if the government was fitting the bill and it was clear they were an agency there could be much more real oversight so efficiency is an issue.

allowing the interest to become high-powered money

consortium of bankers

so? there are two ways they can take advantage of this. these are two different means to possibly satisfying selfish ends. they can take direct money from the tax payers or can add to their banking capacity.

what are you talking about?

im starting to love your left hooks that really come out of no where. i'll happy put together a portfolio under guidelines against one you create any day for all to see.

i never said what if the fed did nothing and came to any of the conlcusions you're accusing me of.

here are my statements:

"
I'm not sure what you're saying. Please explain this even deeper. The fed doesnt have to do anything. They can change the fed funds rate. They can choose not to have a target at all. They can close the discount window"

"Why are you assuming the fed funds rate is targeted. My point was that the rates should free float and this the optimal option."


you're so good at pointing out the wrong in other people that really represents you the best. saves me time describing.

But this is not the question the quote raised. The inability to immediately reject crap like that (basically he doesn't understand accounting) raises questions about your understanding. It's as though you read a whole bunch of random stuff, and anything that says something negative about the Fed, you accept, and anything else you reject. Since most people don't really understand the Fed and the Fed is one of the favorite targets of delusional conspiracy theorists (mostly because it is important and how it works is extremely unintuitive to most), a large amount of negative rantings regarding the Fed will come from those sources. One needs a filter in terms of what makes sense and what doesn't and it appears to me that you lack such a filter. For someone who throws around a lot of words, I stand by my earlier statement that you're best off completely forgetting everything you think you know and start with the basics - only with real understanding, can one begin to formulate genuine criticism.


Say what? Interest payments to the Fed simply reduce their liabilities. What on earth is high-powered money?


None of this makes sense. Pretty much most people who work at the Fed (above administrative level) could make more money at a private sector job.

I mean, if the Fed wanted to be nefarious, gee, why don't they just print money and give it to themselves? They have the power. They don't need the measly interest payments.


That's be interesting, but it's once again irrelevant.


This is exactly what I'm talking about. The Fed can't just sit there and do nothing - there is no such thing as a free floating rate for the dollar when the supply of dollar is controlled by the Fed. I described alternative policies the Fed can pursue (target monetary supply directly, for instance), but all of these result in different interest rates. For the rates to be outside of the Fed's control, we need to issue a new currency. I'm really having a hard time what exactly is the stumbling block for you here. You said "the fed doensnt [sic] have to do anything" - well them not doing anything results in slow liquidation as I pointed out and the monetary base dwindling to zero. Are you really not seeing this?

...how would you plan on doing this, exactly?

Hmm? Maybe what I said wasn't clear. I just meant that if we had no fed and a commodity backed currency I would generally feel safe holding it.

Since we do have a Fed, I feel like the purchasing power of my money is at risk much more so than if we didn't.

How's it going, adanthar?

Hey Andrew

My GLD position is UP $2.21 today

Thanks,
Stephen

Glad I could be of service, sir.

I know everything about this stuff, just give me a hoot if you need any more tidbits.

A quick question AlawPoker and others

Do you have any idea or know the reason WHY I bought GLD yesterday for a trade?

TTYL

I wouldnt say he misunderstands the fed but after thinking about it i agree with your general position on his quote.

out of interest, what do you recommend as good places learn?

but they can create new liabilities. In essence they could transfer money from the treasury account to bank holdings.

anyways, i agree this doesn't matter much because its not like they're getting more useful power than they had before.

you're right. this fact really does trump the quote's implication of something more.

you basically said i was a factor that causes inefficiencies in market pricing. i think thats enough relevance.

When i said the fed doesnt have to do anything i just meant that their policies are heavily discretionary.

The fed funds rates are determined by market trading. The fed could be on stand by mode indefinitely with regard to open market operations as of tomorrow lets say. please explain to me why not, if not?

Um maybe because there was strong support in the chart and it bounced off its 100 day MA the day before. Also a psychological reason with JS and the 887 resistance/support.

because you thought your cash was worth less than the stock and other alternative uses

yes. if had had my IB account setup already i woulda joined you.

Barron

http://www.federalreserve.gov/pf/pf.htm

And obviously a good macroeconomics textbook would be good. The problem with macroeconomics are twofolds. The first is that no one understands it well, so all you ever see are glimpses of someone else's incomplete understanding. The second is that if you only study macro, you get into the habit of thinking in terms and statistics as opposed to thinking in concepts and reality. GDP, unemployment rate, balance of payments, inflation, net international investment position, etc, etc are all just names and numbers - there's an economic reality they fail to capture completely. One abstract way to look at an economy is the set of all transactions (including production and consumption). All these other numbers essentially are derived from that and other ancillary information. So when you look at those numbers, it's important to think in terms of, what happened to these numbers, but what happened that are represented by these numbers. This is all common sense, but one that seems to evade almost all casual economists.

Thus, macroeconomics is ultimately about understanding the economy, not about knowing what the macreconomic terms are. The caveat being that when one does use the terms, one must be certain of their relationship to the reality and in what ways they may be representative or misleading. And in order to do that, one must be familiar with what sort of transactions are common, who does what, how organizations work. Common sense and an understanding of dynamic systems are important. If nothing else, darwinism is a good clutch to fall on, because if an organization has existed for some time, it must have some decent survival characteristics and if someone's employed somewhere, he must not have done something to get fired (and if it's obvious that he should, then you can extend this to his boss and so and so forth). All of this is really just common sense, but applying common sense everywhere consistently takes foresight and diligence.

You can cause inefficiencies in market pricing and still be +EV. This is the same thing as playing exploitative poker that's not game-theoretically sound. And the comment wasn't personally directed at you or anyone - it's just a general comment that market pricing is done by blind men touching various parts of an elephant (that they're not sure is an elephant) - the resulting price won't capture the appearance of the elephant.


So they don't roll their repos and don't buy treasuries as they mature and they don't ship any money back to the treasury? Slowly, the monetary base will dwindle as all liabilities come home. The more interesting question is how quickly will large banks fail under that scenario. 2-3 days?

some of the smartest things ive heard you say

are you talking about the fed? central banks are like 200 years old and quite a few have failed. Who knows how the current ones will fair in the long run. Even still, surviving, especially just in the short run, doesnt equate to providing a good service to society.

i certainly dont believe in EMH

well the idea would be for the demand for balances to have as much uninterupted effect as possible on the fed fund rate. stabilizing the money base by forever auto rolling current security holdings is one option.

they could let their expiring assets mature and leave their non-perishable assets and the national production to stand for the definite future as the money backing as another option.

the banks are already failures. they only survive because of an unusually willing creditor who represents wealth beyond their own. the creditor needs to be restrained by those whose wealth is on the line.

Bingo..... to Barron and the three posters above

How long I stay in this trade is a whole other story though.We are extremely overbought in equities ,and extremely oversold in GOLD at this time IMO.But the next few sessions(esp with Fridays job report) should make for this rally in stocks to stall/reverse.With the commodities down almost 15% ......a continued rise in GOLD has nice risk/reward.

But remember guys...I am not........and NEVER will be a GOLD BUG

TTYL

lol

Seriously, I actually laughed at this.

At what point would you be able to "guarantee the purchasing power" of South African kruguerrands?

I think the argument is that golds value has never gone to zero, over time has generally stayed the same, etc., while all fiat currencies value have eventually gone to zero (and remained at zero, gone away, etc.).

And my reply to that is: so what? I've said it about 8 times, but I'll say it again: that is a completely trivial and irrelevant argument. No reasonably intelligent investor holds on to large amounts of fiat currency for any period of time.

The relevant comparison to make is how gold performs against other INVESTMENTS like equities.

The performance of gold vs. equities over the past 100 years has been atrocious.

You need to make an intelligent argument for why that trend is going to change in the future (other than, "ZOMG look at this graph of the money supply" or "look at the price of gold over the past 5 years").

but slick, equities are DENOMINATED and PAY OUT in useless fiat currency ZOMG!

Barron

I think the main problem is that a lot of the gold bugs in here are politards who confuse the argument of whether currency should be backed by gold with the argument of whether gold is or is not a good investment.

Those are really two completely separate arguments, but some people just don't seem to understand the concept that even if gold-backed currency is better for the economy than a fiat-backed currency, it does not necessarily follow that investing in gold is the best way to maximize one's wealth in the long run.

Or maybe they understand that concept, but just can't help injecting their politics into the debate, which is becoming really tiresome.

well the real answser is that there are cycles and there is a time to be in financials and a time to be in real assets.

if you always stay in financials, for example, you run the risk of getting in for long term in year 1928, take a massive loss that takes 20-30 years to recover from.

on the other hand, if you always stay in real assets you run the risk of getting in long term in gold in year 1979, taking a massive loss that takes 20 -30 years to recover from.

What John Kane is talking about in minimizing exposure to the dollar would be more accurately described as minimizing exposure to the US economy. A precipitous drop in the dollars value would likely be correlated with a major hit to the US economy, keeping your money in US equities doesn't reduce this exposure in general. Such a drop though also places at risk your job either in losing it or losing pay raises, hurts your homes value , in general most American's are fully tied to the dollar in this sense. Further crises such as these have ways of changing the rules, in the 30s the gov decides that it will buy masses of gold from the populace at 21$ an ounce, six months later they change the value of the dollar to 35$ an ounce, at other times trading has been suspended for short periods, wage ceilings and floors have been set, food bought and burned while malnutrition was at its highest rate in US history. Hyperinflation in Germany in the 20s or in Zimbabwe over the last decade show how even those whose net worth is tied to stocks and not to currency suffer large losses of wealth by not diversifying away from the economy from which their lives are tied.

anybody who has their net worth tied to assets denominated solely in their home currency is ******ed.

when i've said in the past keep XYZ tied to your home currency i mean hedged on a rolling basis. the actual assets are denominated in other currencies.

Barron

Damn I'm a ******

my main trail of thought which i base from reading around, is that the US economy is in trouble due too many banks overvalueing assets and having the govt having a lot of debt. to solve the first problem, they seem to be happy to increase their own debt by taking these from the banks hands to ensure the stock market doesnt take huge hits. and to get rid of their own debt, now increased by taking on some of the banks debt (albeit this amount is very small i imagine in relation to their overall debt), is to devalue their currency. the thought of this somehow reversing seems very small, hence i like gold as an investment, as the downsides at worst is gold doesnt keep rising, and the upside is gold going up to $1500+ over the coming years.

i know the above is basic to the extreme and possibly wrong but that's why i having a very small amount of my money in gold, with the remaining vast majority in savings (gbp unfortunately).