In the sound-money community there is universal skepticism about the Fed’s plan to stop monetizing the world’s debt. Hardly anyone thinks they’ll go through with it and absolutely no one thinks they’ll succeed if they do.
But the Fed is acting like it’s serious. Take a look at the monetary base, which is the amount of new currency that’s been created and pumped into the banking system. The trajectory since the 2008 crash tells you all you need to know about the “recovery,” which turned out to be just the Fed printing money and a few mostly rich people spending some of it. But check out the far right edge where the line turns negative. Not wildly negative, but still, the Fed does appear to have stopped adding and started subtracting. The money supply is falling.
This kind of tightening would normally coincide with — or cause — rising interest rates. But that’s not yet part of the plan, so even in the face of manifestly tighter money, interest rates have been allowed (or forced) to decline.
But the pressure of tighter money has to be released somewhere, and in this case it’s been the foreign exchange market. The euro, for instance, has tanked since mid-year.
Every other major currency is down as well, which is the same thing as saying that the dollar is up big. And a rising currency is functionally the same thing as higher interest rates. Consider: If you borrow money you have to pay back the principal plus interest. A higher interest rate obviously makes the loan harder to repay. But so does a rising currency because in order to pay dollars to a creditor you have to get those dollars, and if they’ve become more valuable in the meantime you have to pay up.
So the US is experiencing two of the three symptoms of tighter money: a falling money supply and rising currency. Will we eventually get the third, rising interest rates? That would be interesting to say the least. To understand why, let’s revisit the monetary base chart, with the addition of arrows showing what the stock market did during the previous two attempts at tapering. It tanked — or at least started to tank — and the government relented.
Note that during those other two taper attempts the monetary base didn’t fall much if at all, and the dollar didn’t rise to anything like its current level. In other words, the Fed didn’t actually tighten, it just stopped loosening. This latest iteration is already more serious than the two that came before.
So either another stock market scare is coming, and soon, or the economy has finally achieved the fabled escape velocity in which it can grow under its own power without help from performance-enhancing monetary drugs. We should know the answer soon.
Spoiler alert: The sound-money crowd is right. This ends very badly.
130 thoughts on "Wow, They Really Are Tapering"
This the so called Gold story may have something to do back at the time of Pharaoh. any body knows what happened to the Pharaoh (Egypt) women gold? Story tells that the Israel ladies borrowed the gold for one day ceremony from the pharaoh ladies. Then They left Egypt with the gold. May be the Pharaoh / Jews are trying to return their gold by telling people that gold is not money and secretly they are buying the gold. OR the Israelis are still fooling people in order to still more golds from the world.
Who rules USA? The Dollar bill with unfinished Pyramid on it. please some one connect the dot.
THE LATEST COMPLETE US UNEMPLOYMENT REPORT
100,915,000 Americans eligible and of working age now not working (31.73%)
http://www.breitbart.com/big-government/2015/01/09/record-92898000-americans-not-in-the-workforce/
http://www.cnsnews.com/news/article/ali-meyer/labor-force-participation-remains-36-year-low-0
The US has a population of about 318,000,000 people.
Let’s do some math:
318,000,000 Total People in America on which all percentages based
-69,156,000 Americans NOT ELIGIBLE for Labor Force (21.75%)
248,844,000 Total population ELIGIBLE for working in the US (78.25%)
-92,898,000 Americans ELIGIBLE for Labor Force “Not Participating” (29.21%)
– 8,017,000 Americans ELIGIBLE and “actively seeking employment” (02.52%)
147,929,000 Americans CURRENTLY WORKING (46.52% of all Americans)
170,071,000 Americans CURRENTLY NOT WORKING (53.48% of all Americans)
US DOLLAR CONTINUES TO SKYROCKET UPWARDS
The euro traded below $1.19 at times on Monday, the lowest level in nine years (it was $1.39 as recently as May). The dollar index, which tracks the dollar against six other major alternatives, is up almost 15 percent since June 30. Those swings are big enough to reshape the terms of economic interaction among the most powerful nations — and will affect almost any company or individual doing business across national borders.
http://www.nytimes.com/2015/01/06/upshot/what-a-stronger-dollar-means-for-the-economy.html?_r=0&abt=0002&abg=1
Just one small correction… you stated “the government relented”. The Federal Reserve is a private corporation owned by a consortium of banks, not “the government” – unless of course you meant the de facto government, a different thing. I think that this is something worth repeating over and over again.
People fall for this charade of Fed ‘tapering’, because they fall for the phony ‘brand labeling’ (called national currency) pasted over bottles of poison sold on their local financial ‘supermarket shelves’, though distributed universally.
The banknote scheme is a monolith. Its viability wholly depends on ever increasing lending of new currency into existence to offset the ever accruing interest on currency principal already in circulation. It doesn’t matter a whit, which government-bank generates the interest service funding. What ultimately matters is that it’s made to happen … ‘come hell or high water’. ‘Swaps’, ‘Interest rate derivatives’, ‘inter-bank lending’ and such will spread that service funding wherever it’s urgent, whether originally called ‘dollars’, ‘rubles’, ‘yuan’, or whatever (literally).
Those who recognize currency inflation as certain fate are perfectly correct, though few delve deep enough to understand that it’s a fully automated scheme. It was once believed controllable (by ‘central bank’ interest rate manipulation), but now unveiling itself never really to have been. Like Frankenstein’s ‘monster’, it’s run amok all on its own.
The principal can never be paid off because the whole damn thing is based upon increasing the amount of notes in circulation, always and forever. If the scheme is based upon always and forever increasing the amount of principal owed/due by issuing more of it(by force(since you won’t borrow it any more, we’ll just print it!)), then how could anyone ever pay it down/off?
The concept always has been to keep currency inflation at about 2%. There’s a reason for that … it’s a bit more than the inverse of metallic money’s natural appreciation.
Because average mine recovery of money metals is slightly less than the average net increase of population, this ‘Population Demand Factor’ causes relative purchase power of money to grow about 0.75 to 1.25 % each year That’s a ‘problem’ for governments and bankers because manufacturers and merchants are under pressure to clear markets each cycle or take (nominal) losses.
Eliminating all the artificial inflation-effect from the scrip-notes and reverting back to the metallic form (which ironically retains original purchase power) is the solution which renders the debt more manageable than these phony pumped-up ‘trillions’ make it appear.
Fed and BLS figures confirm that the American banknote has depreciated around 98 to 99 % since 1913, so by switching over to an appropriate copper coin replacement, the automated inflation and co-incident debt stop cold, leaving more (real) capital free to address the existing debt and resume investment toward productive capacity.
If say the banknote is priced at a Troy ounce each, then all wages, prices and accounts could remain numerically identical, making the transition almost invisible to the financial superstructure as it is.
Central banks have reduced gold holdings by around 10% over the past decade from 35000 metric tonnes to 32,000 metric tonnes, and the only reason they are keeping any of it is because of TRADITION and that it makes nice vault DECORATION.
Gold has NEVER been “money” at all. It has simply been used as one of the many materials along with brass, nickel, copper, silver, and other metals to mint coins where the MONETARY VALUE WAS THE NOMINAL FACE VALUE and not the material used to make the coins. You are perfectly welcome, of course, to use a 1 oz gold legal tender American Eagle for its $50 face value at most retail establishments.
The simple fact of the matter is that economies and currencies far outgrew gold as the world’s population has increased to its present approximate 7 billion people.
The total value of the world’s entire gold ever mined of around 180,000 metric tonnes is only worth less than $7 trillion when valued at its current $1,183 per ounce which equates to around $42 million per metric tonne.
The less than $7 trillion value of all gold in the world – 70% of which is in JEWELRY – is a mere pittance compared to the annual global GDP of more than $70 trillion and global assets in excess of $800 trillion which makes gold just a tiny little niche collectible commodity of no relevance to valuation of other assets let alone for any monetary usage whatsoever.
As to the value of the US dollar over the past 100 years…
No, the dollar did NOT really lose 95% of its value since 1913
Let us take at the period from 1913-2006, where we have complete data. So what do they mean, when they say the dollar lost 95.1% of its value in those 93 years? Essentially, an average good/service that cost $1 in 2006, used to be priced at 4.9 cents in 1913. In other words, the average price level of goods/services increased by 1930% since 1913. True, but guess what, average earned income increased by 6560% during the same time period. Average earned income rose from $740/yr in 1913 to $49,300/yr in 2006. Adjusting for inflation, $740/yr in 1913 is $15,000/yr in 2006 dollars. Average incomes, not only kept pace, but beat price inflation by 230%.
So does it make any sense all to say the dollar lost value? In reality, the REAL purchasing power of the average American, has increased by 230% in the past century. Sure, prices were cheap in 1913, but $740/yr doesn’t buy you a whole lot, not anymore than 15,000/yr today.
http://realfactbias.blogspot.com/2012/02/no-dollar-did-not-really-lose-95-of-its.html
Go away shill.
i’m 100% with you. nixon really sold us down the creek to the banksters. if you want my opinion you have won this argument hands down. guess if JFK were still around we could ask him how he felt about the fed. res.
Well, I don’t subscribe to either the ‘left’-‘right’ factional illusion of ‘govern-mentalism’, nor the ‘bankster’ meme. My research over the years leads me to understand bankers and monopoly-industrialists as ‘flanking forces’ which ‘take the heat’ of blame to defend government … the true culprit behind the entire illusory fandango we watch playing out over generations.
ive heard a lot of people that are starting to fill that way. i had become a libertarian but with the things ive been reading online about them that may even be in question. i really felt like they were our last hope of taking our government back from the bankers.
Like our Founders, many folks are re-discovering the blessings of being ‘practically anti-governance’, or more actively Self-Governing through Common Law Due Process, as opposed to standing among ‘the governed’ by membership in any formal political polity.
“Court:
The person and suit of the sovereign; the place where the sovereign sojourns
with his regal retinue, wherever that may be.” –Black’s L.D., 6th Ed. Ab,
pg. 247
“The
sovereignty of a state does not reside in the persons who fill the different
departments of its government, but in the People, from whom the government
emanated; and they may change it at their discretion. Sovereignty, then in this
country, abides with the constituency, and not with the agent; and this remark
is true, both in reference to the federal and state government.” [Spooner v.
McConnell, 22 F 939 @ 943]
very well put. i don’t think that i alone can make a change but i continue to try.
You would be surprised how much positive influence one man or woman can effect in their community, by learning Common Law Due Process and prosecuting Wrongdoers in their own courts (same courthouses, different Process).
One particular category of cases where this has had great success is ‘Official Kidnapping’. Folks are having their boys and girls restored to them within days to weeks (on Claim of Property Theft), where reliance on lawyers arguing Administrative Process against statutory ‘Persons’ (officers, agents, municipalities, etc.), generally leads to many years of woes and costs.
In America’s earliest days, every man or woman was their own ‘lawyer’ and usurpation of people’s Liberties by officials was very rare, It takes a few ‘examples’ of folks practicing ‘original jurisprudence’ and news of success rates quickly spreads to encourage others to study it.
The US population has expanded enormously since its inception in 1776 when it was around 2.5 million people. In 2015, the population of the US is around 317 million people which is an increase of 314,000,000 million people making the US population nearly 127 times the size it was in 1776. So, quite obviously, the currency of the United States needed to expand by at least 127 times the amount it was in 1776 and quaint little notions of “thingy based” money back in 1776 needed to be thrown into the garbage bin of history as was, of course, the case back in 1933 when the brief 60 year failed experiment of the so-called “gold standard” was totally discarded domestically.
The Federal Reserve TOTALLY ENDED QE on October 31, 2014 and since then has been shrinking their balance sheet and REVERSING QE. As to the rest of your bogus assertions, time for you to start dealing with actual reality.
Pretty damned sad when the ONLY ‘upvotes’ on your comments are your own. When will you realize you’re ‘efforts’ are … dismally failing.
socalbeachdude talks a good game… and I even agree with some of his main arguments… particularly portions of his repeated analysis concerning excess reserves. However, that being said, anyone who spends this much time and fervent energy on a site like this, arguing the points that he does, quite honestly smells like a government troll to me… particularly since I’ve never met a so cal beach dude as intense as he is. As a resident of California myself, allow me to provide a little advice to our favorite so cal beach dude:
Dude, chill out… you’re blowing your cover.
Huh, dude?
Propaganda at best. All I have to do is drive around the area where I live and realize we are in a severe decline. I can watch CNBC all day long and the area stays the same. Sounds like you are very very well off and have lost touch with reality.
You need to freshen up on history and see what happens to all these great empires, where are they now and where is all their paper money?
Huh, dude? There is nothing but the greatest prosperity in the 100+ year history of the City of Beverly Hills, California and BMW Rolls-Royce sales are skyrocketing.
Look American Patriot, Chaz Caldwell, Socalbeachdude, whatever, over these past few years I’ve stumbled upon your comments wherever I go: Market Watch, Stockman’s Corner, now this site. Every time a new name, but the same contents and the same annoying style: comments in bold, abundant use of capital letters, “dude”… What I have learned in reading many of your musings is that you seem to have a knack for mixing thoughtful remarks with patently false or outrageous claims.
One piece of advice: at least have the courtesy to drop the bold typing, forget all about your shift lock and try to show some respect for other people’s take on things.
Oh, and another thing: why don’t you try Zero Hedge one of these days? I’m sure that community will look forward to ripping you apart in the comments’ section if you try screaming your comments over there.
Thanks for the insightful follow up. This was the first time I’ve come across “socalbeachdude” (et al), but my “spidey sense” immediately started kicking in. And I thoroughly agree that he should head over to zerohedge if he truly wants to test out his trolling mettle.
In the meantime, here are a few thoughts for everyone to consider:
“I Was a Paid Internet Shill: How Shadowy Groups Manipulate Internet Opinion and Debate”: http://consciouslifenews.com/paid-internet-shill-shadowy-groups-manipulate-internet-opinion-debate/#
ZeroBrains.com isn’t worth even looking at.
Your “ZeroBrains” commentary is clearly a function of disingenuousness. Hopefully such disingenuousness is a function of flawed character… and not a function of monetary compensation. If indeed the former, then I would humbly suggest that you explore some form of psychotherapy… and if the latter, I would humbly suggest that you go take a long walk on a socal beach and/or catch some waves and reflect on whether or not you truly want to continue premising your existence on deception and manipulation.
If the latter interpretation is indeed more accurate, and if you do indeed choose to continue down this dark path, then may God have mercy on you.
Would you prefer that I use either ZeroCredibility.com or ZeroCred.com when referring to those clueless and ignorant dolts who are the ones totally lost in deception and propaganda and pathetic attempts to appeal to those of the same afflictions? Why does their kind of utterly bogus and baseless nonsense appeal to you?
I should have warned you more clearly about our friend: sparring with him might unleash a frustrating digital jungle war, taking up a lot of space and possibly causing a lot of aggravation, sometimes ending in very nasty ad hominem attacks.
By the way, your link turned out to be an interesting read. Socalbeachdude seems to fit the bill very nicely, but if he does, he’s really making a lifetime career out of it, because he’s been at this for many years now.
I appreciate the concern about warnings, but no warning particularly necessary here. As a student of psychology for twenty+ years, and as someone who is generally intuitive when deciphering authenticity/disingenuousness, I generally do not get emotionally engaged or invested with those traveling down a “dark path”.
Notice the content and style of my engagement with socalbeachdude… instead of participating in an exercise of futility by addressing specific economic arguments which were clearly premised on the shifting sands of deception, I instead addressed him as a person. His subsequent escalation of irrationality and defensiveness clearly indicts both him and his economic arguments amongst those with the eyes to see, and the ears to hear.
Overall, I would humbly suggest that we can metaphorically apply the knowledge and tactics of demolition experts in cases like this…
“In the controlled demolition industry, building implosion is the strategic placing of explosive material and timing of its detonation so that a structure collapses on itself in a matter of seconds, minimizing the physical damage to its immediate surroundings.”
“Building implosion”: http://en.wikipedia.org/wiki/Building_implosion
“Building implosion (which reduces to seconds a process which could take months or years to achieve by other methods)…”
Seems to me you’re better equipped to deal with him than I am. Have fun and nice talking to you.
Thanks, mate/ma’am. And by all means, ‘keep fighting the good fight’… you’re clearly a person of good moral character.
And in general, I would like to leave everyone with two other extremely valuable resources by which to help facilitate navigating the world:
“Disinformation Tactics: The Methods Used To Keep You In The Dark”: http://www.pakalertpress.com/2010/02/07/disinformation-tactics-the-methods-used-to-keep-you-in-the-dark/
“a citizens guide to understanding corporate media propaganda techniques”: https://earthblognews.wordpress.com/2010/01/09/a-citizens-guide-to-understanding-corporate-media-propaganda-techniques/
You appear to be obsessed with DISINFORMATION and promulgating such as opposed to being able to discern and comprehend the actual true and correct facts as I have clearly stated. Why is that?
I am not that much acquainted with the way economy works. But Since 2011, i have been waiting the crush of the dollar and never happened. This news is since 2011 as far as i know. You can hear from Kingworldnews and other big and famous sites.
IS THIS A DISINFORMATION?
KingWorld is just another GOLD PUMPERIST PROPAGANDA web site that is utterly clueless and has zero credibility and puts out nothing but egregiously false and utterly stupid DISINFORMATION.
What about Mark keiser in RT. Most of the time they make fun of the US economy. But still US is on her leg.
Your utter ignorance and bogus assertions are mindboggling.
What utterly stupid, bogus, and totally ignorant assertions.
All of my comments are 100% true and correct, dude. Why are you making such ludicrous and utterly bogus assertions? As to the ignorant dolts over at ZeroBrains.com, they aren’t worthy of any comment.
im not real familiar with these type of things. so if i’m getting this right. the fed. is buying other banks toxic assets and creating money from those assets. like i said i’m new to the money game but i’m trying to learn. due to this ever changing world. please be gentle if im wrong. lol
I like Ron Paul, a lot. I think he’s right when he says, “I think we should go back to the Constitution.”
Boy, I’m sure that opens up a heck of a can of worms though. I could go into why I say that, but I want to start it off with the following and see if it starts a discussion or not.
Article 1 Section 10 of the Constitution of the United States says that States shall not make any thing but Gold and Silver coin a legal tender in payment of debts(bills).
It’s right there, plain as day, in plain enough language that it doesn’t need “interpretation”, in case you’re thinking the Constitution needs interpretation(as opposed to it means what it says). It has not been removed by an amendment to the Constitution, it has not been changed/altered by an amendment. So, why aren’t the States paying their debt/bills only in Gold and Silver coin? It’s what the Constitution says!
If Gold and Silver are wrong, then there should be an amendment to the Constitution, correct? There’s a process for that, that’s supposed to be followed, correct? We also have bankruptcy laws on the books. Rather than bailing out banks, aren’t they supposed to be bound by the law and be required by law, to declare bankruptcy when they are in fact, bankrupt? TBTF = Bankrupt
Are there any rules any more? Or do I live in a land of lawlessness? Even anarcho-capitalists say(take Stefan Molyneux as one example)…. no government does not mean, no rules.
Article 1 Section 10 of the Constitution of the United States has NOTHING WHATSOEVER TO DO WITH THE US CURRENCY AT ALL and ONLY APPLIES TO THE STATES AND HAS NO APPLICABILITY WHATSOEVER TO THE FEDERAL GOVERNMENT.
You apparently are severely reading and/or comprehension challenged. Go read that Article 1 Section 10 of the Constitution of the United States. As you stated, “It’s right there, plain as day, in plain enough language that it doesn’t need ‘interpretation’.,”
“The truth is incontrovertible; malice may attack it, ignorance may deride it, but in the end, there it is.” –Winston Churchill
The Truth is, the States are to pay any debts/bills only in Gold and Silver coin. That means that when it comes to money, they are not to deal with the Federal Government with anything but Gold and Silver coin.
Does the Constitution grant the Federal Government the power to emit bills of credit or paper money? If not then you are just plain wrong, because the Federal Government is limited to having only those powers granted to it by the Constitution.
You talk as if the States do not need to follow the Constitution because the Federal Government overrides them. No, the States created the Federal Government. Without the approval of the States at the Constitutional Convention there would not even be a Federal Government. The States are supposed to follow the Constitution regardless of whether the Federal Government crumples up and throws the Constitution into the trash can or not.
Your TOTAL MISUNDERSTANDING of that single Article Section in the US Constitution is mindboggling. First, it only relates to STATES, and second it only relates to STATES CREATING THEIR OWN FORM OF MONEY/CURRENCY. It has NO APPLICABILITY WHATSOEVER TO THE FEDERAL GOVERNMENT OF THE UNITED STATES.
It says that States shall only use Gold and and Silver coin.
Well, are they?
You also have not refuted the fact, that the dollar has become what it is today… by Executive Order. Not by deliberation or legislative process that took place in Congress, no amendment to the Constitution, etc.
“Greed my friends, is not only good, I see it’s been made legal.” –Gordon Gecko
Don’t get me wrong, money has it’s place, money can be important. As Peter Schiff would say when it comes to worrying about money, what are you going to do, wait until you don’t have any to worry about it? Good question, I think. Anyway, when I see my Government bailing out banks and then printing up money and calling it QE… if I hadn’t already learned, that’s a pretty clear message there’s more to life than money.
You obviously have SEVERE COMPREHENSION DEFICIENCIES< dude, as Article 1 Section 10 of the Constitution of the United States certainly does NOT "say that States shall only use Gold and and Silver coin" AND SAYS NOTHING AT ALL ABOUT WHAT THEY USE (key word) for money, but rather simply PROHIBIT STATES FROM CREATING THEIR OWN MONEY OR CURRENCY IN ANY FORM OTHER THAN GOLD OR SILVER.
“It says that States shall only use Gold and and Silver coin.
Well, are they?”
You didn’t answer the question. YES, they are using Gold and Silver coin like it says in the Constitution. Or NO, they are not.
If you are unable to think clearly enough to answer a simple question then I can’t help you, and you cannot help me. If you think everything is so complicated that only you can understand it, then later… dude.
Take Care
Article 1 Section 10 of the US Constitution does not state what you assert at all. Go back and REREAD IT AND ATTEMPT TO COMPREHEND IT. Moreover it has ZERO APPLICABILITY TO THE FEDERAL GOVERNMENT and ONLY APPLIES TO STATES regarding the creating and form of currencies. Hellllllooooooooooo?
It says that States shall make only Gold and Silver coin a legal tender in payment of debts.
That’s what it says, and that’s what it means. So I really don’t know what it is that you are going on about with your assertion that it does not mean what it says.
What it clearly states and means is that STATES are prohibited from creating their own currencies, but there is no such restriction – obviously – on the FEDERAL GOVERNMENT. Hellllloooooooo?
Article 1 second 8 of the US constitution says that the U.S government should be creating the currency, not a Federal Reserve bank. We should not have a private bank creating our currency and charging our government interest on that currency. This Federal Reserve system is unconstitutional and should be abolished. I know this is a hard concept for Communist to understand, but its true. Wake up.
Where do you come up with such blatantly false and totally bogus assertions, dudette? Article 1 Section 8 of the US Constituion obviously says no such thing as you falsely assert. There is nothing the least bit “UnConstitutional” about the Federal Reserve which was enacted into law by the Federal Reserve Act of 1913.
Article 1 Second 8 Clause 5 states – Congress shall have Power to coin Money, regulate the Value thereof..
The Federal Reserve needs to be abolished from existence so that Congress can take the power of money creation back. We are now $18 trillion in debt due to the fact we have a central bank creating our money and charging us interest.
Your extreme miscomprehensions regarding the Federal Reserve are simply mindboggling. The Federal Reserve Act delegated the power over money to the Federal Reserve by the US Congress and has been upheld by the courts over the years to be fully and completely CONSTITUTIONAL.
The reason that the US government has debt of $18.086 trillion has NOTHING WHATSOEVER TO DO WITH THE FEDERAL RESERVE but rather 100% TO DO WITH VAST OVERSPENDING BY CONGRESS SIGNED INTO LAW BY MULTIPLE PRESIDENTS.
The Federal Reserve operates essentially as a NOT-FOR-PROFIT entity and REBATES 100% of its annual profits to the US Treasury each year after paying a modest 6% dividend to its member bank shareholders which ALMOST COMPLETELY MAKES THE US TREASURIES THEY HOLD INTEREST FREE TO THE US GOVERNMENT and its taxpayers. The Federal Reserve is rebating NEARLY $100 BILLION this year to the US government which makes it the single largest contributor of revenues to the US government and its taxpayers.
http://www.federalreserve.gov/newsevents/press/other/20150109a.htm
The Federal Reserve Act was written by banker JD Rockefeller to take control of the United States. There is no purpose in having a central banking system when under the Constitution the US Treasury should have the power to create the currency debt free. There is no reason in the world why our government should be in debt to the Federal Reserve, China, Japan, Saudi Arabia or any other country who purchases the Treasury’s. The system of our government trading U.S Treasuries for Federal Reserve Notes needs to end.
A related question – If there are X amount of petro dollars around the world being spent to buy OPEC oil and now the price of oil is cut in half:
1. what happens to those excess dollars no longer needed?
2. what happens to the old Saudi OPEC bid for US Treasuries, since now they only have half to new dollars to buy US Bonds?
There is no such thing as the “petrodollar” as oil accounts for less than 7% of the use of the US dollar in global transactions.
Oil is just one of the 27 major commodities primarily priced in the US dollar. It doesn’t matter to the value of the dollar at all whether the price of oil is $1 per barrel or $100 per barrel.
OPEC can price oil in any currency it wants to and that would have affect whatsoever on the US dollar. The fact of the matter is that 83% of all global transactions are done in the US dollar, so the only practical general currency to use for pricing all commodities including oil is the US dollar and that is why the US dollar is used that way and why it will continue to be used that way, but that has NO AFFECT WHATSOEVER ON THE VALUE OF THE US DOLLAR ITSELF.
OPEC does $1.5 trillion per year in oil sales in dollars. That’s looking like around $750B that wont need to go find a home in US Bonds.
The OPEC countries hold very little in the way of US Treasuries so the downturn in aggregate OPEC revenues is of nearly zero relevance to the US Treasuries markets.
DUDE! UNBOLD! Do you know how rude it is to type in BOLD? You know who you are.
Sloppy said it best.
socialbeachdude is stuck believing the fed accounting of QE is a complete explanation of what they are doing.
Consider; $340B of US treasuries were bought through Belgium in the first 5 months of Fed tapering. No trail of where that money came from.
The Fed will never tell all. It is a privately held institution.
“this will end badly”.
The accounting that I have stated for the Federal Reserve versions of QE is totally correct and completely verified and verifiable.
As to Belgium, its purchases of US Treasuries are no mystery at all but rather were clearly made from Belgium’s sovereign funds and amount to a very small amount of the $18.14 trillion in outstanding US Treasuries.
I have seen a video where Bernanke him self does not know what happen to the money. There was you tube video of an investigation or questioning
Bernanke.
Does this mean there is a conspiracy going on in side the Federal Reserve?
If Bernanke doesn’t know where the money is, who else knows?
Huh? Are you aware than Benjamin S. Bernanke RETIRED from the Federal Reserve about a year ago and has nothing whatsoever currently to do with the Federal Reserve:? Moreover, during the time that he was a member of the BOG and chairman of the BOG at the Federal Reserve he never made any such statements as you assert.
http://www.youtube.com/watch?v=n0NYBTkE1yQ
And what is that old video supposed to show other than a very stupid Congressman asking very stupid questions and the former Chairman of the Federal Reserve Board of Governors simply being perplexed at such Congressman’s utter stupidity and ignorance?
Sometimes people forget that money is created when it is BORROWED or LENT, not when it is printed. When the banksters on Wall Street made up all those exotic financial instruments they borrowed and lent among themselves and others using the shiny new instruments as collateral even though they were not backed by anything, not even the full faith and credit of the taxing authority yadda yadda. They in effect sidestepped the rules on banking reserves using fictional collateral, then proceeded to gamble in commodities, housing, equities, anything no matter the value.
That was when the monetary base was expanded, Alan Loanspan and the SEC stood by for years and watched this go on – hands in pocket – till it all blew up, and now we all are on the hook to monetize all that debt. All that “collateral” has to be replaced with real money, a gift to Wall Street. Trillions upon trillions. The largest heist in human history. So huge most do not even understand that it happened at all.
How will you be paying for that? Mostly through lower living standards, for generation and maybe even permanently. Unreported inflation, stagnant wages, higher credit costs (for the 99%) and the worst part is while we pay the banksters are already working on the next fraud that will strip even more wealth from us. And most of you simply sit by and blame the brown guy in the Oval Office or the party that does not want to see kids starve, when you SHOULD be out there demanding justice, the imprisonment of Wall Street and the termination of the Fed.
Your notions regarding money and the Federal Reserve versions of QE are categorically and patently false. The Federal Reserve NEVER PURCHASED ANY SECURITIES LESS THAN STELLAR AAA rated securities and never at any time purchased any “bad debts” whatsoever.
Not a single penny of QE funds ever left the Federal Reserve where all of the proceeds for QE securities purchases were deposited in the excess reserves accounts of the banks at the Federal Reserve.
Not true.
The Fed used the 2008 crisis as an opportunity to expand its powers by getting permission from Congress to buy – for the first time – LESS THAN AAA rated debt (i.e., US Treasury bonds). It has since then bought all kinds of “toxic” (i.e., “non-performing”) debt such as Mortgage Backed Securities (MBS) and a number of other things, including futures on gold and the S&P500.
Furthermore, not all of the newly created currency used to monetize debts became “excess reserves”, though most of it did. Of the $3.6 trillion of total monetization about $2.1 trillion became excess reserves but the other $1.5 trillion entered the economy via government deficit spending. The reason QE3 started out at $85 billion per month was because that was the rate of federal deficit spending at that time. Thus QE3 fully funded the government’s deficit spending in 2013+/-. All of that money entered the economy and expanded the M2 monetary base.
What is not true are your bogus assertions. The Federal Reserve has never purchased anything other than the highest quality fully performing securities. Your assertions that the Federal Reserve purchased any “toxic” securities is FLAT OUT FALSE, dude.
The Federal Reserve cannot and does not purchase S&P futures or gold futures. Where on earth do you come up with such utter nonsense?
Your assertions that any of the Federal Reserve QE funds ever left the excess reserves of the banks at the Federal Reserve is another totally bogus and flat out fale assertion. QE3 had nothing whatsoever to funding US government deficit spending at all You obviousy have little to no clue as to how QE worked and what it was and wasn’t.
Not true. First of all, the primary dealer banks cannot issue US Treasury bonds without the Treasury’s consent. After all, a US Treasury bond represents money borrowed by the Treasury department to fund government deficit spending (i.e., spending beyond tax revenues). Therefore, the newly created money that the Fed uses to buy those newly issued US Treasury bonds is spent by the Treasury, so that money does enter the economy and increases the money supply.
Huh? I never said anything about “primary dealer banks cannot issue US Treasury bonds without the Treasury’s consent.” Obviously that is true, but what does that have to do with anything? THE BANKS SOLD EXISTING US TREASURIES ON THEIR BOOKS TO THE FEDERAL RESERVE AS PART OF THE QUE TRANSACTIONS.
The banks did not go out and purchase new US Treasuries to sell to the Federal Reserve with money from QE, but AGAIN AS I STATED THE BANKS SOLD EXISTING US TREASURIES ON THEIR BOOKS TO THE FEDERAL RESERVE AND THE MONEY PAID TO THOSE BANKS WAS THEN DEPOSITED BY THE FEDERAL RESERVE IN THE EXCESS RESERVES ACCOUNTS AT THE FEDERAL RESERVE which, of course, means that the QE MONEY DID NOT GO TO THE US TREASURY AT ALL NOR DID IT EVER GET OUT INTO THE ECONOMY.
What is so difficult for you to comprehend about that? There was NO INCREASE WHATSOEVER IN THE US MONEY SUPPLY AS A RESULT OF THOSE TRANSACTIONS BUT ONLY AN INCREASE IN THE MONETARY BASE ALL OF WHICH STAYED INSIDE THE FEDERAL RESERVE IN THOSE EXCESS RESERVES ACCOUNTS.
The Federal Reserve verison of QE was JUST A SERIES OF ACCOUNTING ENTRIES TO MOVE EXISTING US TREASURIES FROM THE BOOKS OF THE BANKS FROM WHICH IT PURCHASED THOSE SECURITIES TO THE BOOKS OF THE FEDERAL RESERVE IN EXCHANGE FOR THE PROCEEDS OF NEWLY CREATED MONEY BEING DEPOSITED EXCLUSIVELY IN THE EXCESS RESERVES ACCOUNTS OF THOSE BANKS AT THE FEDERAL RESERVE. That only increased the MONETARY BASE and had no affect whatsoever on the MONEY SUPPLY.
QE had nothing whatsoever to do with any markets and 100% of the QE funds always STAYED INSIDE THE FEDERAL RESERVE. There was NO MONEY PUT INTO CIRCULATION WHATSOEVER WITH QE and not a single penny of QE funds were used to speculate on anything as they always REMAINED INSIDE THE EXCESS RESERVES ACCOUNTS OF THE BANKS THERE FROM WHOM THE FEDERAL RESERVE PURCHASED SECURITIES.
The Federal Reserve DID NOT GIVE A SINGLE PENNY TO BANKS WITH QE, but rather purchased existing securities owned by those banks which meant that those banks who sold those securities to the Federal Reserve HAD NO NET GAINS WHATSOEVER with those QE transactions.
FEDERAL RESERVE VERSION OF QE EXPLAINED:
1) Federal Reserve buys securities from banks
2) Federal Reserve deposits cash proceeds in excess reserves accounts of those banks at the Federal Reserve
3) Securities stay parked on assets side of Federal Reserve GL
4) Proceeds funds stay parked on liabilities side of Federal Reserve GL in the excess reserves accounts of the banks at the Federal Reserve
The process is an ENTIRELY CLOSED LOOP just as if it were done inside a VACUUM.
http://www.federalreserve.gov/releases/h8/current/
http://www.federalreserve.gov/monetarypolicy/bst_fedfinancials.htm
How many times does this have to be stated before it actually sinks in, folks?
The QE funds are sitting parked in the excess reserves accounts of the banks and none of them ever got into the economy at all as is clearly established by the evidence on that matter. The total amounts in those excess reserves accounts now exceeds $2.5 trillion.
EXCESS RESERVES ACCOUNTS OF BANKS TOP $2.5 TRILLION – WSJ
So what exactly are excess reserves, and why should you care? Like most central banks, the Fed requires banks to hold reserves—mainly deposits in their “checking accounts” at the Fed—against transactions deposits. Any reserves held over and above these requirements are called excess reserves.
Not long ago—say, until Lehman Brothers failed in September 2008—banks held virtually no excess reserves because idle cash earned them nothing. But today they hold a whopping $2.5 trillion in excess reserves, on which the Fed pays them an interest rate of 25 basis points—for an annual total of about $6.25 billion. That 25 basis points, what the Fed calls the IOER (interest on excess reserves), is the issue.
http://online.wsj.com/news/articles/SB10001424052702303997604579238403178592262
The debt scam we call U.S Treasuries being shuffled around, what a complete scam these Central bankers are committing.
What kind of crack are you smoking?
Huh? What I stated above is 100% true and correct. What is your problem in comprehending what I clearly stated in great detail?
WOW socalbeachdude, what color is the sky in your world???
If anyone believes what the FED reports, I’ve got a bridge I want to sell you.
“Sloppy” describes you quite well then, dude or dudette.
I interpret the drop in the (dollar) money supply to indicate the extinguishing of dollar-based debt. Some of that decrease could be due to voluntary, purposeful debt servicing because ZIRP encourages that (each dollar of debt eliminated that costs I% is equivalent to a guaranteed investment return of I%), or it could be due to defaults. Hard to say which (probably a little of both).
My guess is that it’s due to defaults in the Emerging Markets, and it may begin with the “shale/fracking businesses too if the oil price stays low. In any case, the surge in money supply due to all the QEs in the world is bound to cause instabilities and imbalances and given the fact that the PTB wouldn’t allow things to self-correct in 2008 I doubt they will do it now (when everything is even more bloated), so that means more of the same until they lose control.
There is obviously no “extinguishing of dollar-based debt” which is now at RECORD HIGH LEVELS in the US and globally, with more than $9 trillion globally and more than $60 trillion in the US. However, DEBT HAS NOTHING WHATSOEVER TO DO WITH THE MONEY SUPPLY OR THE MONETARY BASE.
As toi “ZIRP” there is no such thing. The Federal Reserve Federal Funds rate which applies strictly to interbank borrowing is at 0.25% which is the lowest it has gone, and the Federal Discount Rate which strictly applies to banks borrowing from the Federal Reserve through the Federal Discount Window is at 0.75% (3 times the rate of the FFR). With either rate, banks are RESTRICTED TO VERY SHORT TERM (TYPICALLY OVERNIGHT) BORROWING ON A FULLY COLLATERALIZED BASIS STRICTLY FOR LIQUIDITY PURPOSES.
There was NO INCREASE WHATSOEVER TO THE MONEY SUPPLY AS A RESULT OF QE as 100% of the QE funds ALWAYS REMAINED INSIDE THE FEDERAL RESERVE in the excess reserves accounts there of the banks from whom the Federal Reserve purchased securities and THAT ONLY INCREASED THE MONETARY BASE and not the money supply.
I disagree. See my comment to you above. Besides, the M2 monetary base is the money supply.
There has been little increase in the M2 Money Supply in the US over the past 6 years and the same is true of the smaller M1 metric along with the broadest MZM metric.
If get all your economic information from CNBC, the streets are paved with 100 dollar bills. You want a job, turn on the TV, everyone has 2. Want low inflation turn on the TV. Want to be a stawk gambling millionaire turn on the TV.
Want to see reality, come to the South and see an economic waste land.
The Federal Reserve’s success at helping push unemployment to amazing record high levels in the US is simply unprecedented!
THE LATEST COMPLETE US UNEMPLOYMENT REPORT
100,464,000 Americans eligible and of working age now not working (31.59%)
http://www.cnsnews.com/news/article/ali-meyer/labor-force-participation-remains-36-year-low-0
The US has a population of about 318,000,000 people.
Let’s do some math:
318,000,000 Total People in America on which all percentages based
-69,156,000 Americans NOT ELIGIBLE for Labor Force (21.75%)
248,844,000 Total population ELIGIBLE for working in the US (78.25%)
-92,447,000 Americans ELIGIBLE for Labor Force “Not Participating” (29.07%)
– 8,017,000 Americans ELIGIBLE and “actively seeking employment” (02.52%)
148,380,000 Americans CURRENTLY WORKING (46.67% of all Americans)
169,620,000 Americans CURRENTLY NOT WORKING (53.34% of all Americans)
Utter crap – AGAIN.
http://www.mauldineconomics.com/connecting-the-dots/q3-gdp-jumps-5-ha-the-crap-behind-the-numbers
Yep, YOUR assertions are exactly what you described, dude.
My calculations on unemployment / employment above are 100% correct and completely verifiable.
Your perpetual need to post in BOLD
smacks of desperation dude.
The Federal Reserve version of QE worked quite perfectly as designed. It had nothing whatsoever to do with any “stimulus” for the economy in terms of actual money flow and was merely an ASSET SHIFTING PROGRAM in order to create a large liquidity pool for the banks.
PURPOSES OF THE FEDERAL RESERVE VERSION OF QE
There were 3 reasons for the Federal Reserve version of QE.
First, it was essentially a HOAX to make it look like the Federal Reserve was doing all it could to “stimulate” the economy and provide a “wealth effect” to try to life economic activity and asset prices.
Second, and much more important in reality, the primary purpose of QE was TO CREATE A LARGE LIQUIDITY POOL OF EXCESS RESERVES OWNED BY THE BANKS AT THE FEDERAL RESERVE so that the banks would not have to sell off assets such as securities at fire sale prices in the next financial crises, panics, and shocks but rather could turn to that liquidity pool at the Federal Reserve to clear transactions, particularly from bad derivatives plays.
Third, QE lowered the government interest on its massive $18 trillion debt because the Federal Reserve increased its holdings of US Treasuries to over $2.2 trillion making the interest on those ESSENTIALLY FREE to the US government because the Federal Reserve operates as a NOT-FOR-PROFIT entity and rebates 100% of its annual profits each year to the US Treasury after paying a modest 6% annual dividend to its member bank shareholders.
That mission has now been fully accomplished with a LIQUIDITY POOL OF $3.0+ TRILLION in the excess reserves of the banks at the Federal Reserve which will act as a cushion in the next series of crises.
American Patriot is that you…lol?
Hello, Paula!
The US dollar is now at 91.35 on the DXY this morning and at the rate it is rising this year, it will likely cross over 100 on the DXY by the end of this month and keep on soaring up towards and over 120 on the DXY very rapidly.
Happy days are here again!
The Federal Reserve verison of QE was JUST A SERIES OF ACCOUNTING ENTRIES TO MOVE EXISTING US TREASURIES FROM THE BOOKS OF THE BANKS FROM WHICH IT PURCHASED THOSE SECURITIES TO THE BOOKS OF THE FEDERAL RESERVE IN EXCHANGE FOR THE PROCEEDS OF NEWLY CREATED MONEY BEING DEPOSITED EXCLUSIVELY IN THE EXCESS RESERVES ACCOUNTS OF THOSE BANKS AT THE FEDERAL RESERVE. That only increased the MONETARY BASE and had no affect whatsoever on the MONEY SUPPLY.
QE had nothing whatsoever to do with any markets and 100% of the QE funds always STAYED INSIDE THE FEDERAL RESERVE. There was NO MONEY PUT INTO CIRCULATION WHATSOEVER WITH QE and not a single penny of QE funds were used to speculate on anything as they always REMAINED INSIDE THE EXCESS RESERVES ACCOUNTS OF THE BANKS THERE FROM WHOM THE FEDERAL RESERVE PURCHASED SECURITIES.
The Federal Reserve DID NOT GIVE A SINGLE PENNY TO BANKS WITH QE, but rather purchased existing securities owned by those banks which meant that those banks who sold those securities to the Federal Reserve HAD NO NET GAINS WHATSOEVER with those QE transactions.
FEDERAL RESERVE VERSION OF QE EXPLAINED:
1) Federal Reserve buys securities from banks
2) Federal Reserve deposits cash proceeds in excess reserves accounts of those banks at the Federal Reserve
3) Securities stay parked on assets side of Federal Reserve GL
4) Proceeds funds stay parked on liabilities side of Federal Reserve GL in the excess reserves accounts of the banks at the Federal Reserve
The process is an ENTIRELY CLOSED LOOP just as if it were done inside a VACUUM.
http://www.federalreserve.gov/releases/h8/current/
http://www.federalreserve.gov/monetarypolicy/bst_fedfinancials.htm
How many times does this have to be stated before it actually sinks in, folks?
The QE funds are sitting parked in the excess reserves accounts of the banks and none of them ever got into the economy at all as is clearly established by the evidence on that matter. The total amounts in those excess reserves accounts now exceeds $2.5 trillion.
EXCESS RESERVES ACCOUNTS OF BANKS TOP $2.5 TRILLION – WSJ
So what exactly are excess reserves, and why should you care? Like most central banks, the Fed requires banks to hold reserves—mainly deposits in their “checking accounts” at the Fed—against transactions deposits. Any reserves held over and above these requirements are called excess reserves.
Not long ago—say, until Lehman Brothers failed in September 2008—banks held virtually no excess reserves because idle cash earned them nothing. But today they hold a whopping $2.5 trillion in excess reserves, on which the Fed pays them an interest rate of 25 basis points—for an annual total of about $6.25 billion. That 25 basis points, what the Fed calls the IOER (interest on excess reserves), is the issue.
http://online.wsj.com/news/articles/SB10001424052702303997604579238403178592262
Not a single penny of the Federal Reserve QE funds ever left the Federal Reserve where they were DEPOSITED IN THE EXCESS RESERVES ACCOUNTS OF THE BANKS THERE FROM WHOM THE FEDERAL RESERVE PURCHASED SECURITOES and those funds have always remained there in those excess reserves accounts which are now around $3 trillion in aggregate balances.
That does not affect the money supply at all but only increased the monetary base and is now being rapidly reversed by the Federal Reserve.
The Federal Reserve started on November 1, 2014 rapidly tightening dramatically and reversing QE and shrinking their balance sheet.
The Federal Reserve is NOW RAPIDLY REVERSING QE AND USING THOSE FUNDS IN THE EXCESS RESERVE ACCOUNTS TO SELL SECURITIES BACK TO THE BANKS WHICH EXTINGUISHES THOSE FUNDS AND REDUCES THE FEDERAL RESERVE BALANCE SHEET.
The Federal Reserve’s number one priority now is REDUCING THE SIZE OF ITS BALANCE SHEET which is decreasing rapidly and is now down to $3.8 trillion.
Keep an eye on the Fed’s accelerating asset sales – CNBC
The U.S. monetary authorities (Fed) are stepping up the contraction of their balance sheet at a surprisingly fast pace. Since peaking at $4.07 trillion last August, the Fed’s monetary base has been reduced by $259.2 billion as of the latest reserve reporting date on November 26, 2014.
More than half of these Fed asset sales occurred between the end of October and the end of November. But the balance sheet remains an impressive $3.8 trillion — a huge difference with the pre-crisis monetary base of $820-$830 billion.
http://www.cnbc.com/id/102246928?trknav=homestack:topnews:9
HAPPY DAYS ARE HERE AGAIN!!!
4,543,332 billion (4.543 trillion)
http://www.federalreserve.gov/releases/h41/current/
The Federal Reserve versions of QE never increased the money supply at all, but only increased the MONETARY BASE through the increase of the excess reserve accounts of the banks at from whom the Federal Reserve purchased securities and those balances exceeded $3 trillion before QE was stopped and those balances are now being reduced.
As of 01/02/2015, the total M2 Money supply in the US is $11.6 trillion as follows:
M2 Money Stock
2014-12-22:
11,643.5 Billions of Dollars
Weekly, Ending Monday, Seasonally Adjusted, M2, Updated: 2015-01-02 3:51 PM CST
http://research.stlouisfed.org/fred2/series/M2/
M3 hasn’t even been calculated for about 10 years. Instead, the Federal Reserve started using MZM which is around $12.9 trillion as of the end of 2014:
MZM Money Stock
2014-12-15: 12,912.0
http://research.stlouisfed.org/fred2/series/MZM
Well, of course, the Federal Reserve has been REVERSING QE ever since November 1, 2014 just as they stated they would be doing. QE never had anything whatsoeve to do with the economy or the markets and was JUST AN ASSET SHIFTING PROGRAM THAT TOOK PLACE ENTIRELY WITHIN THE FEDERAL RESERVE where the QE funds have always been in the excess reserve accounts of the banks there.
Love how John poses the outcome of rising interest rates in a tightening money environment. Then finishes with the statement,
“Spoiler alert- the sound money is right, this ends badly”
He holds the professionalism to report neutrally and the humour to say, ” who are we kidding, game over” love it, why I read this website everyday!
Who this ends very badly for are the speculators in commodities and equities while the US dollar continues to soar upwards.
For the moment it will NOT last the Fed has painted themselves right into a corner!
Huh? How so? What “corner” are you talking about?
Sounds like fishbowl thinking to me. World currencies are crashing so where does that money escape to in order to maintain buying power? A soveriegn debt crisis can cause international capital flow to slosh around everywhere. How did the stock market in the 30’s rise some 60% in the midst of the Great Depression? Europe bonds was crashing from the war. We must think globally not just domestically or one will get it all wrong.
Huh? What on earth do “world currencies” have to do with the Federal Reserve version of QE? The stock market in the 1930s did not “rise some 60%” except for a very brief period during 1930 after which it promptly crashed again to prior crash levels and then stayed down for the next 20+ years up until 1954. As to the US, it is not any of the business of the Federal Reserve to “think globally” but rather to do what their job is which is to manage monetary policies in the US where they are the central bank.
Like I said fishbowl thinking. BTW it was 1936. Not 1930. The Fed may think it controls all that happens, but money is failing everywhere which creates ICF. When one understands that metric maybe one day the world economies with their stupid politicians will work better. Interventions and controling the business cycle is useless. So is the Fed Res. Their original use was never what it is used for today. Interest rates can never be raised. Why a mere 1% rise in the FedRate will explode the Govt deficits. This is why Audit the Fed was introduced and allowed. They will be hung.
Stocks went SOARING UPWARDS IN 1930 and then did so again in 1936 and in both cases went PLUNGING STRAIGHT BACK DOWN and stayed down until 1954 just as I stated which was the first year that they recovered their 1929 highs (although a number of DJIA 30 stocks had become totally worthless by then and were substituted out of the Dow Jones 30 Industrials index).
Money is certainly NOT “failing everywhere” at all as you very falsely assert.
As to interest rates, they are already soaring in certain countries around the world such as 9% in Greece and 17% in Russia. The Federal Reserve has nothing whatsoever to do with interest rates in the US economy where all interest rates that matter to the US economy are SET IN THE US TREASURY BOND MARKETS.
The only 2 interest rates that the Federal Reserve controls have NOTHING WHATSOEVER TO DO WITH THE YIELDS (INTEREST RATES) ON US TREASURIES.
The Federal Reserve CANNOT AND DOES NOT CONTROL INTEREST RATES AT ALL IN THE ECONOMY and only controls the following 2 interest rates which have nothing whatsoever to do with the economy:
1) Federal Discount Rate – currently 0.75%
2) Federal Funds Rate (which it influences) – currently 0.25%
Both rates are only for VERY SHORT TERM LIQUIDITY PURPOSES AND APPLY ONLY TO BANK BORROWING, with the Federal Discount rate being for direct borrowing by banks from the Federal Discount Window at the Federal Reserve and the Federal Funds rate being for interbank borrowing.
The only 2 rates set by the Federal Reserve have absolutely nothing to do with the interest rates that banks pay on savings account, other than to “influence” the banks to perhaps pay higher or lower rates on those accounts.
Well we can go back and forth with this stuff for days. Try not to use the word “money” so loosely. Gold is real money. The paper representation is what Govt has entitled it to be. Which is a just a big pile of paper and that’s all. Yes paper currencies have ALL FAILED. A matter of fact some 5000 to date AND their Govts. When you decide to jump out of the fishbowl you will truly understand The FED is useless and insolvent not to mention The US Govt. They have no gold.
Obviously, GOLD HAS NOTHING WHATSOEVER TO DO WITH MONEY other than the fact that it costs way too much real money, but fortunately that situation has been rectifying over the past nearly 4 years as gold has plummeted 40% and the US dollar has soared in purchasing value against gold by 80%.
Gold and silver has NEVER been “money” or “currency” at all. They have simply been used as two of the many materials along with brass, nickel, copper, silver, and other metals to mint coins where the MONETARY VALUE WAS THE NOMINAL FACE VALUE and not the material used to make the coins. Anyone, of course, to use a 1 oz gold legal tender American Eagle for its $50 face value at most retail establishments.
The simple fact of the matter is that economies and currencies far outgrew gold as the world’s population has increased to its present approximate 7 billion people.
The total value of the world’s entire gold ever mined of around 180,000 metric tonnes is only worth around $7 trillion when valued at $1,200 per ounce which equates to around $44 million per metric tonne.Gold lost more than $2 trillion in valuation in the past four years from April 2011 based on the drop from a manic high of $1,927 per ounce to less than $1,200 per ounce.
The less than $7 trillion value of all gold in the world – 70% of which is in JEWELRY – is a mere pittance compared to the annual global GDP of more than $70+ trillion and global assets of around $800 trillion which makes gold just a tiny little niche collectible commodity of no relevance to valuation of other assets let alone for any monetary usage whatsoever.
The US government HAS NOT REDUCED ITS HOLDINGS OF AROUND 8,200 METRIC TONNES OF GOLD at all and issues monthly reports on those holdings which can always be accessed at:
http://www.fiscal.treasury.gov/fsreports/rpt/goldRpt/current_report.htm
The current official US government price for gold is $42.22 per ounce which is how they value the US government owned gold and their latest report as of November 30, 2014 shows the value of those holdings to be just over $11 billion – which, by the way, is equivalent to a few days worth of the current federal deficit. Even at current market value of about $1,185.00 per ounce for gold the total value of the US government’s gold holdings would only be around $340 billion which is equivalent to about 4 to 6 months of the current federal deficit.
The Bullion Depository located across the street from Fort Knox in Kentucky IS JUST ONE OF THE VARIOUS US MINT storage depositories for gold in the US.
About 4600 metric tonnes of its gold are stored at the US Bullion Depository located next door to the Army Base in Fort Knox, Kentucky and the remaining gold is stored at US Mint facilities around the country with the most primary being in West Point, New York, and other being Denver and Philadelphia.
I would suggest you read the US Treasury reports which are published at the end of each month on the exact gold holdings of the US government and they can always be found at:
http://www.fiscal.treasury.gov/fsreports/rpt/goldRpt/current_report.htm
If Gold is not that much important today, then why the US is storing and protecting the $340 Billion gold at the military base. In fact, the official amount is $11 Billion. Why to protect such a very small amount if not important.
The US government does not store any gold at “the military base” and never has. The US government HAS NOT REDUCED ITS HOLDINGS OF AROUND 8,200 METRIC TONNES OF GOLD at all and issues monthly reports on those holdings which can always be accessed at:
http://www.fiscal.treasury.gov/fsreports/rpt/goldRpt/current_report.htm
The current official US government price for gold is $42.22 per ounce which is how they value the US government owned gold and their latest report as of November 30, 2014 shows the value of those holdings to be just over $11 billion – which, by the way, is equivalent to a few days worth of the current federal deficit. Even at current market value of about $1,185.00 per ounce for gold the total value of the US government’s gold holdings would only be around $340 billion which is equivalent to about 4 to 6 months of the current federal deficit.
The Bullion Depository located across the street from Fort Knox in Kentucky IS JUST ONE OF THE VARIOUS US MINT storage depositories for gold in the US.
About 4600 metric tonnes of its gold are stored at the US Bullion Depository located next door to the Army Base in Fort Knox, Kentucky and the remaining gold is stored at US Mint facilities around the country with the most primary being in West Point, New York, and other being Denver and Philadelphia.
I would suggest you read the US Treasury reports which are published at the end of each month on the exact gold holdings of the US government and they can always be found at:
http://www.fiscal.treasury.gov/fsreports/rpt/goldRpt/current_report.htm
any proof to this 8000 tones of gold existence?
if gold is not money, then why US did not reduce its gold reserve?
Why not sale when they have deficit?
Huh? The Federal Reserve owns very little of its own gold and primarily acts as a depository for foreign deposits of gold which it stores at its New York Branch under depository agreements. I don’t know the total amount in metric tonnes of gold stored by the Federal Reserve New York Branch, but it has about 1200 metric tonnes stored on behalf of Germany as well as other countries there.
The Federal Reserve does not store any of the gold owned by the US government, and has very little of its own gold holdings but acts as a major depository for custodial storage of gold owned by third parties, mostly foreign, at its New York Branch.
The US government HAS NOT REDUCED ITS HOLDINGS OF AROUND 8,200 METRIC TONNES OF GOLD at all and issues monthly reports on those holdings which can always be accessed at:
http://www.fiscal.treasury.gov/fsreports/rpt/goldRpt/current_report.htm
The current official US government price for gold is $42.22 per ounce which is how they value the US government owned gold and their latest report as of November 30, 2014 shows the value of those holdings to be just over $11 billion – which, by the way, is equivalent to a few days worth of the current federal deficit. Even at current market value of about $1,185.00 per ounce for gold the total value of the US government’s gold holdings would only be around $340 billion which is equivalent to about 4 to 6 months of the current federal deficit.
The Bullion Depository located across the street from Fort Knox in Kentucky IS JUST ONE OF THE VARIOUS US MINT storage depositories for gold in the US.
About 4600 metric tonnes of its gold are stored at the US Bullion Depository located next door to the Army Base in Fort Knox, Kentucky and the remaining gold is stored at US Mint facilities around the country with the most primary being in West Point, New York, and other being Denver and Philadelphia.
I would suggest you read the US Treasury reports which are published at the end of each month on the exact gold holdings of the US government and they can always be found at:
http://www.fiscal.treasury.gov/fsreports/rpt/goldRpt/current_report.htm
If gold is not money, why not sale it. Why to to keep the 8000 tone?
Huh? The government owns tens of trillions of dollars of ASSETS THAT ARE NO MONEY with its largest owned asset classes being REAL ESTATE and US TREASURIES, neither of which are money.
Are you not aware that the annual market for gold is VERY TINY and amounts to only about $234 billion for the approximately 4,600 metric tonnes of gold sold every year, and that is less than half the annual sales of Wal-Mart?
Who would buy the 8,200 metric tonnes of gold owned by the US government? That amount is NEARLY DOUBLE THE ANNUAAL SUPPLY OF GOLD. If the US government put it up for sale at once there is no way it would clear the market without the price of gold massively plummeting down towards the current US government official price of gold of $42.22 per ounce, which is its current book value.
Even if the US government could somehow miracullously sell its 8,200 metric tonnes of gold at current market prices of around $1,225 per ounce, that would only raise about $350 billion which is equivalent to about four and one-half months of the current US government deficit which is running now at around $78 billion per month, so even at current market values and even assuming for sake of argument that the government could somehow realize full market value for its 8,200 metric tonnes of gold, it SIMPLY IS NOT WORTH MUCH AT ALL in the big picture of government finances today.
” How did the stock market in the 30’s rise some 60% in the midst of the Great Depression?” The money supply was increased overnight 69% by the devaluation of the dollar from $20.67/oz gold to $35, by FDR, that’s how.
False. GOLD HAS NOTHING WHATSOEVER TO DO WITH THE US MONEY SUPPLY and the US dollar was TOTALLY DELINKED FROM GOLD IN 1933 DOMESTICALLY.
The total value even at totally preposterous bubble prices for all of the 180,000 metric tonnes of gold ever mined in the world is less than $7 trillion and 70% of that is in the form of jewelry and central banks only own about $1.24 trillion of that
If all of the gold ever mined in the history of the world were to be rounded up and DUMPED DOWN THE MOUTH OF A VOLCANO IT WOULDN’T AFFECT GLOBAL ASSETS BY EVEN 1% AND WOULDN’T MATTER A HOOT FINANCIALLY.
GOLD IS OF NO FINANCIAL RELEVANCE WHATSOEVER and will never ever be used to “back” anything in today’s $70+ trillion global economy and around $800 trllion of global assets.
Artificially constraining the growth of money supplies while the population is growing substantially CAUSES DEPRESSIONS. Isn’t that totally obvious?
All governments GOT RID OF USING GOLD DOMESTICALLY back in the 1930s because populations had grown substantially and GOLD HAD NO FURTHER USE and was damaging economies. In fact, for the US, gold was just a 60 year failed experiment from 1870 to 1933 when the US terminated that “gold standard” nonsense entirely domestically.
The last vestige of any gold convertibility relative to the US dollar was thrown into the garbage can in 1971 as the concept of that was so stupid as to be laughable at that stage, particularly in light of how substantially the US economy and other economies had grown and how dominant and important and indispensable the US dollar had become as the world’s reserve currency and as the de facto currency of the world without equal or anything else even coming close.
“The last vestige of any gold convertibility relative to the US dollar was thrown into the garbage can in 1971 as the concept of that was so stupid as to be laughable”
It wasn’t laughable to the French*,
who exercised their rights under Bretton Woods to exchange their dollars for gold at $42/oz, whereupon Nixon “closed the gold window” and condemned the dollar to fiat status.
*they were not fooled that the U.S. could rack up huge deficits, spending billions on war in Vietnam plus LBJ’s “Great Society” and still pretend the dollar was as good as ever. Those deficits were as a fart in a gale compared to today.
France had nothing to do with the abolishment of the Bretton Wood Agreement which itself had very little to do with gold and was an AGREEMENT FOR FIXED CURRENCY EXCHANGE RATES among sovereign currencies.
After the Bretton Woods Agreement was discarded, currency values were determined in the GAMBLING CASINO CALLED FOREX which has caused ENORMOUS DISTORTIONS IN RELATIVE CURRENCY EXCHANGE VALUES which only now are being corrected towards proper equilibrium levels after decades of MASSIVE DISEQUILIBRIUM.
As to sovereign debt, the government debt of France is 90% of its GDP vers8us 107% government debt to GDP in the US. The aggregate government debt to GDP ratio of the EU is 94% and the single worst country ratio there is Greece at 175%.
Yes, Bretton Woods was AGREEMENT FOR FIXED CURRENCY EXCHANGE RATES among sovereign currencies. They were based on a $42 USD/oz peg for gold. And it failed miserably. The day after France cashed in their dollars, gold went to $170. No amount of all-caps can erase that fact. Today’s fiat regime, with Japan printing yen like mad, and who knows who else’s printing presses run amok is a recipe for disaster.
That price fixing stuff by Governments doesn’t work. Price fixing will be gamed every time. The price of Gold cannot be fixed $20/oz., $35/oz., or $42/oz. as if the hand of God strikes that into a tablet of stone with a lightning bolt from the sky. That doesn’t work. It didn’t work at $20, it didn’t work at $35, nor $42. But they still haven’t given up on trying!
That assertion regarding the price of gold in 1971 is flat our false. For a 200 year price history of gold, see:
http://onlygold.com/tutorialpages/prices200yrsfs.htm
I was always asking my self that the gold each country accumulating is so small when compared to their economy. Then how a country can pay in gold when they have very small amount of gold to cover their business transactions.
Indeed, gold has had NO FINANCIAL RELEVANCE WHATSOEVER since 1933 relative to currencies.
can you explain how Hitler succeeded in making German powerful. Even today. Surely he didn’t use gold.
GOLD WAS THE DIRECT CAUSE OF THE WEIMAR CURRENCY ISSUES and that by long ago ELIMINATING GOLD FROM HAVING ANYTHING TO DO WITH CURRENCIES that nothing like the Weimar issues can ever happen again, do you George?
The cause of inflation in Germany from 1920-23 the huge war reparations demanded from Germany with their currency of the time, the Papiermark, and wasn’t the solution to that in 1923 the replacement of that currency with the Rentenmark which had nothing to do with gold, coupled with the Dawes Plan which created bank financing for a much less onerous war reparation payment plan.
Weimar Republic
https://en.wikipedia.org/wiki/Weimar_Republicusg=AFQjCNGrg4D_EgePedv_X4OxDCHklDRCEw
As to how Adolph Hitler rose to power along with the huge move back to prosperity for Germany during the 1930s while the rest of the world was battling major depression, I would suggest you watch:
‘Adolf Hitler – The Greatest Story NEVER Told’
https://www.youtube.com/watch?v=Vnu5uW9No8g
“Spoiler alert”… LOL … This is why you’re my favorite, Rubino.