you could say that it was partly because of insufficient institutions to hinder assymetric information caused systemic risk to increase, e.g. in forms of bad cdos.
Then again you can really question if that's because of shadow banking per se, or as I would argue; rather institutional failure in the finance sector and its legizlation.
edit: Oh, and quoting its size doesn't say shit, unless you can say anything about the causal effect.
maquiladora
Member
No, because the debt ceiling has to be continuously raised as America needs to borrow more and more. So it's inevitable that this will be revisited in X weeks / months again (depending on the details of the deal that will be reached) unless the whole debt ceiling process is abolished, but that would be very unlikely, even though only a handful of countries in the world have this kind of setup.
Was planning one to
But my cousin who I am really close with, along with 2 of my friends are Fed workers. I been helping them with bills and food so actually been picking up some extra shifts to help them out.Now it looks like we have an actual risk of defaulting? I did not think any thing on this planet is that insane in the sense that the thought of self preservation goes out the window...
Good luck all.
ThLunarian
Member
Hasn't the vote for the debt ceiling traditionally always been held at the 11th hour? I thought I heard that somewhere. It's only actually getting publicity this time because of all the politics surrounding it.
I'm going to continue to hope that this is actually just normal, and things will be fine come the 18th.
I'm going to continue to hope that this is actually just normal, and things will be fine come the 18th.
TheHeretic
Banned
Inflation requires demand, deficit spending increases demand because it puts cash in peoples pockets to spend. I've explained this, you are just not amenable to reason.
Sanky Panky
Banned
Both assymetric information AND poor financial regulation (or enforcement) are now features of our corporatocracy, not the underlying force that caused the liquidity crunch and massive debt deleveraging in the shadow banking system. The underlying economic forces are the natural consequences of reckless speculation during booms, which are only amplified by the availability of fiat money (as we have seen since the 1980's).
In the words of Keynes himself:
"Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done."
The size simply means that it is larger than most national GDP's (combined), and that a sneeze in the collateral chain, will have global implications ($4 Trillion disappeared almost overnight from the system back in 2008, and the Fed had to be reactive and plug the hole). The causal effect is fiat money and finance being the new "enterprise" that shapes our real economy. It is the culmination of central banks being policy arms of the global banking elite.
http://behindthewall.nbcnews.com/_news/2013/10/14/20957509-china-state-media-blasts-us-shutdown-calls-for-a-de-americanized-world?lite
Appartently China is fustrated and scared about what's going on. I know this is just big talk on the part of the Chinese but I think more emphasis needs to be put on how this is a world event and not just a U.S. one. This could really damage relations worldwide it's a decision that is being blocked right now by about 50 individuals. This is absurd.
Appartently China is fustrated and scared about what's going on. I know this is just big talk on the part of the Chinese but I think more emphasis needs to be put on how this is a world event and not just a U.S. one. This could really damage relations worldwide it's a decision that is being blocked right now by about 50 individuals. This is absurd.
empty vessel
Member
First, I want to be clear that you are not again forgetting the topic of discussion. Nobody doubts that deficit spending increases demand. But the decision to deficit spend has already been made by the Congress at the point that the Treasury has to do it. We are talking about how the Treasury deficit spends, not whether or how much it deficit spends. Let's clarify something else.
The Treasury spends by crediting bank accounts. This is just how it spends. There is a law, however, that prohibits the Treasury from crediting accounts in excess of its tax revenue unless the Treasury sells bonds matching the amount by which its credit exceeds tax revenue. I am calling this indirect deficit spending. Selling bonds requires the government to incur a penalty (interest). Thus, the law penalizes deficit spending by requiring the government to spend more than it otherwise would to achieve the public purpose for which the spending is intended. Thus, it is very clearly more inflationary, because it increases government spending and thus increases demand. (Moreover, that penalty for deficit spending is paid mostly to high income earners--the people in the market for bonds.)
My argument is that the law requiring the Treasury to sell bonds to the private sector in amount matching its deficit spending should be repealed. I am referring to this as "direct deficit spending," and my position is that it is less inflationary because it eliminates a government spending program (the bond program that gives risk-free interest to higher income people).
Your argument is that direct deficit spending is more inflationary in the short term, I think "because it puts cash in peoples pockets to spend." But indirect deficit spending does the same thing. If you think about it like a transfer, it transfers cash from a saver (the person looking to buy a bond) to a spender (the recipient of the Treasury's deficit spending). The money then gets re-spent by the spender just as it does through direct deficit spending.* The only difference is that (1) under direct deficit spending the saver can't buy a bond but has to find some other investment option in which to park the money he has earmarked for saving; and (2) the government has spent less money, because it needn't pay interest.
* I should add that in neither case is the person or entity to whom the Treasury is paying the deficit spending necessarily a "spender." Whether that person saves or spends might be predictable if we knew the characteristics of the recipient, but by and large we do not, so we can't really assume much about the effect of the transfer in either case. The point is, however, under either method, the saver is going to save and the recipient of the Treasury's spending is going to do whatever he or she is going to do. Nothing changes with direct deficit spending in terms of aggregate demand except for its slight reduction due to the government's not making interest payments.
Vestal
Junior Member
Before the ridiculousness that happened in 2011, the raising of the debt limit would not get much fanfare and would simply be attached as a single line in any bill that was sure to pass hidden in page 140 of 200.
Not until 2011 had this become such a contentious topic, it had never been used as leverage to pass other legislation and never had even the hint of defaulting been utered by either side.
Snowman Prophet of Doom
Member
People have panicked about banks, central or otherwise, throughout their existence. Yet they keep coming back, likely because governments realize that central banks are an economically useful thing to have.
I know this won't make a difference to Sanky, who is able to interpret literally anything in terms of his insular, nigh-conspiratorial worldview where bankers are the puppetmasters of everything harmful that happens in the realm of public policy.
I know this won't make a difference to Sanky, who is able to interpret literally anything in terms of his insular, nigh-conspiratorial worldview where bankers are the puppetmasters of everything harmful that happens in the realm of public policy.
TheHeretic
Banned
First, many bonds are sold internationally, so what you suggest is only true for bonds sold domestically. Regardless, you continue to ignore my first example.
Putting bonds into the market (as opposed to cash) have obvious differences. If we take this years budget, the 600 billion (or whatever it is) deficit financed your way requires the Government to drop 600 billion into the pockets of Americans, since the Government is purchasing goods and primarily labour. This obviously increases demand, and hence obviously causes enormous inflation. Ill reiterate, no reserve bank in the world does this because of how destructive this would be to an economy.
What reserve banks do is put 600 billion of bonds onto the market, as opposed to cash. These bonds can't be used to buy goods and services directly, hence they have a very different effect on demand. They are also bought by investors domestically and internationally, and hence have a different effect on consumer demand. Contrast this to just flooding labourers pockets with money for them to immediately spend, because this is what you are advocating. Again, this is something we can measure with the velocity of money.
You keep posting, but essentially you believe bonds and cash have the same influence on consumer demand and hence inflation. Honestly, its just Eco 101. I really can't make this any simpler for anyone reading.
David Incorporated Esq.
Member
The government is still putting $600B into everybody's pockets in both scenarios, except that when it issues bonds it takes that same amount back from people who are saving (i.e., not spending) money on the promise that we'll spend even more later.
So what you get is instead of spending $600B we spend $600B plus the interest on money that wasn't in circulation anyway. Cool.
The institutions surrounding the financial sector are definitely the underlying force why it happened, if it wouldn't have been a possibility to do these things, the chain of events wouldn't have been the same.
It's no coincidence that countries with empirically sound financial institutions and legizlation came out of the financial crisis with a healthier financial sector, the same possibilities of abusing the faults of the system didn't exist to the same extent in those places.
The quote is so generalized that it can be applied in both of the context of a sbs, but rather it seems to me that it's more appropriate to take as a sign for any form of institutional failure giving the opportunity to a whole sector doing business on disillusioned speculation.
You need to make so many assumptions to prove your statement as true, and the last part is just plain conspiratory. The problem is once again not the sbs, but rather what sbss are allowed to do in the context, or rather the lack of limitations on them.
If it wasn't the case that a sbs existed, it would obviously just take another form if the possibility existed, it just happens that the banks/other financial firms had the best tools for creating this kind of business.
The fact that you show total ignorance of the global historical implications of the general welfare of set monetary standards, and only having narrow examples trying to prove your points about fiat money and central banking, while continuing to use only specific examples "supporting" the rest of your statements (then again, I don't really know how often they support your statements if you put them in a broader context), shows that you are very myopic.
Fenderputty
Banned
Sanky Panky
Banned
They are useful as lenders of last resort, and to make sure that banks can meet capital calls required when depositors want their money. They are a plague to society as far as influencing the money supply to serve the interest of banks and financial institutions (or to help government fund endless wars).
It is not insular when we have explicit evidence and direct statements about the intents of these "puppetmasters". It is not a "theory" that Morgan, Warburg, Rothschild, and the rest of the banking dynasties met in Jekyll Island to draft the US Federal Reserve in 1910. We can track the decisions implemented by government, and how they have lead to what we see today under our fiat money. We bitch and moan in other threads about the top 1% getting wealthier and wealthier, and the bottom relying further and further on debt... knowing emprically that most global corporations are closely held by only a few... is this really an accident?
And those 50 individuals are only concerned with the hundreds/thousands in their districts, not the country at large let alone the world. Some have even said as much.
empty vessel
Member
So does the indirect deficit spending method.
You are missing the very basic fact that this happens whether the government sells bonds or not. The people who are receiving the Treasury's direct deficit spending still receive the Treasury's indirect deficit spending. Your position is that the government's removal of $600 billion in cash from different people--people who are looking to save their money--reduces the inflationary impact. In other words, that the government's replacement of non-interest bearing dollars with interest-bearing dollars reduces the inflationary impact. That is false because (1) bonds are highly liquid; and (2) by purchasing bonds, those people are expressing their desire to save, not spend. In other words, (1) the cash being removed from the economy through bond sales is not money that is generating demand for goods and services; (2) anybody holding a bond who decides they would prefer to spend can do so at any time they desire; and (3) the bond eventually turns back into cash plus interest in any event.
Of course, this whole conversation is somewhat bizarre given that the economy is suffering from a persistent aggregate demand shortfall. If you believe what you say, then you should support direct deficit spending as more stimulative. And, no, injecting $600 billion in stimulus would not "cause enormous inflation." No credible economist would ever suggest that because of the huge output gap under which we are suffering. To get to demand pull inflation, you first have to get to full employment. Needless to say, we're a long way from there.
This isn't a reserve bank issue. It's a congressional issue. The central bank does not dictate how the Treasury spends. It follows the laws Congress passes just like the Treasury does. If you think that the central bank directs government spending, you need to better inform yourself about how government spending (and, frankly, basic representative government) works. The rest of your post is based on this misperception of the world so I won't bother responding.
ClassyPenguin
Banned
It's not a conspiracy if the history is known and public. The Fed was terribly managed for decades after its creation but that does not a conspiracy make.
TheHeretic
Banned
Again, "saving it" means putting it in a bank to be loaned, or putting that money is other asset classes that are more liquid and hence increase the velocity of money.
TheHeretic
Banned
1 - Bonds are liquid, Government bonds are less so, and certainly less than most other securities.
2 - By saving they are financing other peoples spending. Money in the bank is loaned and spent that way. Else invested in other securities or assets, much of which is more liquid. Also remember this is a fractional reserve system, so the amount loaned compared to saved is multiplied.
3 - The bonds can easily be renewed, avoiding that problem. And thats exactly what the treasury does.
Sanky Panky
Banned
We agree on this. Unfortunately, we can't rely on the paid-for government we currently have to regulate these institutions.
Actually, you only have to briefly understand the re-hypothecation of collateral and the workings of the repo market, to understand the multiplicative effect of a "sneeze" in the chain. These are not assumptions. We agree on the lack of limitations, especially when the Fed is aiding and abetting the sbs, by pumping free excess reserves into a system that is trying to naturally deleverage (and clean up the balance sheet of junk).
Indeed. What separates you from me, is that I recognize that your bolded statement is NOT a coincidence, but the works of a cartel that has been going since the 1800's.
It is public, and it should be known that the creation and purpose of the Fed was to benefit the bankers that met to directly draft the legislation. That should be public knowledge, but it isn't.
That might be a good argument against Fed conducting their mission the way they did during those times, but it isn't a very good argument against central banking.
Okay, so I guess I'm just a lot more optimistic, I just find your view myopic as it doesn't take into account succesful ventures of central banking.
You give the impression that you're so convinced in your argument that it must be the only reason and a natural consequence, while I disagree.
For example, the Nordics have had a financial crisis in the early 90s, what happened after that?
The tools used to fix this were the same you were complaining about, develeraging the banking sector and switching to proper free exchange rate central banking, however to remove the moral hazard problem, many banks were nationalized, disregarding the shareholders (the value of the shares would be zero without the intervention anyway).
Obviously, having a proper independent central bank and using it to your economy's benefit is probably easier if you're a small economy, as the global implications aren't the same.
The chain of events aren't deterministic, due to being more prepared for another crisis due to the legislative groundwork done in the previous nordic crisis, the nordic banks aren't in a horrible position now after the global one.
(I need to mention that they aren't wholly nationally owned anymore, according to the plans to begin with)
Thus, the works of a theoretical, or real, cartel isn't a central bank and fiat money, the works of that cartel are the opportunities to abuse the system.
David Incorporated Esq.
Member
I always hear this but from what I understand the effect of extra saving is minimal per $1 saved.
CyclopsRock
Member
It's the shadow banking system that allowed a lot of banks to over-leverage their assets in ways that often subverted national regulation systems (or, where it didn't outright subvert them, it used different countries' different laws to get around them). For example, the scale of rehypothecation in the UK created a sort of domino effect, whereby assets were leveraged using assets which themselves were leveraged on other things and so on, so that if any one fell through, the whole stack of cards fell down. It's not "obvious" what caused the 2008 crash at all, at least in practical terms. It general terms it's "loads of people lent money to people that couldn't pay it back", but the specifics of how that occurred are very much intertwined with the shadow banking system - a thing whose name makes it sounds like some nut job conspiracy thing, when it's entirely real and acknowledged. It's simply institutions which operate outside the usual regulations (and protections).
maquiladora
Member
CNN :
Maninthemirror
Banned
Is this where GOP gleefully enter the meeting room expecting Obama to cave in again and start talking about all they want before Obama speaks and finally when Obama gets the chance to response they are going to get the middle finger from him ?
davepoobond
you can't put a price on sparks
Obama? More like obamastructionist
They've done this numerous times already. Once again, I think they're going to wait to the last minute and at that point the Senate will come up with something and John Boehner will say he has to allow it on the House floor because of time constraints.
ClassyPenguin
Banned
I am all for central banking. I'm just saying that it isn't a banking conspiracy.
Snowman Prophet of Doom
Member
Wars are decided upon my the government, not the bankers. They will finance said wars no matter WHAT they do. This is reverse vampires-level stuff you're putting out there.
Assuming that this is true, that they "drafted" the Fed rather than simply deciding on how best to advise the government: If you're a government creating a large central bank, who would you want to give input on how it ought to be operated? I might go for the rich bankers that have copious experience, but that's just me.
The top 1% getting wealthier and wealthier has less to do with bankers than with governmental policy since the 1980s waging war against the impoverished and middle class. It's not an accident, but "shadow bankers" are, at best, a small part of the problem, compared to Reaganomists.
At which point we all feel stupid for taking this whole drama so seriously. I for one learned my lesson in 2011, at least partly.
IAmRandom31
Banned
I have a question, seem to be plenty of intelligent people out there who should be able to provide ... clarification for me.
This whole thing is about Obamacare, pretty sure that is the only thing being agreed upon about this whole shutdown. Now, it seems the Republican's main problem with Obamacare is how much money it will end up costing. The main reason for this concern is, once Obamacare if fully up and going, you will have businesses dropping its health-care plans and sending their employers to the exchanges to find healthcare there. And hey, as a businessman, why would you not do this? Why would you spend so much money to keep people on a company healthcare plan when they could easily be dropped and go to the exchanges to find healthcare?
Now, if that indeed does happen over the years, then the previous estimates of the costs of Obamacare would be inaccurate. Especially any workers making in the 20-40K a year range, which is plenty of them. The actual cost of Obamacare could be massive and in Republicans views, unsustainable due to the massive subsidies people will get each year. The more people in the exchanges then the more subsidies being sent out.
My question is, how are they wrong? Or atleast ....... how is this something our current economy can sustain in its present status?
This whole thing is about Obamacare, pretty sure that is the only thing being agreed upon about this whole shutdown. Now, it seems the Republican's main problem with Obamacare is how much money it will end up costing. The main reason for this concern is, once Obamacare if fully up and going, you will have businesses dropping its health-care plans and sending their employers to the exchanges to find healthcare there. And hey, as a businessman, why would you not do this? Why would you spend so much money to keep people on a company healthcare plan when they could easily be dropped and go to the exchanges to find healthcare?
Now, if that indeed does happen over the years, then the previous estimates of the costs of Obamacare would be inaccurate. Especially any workers making in the 20-40K a year range, which is plenty of them. The actual cost of Obamacare could be massive and in Republicans views, unsustainable due to the massive subsidies people will get each year. The more people in the exchanges then the more subsidies being sent out.
My question is, how are they wrong? Or atleast ....... how is this something our current economy can sustain in its present status?
They will be massively penalized if they do this, that's why.
davepoobond
you can't put a price on sparks
I believe it has to do with the short term costs on the businesses And the long term costs for the huge businesses. They don't give a shot about small businesses but it does strengthen their point. Insurance companies and every large corporation will lose money because they have to supply health insurance now.
I suppose there is some traditional conservative concern about the government becoming larger and being involved on an even more personal basis with people's lives but its bullshit IMO.
What it comes down to is obamacare helps people but cuts into businesses.
SteveWinwood
Member
Yeah that's totally what I said.
You completely forgot one huge point. Businesses are taxed if they don't provide healthcare which would cover part or all of the subsidies costs
Why would business want to be taxed when they can provide a tax free benefit.
- Status