Today’s subject is economics. Hear That! Thant sound is most people falling asleep and falling out of their chairs.
I know economics is not the most interesting thing to read about…..but before one can understand what is going on with our fiscal policy….one needs to understand economics….without understanding there is nothing but ignorance.
How many times have you heard the argument against the Fed….is that they are turning on the printing press? How many times has the Fed been blamed for all the economic problems?
The accusation may be a metaphor but way too many seem to think that the Fed will just turn on the printing presses whenever we are in dire financial straits…..
What does it mean when they say the Federal Reserve is printing money? It doesn’t mean the Fed has a printing press that spouts out dollars. Only the Treasury Department does that. However, most of the “money,” or capital, in use today is not cash. That’s because the large financial institutions that do most investments prefer using borrowed money, or credit.
The Federal Reserve does manage the liquidity of capital, which is the amount that is available for investment. High liquidity means there is a lot of capital because interest rates are low, and capital is easily available. When credit is cheap, businesses and investors are more likely to borrow. The return on investment only has to be higher than the interest rate, so more investments look good. In this way, high liquidity spurs economic growth.
The Federal Reserve manages liquidity with monetary policy and the Fed funds rate. By lowering the Fed funds rate target, the Fed lowers all bank rates. This adds liquidity, which adds to the money supply. This has the same effect as printing money.
The Fed then “prints money” to spur borrowing, investing and economic growth.
I realize that I am nit-picking on this subject……but I like precise definitions…….. I just want people to grasp what is going on with our fiscal policy and to watch out for dog whistle slogans that explain nothing……..the Fed cannot actually print money!
So, do you feel the Fed policy of keeping interest rates low is working to fix our economic problems? Do you think quantitative easing is helping to create a stronger economy?
FL, basically I was solely trying to define what is meant by the dog whistle….personally I want the Fed, the IMF and the World Bank all eliminated….I do not see where they are doing a good job at all…..
We agree 100% on this then. I would go a little further and say that not are they not helping but they are damaging the American economy with their actions.
The government is doing a fine job also….regret that the free markets is gone and will stay gone and no matter of tinkering will replace the bad admin we have now….
To your point re precise definitions,I do not believe that you or anyone else really wants a free market. We ALL want certain restrictions and controls. The only debate is as to which ones and who will implement them. We don’t want companies to be able to put unregulated foods on the markets, for example. Asbestos? So on. The concept of a free market is one of those, “Sounds good in theory, but in practice….” concepts. Much like true democracy which doesn’t work in groups larger than about 200 people.
This admin is simply carrying on the same essential policies of the predecessor and his predeccesor and his and … They have all been supply side economics for the last 40 years. A demonstrated failed policy which creates false boom bubbles and when it fails, we all have to bail them out because they do not actually believe the philosophy they have been screaming this entire time.
I do not want free markets…..bit there are some that still use that dog whistle to try and make a point….there is a more equitable system but few will like it…