How does the federal reserve bank pump money into the economy ?

[tradeunionsupporter]

How does the federal reserve bank pump money into the economy and help the economy how does this work can anyone explain ?

http://topics.nytimes.com/top/reference ... index.html (http://topics.nytimes.com/top/reference/timestopics/organizations/f/federal_reserve_system/index.html)

[freakazoid]

It doesn't work. The Fed is a crock of shit.

http://logisticsmonster.com/wp-content/uploads/FRtoiletpaper.jpg

[Tychus]

The documentary Zeitgeist: Addendum is a good resource for exposing the bullshit that is the Fed.

[Renegade Saint]

It doesn't work. The Fed is a crock of shit.

http://logisticsmonster.com/wp-content/uploads/FRtoiletpaper.jpg

People have been predicting hyper-inflation due to monetary expansion for a long time-particularly since 2008 (since then the Fed has tripled the monetary base). We're still waiting. And waiting.

[RGacky3]

The documentary Zeitgeist: Addendum is a good resource for exposing the bullshit that is the Fed.


It is, but its attempt at a solution or further economic analysis is childish and just rediculous.

[Franz Fanonipants]

you mean that caring about the fed at all is a capitalist ploy, just like the fed itself?

[RGacky3]

No their technocrat utopianiams, and their idea that the Fed is the ton power and not a tool of class power.

[NewLeft]

No their technocrat utopianiams, and their idea that the Fed is the ton power and not a tool of class power.

Spare them. They're not all bad ideas, the horizontal farming buildings; the automation of hard labour, libraries for electronics..

[Tim Cornelis]

It doesn't work. The Fed is a crock of shit.

http://logisticsmonster.com/wp-content/uploads/FRtoiletpaper.jpg

Which is absolute nonsense. Here are the recent inflation rates:

2011 (first 11 months only) 3,1 %
2010 1.64 %
2009 -0.34 %
2008 3.85 %

The increase in the money supply is necessary to prevent deflation as deflation may lead to disastrous consequences (that is, a Great Depression).

Deflation, the fall in prices, leads to scaling down of production, and therefore it needs less labour (increased unemployment) and fall of wages. The consequence of this is a fall in demand and a repeat of the process (fall in demand = less need for labour = more unemployment = less demand = less need for labour--and so forth) leading to extreme heights in unemployment. This is what happened during the Great Depression.

You can fight economic crises by increasing the velocity of money (or circulation). This can be done by increasing the money supply, as a Central Bank does by injecting money into the economy. Or alternatively, introducing free money. Free money is when the value of your money decreases the longer you save it, thus giving you an incentive to spend it, thereby increasing the velocity of money (read about it here: http://en.wikipedia.org/wiki/Freiwirtschaft).


Free money may turn out to be the best regulator of the velocity of circulation of money, which is the most confusing element in the stabilization of the price level. Applied correctly it could in fact haul us out of the crisis in a few weeks ... I am a humble servant of the merchant Gesell.
—Prof. Dr. Irving Fisher, economist at Yale University New Haven/USA

The Great Depression, which lasted until 1933, there was a decrease in the money supply. These are the inflation rates for those years:

1933 -5.09 %
1932 -10.30 %
1931 -8.94 %

Thank the fed, for all you know they saved you from a Great Depression by increasing the money supply!

[RGacky3]

Spare them. They're not all bad ideas, the horizontal farming buildings; the automation of hard labour, libraries for electronics..

Yeah, but ideas with no plan to get there is just pointless utopianism, anyone cane come up with utopian models, but its totally useless.

[TheCultofAbeLincoln]

The Fed is the 'bankers bank' which loans money to private banks who loan money to you and me. When they say 'pump money into the economy' they most likely mean, if referencing the fed, to lower interest rates lowering the cost private banks borrow at and, theoretically, lowering the cost of loans to individuals. This doesn't work, as the interest rate set on the dollar by the fed has been at or near 0% since the market crash and has done little to help individuals get loans from private banks, who have the capital but are not forced to make loans and are not doing so right now (at least not to anything but very qualified buyers).

Inflation has been the cause that has rallied many in politics, as has been pointed out in the thread. But unemployment is, thank god, getting the spotlight now.


Yeah, but ideas with no plan to get there is just pointless utopianism, anyone cane come up with utopian models, but its totally useless.


I would pose the thought that instead of lowering the rate private banks borrow at, the focus by us should be (and has been by many leftist groups) to put a moratorium on foreclosures and to allow private banks to absorb some losses from refinancing the private debt held in homes instead of just hoarding capital indefinitely.

[capitalism is good]

The Fed is simply printing more money to pay for the Entitlements that they can no longer afford. You have to cut spending.

[RGacky3]

THe Fed prints money so that capitalism does'nt collapse ....

[capitalism is good]

Printing more money endangers capitalism for it creates inflation. Cutting spending will save capitalism.

[RGacky3]

Printing more money endangers capitalism for it creates inflation. Cutting spending will save capitalism.


Without inflation Capitalism cannot funtion, capitalism needs an at least 3% growth each year to survive.

[Comrade Hill]

Printing more money endangers capitalism for it creates inflation. Cutting spending will save capitalism.

You're just repeating talking political talking points. Nobody is going to listen to this amateur nonsense. You are going to have to back up your statements with empirical data or analysis.

[Platonic Sword]

It's interesting, the economic left and right both know the FR are a bunch of crooks. So who are the power brokers that protect these criminals?? And whose interests to they serve?

[RGacky3]

It's interesting, the economic left and right both know the FR are a bunch of crooks. So who are the power brokers that protect these criminals?? And whose interests to they serve?


The Financial capitalists, the thing is the right that does'nt like the FR are misguided imo, Capitalism COULD NOT exist at all as it is without the FR, if we went back to the gold standard capitalism would collapse quick, if we went back to a fixed monitery system you'd have a major problem.

People forget that one reason the US wen't off the gold standard was that South African and the USSR were the largest miners of gold.

I oppose the FR because they are one of the main systems holding up this disasterous system we call capitalism, and maintaining the class power of the financial capitalists.

[Doflamingo]

Cutting spending will save capitalism.

This is what capitalists actually believe.

[The Teacher]

Inflation is the natural consquence of a market economy. Whenever things are good, the quest for profit means that companies raise their prices as consumers can "afford" it. Then workers demand a raise in wages to compensate for the higher cost of living. In theory this would be sorta okay, except that in market capitalism, wages never keep up with inflation over the long run, unless propped up by artifical means (minimum wage laws, union demands). Even these measures fall short, as the cost of the higher wages is passed on to the consumer. Its not like the people at the top would accept lower profits

[The Teacher]

P.S. the US government will never cut spending on things that benefit the capitalists. Our fiscal policy is essentially a huge giveaway program for the ultra rich. Crooked government contracts, insanely low tax rates on money that is "earned" through investments, corporate welfare that makes sure that some of the most profitable companies get a return on their taxes.

They will cut spending on things that help regular people eat or get healthcare.

[Anarcho-Capitalist]

The Federal Reserve is a private bank centrally planning the currency, half of every economic activity. It is the root cause of the boom, which inevitably leads to a bust.

[RGacky3]

It is the root cause of the boom, which inevitably leads to a bust.

Its also the root couse of Capitalism continuing to exist into the 20th century (yes 20th, not even 21st).

[Tim Cornelis]

This is what capitalists actually believe.

Indeed, the following anecdote catches the stupidity:


[Hayek's theories] implied that the best thing to do in a recession or depression is not to spend, but rather to save as this will bring the savings and loans back into the equilibrium position. Economist R. F. Kahn recounted when Hayek presented his theory at a seminar in Cambridge University. His presentation was followed by silence. Then Kahn asked the obvious question: "Is it your view that if I went out tomorrow and bought a new overcoat, that would increase unemployment?" All that Hayek could offer in reply was the unconvincing claim that to show why would require a complicated mathematical argument.
(source: an anarchist faq)

[RGacky3]

All that Hayek could offer in reply was the unconvincing claim that to show why would require a complicated mathematical argument.


ALL the austrian school does, is make rediculously complicated mathematical models that totally ignore obvious things.

Its like making a mathematical model on why water is boiling without taking to account that its on a stove. You'll need an extremely complicated model to explain it without taking into account its on a stove, but if you take that into account it makes it much easier.


but rather to save as this will bring the savings and loans back into the equilibrium position.

That would increase employment and put and upword pressure on wages how??? The whole point of the credit system is that savings and laons ARE NOT in equilibrium, your creating growth.

Depressions don't happen because credit is'nt in equilibrium with loans, or even that interest rates are too high, its when you can't make a return on it because revenue drops, many times caused by a demand shortage.

Hayek's whole thing was defending a pure form of capitalism, not actually figuring out how economics works.

[Leonid Brozhnev]

This is what capitalists actually believe.

People need money to survive in capitalism and capitalism needs those people to spend their money in order to survive, at the same time Capitalists believe that not spending money will save capitalism?

http://www.majhost.com/gallery/AsiniDiabolica/wat/uhhh.jpg