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Author Topic: US Federal Reserve mulls printing more money  (Read 2384 times)
jgarzik
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September 21, 2010, 06:41:24 AM
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URL: http://www.cnbc.com/id/39271495

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How much of a boost to the U.S. recovery could another trillion dollars or two buy?

That's a tricky question for the Federal Reserve when it meets Tuesday to debate what would warrant pumping more money into the financial system. [...] Fed policymakers are trying to gauge how much they could achieve if they resume massive quantitative easing.

Jeff Garzik, bitcoin core dev team and BitPay engineer; opinions are my own, not my employer.
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September 21, 2010, 08:46:26 AM
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How much of a boost to the U.S. recovery could another trillion dollars or two buy?

I stopped reading the article after this sentence  Roll Eyes

"We will not find a solution to political problems in cryptography, but we can win a major battle in the arms race and gain a new territory of freedom for several years.

Governments are good at cutting off the heads of a centrally controlled networks, but pure P2P networks are holding their own."
Anonymous
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September 21, 2010, 10:07:12 AM
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How much of a boost to the U.S. recovery could another trillion dollars or two buy?

I stopped reading the article after this sentence  Roll Eyes

*brings out the wheelbarrows
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September 21, 2010, 01:46:02 PM
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More money means we all get rich, right?

 Cheesy

good judgment comes from experience, and experience comes from bad judgment
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September 21, 2010, 01:47:10 PM
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A hyperinflation would be the perfect time to advertise Bitcoin as an alternative to USD. I hope they start printing a trillion every day.

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September 21, 2010, 03:47:02 PM
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I refused to follow the link after I read the URL. "Mulls printing more money" my ass! They don't print it any more. They just spend it.

I just read a factlet (but forgot the link) that the Federal Reserve has doubled the money supply during the past two years. What does this mean? It means 50% inflation coming down the pipe, guaranteed.

How monumentally stupid do you have to be to piss away half of America's productivity in just two years?





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September 21, 2010, 04:39:28 PM
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Alternative Link.


I busted up when I saw this on zerohedge this morning.  It's only a matter of time now.  Bitcoin is the future!
Anonymous
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September 22, 2010, 02:07:03 AM
 #8

If you think its bad now just wait till Hillary Clinton takes over.......the head job.


  Cheesy
redengin
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September 22, 2010, 03:45:40 PM
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Please don't confuse "pumping more money into the financial system" with "printing more money" these are two entirely different things.  If you really want to know more I suggest you read about open market operations.

http://en.wikipedia.org/wiki/Open_market_operations
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September 22, 2010, 05:23:01 PM
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"And indeed the Wikipedia article to which you link makes it clear (in the second paragraph) that the central bank funds its open market operations by printing more money."

The wiki states: "To pay for this, bank reserves in the form of new base money (for example newly printed cash) is transferred to the sellers bank"

Granted that is one example, but the US fed is already flush with currency and doesn't require printing any more to meet demand, they simply transfer 'elastic currency' in and out of the money supply.  The treasury has the sole authority and responsibility of printing currency.  In the US, the Federal Reserve can not print currency to increase base money.

http://www.investopedia.com/articles/economics/08/treasury-fed-reserve.asp
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September 22, 2010, 07:21:28 PM
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A hyperinflation would be the perfect time to advertise Bitcoin as an alternative to USD. I hope they start printing a trillion every day.

Hyperinflation would be too late.  Anyway, I don't think that hyperinflation is in the cards for a while, yet.  I don't think that there will even be much or any overall inflation, for that matter, even though food & energy are set to hit the hockey stick.  We are presently in deflation, despite the 'monetary easing' that's been going on, because the contraction in M3 (base currency + credit) has been falling even though the base currency numbers have nearly doubled.  The falling value of real estate is enough to overwelm the rising prices of neccessities, even though it doesn't feel any better.  The US dollar is a defacto international reserve currency, and as such, much of the monetary base is not in circulation within the US economy itself.  Much of it is held by foreign nations or banks as an asset in reserve.  This could change quickly, and China has us in a bad spot should they, for whatever reason, decide to divest themselves of their cash and savings bonds.  They are not likely to ever do this due to economic reasons, because they would harm their own economy significantly in the process; but they may do it for political reasons, and that would cause a massive inflationary adjustment if that much base currency were to suddenly attempt to return to the US economy.  Hyperinflation is a different event.  That is the death of a currency, and is never the choice that banks or their political pets would make, because it would be the end of their con game forever.  And it is a choice, because hyperinflation is always and everywhere a political event.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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September 22, 2010, 07:33:34 PM
 #12

A hyperinflation would be the perfect time to advertise Bitcoin as an alternative to USD. I hope they start printing a trillion every day.

Hyperinflation would be too late.  Anyway, I don't think that hyperinflation is in the cards for a while, yet.  I don't think that there will even be much or any overall inflation, for that matter, even though food & energy are set to hit the hockey stick.  We are presently in deflation, despite the 'monetary easing' that's been going on, because the contraction in M3 (base currency + credit) has been falling even though the base currency numbers have nearly doubled.  The falling value of real estate is enough to overwelm the rising prices of neccessities, even though it doesn't feel any better.  The US dollar is a defacto international reserve currency, and as such, much of the monetary base is not in circulation within the US economy itself.  Much of it is held by foreign nations or banks as an asset in reserve.  This could change quickly, and China has us in a bad spot should they, for whatever reason, decide to divest themselves of their cash and savings bonds.  They are not likely to ever do this due to economic reasons, because they would harm their own economy significantly in the process; but they may do it for political reasons, and that would cause a massive inflationary adjustment if that much base currency were to suddenly attempt to return to the US economy.  Hyperinflation is a different event.  That is the death of a currency, and is never the choice that banks or their political pets would make, because it would be the end of their con game forever.  And it is a choice, because hyperinflation is always and everywhere a political event.

Wouldn't a nationwide bank run result in hyperinflation?
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September 22, 2010, 07:50:51 PM
 #13

Wouldn't a nationwide bank run result in hyperinflation?

  A bank run is an increase in demand for currency.  Which would create hyperdeflation, as the value of currency rose to meet the clearing price at the current supply.
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September 22, 2010, 08:11:15 PM
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Wouldn't a nationwide bank run result in hyperinflation?

  A bank run is an increase in demand for currency.  Which would create hyperdeflation, as the value of currency rose to meet the clearing price at the current supply.

I don't follow you.  If you will, please break it down.

All of those accounts are "insured" for up to $250,000.  Where will this money come from?  They will have to issue more money or default on their promises.
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September 22, 2010, 08:29:15 PM
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Wouldn't a nationwide bank run result in hyperinflation?

  A bank run is an increase in demand for currency.  Which would create hyperdeflation, as the value of currency rose to meet the clearing price at the current supply.

I don't follow you.  If you will, please break it down.

All of those accounts are "insured" for up to $250,000.  Where will this money come from?  They will have to issue more money or default on their promises.

They will default on their promises.  That is why you either want to have your cash in your mattress, or in a very strong bank.

Or, most cynically, put your money in a very weak bank.  If the banks start going down, you want yours to go down first when they're still paying on the 'insurance'.
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September 22, 2010, 09:02:46 PM
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Cash is already a broken government promise and I suspect those broken IOUs won't hold value even as well as they have over the last few decades in this next one.

Play Bitcoin Poker at sealswithclubs.eu. We're active and open to everyone.
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September 22, 2010, 09:10:40 PM
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Wouldn't a nationwide bank run result in hyperinflation?

  A bank run is an increase in demand for currency.  Which would create hyperdeflation, as the value of currency rose to meet the clearing price at the current supply.

I don't follow you.  If you will, please break it down.

All of those accounts are "insured" for up to $250,000.  Where will this money come from?  They will have to issue more money or default on their promises.

The Federal Reserve bank holds large quantities of currency.  The Fed also owns securities and makes loans from which it profits.  There is an awful lot of money available to fulfill demand without having to print more currency.
The Fed uses open market operations to do this.  If the demand for currency increases (bank run) then the Fed offers currency to banks in exchange for securities (treasury notes, bonds, etc.)

The assumption that the Federal Reserve is also the Treasury is the common error.  They are two distinct entities which have different ways to correct the money supply.
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September 22, 2010, 10:31:33 PM
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Wouldn't a nationwide bank run result in hyperinflation?

No, at least not directly.  As has been alluded to by others, a bank run is a sign of rapid deflation.  A bank run is caused by the sudden loss of faith in the soundness of an institution.  A national bank run would indicate the loss of faith in the soundness of the Federal Reserve System & the FDIC.  The result of large numbers of people trying to get their money in cash is a sudden and drastic increase in the demand for currency.  The law of supply and demand, of course, leads us to the conclusion that the value of cash would rise to close the supply gap; which would be large because the FDIC has the option of taking up to 60 days to follow through on the insurance claims without needing outside approval of a longer time period.  There are good reasons why this grace period exists, but the result is that there would be roughly a 60 day period wherein the supply of currency in the economy is significantly short of the demand; and that is assuming that the public actually trusts that the FDIC can follow through, which is mathmaticly unlikely in any national event at the present time.  Currently, the FDIC is insolvent due to so many banks going under the last two years.  The net result of bank failures in the longer term is also deflation, as the failure of a bank is usually related to too many of it's own loans going sour and never getting repaid.  Debts forgiven in bankruptcy court are equivialent to currency, previously willed into existance by the power of fractional reserve banking at the inception of the loan as credit, ceasing to exist.  On a large, national scale, the net result of such events is the contraction of the currency base as it's perceived by the economy at large; (the business owner views credit as being functionally equivialent to currency) and the denial or loss of credit availability results in the academic definition of deflation, i.e. the reduction of currency in circulation relative to the mean economic activity that it represents.  Changes in consumer prices are affected by too many other variables to point at any group of prices at any particular time and determine if inflation or deflation has occured.   A sharp reduction in 'velocity' can have similar effects to reductions in gross volume, and that is usually what we call a "recession".

Of course, a national bank run could easily result in a political 'intervention', resulting in the political forces triggering a hyperinflation; but a national bank run is mathmaticly deflationary.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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September 22, 2010, 10:50:20 PM
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The Federal Reserve bank holds large quantities of currency.  The Fed also owns securities and makes loans from which it profits.  There is an awful lot of money available to fulfill demand without having to print more currency.
The Fed uses open market operations to do this.  If the demand for currency increases (bank run) then the Fed offers currency to banks in exchange for securities (treasury notes, bonds, etc.)

The assumption that the Federal Reserve is also the Treasury is the common error.  They are two distinct entities which have different ways to correct the money supply.

That's assuming institutions will buy treasury notes and bonds or will even have the time to do so.  I imagine a modern day bank run (at a national level) could happen in a matter of hours, possibly in a matter of minutes.  If people can't withdraw their funds on the spot, their confidence in the USD will go from 100% to 0% before the teller is able to finish her apology.
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September 22, 2010, 10:56:02 PM
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The Federal Reserve bank holds large quantities of currency.  The Fed also owns securities and makes loans from which it profits.  There is an awful lot of money available to fulfill demand without having to print more currency.
The Fed uses open market operations to do this.  If the demand for currency increases (bank run) then the Fed offers currency to banks in exchange for securities (treasury notes, bonds, etc.)

The assumption that the Federal Reserve is also the Treasury is the common error.  They are two distinct entities which have different ways to correct the money supply.

That's assuming institutions will buy treasury notes and bonds or will even have the time to do so.  I imagine a modern day bank run (at a national level) could happen in a matter of hours, possibly in a matter of minutes.  If people can't withdraw their funds on the spot, their confidence in the USD will go from 100% to 0% before the teller is able to finish her apology.

I don't think that value of USD will ever go to zero, because there will always be demand for USD as long as The US exists and demands payment for taxes in USD.

"We will not find a solution to political problems in cryptography, but we can win a major battle in the arms race and gain a new territory of freedom for several years.

Governments are good at cutting off the heads of a centrally controlled networks, but pure P2P networks are holding their own."
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