Understanding The Federal Reserve - Khan Academy

[714562]

OMG.

Are the ''member'' banks not being payed .25% on excess reserves right now? That's all I want you to answer. Because I see that you're one of these people who think irrelevant semantics make you smart. So just answer that question.

As I said, they're being paid on excess reserves right now because rates are near zero. Why? Because when rates are that low, banks need some kind of incentive to lend to each other.

It's not semantics. You just don't know what a member bank is.

The Regional Banks are private too, btw.

No. They aren't. The member banks are basically forced to own stock in the regional banks if they want their deposits to be insured. But again, they can't really "sell" that stock or take part in any of the traditional responsibilities we have come to associate with stock ownership. Beyond the token dividend they receive for their trouble and their system of organization (which is similar to a private board of directors), the member banks exercise no authority over the regional banks...which are legally obligated to take their marching orders from the Fed. A private bank doesn't do that. A private bank answers to its shareholders, who vote on and appoint the people in charge. Here, the Fed controls the appointment of presidents from the top down...as well as pretty much every important decision the regional banks make in terms of liquidity.

So you're still not right. But thank you for not responding with large, red letters.

 

[Meta Reign]

As I said, they're being paid on excess reserves right now because rates are near zero. Why? Because when rates are that low, banks need some kind of incentive to lend to each other.

It's not semantics. You just don't know what a member bank is.

Once again, that's not the reason the head of the NY Fed gives.
Dudley Seeing Interest on Reserves as Tool of Choice Sparks New Fed Debate - Bloomberg

No. They aren't. The member banks are basically forced to own stock in the regional banks if they want their deposits to be insured. But again, they can't really "sell" that stock or take part in any of the traditional responsibilities we have come to associate with stock ownership. Beyond the token dividend they receive for their trouble and their system of organization (which is similar to a private board of directors), the member banks exercise no authority over the regional banks...which are legally obligated to take their marching orders from the Fed. A private bank doesn't do that. A private bank answers to its shareholders, who vote on and appoint the people in charge. Here, the Fed controls the appointment of presidents from the top down...as well as pretty much every important decision the regional banks make in terms of liquidity.

So you're still not right. But thank you for not responding with large, red letters.

- Google Scholar

9th circuit in 1982:

Examining the organization and function of the Federal Reserve Banks, and applying the relevant factors, we conclude that the Reserve Banks are not federal instrumentalities for purposes of the FTCA, but are independent, privately owned and locally controlled corporations.

YOU LOSE. I WIN.

 

[Economics]

As I said, they're being paid on excess reserves right now because rates are near zero. Why? Because when rates are that low, banks need some kind of incentive to lend to each other.

It's not semantics. You just don't know what a member bank is.



No. They aren't. The member banks are basically forced to own stock in the regional banks if they want their deposits to be insured. But again, they can't really "sell" that stock or take part in any of the traditional responsibilities we have come to associate with stock ownership. Beyond the token dividend they receive for their trouble and their system of organization (which is similar to a private board of directors), the member banks exercise no authority over the regional banks...which are legally obligated to take their marching orders from the Fed.

There's an organizational chart that can help explain what you and meta are talking about for others on the organization of the federal reserve system that may clarify some things. It's probably on The Fed website itself (FRB: Who owns the Federal Reserve?), (The Federal Reserve Bank of San Francisco: Economic Research, Educational Resources, Community Development, Consumer and Banking Information) I'm sure someone can find it, its not on the beige book link I posted earlier, that's for more current econ data. There was a good org chart that helped visualize all this. I have to bounce for a sec though someone link it up.

 

[714562]

Once again, that's not the reason the head of the NY Fed gives.
Dudley Seeing Interest on Reserves as Tool of Choice Sparks New Fed Debate - Bloomberg

The reason given in that article is tangential to my reason. The risk is that the commercial banks could always decide to start using those excess reserves, forgoing the low rate of interest paid on deposits by the Fed (only 0.25%) and lending those funds to firms and households. Those loans would add to deposits and cause the money supply to grow. They would also increase spending by the borrowers, adding directly to inflationary pressures.

However, the reason that's a concern at all is because the Fed began in October 2008 to pay interest on those reserves because of their low rate easing policy. Commercial banks could place their excess funds in riskless deposits at the Fed, rather than lending them to private borrowers. As a result, the money supply has grown by only 25% since 2008, despite the 40-fold increase in reserves since that time...but it is not clear that the lower interest rates and higher share prices have had any significant effect on real economic activity. So now that they've lowered the rates without seeing the effect they wanted, they're in "oh shyt, don't spark inflation" mode. Make sense? It's like giving a patient chemo expecting him to be better...but the chemo doesn't work as well as you wanted and now you have to deal with the possibility of the patient getting bronchitis because the chemo lowered his immune system. Except not THAT bad.

In fact, the article you just gave me sort of proves that:

he effectiveness of using interest on reserves, or IOR, as a main policy tool may depend on how closely the federal funds rate, or overnight inter-bank lending rate, follows its movements. The Fed has kept its target for the fed funds rate at zero to 0.25 percent since December 2008

Wouldja look at that? It even gets the year (2008) right. Point proven. They've had it low since 2008 and now that they're paying an additional fee on excess reserves, they have to make sure it follows the movement actual fed funds rate. In 2008, when they actually STARTED doing this, nobody was talking about inflation. Now that the money supply has ballooned, it's become a tangential concern. On the one hand, we want banks to get paid for holding reserves, since a 0% interest rate is the same as holding cash. We also don't want them to dump too much cash all at once and cause inflation because that extra money didn't see to help the economy as much as we wanted -- for a variety of reasons. So it's a balancing act.

- Google Scholar

YOU LOSE. I WIN.

Nope. The Lewis decision had to do with the Federal Tort Claims act. For legal reasons, the banks are defined as a "Federal instrumentality" instead of directly a federal agency...the reason being that if one of them gets sued, the government doesn't want to be sued on their behalf.

Scott v. Federal Reserve Bank of Kansas City - Google Scholar

^The above decision classifies the regional banks as federal externalities.

It's called a legal loophole. Has nothing to do with reality.

Saying that the banks are private is like saying that Fannie Mae is private. It's not true.

You still lose. I still win.

 

[blackzeus]

Have a mike's hard lemonade, fakkit.

 

[OsO]

If you listen to Leyet's rant about the fed on the podcast, his general thesis about the reality-shaping power and plotting maliciousness of the fed was absurd.

When we were trying to tell him the fed wasn't sitting the plotting economic destruction, he said yes they are and there's a science to economics and they can control the economic system and create whatever outcome they want. My mic was fukked up but tried to cut across and tell him that econ is the softest science there is--it's called the dismal science for a reason--it's not physics, there are several competing theories and they are dependent upon the predicted rationale of millions of people.

Then after saying he understands this and knows it to be true, he responded to HHL4E's question about what economist or economic theory he would adhere to or agree with by saying "I don't know, I don't understand economics."

everything i said about the fed in the podcast was fact.

if you really wanted to dispute my comments you should have tried harder during the podcast instead of responding now through text.

and i never said the bold, stop making shyt up...

what i said is that im not really familiar with any modern day economists or their stances, but if they aint talking about re-establishing a manufacturing base they aint talking about shyt, which is another fact.

the simple fact the fed is in charge of our monetary policy but is a private corp whose #1 priority is to turn a profit, is absurd. and the fact the shareholders of the fed are not transparent, is absurd. and the fact the fed can run our monetary policy and yet refuse to disclose where all the money is going and what is being done with it, is possibly the most absurd of all.... but keep your head in the sand on a topic you dont understand... idiot.

 

[OsO]

Yeah i remember hearing Leyet say Economics is a science and a few minutes later he claimed he didn't have a knowledge of economics with the reaction.

I even responded on the chatroom that Econ was a soft science.

Leyet actually inspired this thread because of all the wild shyt he was spitting on the podcast.

when did i say i didnt have a knowledge of economics?

vic has always had problems with reading comprehension but now i see you both have hearing problems as well.

and if you could, please state for the record what i was incorrect about in regards to the fed or economic principles in general

 

[ogc163]

everything i said about the fed in the podcast was fact.

if you really wanted to dispute my comments you should have tried harder during the podcast instead of responding now through text.

and i never said the bold, stop making shyt up...

what i said is that im not really familiar with any modern day economists or their stances, but if they aint talking about re-establishing a manufacturing base they aint talking about shyt, which is another fact.

the simple fact the fed is in charge of our monetary policy but is a private corp whose #1 priority is to turn a profit, is absurd. and the fact the shareholders of the fed are not transparent, is absurd. and the fact the fed can run our monetary policy and yet refuse to disclose where all the money is going and what is being done with it, is possibly the most absurd of all.... but keep your head in the sand on a topic you dont understand... idiot.

#1 priority is to turn a profit? Shareholders?!!

 

[Dusty Bake Activate]

everything i said about the fed in the podcast was fact.

No, not even close. You said the fed is purposely destroying the economy, and it's a science that they understand are implementing it purposely. That is not fact in the slightest. That is tinfoil hat nonsense.

if you really wanted to dispute my comments you should have tried harder during the podcast instead of responding now through text.

lol...dude, you were rambling on and on and on nonstop toward the end of the podcast and throwing out a million things. I tried to cut in several times, but my mic was weak as fukk. You can hear muffled noises from my ends several times while you were rambling. That's my fault for not being better technologically equipped. Next time if you're on, I should have a better mic. You weren't speaking on any specifics, and you were just on your soapbox about things wrong with the economy, much of which I agree with but had little to do with monetary policy, or at least not primarily.

And you never addressed specifically what you would change about monetary policy. Not who runs or the transparency or lack thereof, but specifically what you would change in terms of interest rates, expansion and contraction of the money supply, etc. despite being asked repeatedly by 3 people on the podcast whenever you paused for air during your filibustering.

and i never said the bold, stop making shyt up...

what i said is that im not really familiar with any modern day economists or their stances, but if they aint talking about re-establishing a manufacturing base they aint talking about shyt, which is another fact.

You didn't say it word for word, but when HHL4E asked you what economist or theory should we listen to, you did essentially say you don't understand economic theory at all. That's where your contradiction and lack of the full scope of things became apparent. You're not familiar with basic economic theory at a fundamental level, but at the same time you're saying you've studied it and it's a science and you know for a fact that the fed has successfully plotted to destroy the economy and they have this foolproof formula to do so.

That's what happens when you just attach yourself to unsubstantiated conspiracy theories in lue of actually learning and getting grounded in the fundamentals of a subject. You end up saying shyt like "I don't understand economic theory, but I do know that there is a secret economic theory that only the Federal Reserve understands that allows them to do whatever they want with the economy any time they want" with a straight face.

the simple fact the fed is in charge of our monetary policy but is a private corp whose #1 priority is to turn a profit, is absurd. and the fact the shareholders of the fed are not transparent, is absurd. and the fact the fed can run our monetary policy and yet refuse to disclose where all the money is going and what is being done with it, is possibly the most absurd of all.... but keep your head in the sand on a topic you dont understand... idiot.

Stop being so sensitive when your ideas get challenged bruh.

And you don't understand shyt about economics...nothing. But you would have us believe that you are privy to some special understanding that there is this secret KFC recipe the Fed has that can make the economy do whatever they want like they're magicians.

You said you see know this conspiracy theory to be true so all these "egghead motherfukkers" or whoever who studied at Harvard at the fed know too. Well I have a simple question. There are several "egghead motherfukkers" who study economics for a living at Yale, Harvard, MIT, etc. and working at think tanks and universally they all think your fed conspiracy theory is complete bullshyt and don't even entertain it. Why is that?

 

[OsO]

No, not even close. You said the fed is purposely destroying the economy, and it's a science that they understand are implementing it purposely. That is not fact in the slightest. That is tinfoil hat nonsense.


And you never addressed specifically what you would change about monetary policy. Not who runs or the transparency or lack thereof, but specifically what you would change in terms of interest rates, expansion and contraction of the money supply, etc. despite being asked repeatedly by 3 people on the podcast.

You didn't say it word for word, but when HHL4E asked you what economist or theory should we listen to, you did essential say you don't understand economics.


You said you see know this conspiracy theory to be true so all these "egghead motherfukkers" or whoever who studied at Harvard at the fed know too. Well I have a simple question. There are several "egghead motherfukkers" who study economics for a living at Yale, Harvard, MIT, etc. and universally they all think your fed conspiracy theory is complete bullshyt. Why is that?

1) so you think our economy is fukked up because of ignorance on the part of the government and policy makers? no. you even said yourself this is a widely coordinated effort amongst many agencies to polarize the wealth in this country... so exactly what part is conspiracy and what part is theory?

2) i said repeatedly the answer is to get back into manufacturing, producing goods and services. next time listen

3) i did not, in any way, shape, or form, imply or say anything about not understanding economics. again, stop making shyt up

4) there are several egg head muthafukkas who think the fed conspiracy is bullshyt and there are several egg head muthafukkas who dont think the fed conspiracy is bullshyt, now why is that?

 

[zerozero]

tell me one thing the federal reserve can do to encourage domestic consumer goods manufacturing you don't understand that there's a push pull dynamic to all this. If they make the dollar weaker to encourage exports that's going to ravage people's savings via inflation. And the whole world depends on the dollar being stable & strong. You think China (or your specified boogeyman, the Bank of England and the Rothschilds) is going to hold all this US debt and be happy if the US economy gets weaker? Hell no

you were going on about interest so we pointed out that the fed kept interest rates low and encouraged the internet & housing bubbles. your response was that the economists aren't stupid. well, no, but they have to make choices and everyone in a bubble economy wants the money to keep flowing and you don't know in the middle of a bubble when to close the flow (and there's still a bunch of choices about how.)

We can have a stable economy instead of a boom bust economy. But Americans all the way from government to individual consumers have to want that.

 

[714562]

i said repeatedly the answer is to get back into manufacturing, producing goods and services. next time listen

3) i did not, in any way, shape, or form, imply or say anything about not understanding economics. again, stop making shyt up

...but that first quote proves that you don't.

Producing services is the opposite of producing industrial goods. That's why people differentiate between service economies and industrial economies. Literally, polar opposites. And we're already a service economy so...what are you like, even talking about?

And anyway, the manufacturing fallacy holds no water here. The $ value of the US manufacturing sector is greater now than it has ever been. We don't manufacture bathtubs and car doors anymore because...we don't need to. We make semiconductors and jet engines now. It takes at minimum a college degree to have steady pay in manufacturing because it's become much more technology oriented. Blue Collar Joe can't waltz into a factory and earn a middle class wage. That's why, despite lower employment and less factories, the manufacturing sector is making more money for the economy than it ever has.

Whether or not Blue Collar Joe needs to be re-educated and taught a job BESIDES low-level manufacturing so that he can make money and contribute to the economy again is a different story...but "returning" to manufacturing solves nothing. We haven't fallen off of manufacturing and there's no point in us building toaster factories.

This is especially true considering that manufacturing was one of the first economic sectors to rebound when the value of the dollar plummeted and made our goods cheaper for export. The current employment glut exists primarily in commercial construction -- as it has for the past couple of years now. Shout out to the president for passing a flawed stimulus package

 

[ogc163]

Economist views on the fed's recent actions...





Federal Reserve Reform, Economists Panel - C-SPAN Video Library
How US Can Reclaim Its Economic Strength? - CNBC

 

[714562]

Brad Delong is a BAUUUUUUUUUUUUUUUSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSS...



...though he does stan Krugman way too much.

 

[ogc163]

Some investor's views on the fed...