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Can one of you financial lender geniuses explain this to me?

Discussion in 'Other Off Topic Forum' started by JimSchad, Nov 7, 2003.

  1. JimSchad

    JimSchad Guest

    Follow this link. It is to some data on how the Fed is dumping money reserves into the banking system almost daily. I don't know what all the fancy terms mean....coupon pass, reverse repos, overnight repos etc.

    Seems to me though that they are pumping cash into the system to prop it up and taking Treasury Bills as collateral which are just promises to pay from the US Govt.....so really no collateral other than the USA's good credit.

    http://biz.yahoo.com/n/z/z0003.html
     
  2. ILuv4Res

    ILuv4Res F1 Veteran
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    Fred
    Jim, remember, we were taken off of the Gold Standard. Therefore all money is nothing more than the strength of the issuing government.

    The Fed is trying to de-value the $. By doing so, it makes the $ worth less so other countries will buy US goods. Foreign money buys a larger basket of goods.

    It also helps sustain prices of items such as Real Estate and Stocks without changing value. For example: if $1 could buy you an item a year ago, but now that same item sells for $2, by making that $2 the equivalent of $1 of last years dollars it keeps the price high at $2 (to eliminate deflation of price) while retaining value.

    Increasing the supply of $ allows interest rates to stay lower since there's more $ to lend.

    They're playing a scary game in my opinion.
     
  3. Doody

    Doody F1 Veteran

    Nov 16, 2001
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    Mr. Doody
    "scary" is one word. "stupid" might be another". at best, perhaps, "a game whose time has passed".

    it'd be one thing if it was one or a few short-term bursts, but, correct me if i'm wrong, it's been a continual long exercise. at some point it's likely to backfire. and the longer they keep it up, the worse the backfire is likely to get.

    doody.
     
  4. redhead

    redhead F1 Rookie
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    I am ignorant on this, so what might the "backfire" be? Another great depression or something of that magnitude???
     
  5. Doody

    Doody F1 Veteran

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    i wouldn't suggest anything of that magnitude, though i assume some outlier economists would suggest just about anything :).

    the risks are that they cause inflation to happen by printing too much money and they cause foreign exchange to go flaky if/when the other world governments think we've printed too much.

    my two pennies. i'm not an economist - i just play one on the net.

    doody.
     
  6. redhead

    redhead F1 Rookie
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    Cool---Understand a little better now.

    thanks Doody!

    Red
     
  7. bobafett

    bobafett F1 Veteran

    Sep 28, 2002
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    I'm half expectnig a balance of payments crisis...

    --Dan
     
  8. Texas Forever

    Texas Forever Three Time F1 World Champ
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    Apr 28, 2003
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    Texas!
    Jim, I wouldn't waste any time trying to figure out the Fed. There's a small army of folks who daily study pig entrials and chicken guts trying to figure out the Fed, when the truth is that we are all caught in a riptide that is carrying us to who knows where. Put another way, even the Fed doesn't have a clue as to what's gonna happen next. Scary, but true.

    IMHO, all you can do at the individual level is to "take a look around you and see which way the wind blows." There are always opportunties to make money, no matter how bad things might seem. According to legend, Lord Kynes made a killing buying real estate in Paris during WWI even as the Huns were approaching.

    In other words, trust your own gut. Nobody bats a 1,000. But if you have good instincts, you can make it to the World Series.

    Good luck, Dale
     
  9. JimSchad

    JimSchad Guest

    Yeah I agree it is bigger than one individual so I can't try to change things. Just trying to not be surprised when it hits the fan. All fiat money systems....backed by nothing....eventually run aground. It has happened 4 times already in the US's short history. It just seems that more and more cash is being created and pumped in and at some point its gotta bust. It is really scary if you think about it yet we all go about our daily lives like nothing is going on.

    According to many theorists boom and bust cycles are engineered by banks by increasing and decreasing the money supply. The depression according to some was calculated by banks calling in their notes that everyone had borrowed to buy overvalued stocks. Many had to sell to cover their calls and selling begat selling and the crash happened. Joe Kennedy's fortune went from $4MM to $100MM during the depression so I have read by taking advantage of the situation.
     
  10. ILuv4Res

    ILuv4Res F1 Veteran
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    What a racket......run up a US defecit then print money to pay for it......I wish I could print money so I could pay back my loans.......
     

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