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HomeOff Topics News & Politics › The Single Chart That Should Force The Fed Out Of Business
01-28-2013 04:32 PM  5 years agoPost 21
Dennis (RIP)

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Someone should send Obama a roll of duct tape to patch up all the holes of the federal government from bleeding money
To late. There is nothing that will stop it.

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01-28-2013 05:04 PM  5 years agoPost 22
R Hudson

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I've found it quite interesting all along that Obama takes all the heat (or Bush during his years in office as well). Meanwhile, the true financial stakeholders are laughing their a$$es off that nobody is coming after them. They have a great system set-up.

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01-28-2013 05:07 PM  5 years agoPost 23
GREYEAGLE

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Just have too know more about the Federal Reserve and International Monetary Exchange rate system.

HERE COME"S your New Immigration Policy !

greyeagle

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01-28-2013 05:42 PM  5 years agoPost 24
Dennis (RIP)

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01-28-2013 07:56 PM  5 years agoPost 25
rander1

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But the US money supply shrank when Obama took office
Not sure how Divisia measures their M4, but here are the official measures from the FED.

M1, M2 and M3 (which is discontinued) are the FED's money measures.

M1 consists of: (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) traveler's checks of nonbank issuers; (3) demand deposits; and (4) other checkable deposits (OCDs), which consist primarily of negotiable order of withdrawal (NOW) accounts at depository institutions and credit union share draft accounts.
Looks to me like the money stock has skyrocketed.

Furthermore, the money multiplier (value of every dollar printed) is negative. This is the law of diminishing returns in action.

Here's the velocity of money:
Velocity is a ratio of nominal GDP to a measure of the money supply. It can be thought of as the rate of turnover in the money supply--that is, the number of times one dollar is used to purchase final goods and services included in GDP.

Imagine what would happen if all of those dollars that are being printed, actually start being used.....

Massive fundamental inflation for raw materials.

Also, these graphs do not attempt to leverage public debt, as well as interest payments and tax revenues. Put those into the picture and you see a huge disconnect where de-leveraging is the only way out.

Tic Toc Tic Toc

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01-28-2013 09:08 PM  5 years agoPost 26
baby uh1

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Imagine what would happen if all of those dollars that are being printed, actually start being used.....
Could this be why the government seems to be working against a thriving economy?

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01-28-2013 11:04 PM  5 years agoPost 27
Dusty1000

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Not sure how Divisia measures their M4, but here are the official measures from the FED.
M1, M2 and M3 (which is discontinued) are the FED's money measures.
Divisia isn't an organisation, it's a measure of money.
In econometrics and official statistics, and particularly in banking, the Divisia monetary aggregates index is an index of money supply. It is a particular application of a Divisia index to monetary aggregates.

http://en.wikipedia.org/wiki/Divisi...ggregates_index
Broad money growth (or lack thereof) explains why the U.S. economy is flat in the water. The best metric for U.S. broad money is the Divisia M4 measure (see the accompany chart). Unlike conventional money supply measures that represent the simple sum of the components of the money supply (with each component carrying an equal weight), the Divisia metric assigns a weight to each component. The weights are a function of the usefulness that each component of the money supply possesses as a medium of exchange. So, currency, traveler’s checks, and demand deposits receive a relatively “high” weight; whereas, institutional money market funds receive a relatively “low” weight.

http://www.cato.org/publications/co...l-status-report
The UK money supply is in much the same boat. The Bank of England has also done plenty of quantitative easing, and the M4 money supply, which IS the official Bank of England broad money measure, looks much the same as the US M4 money supply.
Furthermore, the money multiplier (value of every dollar printed) is negative. This is the law of diminishing returns in action.
There you go! Take another look at that chart. How could it have increased after the financial crash, if the money supply has also increased?
Imagine what would happen if all of those dollars that are being printed, actually start being used.....
The new money cannot be so easily spent, because the new money is in the form of bank reserves. When someone spends money, it will invariably go into someone else's bank, and the reserve aggregate remains the same.

The Fed has expanded the monetary base - i.e. bank reserves + notes + coins (which we call narrow money in the UK). This is where you'll find all the extra money the Fed has printed.

But strictly speaking, banks only lend reserves to other banks. When someone gets a loan from a bank of say $10,000, the bank types $10,000 into their account, but no account elsewhere simultaneously decreases. So the $10,000 loan adds $10,000 to the US money supply, which the bank has just created out of thin air. When the loan is repaid, the debt disappears, and so does the money. This is why money supplies can both expand and contract.

''Lending'' is a misleading term, because it implies the transfer of money from one account to another. But that's not what banks do when they make loans (except to other banks), but they call it ''lending'' in any case. The reason the money supply has fallen, is because banks are not lending. Old loans are being repaid, and the banks are not making enough new loans.

Think about it. If a bank lends $10,000, and the customer spends it on say a car, the customer transfers $10,000 from his bank account to the car dealer's bank account, and $10,000 of reserves moves from the customer's bank's reserve account at the Fed, to the car dealer's bank's account at the Fed. Unless both the customer and car dealer use the same bank, in which case the reserves stay where they are. No new reserves were created when the bank made the loan, and the reserves don't disappear when the loan is repaid.

Expanding the monetary base makes banks more stable, because it gives them more reserves. But because they are not lending, the aggregate balance of bank accounts has fallen. So although the M4 money supply is approximately flat, and the banks are more stable, people have less money in their accounts, which means less demand, which is why our economies are in the state they are in.

Dusty

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01-29-2013 01:26 AM  5 years agoPost 28
Dennis (RIP)

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Expanding the monetary base makes banks more stable, because it gives them more reserves. But because they are not lending, the aggregate balance of bank accounts has fallen. So although the M4 money supply is approximately flat, and the banks are more stable, people have less money in their accounts, which means less demand, which is why our economies are in the state they are in.
The reason our economies are in the state they are in is because government is sucking more and more out of the economy in taxes and fees so that they can give out the free sh#t. Pure and simple. Nothing complicated about that.
The new money cannot be so easily spent, because the new money is in the form of bank reserves. When someone spends money, it will invariably go into someone else's bank, and the reserve aggregate remains the same.
No it does not. Here's why.

You forgot to mention that loans are a product that banks sell. In exchange for collateral on a loan while being paid, those same banks charge interest. That interest, after costs, is their profit. When they slow down loans, they increase or create new fees to charge customers to make up the difference in lost profits from decreasing loan packages.

They do not give out loans at banks for free.

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01-29-2013 02:04 AM  5 years agoPost 29
punkin71

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Dusty, I gotta study more about how your govt gave power to banking institutions to create currency in 1666 as you state, just as ours did the same in 1913...

You and Baby are making too much sense and seem to have a good understanding of fraction reserve banking, from my perspective anyway...

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01-29-2013 03:04 AM  5 years agoPost 30
GREYEAGLE

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When people become nervous or apprehensive about the condition's =

The 1st thing they do is to become uber conservative with their $$$ .

Hence it back's the whole system up all the way thru production and inventory control. ALL THE WAY - Even to the foreign warehouses / all manufacturing start's to screech to a halt.

None have the confidence needed to make capital improvement's /invest in High dollar infrastructure. The trick is to build the confidence back in the consumer which the assumed risk is palatable .

Some time's Coaxing will work : RE : Very Low or almost free money

3.35 % 30 Year morgages ect or the plethora of gimmick's. { Water into Wine }

Bank's are absolutely FLUSH and over flowing : WHY ???

It is SCRIPT !!!!

Why are the Market's absolutely screaming in Volume ???? Velocity ---

greyeagle

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01-29-2013 01:11 PM  5 years agoPost 31
Dusty1000

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The reason our economies are in the state they are in is because government is sucking more and more out of the economy in taxes and fees so that they can give out the free sh#t. Pure and simple. Nothing complicated about that.
So which taxes and fees went up during the financial crash?

Which taxes are higher now, than in the boom years when Clinton was president?

Welfare primarily redistributes money within an economy, rather than suck it out. Give a poor man a dollar and it will likely be spent in the real economy. Give a wealthy man a dollar and it will likely be invested in the financial markets.

As the wealth gap increases, the financial markets grow, while the real economy struggles - which is exactly what we are seeing happening now.
No it does not. Here's why.
Yes it does.

As an example, take a simple hypothetical banking system with two banks, each with $100 of reserves. 100 + 100 = 200.

If a customer at bank A sends $10 to a customer of bank B, bank A ends up with $90 of reserves, bank B ends up with $110 of reserves. 90 + 110 = 200.

As 200 is the same as 200, the reserve aggregate remains the same.
You forgot to mention that loans are a product that banks sell. In exchange for collateral on a loan while being paid, those same banks charge interest. That interest, after costs, is their profit. When they slow down loans, they increase or create new fees to charge customers to make up the difference in lost profits from decreasing loan packages.
They do not give out loans at banks for free.
None of which has anything whatsoever to do with the point I was making.

Dusty

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01-29-2013 01:16 PM  5 years agoPost 32
Dusty1000

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Dusty, I gotta study more about how your govt gave power to banking institutions to create currency in 1666 as you state, just as ours did the same in 1913...
I highly recommend reading up to page 16 of this IMF research paper - and don't be put off by the fact that it comes from the IMF. It does not represent the official position of the IMF, and was published by their research department. It's the best researched description of how our banking systems work, and history of money, that I've come across.

http://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf

Dusty

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01-29-2013 01:17 PM  5 years agoPost 33
baby uh1

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Give a poor man a dollar and it will likely be spent in the real economy. Give a wealthy man a dollar and it will likely be invested in the financial markets.
The problem might be that when you give a poor man a dollar he spends it on Chinese junk, imported drugs, and foreign oil instead of investing it in something that will produce a domestic job.

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01-29-2013 01:24 PM  5 years agoPost 34
Dusty1000

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The problem might be that when you give a poor man a dollar he spends it on Chinese junk, imported drugs, and foreign oil instead of investing it in something that will produce a domestic job.
As I've pointed out, the wealth gap is increasing, wealthy people are getting more of the money in existence, but domestic jobs are not being created. While the financial markets are growing.

Nice theory, but it doesn't reflect reality.

Dusty

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01-29-2013 02:22 PM  5 years agoPost 35
rander1

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I must point out that wealth is not finite, in that if one gains wealth another other does not lose. Healthy economies allow wealth creation, in both upper and lower. Wealth is not measured in income.

The problem is that there is a diverse mis-allocation of capital to inefficient areas. This is largely because of the government (education is also a factor).

Economies work on efficiency, laws, savings, contracts and bankruptcies. The monetary base/supply expansion is a band-aide to much bigger structural problem.

A large step towards prosperity would be to re-institute Glass-Steagle and stop TBTF banks from gambling with deposits.

The expanded monetary base is already causing inflation, look at any non government statistic and you will see.

The increase in tax that we have had since Bush is in fact inflation. They are debasing the currency making our imports more expensive which go right into raw materials. The US is a net importer, we need a stronger currency, not a weaker one.

Tic Toc Tic Toc

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01-29-2013 02:59 PM  5 years agoPost 36
Dennis (RIP)

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01-29-2013 03:21 PM  5 years agoPost 37
Dusty1000

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The problem is that there is a diverse mis-allocation of capital to inefficient areas.
Indeed. Here's a chart which shows where the capital is going.

This is largely because of the government (education is also a factor).
The World Bank identified in the 1990s that the reason for China's phenomenal growth, is the state owned Chinese banks are obliged to allocate capital to the real economy, i.e. productive means, rather than the financial markets, i.e. speculative means.
A large step towards prosperity would be to re-institute Glass-Steagle and stop TBTF banks from gambling with deposits.
I agree. But as bankers fund both the Republicans and Democrats, we can expect to see government policy favouring them. Ron Paul is a notable exception.
The expanded monetary base is already causing inflation, look at any non government statistic and you will see.
Just because the monetary base is being expanded, and inflation is prevalent, does not mean one causes the other.

The more a commodity is bought and sold on the financial markets, the more expensive it is likely to be to both the producers, and to the end consumer.
The increase in tax that we have had since Bush is in fact inflation. They are debasing the currency making our imports more expensive which go right into raw materials. The US is a net importer, we need a stronger currency, not a weaker one.
While financial markets prop up the value of a currency to a certain extent, a productive economy which actually produces things, and creates jobs etc, is preferable.

When the UK economy was the most productive in the world, the UK was also the richest country in the world. Then when the US took over as the most productive economy in the world, it became the richest country in the world. While it still is, the gap between the US and China is shrinking fast, due to the fast increasing productive capacity of the Chinese economy.

Dusty

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01-29-2013 03:49 PM  5 years agoPost 38
Dennis (RIP)

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Welfare primarily redistributes money within an economy, rather than suck it out.
One can only hope that you are not like Palosi who claims that welfare and unemployment benefits stimulate an economy.

If you are, then we all might as well quite our jobs, get on the government free sh#t wagon and everything will be fine.

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01-29-2013 03:51 PM  5 years agoPost 39
Dennis (RIP)

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These 11 States now have More People on Welfare than they do Employed
Last month, the Senate Budget Committee reports that in fiscal year 2011, between food stamps, housing support, child care, Medicaid and other benefits, the average U.S. household below the poverty line received $168.00 a day in government support. What’s the problem with that much support? Well, the median household income in America is just over $50,000, which averages out to $137.13 a day. To put it another way, being on welfare now pays the equivalent of $30.00 an hour for a 40-hour week, while the average job pays $25.00 an hour.

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01-29-2013 03:54 PM  5 years agoPost 40
Dusty1000

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One can only hope that you are not like Palosi who claims that welfare and unemployment benefits stimulate an economy.
It should be evident from what I said that production is what stimulates an economy.

I suggest you refer to what I did say, rather than what I didn't say.

Dusty

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