Fed plotting how to achieve infinite money

[Spartacus]

Re: Fed plotting how to achieve infinite money

Perhaps I'm still too idealist at heart, but I don't agree that a short term failure still means giving up and legalizing.

But then again, why isn't prostitution legalized? I'd think this is a far less dangerous (self and others) type of activity than drugs.

Or fraud? Almost no one dies or is physically hurt by such activity.

Stupid is as stupid does.

I'm not even going into theft, extortion, armed robbery, etc.

The difference is, the laws against fraud and extortion do not raise the social costs of fraud and extortion.

The law makes these situations better.

The law makes the social costs of heroin infinitely worse than if the heroin is legal.


http://emedicine.medscape.com/article/166464-overview

>>>Street heroin samples are frequently mixed with other substances so dealers may maximize their profits. Because of these impurities and additives, street heroin may appear in various hues and colors, ranging from white to dark brown. Heroin is occasionally sold as a black, tarry substance, especially when crude processing methods are used to manufacture it.

The presence of impurities and additives also limits heroin absorption through mucous membranes, thus limiting its "rush" and "high" when it is sniffed or snorted. In patients who are dependent on heroin, intravenous injection ("mainlining") becomes the only effective method of heroin use.
<<<

that bears repeating - the law makes heroin impure. The impurities make heroin poisonous and less potent orally. The only way to use heroin then becomes injecting it. AND the poisons that made oral use impractical are now being INJECTED. The law adds poison to heroin, AND makes addicts inject - inject heroin and poison.



It's the injection of this stuff directly into your veins that causes most of the health problems. the heroin itself is far, far, far safer than the excipients.

Also remember that if it had not been for the IV drug users, AIDS and hepatitis would be near non existent in the straight world.

This is just another cost of the law - the law makes the situation so much worse than it ever needed to be. It's not the heroin that causes most of the damage, it's the law.

http://www.google.ca/search?hl=en&q=...=Google+Search

[Uno]

Re: Fed plotting how to achieve infinite money

"So why don't we provide cheap tobacco and alcohol then?"

The market does, you don't think alcohol in the US is cheap? Nobody robs a bank or steals a car to get drunk. You can probably stay drunk for $10 a day if you bargin hunt.

[Uno]

Re: Fed plotting how to achieve infinite money

What about that other fake neo-liberal / neo-con war - "war on drugs"

What will the FBI and CIA do? Chase bankers all day long!

What central & south American rebels will congress sell US arms to?

Who we will invade after the "war on terror" ends?

Where will the Christian Evangelicals recuit born-agains from?

What will ex-NFL players do for a living?

[cjppjc]

Re: Fed plotting how to achieve infinite money

"So why don't we provide cheap tobacco and alcohol then?"

The market does, you don't think alcohol in the US is cheap? Nobody robs a bank or steals a car to get drunk. You can probably stay drunk for $10 a day if you bargin hunt.

Tobacco and alcohol would be a lot cheaper without all the "Sin Taxes" on them. As the revenue gets smaller and smaller the "Sin Taxes" will rise and rise and rise and rise and rise.

Can you tell I drink and smoke?

[BadJuju]

Re: Fed plotting how to achieve infinite money

Get to da choppa, Bernanke! :p

[pwcmba]

Re: Fed plotting how to achieve infinite money

I never get the whole - "you can't eat gold thing" Nobody eats the paper money in circulation either. One statement is gold at $2,000 and the next is break off a piece to eat. This I never get. Wouldn't someone exchange the oz of gold for us dollars or whatever currency is used where they live and then buy the food? Also, this brings up the reason for having both gold and silver and in different sizes. The reason is that you do not want too much change in worthless fiat currency when you need to make exchange. The ideal is to match your exchange (metal for fiat) to the size of your purchase.

[pwcmba]

Re: Fed plotting how to achieve infinite money

http://tinyurl.com/bu3wly

"Long-lasting gold bull markets take place when gold’s role as money is being re-established. In my opinion, we are just beginning this period of re-establishment."

This statement above really resinates with me. I've been thinking how the fed keeps creating more currency/debt but can not get much interest from people in borrowing and using it; so, while there are piles of it, it just sits (no velocity).

In contrast, the gold price is at or close to all time highs in most currencies. It is becoming the preferred money.

[Slimprofits]

Re: Fed plotting how to achieve infinite money

The original story appears behind the pay wall of the Wall $treet Journal here:http://online.wsj.com/article/SB1207..._us_whats_news

a tip for you Gools, nothing is really behind that pay wall:

http://machinist.salon.com/blog/2008/03/21/wsj/

[gwynedd1]

Re: Fed plotting how to achieve infinite money

iTulip's position since 1999 is an eventual managed high inflation, not hyper-inflation and certainly not deflation.

The US might suffer a hyperinflation except that US foreign debt is denominated in US currency, so the US has a level of control over the process, just as it has for the first 40% devaluation. It may go on for five years or may go on for ten or more. However, the process is inexorable.

The US cannot suffer a deflation because it cannot cause its currency to appreciate. The only way the US could cause the dollar to appreciate is if the US goes back on the gold standard. Then the US would quickly fall into a 1930s style deflationary depression. We'd put the probability of that at less than 1% and your WSJ story suggests the exact opposite.

Anyone who expects US monetary deflation does not understand double entry book keeping. The way money is created is as follows.

Borrower: "Lend me $1,000."

Lender: "OK, I've added $1,000 in the assets to my balance sheet and debited my reserve account by $50 in accordance with the 5% reserve requirement for that type of account. Here's $1,000."

Borrower: "Thanks! I'll put $1,000 my cash account and add a $1,000 liability to my balance sheet."

That's it. The mind is repelled at the simplicity, as Galbraith said.

What keeps a bank from added new $1,000 entries on behalf of borrowers? Rules. Change the rules, such as by lowering reserve requirements and loosening lending standards, and new $1000 loans are made.

Banking without constraint of a gold standard is like playing basketball on a court that can be changed as follows if you are losing: ball shrunk by half, foul line moved five feet closer to the hoop, hoop doubled in diameter and lowered to waist height.

Hi Fred,

Isn't that liability on the bank's balance sheet? When a bank loans they create a loan asset and then the liability for the principle. That is what keeps banks from being a printing press.
As of now I cannot think of any inflationary scenario with current rules. There is simply no collateral likely to support loan activity at this point so I see nothing but deflation with current rules.
However as you say, the threat is a rule change indeed. The bailouts themselves are just book entries to satisfy bank accounting rules. My only hesitation is that there is money to be made by deflation, even more so than inflation actually. I just do not see any inevitability but rather something more arbitrary. The Fed can do what it wants. I will admit I do not know what that is.

[cmalbatros]

Re: Fed plotting how to achieve infinite money

Making heroin and other drugs legal? Never going to happen, way too much money involved by privately run federal prisons i.e. Wackenhut , tens of billions of dollars, watch "Americas Drug Wars" as was shown on PBS recently to get the picture. It's all about money to congress and parliaments around the world from lobbyists, hence common sense and practical solutions are thrown out of the window.

[Judas]

Re: Fed plotting how to achieve infinite money

Legalization doesn't equal condoning.

That sentence should be written in large glowing neon letters in every Washington D.C. office, chamber, and meeting space.

[FRED]

Re: Fed plotting how to achieve infinite money

http://tinyurl.com/bu3wly

"Long-lasting gold bull markets take place when gold’s role as money is being re-established. In my opinion, we are just beginning this period of re-establishment."

This statement above really resinates with me. I've been thinking how the fed keeps creating more currency/debt but can not get much interest from people in borrowing and using it; so, while there are piles of it, it just sits (no velocity).

In contrast, the gold price is at or close to all time highs in most currencies. It is becoming the preferred money.

This is consistent with the long standing theory at iTulip since our gold buy in 2001 that the markets will cause a re-monetization of gold if governments attempt to fight the deflationary impact of debt deflation with currency depreciation. See Questioning Fashionable Financial Advice: Gold - September 2001 and The Fourth Currency. The gold $2,500 target forecast is specifically Eric Janszen's since 2006.

[junkacc]

Re: Fed plotting how to achieve infinite money

What Fred said is pretty much correct. In essence, the bank creates $1,000 out of $50 just like that. The corollary is if said borrower repays the $1,000, the bank makes back its $50 + interest. Its the power of imaginary money where money is made from nothing and goes back to nothing.

[Joy]

Re: Fed plotting how to achieve infinite money

The US could definitely cause deflation if it wanted. All it would take is a serious dose of reverse repos and high interest rates. There is enough residual dollar demand out there that a reduction in dollar supply would make the exchange value of the dollar go up against goods and services.

Of course, there is no rational reason for the US to do this. What seems almost preordained is dollar devaluation, as you point out, to reduce the huge debt burden. What is truly hilarious is the deflation heads who think the US can't reduce the value of its currency no matter what.

[gwynedd1]

Re: Fed plotting how to achieve infinite money

What Fred said is pretty much correct. In essence, the bank creates $1,000 out of $50 just like that. The corollary is if said borrower repays the $1,000, the bank makes back its $50 + interest. Its the power of imaginary money where money is made from nothing and goes back to nothing.

Hi junkacc,

I don't think so. That is how a counterfeiter works. Print then spend. The important step in the middle is when a bank creates money they need to put a liability on the books at the same amount of the loan asset. That is why banks can fail. When many of their loan assets go in default they are stuck with liabilities. Otherwise it works exactly as you say. Money is destroyed on retirement of the principle just as it was created.
The important thing Fred said is these are just the current rules. Giving treasuries to banks to give them assets to "follow the rules" is just such an event. Banks would not technically be solvent otherwise but its really just book keeping. They are following the rules technically but not in effect or in spirit. It appears to me this is a Wall street consolidation to cull off the regional banks. If they keep doing this will be the the result.
One thing that concerns me is the Fed and Obama has actually has done nothing to actually put money back into the goods and services economy. They have thus far been doing "all they can". The evidence of what has been going on in the last few months is evidence enough. They are doing nothing to help. Tax credits for purchases would have solved the problem outright and they surely know it.

I will say one thing no one can convince me otherwise. No one who has the power to create a fiat currency and who has taxing power is "helpless" as to the amount of money in the economy. The dollar is a completely man made entity. If they want inflation they can suspend the income tax and give out tax credits. If they want deflation then they can double taxes , raise interest rates to 20%. If deflation is happening now and I have thus far seen nothing in reality to change it I assume this is what they want, for now.