Edit: wrote this whole thing from a phone. Bear with the mobile fed links.
It's kind of obvious in a sneaky way.
You see when you look up us money supply you typically get this, the monetary base:
http://m.research.stlouisfed.org/fred/series.php?sid=BASE&show=chart&range=max&units=linBut, this is actually more important for determining inflation in the short term:
http://m.research.stlouisfed.org/fred/series.php?sid=WCURCIR&show=chart&range=max&units=linCheck it out. Whas the difference between currency in circulation and monetary base? Monetary base also includes demand deposits in the federal reserve. Demand deposits in the fed still bear interest. But unlike a normal demand deposit, the money is not invested or relent. Instead, its effectively destroyed. Until the depositor demands it back that is.
But, how can it pay a rate then? The answer is, it doesn't, not really. That rate is effectively a bribe to banks to give the fed permission to destroy that chunk of the money supply for a while. And currently it accounts for a huge portion of the monetary base. In fact, it accounts for nearly the ENTIRETY OF QE.
To me, that's a mixed message. Why bribe banks to destroy money when supposedly the entire point of QE is as so many people like to put it, "print money", or as the feds like to call it, "stimulate the economy."
In actuality it neither , nor was likely intended to achieve, either end. We've got it wrong, at least on the surface. The real purpose of QE was to decrease real reserve ratios. I'll get to why in a second.
Here's how people think the QE story works:
Government sells bonds. Banks buy bonds. Banks resell those bonds. Fed buys bonds sending newly printed money to banks. Bank lends money, government spends money. Money was just printed.
Here's how it really works:
Government sells bonds. Banks buy bonds. Bank knows that bonds don't count as a reserve asset, and knows that interest rates will rise because the fed said they would. Bank sells bonds. Fed buys bonds. Bank DOESN'T lend the money, it deposits it right back into the fed. Why? Because like bonds, loans to business and consumers typically depreciate as rates rise. Also like bonds they don't count as reserves. Not to mention the risk. So bank deposits money into fed who then bribes the bank to keep it there with their low demand deposit interest rate.
See how that works? No money is actually created. The government can spend the money it got from banks. The banks can't because it's locked in the fed demand deposit account that serves as a reserve so they have no incentive to ever lend to anyone else, or so anything else but repeat this process as often as possible (since they get a markup when they resell the bonds).
Actually, this whole QE thing is basically a clever marketing trick. To sell what? Government debt.
By switching the bond for cash it won't lend or spend, the bank still effectively has it lent to the government. Only, instead of having to lock it in for 10 years, it's entirely liquid. Moreover, there would be no one In his right mind to buy bonds when rates are artificialy low. But the demand deposit account has a variable rate!
All's dandy till th banks demand their deposit. Naturally they can only demand a portion - laws mandate they have to have some in there - but even if a mere 1 trillion were suddenly withdrawn and lent the currency in circulation - what actually affects prices - would basically double.
Now check this out.
http://www.federalreserve.gov/releases/h3/current/h3.htmLast week, there was a net outflow for the first time I can see.
So? What happens? "We're raising rates soon! So don't lend because we're about to devalue that loan! Also we're going to bribe you more to keep your money out of the economy!"
http://m.us.wsj.com/articles/fed-officials-see-role-for-interest-on-reserves-1404929744?mobile=yThe thing is, the bigger bribes they pay the more there will eventually be to withdraw. Hmmm....
I must say this was quite the feat to come up with the above. Congrats. But I must digress with the OP quite a "bit", pun duly intended.
1) Actually, this whole QE thing is basically a diabolical backdoor Bailout to Reward Failed Banks that were and still are hopelessly insolvent by way of giving them interest free loans to deposit at the Fed for risk free interest earnings. Quite a deal if one can be a bank and borrow at zero or near zero interest rates and then turn around and earn risk free 2% or more without doing ANYTHING but FAILING and staying utter failures. Toss in their creative accounting that is really Enron and World"con" cook the books accounting with hiding the losses off their balance sheets till hell freezes over and marking assets to fantasy. Then toss in that these same banks then lever up those assets on deposit as collateral to aid and albeit their front running and other stock market fixing schemes to hardly ever have a losing day in the stock market while doing the PPT's dirty work for them much of the time since Spring 2009. Not to mention completely re-blow the bubbles right back to where they were before, and beyond. Let's end this topic here, but we could add scores more on number 1) here alone!
2) The Fed is the "Buyer of Last Resort", And the Fed is almost the ENTIRE Bond Market (currently 70+%). Why? Because suddenly nearly everyone else finally wised up and didn't care US Govt Debt/bonds. There is no "marketing gimmick tricks here". The Fed is buying up what no one else will purchase. Of course other central banks are also creating monies out of thin air and trading those currencies for some US Government Bonds too, but then their the rest of the vast majority entire US Government Bond market, save a dribble here and there from weak banker prostrates and the occasional fool(s). Of course the Fed is supporting other central banks too. It's a vast, global, criminal, banking cartel. They privatize all the profits, and socialize all their losses, just like every bad Corporate Fascist does.
3) Meanwhile the Fed is creating money out of thin air for zero costs ( just some quick keystrokes of effort) and stealing upwards of 50 billion per month is real asset backed paper (Mortgage Paper), costs them nothing, they get real asset back securities in return. Nice racket for the fed and the failed banks get them off their balance sheet with new, laundered, clean, funny QE monies. But they call that QE too, just like their purchases of Treasuries that no other market makers are willing to snatch up either.
But at least the Mortgage Paper (MBS) is a far cry from thos (Treasuries) backed by nothing but a failing Central Bank and their hostage Nation State called the USA that can inever pay back any of that debt in the end.
Of course the USA still borrows the interest payments from the fed so it can still meet it's interest payment obligations. Or just takes that out of the revenue stream, I don't know. Whatever. All I do know is their having to borrow far too many hundreds of billions or trillions per year, and keep several trillions per year off the Governments balance sheet altogether to keep the scheme going just a little, etty, bitty, bit (pun intended) longer. See here: It's a mathematical impossibility just in case the OP has a problem with his math skills like the economists at the Fed certainly appear to have - for the government to ever pay off the governments debts. Why? Example: After the first dollar is loaned into existence then suddenly their is more debt than dollars and the debt cannot possibly be fully repaid. Compound that by 101 years of insanity and here we are. Much the same for any nation that borrows their money from their own central bank. It's called "debt bondage" just in case anyone was wondering. That must end.
All the above and much more is exactly why Bitcoin was created. (To keep governments in line, in check, and to allow people an decentralized, secure, liquid, digital safe haven no matter where they are in the world.
4) I could go on and on and on and on. But the point is NO. The OP is wrong. It's not a clever "marketing trick" or whatever. No one has anything "backwards" but the OP is trying to twist logic into fitting his own needs and desires. Yes, he has some points.
*By design these largest series of thefts and largest financial crimes in all history (what has been and still is going down for the last few decades) by the wealthiest banks and their largest shareholder/owners whom all told now own >40% of the worlds assets collectively, according to recent reports about the worlds most wealthy 141 corporations.
5) What next? Maybe some more Libertarian / Greenspan / Dr. Paul folly and nonsense that "decentralization and privatization are the only solutions" when in fact they have enabled these financial criminal pirates to gut the world of nearly have it's assets in a few short decades?
Sure, let's here from the 3rd faction of parasites (Libertarians) and how their Austrian Economic Theory doesn't have grave flaws in it too. (The ones just mentioned in this topic) or for the really clueless dimwit (the phony charade that "decentralization and privatization are the only solutions" by these libertarian fools (or mega parasites, depending on which they really are - fool or parasite) whom attempt to peddle such obvious rubbish.
Case in point. Austrian Economic theory is gravely flawed just like contemporary Western (Chicago School) Economic Theory also gravely flawed in various other ways.
Hell, even Greenspan "the Librarian" but supposedly operating as the FOMC Chairman in a Chicago School environment finally had to admit a couple of "flaws" in his own Libertarian theories about his flawed concepts of the "deregulated financial market end results not being what he theorized they would be (self balancing", NOT...). OF course I KNOW Greenspan "the financial terrorist" knew better, anyone that properly did their due diligence on Greenspan knows he KNEW BETTER but could care less about that since he and his pals and masters were out to rob and dominate the entire world. Yet there are flaws in that entire set of schemes too, and the blowback is becoming quite severe already. But none the less "Bubbles" Greenspan couldn't help but to baffle the fools with utter bullshit and pure contempt while they cheered him on since they didn't have a clue what he just stated in his usual gibberish babble, and eventually these same fools and criminals finally made him a Sir Alan Greenspan in return. What nonsense. So how many were fooled by Sir Alan Greenspan? I dare to say it was 99.9% of the entire population that bothered to comprehend his bullshit. Don't even get me started on the idiot Bernanke and his QE to Infinity insanity (hint).
Wake up people.
Yes, the OP has some points. No, he isn't on to any valid conclusions that no one else ever found before. Sincere in his attempts? I don't know. I don't care. But to read some of the replies here it's down right scary how clueless many are and just go along to what? Get along? Get a clue, or have a spine people! But don't take it personally, 99.9% in the wild seem even much more than merely clueless than folks here so pat yourselves on the back and just try not to be so naive and gullible in the future.
Seriously, I understand. It takes a ton of time and effort to learn these things, much of it long before most of you were even born. Fine. But the information and truth is out there waiting for you. Otherwise their going to rob you of every last dollar and get you so far in debt that it will take you 20+ years merely to pay of just your college loans where as back in the day we earned those monies as we went to school and during summer break. It's so sad to see an entire generation become debt surfs, but they just don't listen to solid reasoning yet.
Instead they are unfocused and merely desire to "Occupy places". REVOLT YOUNG FOLKS. REVOLT.
Let me help. FOCUS on solutions, not on what's troubling and upsetting you (Occupying Crooked Places).
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DEMAND THE FOLLOWING:
1st - END THE FED.
2nd - Outlaw all debt-based currencies.
3rd - Outlaw all Private Bankers having anything to do with fiscal and monetary policies.
Until then REVOLT in any and every way possible. And don't listen to drivel. Never trust anyone.
ALWAYS VERIFY EVERYTHING ( aka Trust No one aka DO your Due Diligence) - Reagan got that much correct, but precious little else! Of course that's a common theme in government long before and ever since the days of "make us feel good about America Reagan"
Bottom Line:
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It's nothing but sheer panic, desperation, and complete incompetence at the Fed and other Central Banks ever since Greenspan & Co gained control and went stark raving stupid. Before that at least Paul Volcker set America straight, but it was extremely painful. Today he like many old timers, myself included, are steaming furious. At least 25,000 Bankers belong in Prison for decades today, and their still plundering and terrorizing their customers instead. Go figure. Back in the 1980's we shit canned 10,000 parasite, criminal bankers to prisons. But that's not happening anymore. Because this is Bankster Fascism, they own and control the government, and have brought their fangs to bare to boot. Yet suddenly the entire world is now in revolt against the fed's debt based dollars that enabled the USA a free lunch for many decades. That's ending now. The fed is nearly dead, as is the dollar as we presently know it.
The Feds entire criminal history, and it's series of Ponzi Schemes and scams have come unraveled under the guidance of Greenspan and Bernanke. And yes their quite adept at fooling wealthy suckers and clueless masses whom all cling to any hope that they can same them all from ruin. They can't, and wont. But their quite the financial can kickers! Gotta give them that much. They can sure kick a can forward just a little "bit" more. More than most of us that had more than a clue thought possible. Yet suddenly the world is conspiring against the criminal fed and it's other cohorts. Suddenly their facing enemies from every corner of the globe. Their just about dead in other words.
Just sit back, research, and admire their complete utter failure for 101 years at the Fed, while they also succeeded in plundering the wealth from the masses of gullible fools for 101 years straight. They have failed at all their mission statements and objectives, consistently during their entire rein of financial terror and plunder for 101 years straight. But they sure did pull off the largest heist in all of history. Their not worthy of running a snow-cone stand, let alone being in control of fiscal and monetary policies. Their the most diabolically evil creation ever. And must be destroyed. Dr. Ron Paul get's that part perfectly accurate beyond a shadow of a doubt.
Now what? I am suppose to click a link at the fed and read their nonsense in the OP's post? No. No way. Never. Their incompetent, and grossly negligent, and well as operating an ongoing criminal conspiracy in violation of the RICO Criminal Act, as well as committing ongoing federal felony frauds and conspiracies, and... In fact all their largest owners (their largest Member banks) are guilty of federal felony financial fraud. But deemed "too big to jail". Whatever.
This ends horribly. But afterwards we have a great chance to have a wonderful future for the younger generations if enough of us demand it be that way and future generations learn from histories mistakes. Something our last two generations and the senior most generations today failed to learn from at all. Hence history does often rhyme.
Lastly-
In case any of you are not getting the global news:
=================================
The world just said NO to the fed and it's dollars for their own bilateral trading needs. Do you know why? Better catch up if one doesn't know why already.
END THE FED. At least Dr. Ron Paul get's that one correct.
End all debt-based currencies.
Outlaw private bankers from controlling the money supply, setting interest rates, and setting other fiscal and monetary policies.
Their complete failures. Their track record has proved it time after time after time, for 101 years. But yes, some can be retained
as consultants. Well, not those guilty of treason, fraud, RICO Act, and various other financial related crimes. But the others sure
could have a shot at being government "economic consultants", but they better have a real damn good idea of what their doing
because the real best and brightest will rip their panties off if they don't and publicly call them out on it after these financial wheels
soon fall off the fed and it's shameful dollars.
Checkmate Fed, your almost dead. Same for your fed dollars.
We cannot reward failure.
We cannot bailout anyone.
Capitalism doesn't reward failure nor offer any "bailouts" to anyone. Of course this isn't "capitalism" anymore.
No one is really too big to fail. That was another giant lie suckers fell for. There was no systemic risks. Another giant lie. The only risks where that the losers wouldn't get to turn their losing bets back into winners if their counter-parties were not bailed out. Treasury Sec. Paulson saved his own 400 million by getting on his knees and begging senior members of congress to pass the tarp bill. But that was all smoke and mirrors, while the fed secretly loaned TRILLIONS out at the very same time. 16+ trillion to date, to FAILURES.
*.*
