The Bern Identity

[ETcallhome]

my grandfather gave me two things to read, One was the Bible and the other was J. Edgar Hoover's guide to How to Defeat Communism, and I've been messed up ever since. (never read the Bible when you are tripping on LSD. Or for that matter anything written by anti communists.)

I'm not so sure the fed is as bad as people that write about them and sell books say they are. If you were setting up a new country today would you want a central bank?

 

[piezoe]

thank for the link it is interesting. I note you keep focusing on the accounting mechanisms... and I am trying to get you to focus on the money creation.

Where is the summary of all the money they created in the past year...
column and row



those links seem to reporting the bank has 4. 6 trillion in assets of which over 4 trillion is the face value of securities. That was a lot of crap they purchased with the money they created electronically out of thin air. Here is how the FED purchased those securites... by creating 2 trillion dollars out of the electronic either....

http://neweconomicperspectives.org/2012/03/where-did-the-federal-reserve-get-all-that-money.html

“Now, you might ask the question, well, the Fed is going out and buying 2 trillion dollars of securities – how did we pay for that? And the answer is that we paid for those securities by crediting the bank accounts of the people who sold them to us, and those accounts, at the banks, showed up as reserves that the banks would hold with the Fed. So the Fed is a bank for the banks. Banks can hold deposit accounts with the Fed, essentially, and those are called reserve accounts. And so as the purchases of securities occurred, the way we paid for them was basically by increasing the amount of reserves that banks had in their accounts with the Fed." Chairman Bernanke

2. But... again I want to know the column that shows how they created trillions to lend out what tallied up to 16 trillion. Where is that money creation column. You have said they reported the amounts but not the names... when and where do you get this information. It is not consistent with any of the reporting I produced for you. The FED created and gave that money out secretly. Why are you obfuscating this fact.

3. Again, where is the column that says no other money is being created in the Federal Reserve system besides the columns we show here?

Please take this question: "
Where is the summary of all the money they created in the past year...
column and row",,,
to your friendly CPA. Thanks.

If you want to know exactly how QE works. There are hundreds of pages on the subject available to you free on the net. But be advised that much of it is incorrect, so make sure you're not reading some politically motivated crap. It was very interesting for me to observe how the dollar plummeted when the Fed embarked on QE and how the ET crowd assumed that there would be run-a-way inflation. In fact some of them are still saying that. It is like saying there will be a stock market crash. Of course there will. But please tell me when, not merely if. Those folks obviously did not study economics with Samuelson at MIT. They had no clue how QE really works. Thank god we had a smart guy like Bernanke at the helm in a time of crisis.

What people thought of course was that QE is 'printing', and why shouldn't they have when even Bernanke once said himself "essentially", or was it "in effect", "it is". [I bet he wishes he could take that incautious statement back!] No wonder people thought it was the same as printing, which is creating money out of thin air and will lead to horrible inflation (usually). [An interesting exception is the economic miracle in Germany under the Nazis. That was a prime example of both Keynesian Economics and money printing, though I doubt if Hitler had ever heard of Keynes, though his economists may have. But it was before Keynes real fame. The third Reich printed like crazy and got away with it!] I will just tell you this to whet your appetite for further knowledge. QE is creation of money out of debt, and it is a reversible process. It is not 'printing' as it is so often said to be. In other words it is borrowing, but a special kind of borrowing in which Central Bank participation forces rates down when otherwise they would go up.

 

[ETcallhome]

The Benrie Sanders Immediate Problem was that many people lost their jobs and could no longer keep current on their mortgage payment. And their refinanced (to pay off their car loan and credit cards) new mortgage payment was based on the appreciation of their property, not their future income.

Yet, instead of bailing out the poor debtors who took the the stupid loans we bailed out the rich bankers who made the stupid loans.

 

[jem]

1. The 7-16 trillion dollars was not QE or Tarp... you know that.
They created and probably destroyed some of that money... the creation was out of the proverbial "thin air".

2. As far as QE is concerned... Here is the proverbial "thin air" creation of money --- from bernanke's mouth...

No matter how hard you try... we are not going to let you 1984/Orwell this one. crediting their accounts with trillions is the creation of trillions out of thin air. Trees were not even needed.



“Now, you might ask the question, well, the Fed is going out and buying 2 trillion dollars of securities – how did we pay for that? And the answer is that we paid for those securities by crediting the bank accounts of the people who sold them to us, and those accounts, at the banks, showed up as reserves that the banks would hold with the Fed. So the Fed is a bank for the banks. Banks can hold deposit accounts with the Fed, essentially, and those are called reserve accounts. And so as the purchases of securities occurred, the way we paid for them was basically by increasing the amount of reserves that banks had in their accounts with the Fed." Chairman Bernanke

Please take this question: "
Where is the summary of all the money they created in the past year...
column and row",,,
to your friendly CPA. Thanks.

If you want to know exactly how QE works. There are hundreds of pages on the subject available to you free on the net. But be advised that much of it is incorrect, so make sure you're not reading some politically motivated crap. It was very interesting for me to observe how the dollar plummeted when the Fed embarked on QE and how the ET crowd assumed that there would be run-a-way inflation. In fact some of them are still saying that. It is like saying there will be a stock market crash. Of course there will. But please tell me when, not merely if. Those folks obviously did not study economics with Samuelson at MIT. They had no clue how QE really works. Thank god we had a smart guy like Bernanke at the helm in a time of crisis.

What people thought of course was that QE is 'printing', and why shouldn't they have when even Bernanke once said himself "essentially", or was it "in effect", "it is". [I bet he wishes he could take that incautious statement back!] No wonder people thought it was the same as printing, which is creating money out of thin air and will lead to horrible inflation (usually). [An interesting exception is the economic miracle in Germany under the Nazis. That was a prime example of both Keynesian Economics and money printing, though I doubt if Hitler had ever heard of Keynes, though his economists may have. But it was before Keynes real fame. The third Reich printed like crazy and got away with it!] I will just tell you this to whet your appetite for further knowledge. QE is creation of money out of debt, and it is a reversible process. It is not 'printing' as it is so often said to be. In other words it is borrowing, but a special kind of borrowing in which Central Bank participation forces rates down when otherwise they would go up.

 

[piezoe]

Jem, I don't believe I gave you this link yet, did I? http://www.propublica.org/article/carmen-segarras-secret-recordings-from-inside-new-york-fed

This is why I love propublica. really detailed in-depth, carefully researched reporting. I send them a little money from time to time because I think this kind of straight forward reporting is very uncommon now, and we need much more of it. Here we can see that the ultra conservative Fed, including the NY Fed, has problems with "regulatory Capture". They need this kind of exposure to get their act together. We want our Fed to maintain arms length from the institutions they are regulating, and not get in bed with them.

 

[piezoe]

1. The 7-16 trillion dollars was not QE or Tarp... you know that.
They created and probably destroyed some of that money... the creation was out of the proverbial "thin air".

2. As far as QE is concerned... Here is the proverbial "thin air" creation of money --- from bernanke's mouth...

No matter how hard you try... we are not going to let you 1984/Orwell this one. crediting their accounts with trillions is the creation of trillions out of thin air. Trees were not even needed.



“Now, you might ask the question, well, the Fed is going out and buying 2 trillion dollars of securities – how did we pay for that? And the answer is that we paid for those securities by crediting the bank accounts of the people who sold them to us, and those accounts, at the banks, showed up as reserves that the banks would hold with the Fed. So the Fed is a bank for the banks. Banks can hold deposit accounts with the Fed, essentially, and those are called reserve accounts. And so as the purchases of securities occurred, the way we paid for them was basically by increasing the amount of reserves that banks had in their accounts with the Fed." Chairman Bernanke

Jem, do you see that the net effect of the transaction Bernanke described is what is underlined. The Fed did not directly credit the bank reserve account in this kind of transaction but the effect of the transaction was as if it had. Bernanke should have used the word "effectively" instead of "basically" because in this transaction "effectively" is what he really meant. This is perfectly legitimate.

 

[jem]

1. I effectively created the underline.
2. your explanation is effectively not reality.

the 2 trillion did not come form the banks assets
the money did not come from the the banks reserves
the money did not come from Congress
the money did not come for the banks owners pockets
the money did not come from lenders
the money did not even come from printed paper
the money did not come from the sale of assets
the money did not come taxes
the money did not exist previously
the money came from a keystroke...

Jem, do you see that the net effect of the transaction Bernanke described is what is underlined. The Fed did not directly credit the bank reserve account in this kind of transaction but the effect of the transaction was as if it had. Bernanke should have used the word "effectively" instead of "basically" because in this transaction "effectively" is what he really meant. This is perfectly legitimate.

 

[fhl]

Here's a link from a google search:

I Bet You Didn't Know The Fed Owns 40% Of All Treasuries ...
www.forbes.com/.../the-fed-has-been-cornering-the-treasury-mark...Forbes
Nov 25, 2013 - The Fed's 4 years of QE, QE1, QE2, and QE3 has accumulated 36% of... I Bet You Didn't Know The Fed Owns 40% Of All Treasuries Over 5 Years InMaturity .

----

When the fed bought up all these five and ten yr treasuries and their supporters tried to convince us it was nothing more than open mkt operations, people who can think realized that was baloney. I already posted an article earlier in the week in the econ section showing how the fed is not even going to let the bonds roll off without replacing them, let alone ever sell them, as they would in open mkt operations. The facts show that the fed is the owner of US debt that it never intends to sell. What else can anyone conclude. It was common sense at the time it bought them, now it is no longer conjecture, it's fact.
If fact, the article I referred to that I posted in the econ section wasn't even necessary to draw the conclusion. It was easy enough to conclude just by thinking. If the fed buys five and ten yr bonds five yrs ago and hasn't sold them yet, isn't that enough evidence that they bought them to hold to maturity? Five yr bonds are now maturing and ten yr bonds are half way there. Simple math proves that the 'open mkt operations' explanation of qe wasn't even spin. It was just nonsense.

Now on to whether qe is printing money or not. Of course the fed was using money that they created out of thin air to buy the bonds. How else did they buy them? But if the money they created was used to buy bonds and just replace them with bank reserves, so we are told, then bank balance sheets don't expand and thus there is no increase in the money supply. This is why they say that it is not a money printing operation.
But during this time of qe, when money supply was supposedly not affected, money supply was going up while bank lending was going down. This shows that something was going on that was not accounted for.
http://www.acting-man.com/?p=40948
The article has charts showing this. So what happened? The money came from somewhere. If banks didn't create it with new loans, then who else created the additional money? There is always some movement back and forth from eurodollar deposits to US deposits, but the most likely culprit for the increase in money supply is the federal reserve. The article speculates this by the following. The primary dealers are separate entities of the banks, and when they sold those treasury bonds to the federal reserve, they may have received real money for the bonds from the fed, that they then deposited in the bank they were owned by, which then became reserves for that bank. By this method, there were both deposits and reserves created, and not just reserves. iow, qe may actually be a two step transaction creating real money for the primary dealers before it is transferred to the banks and shows up on their reserve accounts.
And when bernanke says "effectively" or "basically", how do we know what he really means by that? How do we know these aren't fudge words to describe what i've just laid out?
The point being, money supply was going up while bank lending was going down. It came from somewhere. If the federal reserve didn't do it, then where did it come from?

And as far as the fed being transparent, I still think that's a joke. A list of their transactions could easily be circumvented by the fed if they wanted to.
For example, if they do a transaction in something like gold, how do we know if they are just settling some account or if they are trying to manipulate the mkt price to send false signals to the mkt?
Or how do we know that when they enter into some kind of transaction with a foreign central bank, it isn't some kind of quid pro quo for the foreign bank to do something that our own bank wants done but doesn't want to be seen doing. The Swiss central bank owns over a billion dollars of aapl. Central bankers are known for cooperating. They're also known for being sneaky.

The whole idea for us to just let the fed go about it's business and trust them is just asking for trouble.

 

[ETcallhome]

to be fair, Bernanke was pretty clear (if you understand fed speak) that they would never dump the bonds on the market and they would unwind by just letting them mature.

 

[fhl]

to be fair, Bernanke was pretty clear (if you understand fed speak) that they would never dump the bonds on the market and they would unwind by just letting them mature.

Not at the time he bought the bonds.