THE Federal Reserve Thread pt 2 (merged)

[I_Like_Plants]

All museletters = good

[oiless]

There were bank failures in the '70s and '80s, they had to rejigger the deposit insurance system a couple of times, as it kept going bankrupt.

http://wfhummel.cnchost.com/depositinsurance.html

There have apparently been no bank failure in the States yet this year, and the numbers have been decreasing over the years, I have no idea if this is due to good economic times, better management and controls, or the amalgamation of many smaller banks into existing mega-banks.

http://www.fdic.gov/bank/historical/bank/

In Canada we had a number (2 or 3 or 4, I don't remember for sure) of bank failures in 1985. This shook things up a bit, since these were the first Canadian bank failures since 1923.

[spot5050]

The economic principle at play is one of inflation/defaltion. Too much money supply creates inflation. Too little, deflation. Cutting the money supply is easy. Increasing the money supply is another thing altogether. It is this balance that keeps the house of cards standing.

The accepted economic principle is that you will always be able to increase the money/energy supply. Without energy you can only increase the money supply by hyperinflation.

Hi MQ, accepted where? Got any books or links? I can't find anything that discusses economics and declining energy.

The principle seems to be common sense to me, but I have failed to find any economics books that even mention it.

[spot5050]

I thought this article was very interesting in the way it was put together:

I Want The Earth Plus 5%


I thought these books were worth taking a look at too:

Edward Griffin "The Creature from Jekyll Island"

Murray Rothbard "What has Government Done to Our Money?"

Murray Rothbard "Mystery of Banking" (scroll to the middle of the page)

There were several tens of thousands of words in those articles qwanta. I'm not going to read the whole lot. Can you summarise?

[spot5050]

MUSELETTER - MONEY

IMO - a very good piece on money.

What do you think that piece means NEOPO? Why is it good?

And how does it relate to my OP?

[MonteQuest]

The accepted economic principle is that you will always be able to increase the money/energy supply. Without energy you can only increase the money supply by hyperinflation.

Hi MQ, accepted where? Got any books or links? I can't find anything that discusses economics and declining energy.

The principle seems to be common sense to me, but I have failed to find any economics books that even mention it.

Maybe I should have said the accepted "notion" or "assumption". You know, infinite growth will always be possible.

[spot5050]

Maybe I should have said the accepted "notion" or "assumption".

Ok.

I've struggled through a couple of excruciatingly tedious books in my little quest to find out if our banking and finance systems will collapse as a result of PO. Nothing conclusive yet, but I've just got an email from Amazon to say that another book is on its way. Yippee.

Still the only aspect of PO that makes me really nervous is how banks will cope.

I hate doomers because they are missing the point. PO will not mean that the world will end next Wednesday, but it could very well mean economic turmoil within the next decade (assuming we are peaking about now).

[FoxV]

well I've been harping since June that the End begins this October, so could this article about the fed getting serious signal the beginning of the End (actually I don't really mean the end but just the start of our 30 year slide to oblivion)

Basically it says that the Fed is on the verge of cracking down on inflation (which is pretty tough talk for an institution that has sat by and watch bubble after bubble inflate without doing squat). This article also mentions how some big producers will now be increasing prices because of energy costs (an inflation increase that will not go away for at least 1 quarter, regardless of oil prices)

at the end there's:

"Oil could head lower or even stabilize in the low $60s, which would be good enough for the market to rally," Dickson says. "So, by mid-October we're looking for a sustainable bottom and then we would jump in for a fourth-quarter rally."

I was going to make a wisecrack about this but decided not to because there's so much wrong with this statement I don't know where to begin

[Eli]

Yup it is going to be another black October.

The fed is raising the cost of borrowed money which is not good for business.

Heck without cheap and easy lending practices we would not have an economy to speak of.

But rising costs of everything because of oil prices and now higher interest rates on servicing debt is going to sink major corporations. Unlike people who take out loans in the thousands of dollar range the big boys borrow cash in the billions. Higher interest rates for that cash makes it tough for them to pay back.


I herd too Delphi is going to file chapter 11 soon and there is a question of whether or not GM is libel for covering the pensions of the employees. GM is toast it is only a matter of time.

[MicroHydro]

I bet a reasonable sum that the market would fall - still waiting

[rogerhb]

Once you have spent years syphoning off the peeps dollars you might want to try decide to try and hold their value at some point. Can't have all the rich peoples money evaporate now can we?

[seldom_seen]

The fed is in a real f-ing bind.

They need to raise rates to try and keep inflation in check, while at the same time they need to lower rates to stimulate a stagnant economy. There's really not much they can do to help.

[Eli]

You know really isn't it the same thing?

On one hand you can make borrowing money more expensive but that is guaranteed to slow growth but it will control inflation.

On the other hand you do not raise rates but the economy still goes down because inflation eats up the growth and everything gets more expensive.

Either way the economy slows down.

[MrBill]

On one hand you can make borrowing money more expensive but that is guaranteed to slow growth but it will control inflation.

On the other hand you do not raise rates but the economy still goes down because inflation eats up the growth and everything gets more expensive.

Either way the economy slows down.

Yes, it is called stagflation.

[Macsporan]

Someone told me once its caused by rises in the the price of oil. You know, like in the 70's...

[ChadP]

The cynic in me says that at least some interest rates'll go up on October 17th.

[FoxV]

well 123 points off the Dow and 212 points off the TSX and almost all the major foreign markets dropped a similar 1% (TSX is very heavily weighted in energy so that's why we took a 2% hit)

and hey guess what, more bad news due tomorrow. Profit warnings from some big players, and I believe the Consumer confidence report is due as well.

Jst think we still haven't gotten the big wammies yet. Inflation report, Big Three Auto's "profits", CC minimums increase (Should mix nicely with already high levels of missed payments). And people rushing to file bankruptcy before the new rules come out.

and lets not forget to throw in a hurricane or two (or three) into the GOM

edit---

The cynic in me says that at least some interest rates'll go up on October 17th.

oh and just wanted to mention, the economist keep talking about interest rate increases to control inflation and seem to forget (or afraid to mention) that interest rates increases are also need to support the US's falling dollar (which is hitting long time lows) and to get foreign investors to pay for the Gov't debt (which should be real nice with the Katrina bill added to it)

[Vexed]

Jst think we still haven't gotten the big wammies yet. Inflation report, Big Three Auto's "profits", CC minimums increase (Should mix nicely with already high levels of missed payments). And people rushing to file bankruptcy before the new rules come out.

Big bucks, No Whammys!

[Vexed]

My link above doesn't seem to be working.
If you can find it, great article on US consumers.

7 habits of an economy in peril
Merrill Lynch expert provides evidence of consumers' bind.

[Grimnir]

...will be announced in about 2 hours. At least, that's what MSNBC and Drudge are saying. That was unexpected.

Three potential candidates are regularly mentioned for the Fed chairman job: Glenn Hubbard, a past adviser to Bush; Harvard economist Martin Feldstein; and Fed governor-turned White House adviser Ben Bernanke.
Other potential contenders include former Bush economic aide and ex-Federal Reserve Governor Lawrence Lindsey; Fed Governor Donald Kohn; Fed Vice Chairman Roger Ferguson; and ex-Dallas Fed President Robert McTeer.

How much you want to bet he goes with the guy he's known the longest?

Update: White House adviser Ben Bernanke is expected to be named.

http://www.msnbc.msn.com/id/9803463/