Inflation And The US Dollar

Not exactly. The Fed "is a quasi-public (government entity with private components) banking system" (Wikipedia)

Neither the banks nor the government are in total control, however, each can exert its will through the system when needed. Either way, it is a failed system with too much power and the core of the quote still stands:

It depends on who is the head of the FED as to the influence that one can exert on it. People can make their wishes known, but can't impose. Alan Greenspan was a typical example. He did what he thought was best for the economy and didn't give a rats .... about what the President wanted.




The FED can ease money (lower rates) to help the economy grow. Easier/cheaper to borrow or can tighten money (raise rates) to slow economy - slow down inflation.

The FED has a line to walk. Depending upon the chairman's philosophy, they will act accordingly.

Interesting information; thanks for posting it, WWhitman!

No, that doesn't quite get them. Notes are promises to pay, not payments on the deficit. Simply put: deficit become debt, currently $9.7 trillion (yes, with a T). That basically means every child born in this country starts out with a negative $30,000+ savings account.

The definition of recession you mention is correct, but the growth numbers can be managed. Looking at the June numbers, I wonder how much growth there would have been without the economic stimulus checks (see deficit spending/debt/borrowing from our children above). This quarter and next will tell us a lot more. It's impossible to say when a recession starts until it's been going on for two+ quarters, but the economists I'm reading seem to be leaning about 80-20 to negative growth. The jobs data I read this morning (2 seekers for every 1 opening) appear to lend even more support to this idea.

The problem as you define it only tells the story of the foundation of the house of cards. We should all become familiar with the term "mortgage-backed securities." The problem was most assuredly not that people purchased homes on silly terms. The problem was that mortgages were packaged and sold as investments, and then resold, and other investment vehicles were created and purchased using value of the original 'mortgage-backed' investment as collateral for reinvestment--the financial services and investment community built a huge house of cards on the very shaky foundation they created. The problem stemmed from not only a lack of proper lending standards, but also the assumption that the values of the properties in question would continue to rise at such a rate as to minimize the tremendous risk that was being piled onto the original debt instruments. Everyone in the financial sector who dealt in mortgage-backed securities should receive some blame, but this problem would have been nowhere near as large with proper oversight and regulation of the investment companies that were allowed to mingle their activities with banks with absolutely no transparency. Current bailout estimates are in the trillion dollar range. You can blame the original borrower/lender relationship if you want to, but it's missing the big picture. Remember Enron? The curent Ponzi scheme we taxpayers are on the hook for will make Enron look like the 'good old days.'

There has been massive shorting on Wall Street. A lot of the "gains" you are seeing in the last two days is traders covering their shorts because the short-sellers were right--the companies they were shorting were in dire trouble--and the government is saying that in changing the rules we can't afford to let short-sellers be "too right." If stocks were going to be traded based on the current fundamentals and not on the promise of a huge taxpayer-funded bailout and a changing of the short selling rules, the stock market might suffer bigger declines than those of earlier this week, and trigger something much worse than a possible recession.

A few different topics going on at once...
So I won't add much of anything, but has anyone else noticed that one of the underlying factors to this whole mess isn't discussed much? At one end is the behavior of banks who created highly-leveraged MBS of dubious worth. On the other end is the American consumer, who for the past few decades has been saving less and spending more on extremely leveraged lifestyles. Just consider the savings rate against credit balances and real estate leveraging such as mort equity withdrawal. The banks did their part in pushing for higher credit volumes, hence the crazy mort products of the last few years--and the consumer did more than their part by spending at absurd levels. I should add this happened in Europe too.

So how will this play out? Will our govt. somehow backstop all this bad debt and the liquidity game enters a new round? Oh yeah, sure...whatever.

Founding Fathers. Graves. Spinning. Assemble your own sentence!

Amazing, our species evolved and survived over two million years without big government, but... oh, never mind, that discussion does not belong here.

I mentioned the whole living beyond your means thing in another thread & it didn't go over too well. I think I understand the current situation as well as the next guy. Some of our problem comes from the people that took out bad loans. The rest of it comes from the financial institutions that created questionable financial instruments in the search for ever greater profit. There's plenty of blame to go around, & you can split it up to suit your viewpoint.

That doesn't take away the fact that people live beyond their means. I don't know how many times I've heard someone complain that health insurance is too expensive & they can't afford it. Then they get in the brand new truck they use to pull their matching bass boat. Or they'll say they can't save in one breath, & in the next talk about their week long vacation at the luxury resort in the Bahamas. Or say they can't afford to retire as they drive their Lexus to the 3000 sq/ft home they "need" even though the kids have moved away.

as well.
Me thinks our priorities are outta kilter