lets try again
And the banks just hold that money in reserve and do nothing with it? Or do they use those assets as collateral and lever up to trade?
Why should they. The rich just get richer. , the inflation gets burried in a broken index , and the poor get, well , more poor
Huh? The primary dealers will buy them and sell them to who? Who will eat the losse on this debt as rates rise? If ten primary dealers all hold this debt as inflation roars, every one of these banks will fail all over again.
Are you serious?
[QUOTE
Same question
And the banks just hold that money in reserve and do nothing with it? Or do they use those assets as collateral and lever up to trade?
Why should they. The rich just get richer. , the inflation gets burried in a broken index , and the poor get, well , more poor
.
Huh? The primary dealers will buy them and sell them to who? Who will eat the losse on this debt as rates rise? If ten primary dealers all hold this debt as inflation roars, every one of these banks will fail all over again.
.
Are you serious?
[QUOTE
Same question
They can't do anything with it other than loan to other banks. There is pretty much no difference between the primary dealers having reserves on their balance sheet or treasuries other than interest rates. That's all the Fed is doing. Banks can't use reserves to purchase stock or buy furniture. They are pretty much useless. There are some countries even eliminating reserves all together because they play such a little part in the banking system these days. The only reason they are important in the US is because the Fed instituted the IOER. Which if you understand the banking system, they are actually worse off with these reserves than with the treasuries.
Everything the Fed has done has been inline with helping the economy for the general population and not the rich. As much as you might hate it, we are dependent on the banking system and credit.
They don't need to sell them to anyone. They just keep them on their balance sheets. And if someone in the market wants to buy them, then the Primary Dealers will sell them and have reserves instead. It's the same thing as the Fed is doing. You just really got to understand how banking works. It's just a transfer of assets and the Fed has complete control over the rates of these assets.
Dead serious. You have the same arguments as they had 75 years ago. The debt was $42 billion and everyone was crying about how much it is and how the economy was going to collapse. In fact the Govt cut spending by 20% because of the fear of the debt. And of course the economy went back in to a recession and that lasted less than a year. Same people cried at $100 billion, $500 billion, at $1 trillion the govt was threatening to shut down (what a surprise), $5 trillion, $10 trillion, $17 trillion... blah blah blah. There is no mathematical reason why the debt can't continue growing to infinity. Absolutely nothing except fear and ignorance.
I actually agree with a lot of what the doomdayers say.....Market manipulation, crony capitalism, fed induced bubble...
I just think the cause isn't going to come close to getting the effect that they think it will. People have been screaming armegeddon/collapse/social instability for a long time.
I'm all for gold as a inflation hedge or speculative buy with the right info but I just don't foresee gold 5k and society completely crumbling in our future, atleast I hope not. Also if that does happen, like Illini said I probably wouldn't want to live anyway.
Also the response of "Because it always has" for the "Why will it have value if SHTF?" question is not a remotely compelling argument.
I just think the cause isn't going to come close to getting the effect that they think it will. People have been screaming armegeddon/collapse/social instability for a long time.
I'm all for gold as a inflation hedge or speculative buy with the right info but I just don't foresee gold 5k and society completely crumbling in our future, atleast I hope not. Also if that does happen, like Illini said I probably wouldn't want to live anyway.
Also the response of "Because it always has" for the "Why will it have value if SHTF?" question is not a remotely compelling argument.
your not addressing the question of what happens to the value of those treasuries when rates rise? Either the Fed has the bonds on their balance sheet , or the dealers on theirs . If rates spike, someone is eating the paper losses that will continue to get worse if rates don't come back down, or rise further. At that point either the dealers go bust, or the Fed starts submitting a bill to the treasury for the losses .
So we had a recession that ended less then a year, interesting
Anyhow, let's gets back to blah blah blah. So the debt can grow to infinity, we can just borrow and spend more money, and there are no consequences . We can and should borrow another trillion, just send to checks to everyone, and our standards of living will all rise, and we will live happily ever after.
Better yet, let make it two trillion, and let's do it annually.
You seem like a smart guy, how can you possibly believe this nonsense ?
What losses are you talking about? Treasuries are guaranteed payments by the govt regardless of the interest rate. The only thing that will happen if they sell off treasuries is the private sector/non PD's/foreign sector might invest more in treasuries to get the higher rates. Absolutely nothing happens to the fed or the banks. Just a transfer of interest bearing assets.
Reductio ad absurdam. "Borrowing" is just what the government calls it. It's not like there was $17 trillion out there for the government to borrow. You just really have to understand how the banks work. The government borrows just like you and I borrow. And the people lending that money only care about the interest rates as the money is a wash when it comes to their actual balance sheets. The government will never run out of buyers of debt and they will never run out of money to "borrow".
There are consequences to actions, just like there are consequences to not spending enough money. There are cases where you can spend too much money. But just being scared because the debt is "large" isn't an argument. People in 1937 had a hissy fit over $42 billion because they thought that was a ridiculously large number.
It's all relative. In a 100 years we will be looking at a trillion dollars like we look at a billion dollars right now.
Yes treasuries have a guarantee for their principal and interest, but their relative value collapses when rates rise. So if you have to sell, you are forced to realize these losses. In the meantime these treasuries as well as mortgage paper are losing value on your books.
If you think the world will continue to vendor finance our consumption based economy and buy endless amounts of our debt at negative real rates of return, I want what you are drinking.
The Fed doesn't care about their value on their books. They give 95% of their profits back to the Treasury anyways. The primary dealers do not have a choice. They will take whatever rates the Fed wants them to. It's funny people are still talking like govt debt is a problem after probably the biggest crises this country has ever seen. It could have been a catastrophe without the knowledge they have of monetary systems. A lot of it learned from their failures in the Great Depression. I'll keep drinking what I'm drinking because it's based on facts and logic. Not irrational fears.
The world is not out vendor. The Fed does not give a fuck whether foreign countries invest in treasuries or not. We can spend, borrow, create as much of our made up money as we want. We have to fund the world with our currency before we can borrow it. Something to think about.
Profits, yes, for now So if they give 95% of them back, what happens if those profits turn to losses? Who eats those losses? If rates spike those values collapse.
How does the Fed "fight the inflation" If they are reducing their balance sheet by selling assets and huge losses?
Im just speechless on this one
We can spend, borrow, create as much of our made up money as we want. We have to fund the world with our currency before we can borrow it .
