What does the Fed actually do?

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It runs the interbank payments system. It lends the commercial banks and LFIs reserves on demand at interest.

It does not lend the government $US to spend. It cannot spend into the private sector. It cannot increase the 'money supply' whatever that is.

It can only set interest rates in compliance with Treasury diktat.

Banks do not operate under the Fractional Reserve Banking system that Wikipedia and Ewetube promote as fact.

Banks do not lend reserves except to each other.

Every new loan is new money. 100%. A bank's balance sheet increases by 100% of the loan amount.

George Romey can't get a job because he's a moron.

Comments

Dino Manalis Added Apr 26, 2017 - 8:13am
The fed adjusts interest rates, that's extremely important, and it has to be independent from politics, although I would support occasional meetings between the president and the Fed chairman to discuss conditions and potential actions to help economic growth and jobs.  However, the Fed can't stimulate the economy on its own, the president and Congress are responsible for pro-growth policies and make the Fed's job much easier.
Patrick Writes Added Apr 26, 2017 - 8:58pm
Weathermen across the world are all idiots because they speak of sunrise and sunset. The sun isn't moving, the earth is. Morons...
 
Article: " It [The Fed] cannot spend into the private sector. It cannot increase the 'money supply' whatever that is."
 
http://www.financialsense.com/contributors/matthew-kerkhoff/qe-printing-money-inflation
 
"...think of the Fed's QE program as an asset swap....QE does enable more bank lending, but the lending must take place for the total money supply to grow.
 
Bank lending is dismal, which is why the total money supply has not increased as much as anticipated. The money which the Fed is making available for banks to lend is not being lent out, and is instead working its way into asset prices and accumulating in the reserve accounts of member banks. If and when that money begins to flow out as loans - then we will need to be acutely aware of inflation showing up on our doorstep."
 
 
Banks don't operate on the fractional reserve banking system? Do you feel the need to cite these kind of statements when it disagrees with 99% of accepted knowledge? 
 
Could you explain how did Lehman Brothers Bank collapsed in 2008 (if I can assume that commercial cash reserves aren't important in your view)? 
Michael B. Added Apr 26, 2017 - 10:51pm
John G., go fuck yourself, you slimy limey ass-fucking-hole. You and Jeff Bitchka should 69 each other's old, wrinkled, puny pee-pees and lick out each other's dessicated assholes.
John G Added Apr 27, 2017 - 3:10am
The money which the Fed is making available for banks to lend is not being lent out
The Fed doesn't not make money available for banks to lend out.
If and when that money begins to flow out as loans
Reserves cannot be lent outside the payments system.
Banks don't operate on the fractional reserve banking system?
No. Reserves are not lent outside the payments system and savings are not lent to borrowers.
Every new loan is new money. Loans create deposits. 
 
John G Added Apr 27, 2017 - 3:13am
They do this by buying or selling  US  Treasuries in the open market through a select number of brokers and banks that qualify financially. This adds or subtracts dollars from the system.
No it doesn't. It just changes that asset portfolio of the private sector.
John G Added Apr 27, 2017 - 3:16am
"...think of the Fed's QE program as an asset swap....QE does enable more bank lending,
QE is an asset swap. Yes.
It does not enable more bank lending. No.
Bank lending is only limited by the availability of willing qualified borrowers.
 
John G Added Apr 27, 2017 - 3:55am
George is no moron , but a smart individual.
How could a moron like you judge?
Nope. George is a rude, ignorant moron like you.
Katharine Otto Added Aug 7, 2017 - 2:05pm
Patrick,
You've confirmed what I suspected, that qualified borrowers are scarce.  If I were in business, I would be terrified of going into debt, these days, with the economy so unstable.  Debt is a trap, and after 2008, more and more people are realizing it.  
 
We are being conditioned to believe debt is an asset, because that's how the system has worked since 1913, with the start of the Federal Reserve System.  When so many indebted farmers lost their farms in the Depression, we should have learned better, but we didn't.  The Fed/Feds  are a Ponzi scheme, and the haha truth is that they are desperate to lend their fake money to further pollute the money supply, but not enough people are buying the scam, and that's why they can't create the inflation they so desire.  Too many people walking away from debt, paying off debt, and refusing to borrow more.  Debt write-offs serve to deflate currency, too, and presumably, to shrink the money supply.  This is good for the individual, because her money has more buying power.
John G Added Sep 27, 2017 - 9:36pm
Oh good lord. One person's debt is another person's asset. Money is about double entry book keeping.
George N Romey Added Sep 28, 2017 - 9:20am
Katharine debt no longer fuels a productive economy. Companies used to borrow for expansion and research which expands employment. Today it's for stock buy backs and acquisitions which do nothing to expand the economy.
 
The Fed is clueless. Zero interest rates and QE was designed to stimulate lending but its debt that is collapsing the economy. It's like treating lung cancer with cigarettes.
 
Or banks take the cheap money and redeposit with the Feds as interest paid reserves. The money doesn't circulate into the real economy, it's nothing more than a profit producing gimmick between 2 parties.
 
What is really needed is a jubilee and a return to sanity lending and normalized interest rates. Consumption for the past 20 years has been driven by debt. People like John live in this fantasy world think debt isn't really harmful. Tell that to someone struggling to make a mortgage or car payment.
 
The Fed has rarely understood what is happening in the real economy because like most elites they live in a textbook driven bubble world. They don't understand that debt takes away future consumption and that at some point the future becomes today.
 
Of course John will come back with some smart ass comment but no links to his beliefs. He's got nothing. I know of no one that thinks the Fed isn't a private bank.
John G Added Sep 28, 2017 - 4:16pm
Of course John will come back with some smart ass comment but no links to his beliefs. 
Honest people don't frame the arguments of their opponents. 
I know of no one that thinks the Fed isn't a private bank.
Then you have a very small exposure to people. Or maybe they just agree with you and back off?
People like John live in this fantasy world think debt isn't really harmful. 
People like John understand that for every debt there is a credit. And that is what money is.
We also understand that government money and bank credit are different.
He's got nothing.
You won't ever address the issues that I raise with you because YOU have nothing.
Your Fed conspiracy theory has made Mr Griffin and the gold bugs a lot of money over the years.
But that is all it is. Misdirection.
John G Added Sep 28, 2017 - 4:19pm
Romey, your style of making drive by comments and then ignoring the responses is as cowardly as Jackson, Leroy and the new Libertarian nutter with the double barrelled name.
You avoid arguing with people who can unravel your shit by calling them trolls.
Coward.
George N Romey Added Sep 28, 2017 - 4:46pm
So John give us names of people that back up your ideas.
John G Added Sep 28, 2017 - 5:02pm
John G Added Sep 28, 2017 - 5:07pm
New Economic Perspectives
That should keep you going for a while.
If, and that's a big if, you are genuine.
George N Romey Added Sep 28, 2017 - 5:08pm
Patrick the Fed buys bonds with money digitized by the Treasury. The idea is that banks will turn around and lend that money out reinforcing the economy. However banks have simply turned around and deposited excess reserves at the Fed with interest paid. A risk free proposition for the banks but nothing for the economy. So yes indirectly if QE operated as planned the Fed would put money into the private sector through lending.
 
The Fed among other things buys Treasuries. So indirectly the Fed lends the government money-the same money digitized by the government. If this spells Ponzi Scheme to you, yes you are onto something.
John G Added Sep 28, 2017 - 5:11pm
Greenspan. schools Randian goof Ryan.
I'm no fan of Greenspan by any means but he's right.
John G Added Sep 28, 2017 - 5:35pm
The idea is that banks will turn around and lend that money out reinforcing the economy.
No it isn't. Banks don't lend reserves to retail borrowers. They can only lend them to other LFIs.
John G Added Sep 28, 2017 - 5:36pm
What does digitized by the Treasury mean?
John G Added Sep 28, 2017 - 7:23pm
I've given you names George. And as usual I get zip in return from you.
Saint George Added Sep 30, 2017 - 12:29am
It cannot increase the 'money supply' whatever that is
 
The "money supply" means "the supply of money". Sort of like the "potato supply" means "the supply of potatoes". What do you not get?
 
As usually, you're wrong. The Fed routinely adjusts the quantity of money by means of buying assets like Treasury securities (which increases the money supply) or selling assets like Treasury securities (which decreases the money supply). It does one or the other in order to continue meeting its target interest rate for the federal funds market.
 
You truly are an ignorant twit.
John G Added Sep 30, 2017 - 1:26am
LOLz. You've just contradicted yourself in two sentences. Again.
Moronic wanker.
John G Added Sep 30, 2017 - 4:02am
Romey: If this spells Ponzi Scheme to you, yes you are onto something.
If it spells Ponzi scheme to you, you're as clueless as George is.
George sounds like a Peter Schiff rant.
Digitising this and monetising that!
But what does it mean?
They can never tell you because it's just nonsense.
John G Added Sep 30, 2017 - 4:04am
StGeorge/Corey is a clueless idiot.
The Fed CAN NOT increase the amount or quantity of money in the system aka the 'money supply'.
It can rearrange the asset portfolio. It can increase and decrease reserve balances. 
But it CAN NOT increase or decrease the quantity of money.
The treasury can, and does, increase and decrease the net financial assets of the private sector under orders from the Congress.
But the quantity of money is mostly determined by the commercial banks and borrowers.
The vast majority of money in the system is bank credit.
John G Added Sep 30, 2017 - 5:03am
Reserve accounts are credited when TREASURY spends and reserve accounts are debited when TREASURY taxes.
Doug Plumb Added Oct 13, 2017 - 5:45pm
The Central banks controls interest rate so it is in direct control of the economy.
 
The US government borrows directly from the Fed is my understanding. Where /how does it get funded? I've read lots of independent sources that say this. I should probably re read JKG's book "Money...". He says that the USA is in control of a handful of men.

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