Liquidity injection by central banks

Quote from buzzy2:


Second, that the 30s depression was caused by deflation is a huge misconception propagandized by exactly the same people advocating the need for central banks and 'accommodative' monetary policy.

The 30s were just cleansing from the excesses of the previous two decades which was caused by: surprise! excess of liquidity.

Once you convince people that deflation is the boogeyman (which is false), then you can easily sell them central banking and the system of fiat money.
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Ever take an economics course regarding gold backed currency or dollar-gold standard? It's not a bunch of propaganda. Makes a lot more sense than your theory.

There was indeed excess liquidity during the late 20's and political discussions regarding the passing of the Hawley-Smoot tariff Act in 1930 (along with the excess liquidity problem) sent the market into a tail spin.

The tariff act effectively led to serious GNP contraction world-wide and skyrocketing unemployment. A gold backed currency doesn't have a fix for a situation in which consumers are defaulting in mass amounts. Banks can't absorb the collateral when there is noone to sell to. A fractional reserve system that allow for economic expansion and huge bank profit has the ability to lead them straight to bankruptcy if they can't liquidate.

A fiat currency allows the FED to create inflation to hopefully avoid this type of situation. Again the point being that the FED can save the credit market, but not the individual consumer.
 
Let me understand this when I blow up my trading account for making bad trades I'm responsible for the loss...NO ONE including ECB or FED orlocalbank lends to me or bails me out.

If I buy a home in the burbs and put 20% down and year later the house market goes down so my mark-to-market value of the house is less than my mortgage will the ECB or FED loan me?

Stuff the funds and banks let em burn!!!!
 
Quote from Trendytrader:

Let me understand this when I blow up my trading account for making bad trades I'm responsible for the loss...NO ONE including ECB or FED orlocalbank lends to me or bails me out.

If I buy a home in the burbs and put 20% down and year later the house market goes down so my mark-to-market value of the house is less than my mortgage will the ECB or FED loan me?

Stuff the funds and banks let em burn!!!!
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I agree that they were irresponsible, but you can't just say screw the banks. Is your money kept in a jar under your matress? Did you buy your house with cash?
 
Quote from Cache Landing:


A fiat currency allows the FED to create inflation to hopefully avoid this type of situation. Again the point being that hte FED can save the credit market, but not the indivisual consumer.
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A fiat currency allows irresponsible FED to create inflation that destroys and transfers wealth from the whole country to a small group of people -

That was happened in Russia in 90s. Whole country wealth was transfered through inflation to a small group of people - not more than 100 people

now its transfered to banks which are already super rich
 
Quote from Cache Landing:

I agree that they were irresponsible, but you can't just say screw the banks. Is your money kept in a jar under your matress? Did you buy your house with cash?
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Sure, banks give useful services, but why don't they fire people and cut bonuses to pay for their mess, like any other company.
 
Quote from Trendytrader:

Cash in bank up to $100k is government backed.
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How do you think the government is going to pay all those people.:p They print money that essentially has no value. If you lose funding on your home (probably worth much more than $100K) who is going to carry your debt?
 
Quote from Cache Landing:

Ever take an economics course regarding gold backed currency or dollar-gold standard? It's not a bunch of propaganda. Makes a lot more sense than your theory.
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Duh, an economics course from whom? from someone like 'Professor Bernanke'. pfft.
 
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