Home › Forums › Financial Markets/Economics › Deciphering Bernanke’s comments
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Deal Hunter.
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February 28, 2008 at 4:58 PM #162516February 28, 2008 at 5:18 PM #162206
barnaby33Participantcooprider14, I’ve tried telling you this several times with subtlety, it doesn’t seem to work. THE FED DOES NOT PRINT MONEY. THE FED CREATES CREDIT, AGAINST COLLATERAL. Printing money is the purview of the treasury. There are a couple of big reasons why that is important.
1)The FED cannot print us out of this mess. The credit has already been created and spent, the inflation has already occurred. If the treasury does authorize printing the bond market will take immediate notice. 160B “stimulus” plan, hmm we’ll just demand higher interest rates for TBills.
2)If under the normal course of events someone pays the fed back the loan, the credit created is destroyed. That in itself isn’t deflationary, but the interest paid on the debt can be.
3)As debtors default the credit is destroyed and that is deflationary. It is so for two reasons, one the bank that made the loan has to take a hit on its books meaning it has to raise capital to cover the loss and two it is less willing to loan out money to others, thus slowing velocity.
4)The FED didn’t really create the problem, lots of non-bank entities did (New Century for example). What the FED did fail to do, was stop the banks from buying the bad debts, which is a regulatory failure, not a monetary one.
5)If you want to blame the FED, fine blame Greenspan, he was at the helm during the historic lowering of interest rates that led to all the crap loans in the first place.
Josh
February 28, 2008 at 5:18 PM #162604barnaby33Participantcooprider14, I’ve tried telling you this several times with subtlety, it doesn’t seem to work. THE FED DOES NOT PRINT MONEY. THE FED CREATES CREDIT, AGAINST COLLATERAL. Printing money is the purview of the treasury. There are a couple of big reasons why that is important.
1)The FED cannot print us out of this mess. The credit has already been created and spent, the inflation has already occurred. If the treasury does authorize printing the bond market will take immediate notice. 160B “stimulus” plan, hmm we’ll just demand higher interest rates for TBills.
2)If under the normal course of events someone pays the fed back the loan, the credit created is destroyed. That in itself isn’t deflationary, but the interest paid on the debt can be.
3)As debtors default the credit is destroyed and that is deflationary. It is so for two reasons, one the bank that made the loan has to take a hit on its books meaning it has to raise capital to cover the loss and two it is less willing to loan out money to others, thus slowing velocity.
4)The FED didn’t really create the problem, lots of non-bank entities did (New Century for example). What the FED did fail to do, was stop the banks from buying the bad debts, which is a regulatory failure, not a monetary one.
5)If you want to blame the FED, fine blame Greenspan, he was at the helm during the historic lowering of interest rates that led to all the crap loans in the first place.
Josh
February 28, 2008 at 5:18 PM #162503barnaby33Participantcooprider14, I’ve tried telling you this several times with subtlety, it doesn’t seem to work. THE FED DOES NOT PRINT MONEY. THE FED CREATES CREDIT, AGAINST COLLATERAL. Printing money is the purview of the treasury. There are a couple of big reasons why that is important.
1)The FED cannot print us out of this mess. The credit has already been created and spent, the inflation has already occurred. If the treasury does authorize printing the bond market will take immediate notice. 160B “stimulus” plan, hmm we’ll just demand higher interest rates for TBills.
2)If under the normal course of events someone pays the fed back the loan, the credit created is destroyed. That in itself isn’t deflationary, but the interest paid on the debt can be.
3)As debtors default the credit is destroyed and that is deflationary. It is so for two reasons, one the bank that made the loan has to take a hit on its books meaning it has to raise capital to cover the loss and two it is less willing to loan out money to others, thus slowing velocity.
4)The FED didn’t really create the problem, lots of non-bank entities did (New Century for example). What the FED did fail to do, was stop the banks from buying the bad debts, which is a regulatory failure, not a monetary one.
5)If you want to blame the FED, fine blame Greenspan, he was at the helm during the historic lowering of interest rates that led to all the crap loans in the first place.
Josh
February 28, 2008 at 5:18 PM #162517barnaby33Participantcooprider14, I’ve tried telling you this several times with subtlety, it doesn’t seem to work. THE FED DOES NOT PRINT MONEY. THE FED CREATES CREDIT, AGAINST COLLATERAL. Printing money is the purview of the treasury. There are a couple of big reasons why that is important.
1)The FED cannot print us out of this mess. The credit has already been created and spent, the inflation has already occurred. If the treasury does authorize printing the bond market will take immediate notice. 160B “stimulus” plan, hmm we’ll just demand higher interest rates for TBills.
2)If under the normal course of events someone pays the fed back the loan, the credit created is destroyed. That in itself isn’t deflationary, but the interest paid on the debt can be.
3)As debtors default the credit is destroyed and that is deflationary. It is so for two reasons, one the bank that made the loan has to take a hit on its books meaning it has to raise capital to cover the loss and two it is less willing to loan out money to others, thus slowing velocity.
4)The FED didn’t really create the problem, lots of non-bank entities did (New Century for example). What the FED did fail to do, was stop the banks from buying the bad debts, which is a regulatory failure, not a monetary one.
5)If you want to blame the FED, fine blame Greenspan, he was at the helm during the historic lowering of interest rates that led to all the crap loans in the first place.
Josh
February 28, 2008 at 5:18 PM #162536barnaby33Participantcooprider14, I’ve tried telling you this several times with subtlety, it doesn’t seem to work. THE FED DOES NOT PRINT MONEY. THE FED CREATES CREDIT, AGAINST COLLATERAL. Printing money is the purview of the treasury. There are a couple of big reasons why that is important.
1)The FED cannot print us out of this mess. The credit has already been created and spent, the inflation has already occurred. If the treasury does authorize printing the bond market will take immediate notice. 160B “stimulus” plan, hmm we’ll just demand higher interest rates for TBills.
2)If under the normal course of events someone pays the fed back the loan, the credit created is destroyed. That in itself isn’t deflationary, but the interest paid on the debt can be.
3)As debtors default the credit is destroyed and that is deflationary. It is so for two reasons, one the bank that made the loan has to take a hit on its books meaning it has to raise capital to cover the loss and two it is less willing to loan out money to others, thus slowing velocity.
4)The FED didn’t really create the problem, lots of non-bank entities did (New Century for example). What the FED did fail to do, was stop the banks from buying the bad debts, which is a regulatory failure, not a monetary one.
5)If you want to blame the FED, fine blame Greenspan, he was at the helm during the historic lowering of interest rates that led to all the crap loans in the first place.
Josh
February 28, 2008 at 5:30 PM #162522Deal Hunter
ParticipantIgnore the Harvard Professor behind the curtain! The great OZ has spoken!
February 28, 2008 at 5:30 PM #162609ParticipantIgnore the Harvard Professor behind the curtain! The great OZ has spoken!
February 28, 2008 at 5:30 PM #162541ParticipantIgnore the Harvard Professor behind the curtain! The great OZ has spoken!
February 28, 2008 at 5:30 PM #162508ParticipantIgnore the Harvard Professor behind the curtain! The great OZ has spoken!
February 28, 2008 at 5:30 PM #162211ParticipantIgnore the Harvard Professor behind the curtain! The great OZ has spoken!
February 28, 2008 at 8:12 PM #162306bsrsharma
ParticipantThough I think highly of BB, I think this assessment was purely political. All indicators seem to be worse than in the ’70s. If we can get away with a repeat of 1974-82, we should count ourselves lucky!
February 28, 2008 at 8:12 PM #162602ParticipantThough I think highly of BB, I think this assessment was purely political. All indicators seem to be worse than in the ’70s. If we can get away with a repeat of 1974-82, we should count ourselves lucky!
February 28, 2008 at 8:12 PM #162617ParticipantThough I think highly of BB, I think this assessment was purely political. All indicators seem to be worse than in the ’70s. If we can get away with a repeat of 1974-82, we should count ourselves lucky!
February 28, 2008 at 8:12 PM #162636ParticipantThough I think highly of BB, I think this assessment was purely political. All indicators seem to be worse than in the ’70s. If we can get away with a repeat of 1974-82, we should count ourselves lucky!
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