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Federal Reserve makes record $52.1bn profit!


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I am sure most everyone in this thread knows more about this subject than me, but I have a couple of questions.

About Gold being the most useful metal and that is why it has value. Didn't aluminum at one time have a similar status as gold as far as value? And aluminum is far more useful than gold, so why wouldn't it be just as, if not more valuable than gold? Is that because it is more abundant?

If there is a finite supply of gold, doesn't that stifle growth? Is that why we went away from the gold standard?

And no matter what the currency whether it be gold, platinum, monopoly money, or small pox blankets, isn't just bartering in the end?

And while the argument that the gov't could just print 50 trillion dollars overnight and devalue the money, isn't there a reason that hasn't been done yet? Is it because the people running the system understand the kind of devastating consequences that would have and therefore don't allow it to happen?

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... which it hasn't yet.

But if we had no flexibility in the money supply, we WOULD be in a depression right now.

There are multiple problems with this statement.

First and foremost, I believe that fiat currency is very, very unconstitutional.

Why? Under Section 8 of the Constitution, it clearly states one of the powers of Congress is: To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures. From my studies, a coin is a coin and the intent was to be of gold or silver (which is backed up under Section 10). The regulation of this is in the statement of fixing the Standard of Weights and measures by regulating how much each coin weighs and how much gold or silver is contained in each coin. This is evidenced by coins made prior to 1965 and those coins are worth more than face value now! What if our dollar were done in the same manner? Surely it would be worth more than it is now. This is further backed up in the Constitution under section 10 where it states clearly that no state shall make anything but gold and silver coin!

Somebody please point out the Constitutional Amendment that was passed to allow our government to print monopoly money backed by nothing except a promise!

Further, if we drastically reduced our country's expenses by reducing unnecessary expenditures (like having 75,000 US troops in Germany and the mountains of foreign aid) then the income tax could be eliminated altogether except in times of war (as the Constitution originally intended until the 16th Amendment was passed under very deceitful terms).

The dollar would be much more stable and prices would adjust as the value of the dollar adjusted. What a novel concept! Instead of imposing a hidden tax (wages are the last thing to increase when the dollar drops and prices rise so whether you realize it or not, there's another imbedded tax), prices would drop significantly as the price of goods would decrease with decreases in production costs. Yes, wages would drop as a result but spending power would remain the same as the dollar is suddenly worth more!

It's all about the Constitution and the fact that it's been trampled on for far too long...

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you posted the article without knowing anything about it? :unsure:

The Fed bought government securities to stabilize the financial system... The financial system has made 52.1 billion... 46 of which come to us, the taxpayers...

As long as this is done incrementally so not to cause inflation, the financial system will recover... we are already seeing this, the next domino effect is rise in employment.

It's absolutely mind-blowing how dumb people can be about this stuff.

If the Fed had lost money this guy would be crying about wasting taxpayers dollars and incurring more debt for future generations. But the Fed gained money while simultaneously helping the financial sector, and of course he can't say anything good about Obama, so he has to pitch a fit about some conspiracy involving government making a profit.

It boggles the mind how people can be so blind.

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But once again, for the bazillionth time, we aren't continuing to screw ourselves over and lower our standard of living as a result. If we wanted to, we could just freeze the currency and reset it to where candy is a nickel again and cars are 3000 dollars, (as they did in places like Germany to combat hyperinflation). But that's relatively futile because how much a dollar is worth is a very useless number without realizing the big picture. Our dollar may have half the purchasing power as it did, but we don't get paid the same amount as we did back then. And the money we stored from back then sits in accounts that pay interest that outpace that devaluation (and are largely possible BECAUSE we devalue our currency).

And that's a part of this that nobody tends to talk about...inflation is GOOD for people who have debt. Wages typically rise with inflation, but the amount of money owed to lenders stays the same. So if you have $50k in debt and make $30k a year, and inflation drives your salary up to $50k a year over 10 years, then your debt relative to income has shrank considerably.

That was very much the idea behind the Progressive movement's push for unlimited coinage of silver back in the early 1900s...banks and lenders went nuts over the idea because they realized that the inflation caused by unlimited coinage of silver would hurt their investments/loans.

Which is more proof that even when we use rare metals as currency (silver and gold), government policies can still create very high rates of inflation and otherwise manipulate the worth of that currency.

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There are multiple problems with this statement.

First and foremost, I believe that fiat currency is very, very unconstitutional.

Why? Under Section 8 of the Constitution, it clearly states one of the powers of Congress is: To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures. From my studies, a coin is a coin and the intent was to be of gold or silver (which is backed up under Section 10). The regulation of this is in the statement of fixing the Standard of Weights and measures by regulating how much each coin weighs and how much gold or silver is contained in each coin. This is evidenced by coins made prior to 1965 and those coins are worth more than face value now! What if our dollar were done in the same manner? Surely it would be worth more than it is now. This is further backed up in the Constitution under section 10 where it states clearly that no state shall make anything but gold and silver coin!

Somebody please point out the Constitutional Amendment that was passed to allow our government to print monopoly money backed by nothing except a promise!

Further, if we drastically reduced our country's expenses by reducing unnecessary expenditures (like having 75,000 US troops in Germany and the mountains of foreign aid) then the income tax could be eliminated altogether except in times of war (as the Constitution originally intended until the 16th Amendment was passed under very deceitful terms).

The dollar would be much more stable and prices would adjust as the value of the dollar adjusted. What a novel concept! Instead of imposing a hidden tax (wages are the last thing to increase when the dollar drops and prices rise so whether you realize it or not, there's another imbedded tax), prices would drop significantly as the price of goods would decrease with decreases in production costs. Yes, wages would drop as a result but spending power would remain the same as the dollar is suddenly worth more!

It's all about the Constitution and the fact that it's been trampled on for far too long...

So according to you, we should give back all of the land West of the Mississippi river. Because it's all about the Constitution...

I agree, it’s too bad so many Americans see the Constitution as better suited for lining the bottom of a bird cage :wacko: than a document to govern by :)

Same question for you...do we give back all land West of the Mississippi River?

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So according to you, we should give back all of the land West of the Mississippi river. Because it's all about the Constitution...

Going to an extreme again?

No, what I said was not engage in conflicts that we have no business in abroad (see Korea, Vietnam, Iraq and Afghanistan) or give aid to foreign countries or have our troops scattered abroad. Further, I also stated my opinion on coining money.

Seriously, I'm sure you and a certain litigious guitar player have already had these discussions... ;)

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Going to an extreme again?

No, what I said was not engage in conflicts that we have no business in abroad (see Korea, Vietnam, Iraq and Afghanistan) or give aid to foreign countries or have our troops scattered abroad. Further, I also stated my opinion on coining money.

Seriously, I'm sure you and a certain litigious guitar player have already had these discussions... ;)

So you like to pick and choose which parts of the Constitution to follow. According to your viewpoint, the Louisiana Purchase was unconstitutional, and we should go back to the days when people followed the Constitution.

Can't have it both ways, man.

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There are multiple problems with this statement.

First and foremost, I believe that fiat currency is very, very unconstitutional.

Why? Under Section 8 of the Constitution, it clearly states one of the powers of Congress is: To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures. From my studies, a coin is a coin and the intent was to be of gold or silver (which is backed up under Section 10). The regulation of this is in the statement of fixing the Standard of Weights and measures by regulating how much each coin weighs and how much gold or silver is contained in each coin. This is evidenced by coins made prior to 1965 and those coins are worth more than face value now! What if our dollar were done in the same manner? Surely it would be worth more than it is now. This is further backed up in the Constitution under section 10 where it states clearly that no state shall make anything but gold and silver coin!

Somebody please point out the Constitutional Amendment that was passed to allow our government to print monopoly money backed by nothing except a promise!

Further, if we drastically reduced our country's expenses by reducing unnecessary expenditures (like having 75,000 US troops in Germany and the mountains of foreign aid) then the income tax could be eliminated altogether except in times of war (as the Constitution originally intended until the 16th Amendment was passed under very deceitful terms).

The dollar would be much more stable and prices would adjust as the value of the dollar adjusted. What a novel concept! Instead of imposing a hidden tax (wages are the last thing to increase when the dollar drops and prices rise so whether you realize it or not, there's another imbedded tax), prices would drop significantly as the price of goods would decrease with decreases in production costs. Yes, wages would drop as a result but spending power would remain the same as the dollar is suddenly worth more!

It's all about the Constitution and the fact that it's been trampled on for far too long...

If you want to know how it's justified, the government still retains the power to coin money. But they've allowed that power to be transferred to the federal reserve.

If you want to speak in terms of economic feasibility, your currency would require full reserve banking instead of fractional reserve. There's no way we could support our business structure, ESPECIALLY our small business structure, if we did that. Of course nor would banks/credit unions really have any incentive to pay interest in their accounts as it's not like they can use that money anyway. If banks could loan out anything that resembles what they do today without fractional reserve, they would hold so much of the total wealth in the US it would be downright scary.

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So you like to pick and choose which parts of the Constitution to follow. According to your viewpoint, the Louisiana Purchase was unconstitutional, and we should go back to the days when people followed the Constitution.

Can't have it both ways, man.

Not at all. I think Jefferson should have gone through with the amendment that he drafted. That said, does that preclude us from learning from the past and doing things right?

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If you want to know how it's justified, the government still retains the power to coin money. But they've allowed that power to be transferred to the federal reserve.

If you want to speak in terms of economic feasibility, your currency would require full reserve banking instead of fractional reserve. There's no way we could support our business structure, ESPECIALLY our small business structure, if we did that. Of course nor would banks/credit unions really have any incentive to pay interest in their accounts as it's not like they can use that money anyway. If banks could loan out anything that resembles what they do today without fractional reserve, they would hold so much of the total wealth in the US it would be downright scary.

How is running a printing press "coining"? Where are they allowed to transfer that power in the Constitution?

Not talking about flipping a switch, there would definitely have to be a transition to it. Further, who said it would require full reserve banking? I know I didn't.

Bottom line is this: If all of us gold and silver people are wrong then the only thing that happens is that a bunch of people have gold and silver assets.

If we are all right and the dollar dies, aren't we much better off having done this?

Risk vs. Reward principle says we should do this...

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How is running a printing press "coining"? Where are they allowed to transfer that power in the Constitution?

Not talking about flipping a switch, there would definitely have to be a transition to it. Further, who said it would require full reserve banking? I know I didn't.

Bottom line is this: If all of us gold and silver people are wrong then the only thing that happens is that a bunch of people have gold and silver assets.

If we are all right and the dollar dies, aren't we much better off having done this?

Risk vs. Reward principle says we should do this...

A bit off topic, but you realize that gold is the greatest sucker bet there is when it comes to investments, right? There are people who had money in gold from years ago and are making a very nice profit off of their investments. But buying it now is frankly silly because it's almost guaranteed to go down over the next five years. As a long-term investment, moreover, it just doesn't make sense.

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How is running a printing press "coining"? Where are they allowed to transfer that power in the Constitution?

Not talking about flipping a switch, there would definitely have to be a transition to it. Further, who said it would require full reserve banking? I know I didn't.

Bottom line is this: If all of us gold and silver people are wrong then the only thing that happens is that a bunch of people have gold and silver assets.

If we are all right and the dollar dies, aren't we much better off having done this?

Risk vs. Reward principle says we should do this...

Yeah, and using that logic the constitution only grants rights to people "born or naturalized" in the US, and last I checked a woman's fetus hasn't been either born or naturalized, meaning the founding fathers wanted abortion to be legal.

... how do you have a full gold currency with fractional reserve banking? Furthermore, how do you expect any currency working under the fractional reserve system not be susceptible to inflation? Under fractional reserve, private banks create money out of thin air, which you don't want us to be able to do.

And if you're wrong about gold, we'll experience massive deflation (or inflation, even), go through a massive depression, and lose really most of the power we have in the international community that we currently derive on the strength of our dollar.

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Yeah, and using that logic the constitution only grants rights to people "born or naturalized" in the US, and last I checked a woman's fetus hasn't been either born or naturalized, meaning the founding fathers wanted abortion to be legal.

... how do you have a full gold currency with fractional reserve banking? Furthermore, how do you expect any currency working under the fractional reserve system not be susceptible to inflation? Under fractional reserve, private banks create money out of thin air, which you don't want us to be able to do.

And if you're wrong about gold, we'll experience massive deflation (or inflation, even), go through a massive depression, and lose really most of the power we have in the international community that we currently derive on the strength of our dollar.

Actually that's a faulty analogy because the subject of abortion was never meant to be dealt with at the federal level but is one that should have been left to the states.

I think you are still thinking of the old gold standard and not what has been envisioned here as far as your 2nd paragraph...

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A bit off topic, but you realize that gold is the greatest sucker bet there is when it comes to investments, right? There are people who had money in gold from years ago and are making a very nice profit off of their investments. But buying it now is frankly silly because it's almost guaranteed to go down over the next five years. As a long-term investment, moreover, it just doesn't make sense.

Of course I do, that's why I have none. If I were to invest in metals now it would be silver but even still, I don't think those are good long-term investments. I do think they are an effective hedge in the short-term however...

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Actually that's a faulty analogy because the subject of abortion was never meant to be dealt with at the federal level but is one that should have been left to the states.

I think you are still thinking of the old gold standard and not what has been envisioned here as far as your 2nd paragraph...

What?

Ok, a bank gets 10 dollars on a loan. they loan 5 of it out, then collect the 5 dollars back at a later date.

They just created money out of thin air, with no gold to back any of it. How does your system account for that, then?

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What?

Ok, a bank gets 10 dollars on a loan. they loan 5 of it out, then collect the 5 dollars back at a later date.

They just created money out of thin air, with no gold to back any of it. How does your system account for that, then?

No, at no point do they change the money supply--money simply changes hands. Just like now, when you deposit money in a bank they become trustees of your money. It doesn't just sit in a bank and rot. The currency itself is still backed, regardless of location...

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No, at no point do they change the money supply--money simply changes hands. Just like now, when you deposit money in a bank they become trustees of your money. It doesn't just sit in a bank and rot. The currency itself is still backed, regardless of location...

No. Come on, as someone who's so anti fed, you should know this. If a bank takes in a deposit and then loans out that money while still guaranteeing the full deposit, they just created money out of thin air. It's one of the tools at the disposal of the fed to manipulate the money supply.

The amount that the money supply is increased by is dependent on how much they have to keep as a reserve, which is a mandate that comes down from the Fed and one of the things the Fed can use to manipulate the money supply.

Thats money 101, man.

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No. Come on, as someone who's so anti fed, you should know this. If a bank takes in a deposit and then loans out that money while still guaranteeing the full deposit, they just created money out of thin air. It's one of the tools at the disposal of the fed to manipulate the money supply.

The amount that the money supply is increased by is dependent on how much they have to keep as a reserve, which is a mandate that comes down from the Fed and one of the things the Fed can use to manipulate the money supply.

Thats money 101, man.

Well aware of what you are saying but it's two separate issues. Again, a bank loans out money to make money. Whoever they loan it to is obligated to pay it back plus interest. They haven't "created" money because they haven't changed the money supply. They would only change the money supply if they had some method of printing more legal currency and paying the interest with it.

The problems occur far further up the chain than at your local bank area and the two arguments shouldn't be intermingled as such...

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Well aware of what you are saying but it's two separate issues. Again, a bank loans out money to make money. Whoever they loan it to is obligated to pay it back plus interest. They haven't "created" money because they haven't changed the money supply. They would only change the money supply if they had some method of printing more legal currency and paying the interest with it.

The problems occur far further up the chain than at your local bank area and the two arguments shouldn't be intermingled as such...

No man, I don't think you understand.

Ok, let me give you an example.

John deposits 100 dollars in a bank.

The bank gives 50 of the dollars to Tim interest free (for the sake of simplicity) as a loan.

The second they do that, they've expanded the money supply, because they've counted the money twice in the books and loaned out money that doesn't technically exist (as all the money they loaned Tim is technically still in Johns bank account). The 100 dollars they have in their account magically turned into 150 dollars. 50 dollars of real money magically found it's way into the system, despite if there's gold to account for it or not.

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No man, I don't think you understand.

Ok, let me give you an example.

John deposits 100 dollars in a bank.

The bank gives 50 of the dollars to Tim interest free (for the sake of simplicity) as a loan.

The second they do that, they've expanded the money supply, because they've counted the money twice in the books and loaned out money that doesn't technically exist (as all the money they loaned Tim is technically still in Johns bank account). The 100 dollars they have in their account magically turned into 150 dollars. 50 dollars of real money magically found it's way into the system, despite if there's gold to account for it or not.

What you're describing is really still full reserve banking, since the bank is lending out less than it has in its vault. A better example of fractional reserve:

The required reserve ratio is .2 (20%).

John deposits 100 dollars in a bank.

The bank gives 100 dollars to Tim, 100 dollars to Bill, 100 to Steve, 100 to Mario, and 100 to Jamal.

400 dollars just got created out of thin air because of a reserve requirement of 20%.

That's how it works.

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No man, I don't think you understand.

Ok, let me give you an example.

John deposits 100 dollars in a bank.

The bank gives 50 of the dollars to Tim interest free (for the sake of simplicity) as a loan.

The second they do that, they've expanded the money supply, because they've counted the money twice in the books and loaned out money that doesn't technically exist (as all the money they loaned Tim is technically still in Johns bank account). The 100 dollars they have in their account magically turned into 150 dollars. 50 dollars of real money magically found it's way into the system, despite if there's gold to account for it or not.

Yeah, I do understand (job experience, etc. required it). Here's where accounting comes into play. It's not counted twice in the books, it's actually offsetting entries so that there is no net change, at least in your scenario (see above post) and I won't get into deferred revenue, liabilities, etc. Key point is that not 1 piece of actual currency is created.

Loans were around prior to 1971 and they'd still be around under a new (and entirely different) gold standard...

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What you're describing is really still full reserve banking, since the bank is lending out less than it has in its vault. A better example of fractional reserve:

The required reserve ratio is .2 (20%).

John deposits 100 dollars in a bank.

The bank gives 100 dollars to Tim, 100 dollars to Bill, 100 to Steve, 100 to Mario, and 100 to Jamal.

400 dollars just got created out of thin air because of a reserve requirement of 20%.

That's how it works.

You're certainly correct, but I was just keeping it simplified without pushing things to the Nth degree.

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Yeah, I do understand (job experience, etc. required it). Here's where accounting comes into play. It's not counted twice in the books, it's actually offsetting entries so that there is no net change. Key point is that not 1 piece of actual currency is created.

Loans were around prior to 1971 and they'd still be around under a new (and entirely different) gold standard...

If that were true, the Fed wouldn't use reserve requirements as a tool to regulate the money supply.

And loans existed in 1971, yes. Inflation, in fact inflation that far outpaced recent inflation, was also around.

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If that were true, the Fed wouldn't use reserve requirements as a tool to regulate the money supply.

And loans existed in 1971, yes. Inflation, in fact inflation that far outpaced recent inflation, was also around.

Common sense says that not so much as a penny was physically created. It's just moving money around is all it is.

As for inflation, 2007 was the highest inflation rate since 1973, a mere 2 years after the gold standard was permanently removed by Nixon and the dollar hasn't stopped declining yet because the printing presses keep on running.

Might as well just agree to disagree on this one and neither of us are going to concede to the other...

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