Fair enough, click it.
Prtesident Trump is Truly Dangerous!
- Thread starter piezoe
- Start date
That wasn't to you, but to "The Futures Farmer". While you and I disagree on almost everything, I certainly do not equate you to a shrieking lunatic on the street.
I don't no exactly what you mean by money creation, but if your referring to money supply, that is largely dependent on credit demand. Something the Fed has very little control over except perhaps at one extreme of the wholesale cost of money. The Fed is the government, and the government can create as much money as it needs, but the supply of money in the economy is primarily driven by credit.
Piezoe, come on. You can't be this clueless. This has to be a windup, and you're trolling us.
The Fed directly controls the cost of money which directly influences the demand of credit. Low rates, cheap money, high demand to lever up. It's really quite basic and simple. The demand of credit doesn't influence the supply of money. It's the other way around.
Raise rates, restrict credit through higher rates that business declines borrowing on.
It's pointless to put anyone on ignore. Just skip over their posts rather selectively. The advantage of having someone else put you on ignore, however, is that you will still see their nutty posts and you can speak the truth about them. They won't see your posts. But everyone else will! Trading attracts a lot of folks well away from the mainstream of political thought. I liken it to the people you would meet at the dog track. That's not a place you would go if you wanted to expose yourself to the mainstream. (I have have nothing against gray hounds or folks who like them.)
There is also an above normal concentration of folks in these political forums who have bought into various conspiracy theories. Our own jem is a primary example. He posts now under the pseudonym "TJustice". There is a certain vocabulary that these folk like that immediately tips you off to their infatuation with Breitbart, Infowars, and You Tube conspiracy videos.
Trading is something with a very low barrier to entry. Thus there is a very wide rage of folks doing it. To be sure, there are some very smart, well educated folks here as well, and some of them are undoubtedly savvy and experienced traders and investors. In the end, we are all just one, big happy family, but some of us are just a bit insane.
That certainly is conventional thinking but it's wrong. At the low extremes of the Funds rate small changes have very little impact on demand for money. It's not at all a linear effect! Only at the very high extremes does the funds rate begin to dampen demand for credit. A perfect example of this is that when the Fed took rates to near zero during the great recession the demand for credit remained low even though reserve accounts were extremely swollen. (They were so swollen in fact that Bernanke began to pay a token small interest on reserves to put a floor under rates.) It is economic conditions that creates demand for credit and the amount of credit determines the money supply. See, for example, Bill Wilson's blog for a nice discussion of this.
You're uninformed. Again. This forum has a feature that, when you totally block them, all your posts disappear from the person you ignore, and you won't see their posts either. It's a complete block out. There is also a vanilla ignore option you can select that makes it so you cannot see their post, but the person you ignore can see yours. That is pointless, I agree.
I stand corrected. I was unaware of this advanced feature, since I long ago stopped putting lunatics on ignore. Scat, a truly insane person, has apparently used "ignore lite" because he has a large number on ignore, but we can still see and chuckle at his absurd posts. I can continue to enjoy calling him a jackass with impunity.
This is so untrue. I am stunned to see someone who claims to understand the Fed actually put these words to paper (or computer).
Demand for credit remained low even though rates were taken low because, at a certain point, companies, people, etc, can't borrow any more. You can only service so much debt before you simply cannot borrow anymore no matter what. Unless, as you lunatics like to do, you move rates negative and someone actually pays you to borrow. Then it is a matter of covenants and leverage that prevent you from taking on more (which you would know if you had actual, real world business experience).
I am removing from the discussion the banks borrowing from the Fed because it is an irrelevant piece for this discussion. As the Fed raises rates, rates are raised at institutions. This higher cost of capital drives whether institutions and individuals want to borrow. It also affects risk models and investment options. Forget about the reserves discussion. I'm talking about the action of raising rates and how it impacts borrowing demand (which you seem to think works the other way around - boggles the mind).
Exactly. it is the change in demand for credit that affects the change in the amount money circulating in the economy. It's not, generally speaking, the Fed Funds Rate. When you couldn't borrow any more for whatever reason, demand for new credit dried up, even though rates were rock bottom. And that's why reserve accounts remained swollen. It wasn't because the banks had no money to loan (Banks always have money to loan to qualified borrowers -- it's independent of their reserve positions) it was because no qualified borrowers were coming through the front door. )
Supply side economics is nuts. If you want to have a healthy economy for the long run you must leave more non-leveraged money with labor who will spend it rather than move it into Treasuries. I.E., the stimulus needs to be on the demand side, not the supply side.
It's Bill Mitchell by the way, not Bill Wilson. I just noticed. I was having a senior moment.
http://bilbo.economicoutlook.net/blog/
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