- This topic has 7 replies, 6 voices, and was last updated 18 years, 1 month ago by sdduuuude.
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August 31, 2006 at 4:11 PM #7395September 1, 2006 at 5:21 AM #34167powaysellerParticipant
Too few people are savers, so the Fed focus is on helping the masses; 70% of GDP is consumption, and most Americans are up to their eye balls in debt. At my elementary school, most moms work now; the PTA President told me thiw year we’ve got a bunch of incoming kindergarteners with working moms; volunteer work is down as more moms are working to pay off all that debt and have no time to help at the school. They’re overextended; you can see it everywhere.
Why would the Fed help the 1% or so (just a guess) of Americans who save?
Also, the Fed’s goal is monetary stability, so they must react to large trends that would cause inflation or deflation, not to the minor trends caused by the savers.
September 1, 2006 at 7:21 AM #34175barnaby33ParticipantIts even more sinister and self-interested than that. If you owe the bank 1000 dollars its your problem. If you the banking system 3 trillion in adjustable rate mortgages, its the banking systems problem.
Josh
September 1, 2006 at 7:21 AM #34176technovelistParticipantActually, the Fed’s goal is inflation. That’s why it was created in the first place, so that the government could spend more than it takes in taxes. However, if people realized that, they wouldn’t be able to get away with it anymore. Thus, they are always trying to bamboozle the public into believing they are “fighting inflation”, when in fact ending inflation is easy: just stop printing money.
September 1, 2006 at 12:02 PM #34216poorgradstudentParticipantThis seems like as good a place as any to put this thought I’ve had lately:
Would Deflation be such a bad thing?
From my understanding, deflation tends to raise wages and rewards savers while lowering corporate profits and hurting borrowers.
It also does tend to raise unemployment.
Over the past couple years wages have not increased, while corporate profits have been flying high. I wonder if a little deflation would be good for the economy right now.
September 1, 2006 at 1:45 PM #34223technovelistParticipantYes, of course deflation is good for savers and bad for borrowers. But what is the biggest borrower in the world? Hint: its initials are “USA”. And it just so happens to have a magic “money” printing machine to make sure that there is no deflation, courtesy of the Federal Reserve. Thus, deflation cannot happen until and unless the Federal Reserve loses the ability to inflate, which in turn can happen only when no one will take their funny “money” any more, i.e., after a hyperinflation that wipes out the “dollar”.
September 1, 2006 at 1:51 PM #34224sdduuuudeParticipantI think I’ve heard Rich say the Fed doesn’t really care about limiting inflation. It only strives to limit the public’s perception of or expectation of inflation. Someone else may have to explain that in full, or link to one of Rich’s articles.
September 1, 2006 at 1:57 PM #34225sdduuuudeParticipantWow. Just after I posted that, I noticed this from this morning.
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