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wages haven't really correlated with productivity in decades.

What I meant is that the workers in the US who are productive are the ones whose wages are going up, the workers in the US that are not more productive have stagnant ones.

However real total compensation per hour has followed labor productivity.

So even if the Fed isn't technically private, its operations may be private enough to allow shady practices.. with billions/trillions of your money.

What you said makes sense, but people thought of that already. Not only are the Fed's books open, but you can get to them online.

But anti-Fed people never comb through the books and cite specific transgressions, instead they talk in broad strokes. My impression is that they don't really know what they are talking about and haven't really done any research or they would be able to list some specific incident.

The great depression happened AFTER the creation of the FED.

And specifically the Federal Reserve acted to try to "pop the asset bubble" and its actions created the deepest part of the Depression, as explained by Ben Bernancke:

early in 1928, and the Fed passed into the control of a coterie of aggressive bubble-poppers, of whom the most determined was probably Board Governor Adolph Miller... in 1928, in a situation in which the inflation rate was actually slightly negative and the economy was only barely emerging from a mild recession, the Fed began to raise interest rates...For short periods the rates on these loans sometimes spiked above 20 percent.

The popular view is that the market crash was the harbinger of the Great Depression. In fact, the weight of historical research has shown that this interpretation gets the causality largely backward. The economy was already slowing by the fall of 1929 (the NBER peak, marking the beginning of the Depression cycle, was in August 1929), largely as a result of monetary tightness.

The correct interpretation of the 1920s, then, is not the popular one--that the stock market got overvalued, crashed, and caused a Great Depression. The true story is that monetary policy tried overzealously to stop the rise in stock prices. But the main effect of the tight monetary policy, as Benjamin Strong had predicted, was to slow the economy--both domestically and, through the workings of the gold standard, abroad. The slowing economy, together with rising interest rates, was in turn a major factor in precipitating the stock market crash. This interpretation of the events of the late 1920s is shared by the most knowledgeable students of the period, including Keynes, Friedman and Schwartz, and other leading scholars of both the Depression era and today.

How is there not a finite amount of wealth to be had? Let's use money as an example (but this applies to any form of economy).

At any point in time, there is a finite amount of money in the world (like every other resource). For example, if we look at http://www.federalreserve.gov/faqs/currency_12773.htm, they say:

There was approximately $1.1 trillion in circulation as of March 14, 2012, of which $1.06 trillion was in Federal Reserve notes.

. Other countries certainly have an equally finite amount of money. The wealth of any individual is directly related to what percentage of that amount they have.

To put it simply, if I have $200,000, I have .00000001% of the total wealth to be had. Meanwhile, a billionaire has 0.0009% still a small number but *clearly* a much larger portion of the pie than I have. He has more "wealth" than I do. Even if we shrink the numbers to be more manageable, it's the percentage of the whole that establishes my wealth in the system.

Sure, we can print more money. And that could go two ways, both of which are bad. If it gets over time evenly distributed across the population, then everyone's relative wealth stayed the same, even though there bank accounts went up, the percentage stayed the same. The dollar has simply been devalued.

Or, more realistically. If the majority ends up in the hands of the already wealthy (let's face it, if a rich person invests $5 in something, they expect to get at least > $5 back... otherwise it isn't an investment), then the rich get richer and the poor get poorer AND the value of the individual dollar is devalued.

In the end, it is most certainly a "zero sum" game. For me to have something, that means someone else can't have it. Even for simple things like me going out and buying an xbox, my total worth has gone down (I can't reasonably sell a used xbox and full retail price, so it's a net loss) and someone else's has gone up. Sure, I've decided that this trade is "worth it" to me because I am willing to trade some wealth for entertainment. But I'm certainly slightly less rich.

Economies are *driven* by the fact that resources are limited. The more limited a resource, the more value it has. If wealth were infinite, then it would be effectively equally accessible to everyone, meaning that money would have no value (since infinite things are certainly *not* rare by any definition).

The American money supply is based on a zero-reserve banking system.

No it isn't.
http://en.wikipedia.org/wiki/Reserve_requirement#United_States
http://www.federalreserve.gov/monetarypolicy/reservereq.htm

The federal funds rate is 0.12%. This is the rate banks pay the Fed to barrow money. Here's a link to the list of rates from the Fed:
http://www.federalreserve.gov/releases/h15/current/

The Fed pays 0.25% interest on required balances and excess reserves. Here's a link to the rates from the Fed:
http://www.federalreserve.gov/monetarypolicy/reqresbalances.htm

0.12% - 0.25% = 0.13%

That is the subsidy. And that is why the money does not make it into the system. It's literally free money for doing nothing.

The federal funds rate is 0.12%. This is the rate banks pay the Fed to barrow money. Here's a link to the list of rates from the Fed:
http://www.federalreserve.gov/releases/h15/current/

The Fed pays 0.25% interest on required balances and excess reserves. Here's a link to the rates from the Fed:
http://www.federalreserve.gov/monetarypolicy/reqresbalances.htm

0.12% - 0.25% = 0.13%

That is the subsidy. And that is why the money does not make it into the system. It's literally free money for doing nothing.

No, I am not describing the bailout loans. Second you have some things really confused.

The federal funds rate is 0.12%. This is the rate banks pay the Fed to barrow money. Here's a link to the list of rates from the Fed:
http://www.federalreserve.gov/releases/h15/current/

The Fed pays 0.25% interest on required balances and excess reserves. Here's a link to the rates from the Fed:
http://www.federalreserve.gov/monetarypolicy/reqresbalances.htm

0.12% - 0.25% = 0.13%

That is the subsidy. And that is why the money does not make it into the system. It's literally free money for doing nothing.

No, I am not describing the bailout loans. Second you have some things really confused.

The federal funds rate is 0.12%. This is the rate banks pay the Fed to barrow money. Here's a link to the list of rates from the Fed:
http://www.federalreserve.gov/releases/h15/current/

The Fed pays 0.25% interest on required balances and excess reserves. Here's a link to the rates from the Fed:
http://www.federalreserve.gov/monetarypolicy/reqresbalances.htm

0.12% - 0.25% = 0.13%

That is the subsidy. And that is why the money does not make it into the system. It's literally free money for doing nothing.

...all you proved by that comment was that you still don't get it. Companies didn't sit on actual cash. Those so-called cash reserves were nothing but 1s and 0s in their bank accounts.

The only institutions with any appreciable amount of actual money in actual safes are casinos, and only because by law they still have to. Banks, too, except no not really: banking institutions with accounts up to around $10M have no reserve requirement; under about $70M the reserve requirement is 3%. In the top bracket, institutions with over $70M in accounts need 10% reserve. They must meet reserve requirements every night, on paper (i.e. not actual cash); of course, banks can easily accomplish this by obtaining short-term (typically <24-hour) loans from the Fed or from another bank. The Fed, quite understandably, finds this as ridiculous and inconvenient as you might expect, and its proposed solution is to eliminate the hassle of fractional-reserve banking altogether: "The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system".

Wow. Your ignorance here is blowing me away. I don't mean that as flamebait or trolling. I'm honestly shocked that you wrote what you did.

Seriously, go try to find proof that 'they' (I'm assuming that you mean the Federal Reserve since you mentioned Greenspan or the Federal government in general) stopped. You will find that the Federal Reserve never reported inflation directly but use data from the BEA and BLS in their research and reports. Neither the BEA nor the BLS has stopped reporting CPE or CPI, respectively.

Based on your claims, I'm guessing you read something about money stock levels as measures of inflation. In reality money measures don't track inflation well. The Fed did stop reporting its M3 measure in 2006 shortly after Bernanke became Chair. The reason given was: "M3 does not appear to convey any additional information about economic activity that is not already embodied in M2 and has not played a role in the monetary policy process for many years."

Inflation rates are measures of relative value across time in a common currency. Exchange rates are relative value of different currencies at the same time. You are clearly conflating the two in your mind.

Is it legal for a business in the United States to refuse cash as a form of payment? Section 31 U.S.C. 5103, entitled "Legal tender," states: "United States coins and currency [including Federal reserve notes and circulating notes of Federal reserve banks and national banks] are legal tender for all debts, public charges, taxes, and dues." This statute means that all United States money as identified above is a valid and legal offer of payment for debts when tendered to a creditor. There is, however, no Federal statute mandating that a private business, a person, or an organization must accept currency or coins as payment for goods or services. Private businesses are free to develop their own policies on whether to accept cash unless there is a state law which says otherwise.

Basically, if something can be sent to a collections agency (in this case the internal Verizon collections agency), the it is a DEBT and thus the creditor (VerizonWireless) CANNOT refuse payment. Since payment of a Verizon bill is frequently after some or all of the service has been given, their is debt (money owed for services previous rendered). Retail is different because there is no debt owed to the retailer since the merchandise ownership is only exchanges (barring a contract) after the payment has been given. (technically, it could be argued in some cases that a verbal contract has been established and thus a debt has been agreed to).

The Fed has a dual mandate, including "stable prices." - where is the concern for low inflation?

http://www.federalreserve.gov/faqs/money_12848.htm

As anyone can see, we do not have low inflation. The Fed has not complied with the law.

>> This changed when firms went public and came to be run by employees rather than partners

Not "by employees", but by the other investment groups (401k's, pension funds, etc), who want their guaranteed quarterly dividends or-else-they'll-throw-the-bums-out, leading to riskier investments in order to placate them. Combine that with situations like the CRA, where the banks are told on the one hand to lend prudently, but on the other told they'll be penalized if they fail to lend enough in depressed areas, by definition a riskier prospect.

CRA is a favorite target for causing the subprime mortgage crises, the evidence that it was a primary cause is scant. In a speech by the Fed governor the relationship between the CRA and subprime loans was discussed.

Recently, Federal Reserve staff has undertaken more specific analysis focusing on the potential relationship between the CRA and the current subprime crisis. This analysis was performed for the purpose of assessing claims that the CRA was a principal cause of the current mortgage market difficulties. For this analysis, the staff examined lending activity covering the period that corresponds to the height of the subprime boom.

The research focused on two basic questions. First, we asked what share of originations for subprime loans is related to the CRA. The potential role of the CRA in the subprime crisis could either be large or small, depending on the answer to this question. We found that the loans that are the focus of the CRA represent a very small portion of the subprime lending market, casting considerable doubt on the potential contribution that the law could have made to the subprime mortgage crisis.

Second, we asked how CRA-related subprime loans performed relative to other loans. Once again, the potential role of the CRA could be large or small, depending on the answer to this question. We found that delinquency rates were high in all neighborhood income groups, and that CRA-related subprime loans performed in a comparable manner to other subprime loans; as such, differences in performance between CRA-related subprime lending and other subprime lending cannot lie at the root of recent market turmoil.

In analyzing the available data, we focused on two distinct metrics: loan origination activity and loan performance. With respect to the first question concerning loan originations, we wanted to know which types of lending institutions made higher-priced loans, to whom those loans were made, and in what types of neighborhoods the loans were extended.5 This analysis allowed us to determine what fraction of subprime lending could be related to the CRA.

Our analysis of the loan data found that about 60 percent of higher-priced loan originations went to middle- or higher-income borrowers or neighborhoods. Such borrowers are not the populations targeted by the CRA. In addition, more than 20 percent of the higher-priced loans were extended to lower-income borrowers or borrowers in lower-income areas by independent nonbank institutions--that is, institutions not covered by the CRA.6

Putting together these facts provides a striking result: Only 6 percent of all the higher-priced loans were extended by CRA-covered lenders to lower-income borrowers or neighborhoods in their CRA assessment areas, the local geographies that are the primary focus for CRA evaluation purposes. This result undermines the assertion by critics of the potential for a substantial role for the CRA in the subprime crisis. In other words, the very small share of all higher-priced loan originations that can reasonably be attributed to the CRA makes it hard to imagine how this law could have contributed in any meaningful way to the current subprime crisis.

Second paragraph.

I keep seeing the "Mortgage crisis was cause because Banks were forced to lend to poor people" meme too, but they never provide any numbers to support this.

They can't, because it's bullshit. Here's a link to the act itself. Note the words "consistent with safe and sound operations."

Then there's the fact that most bad subprime debt was issued by institutions outside the scope of the act, and that commercial real estate - also outside the scope - is in an equally bad or worse state than home loans.

(which of course is on top of the 3% fee they charge to the merchant)

No, it's instead of the 3% fee they charge the merchant. The whole reason they're going to make the debit card user pay the fee instead of having the merchant pass the fee along to the user through the product price is because as of a few days ago, it's illegal for them to charge the merchant more than $0.21 + 0.05%. Now I'm all for turning hidden fees into non-hidden ones, but we all know that merchants aren't going to reduce their prices now that they no longer have to pay large debit card fees.

It's not like there's a shortage of banks in this country to do your banking with.

What about banks that don't charge a debit card fee? The number of those is definitely on the decline. Wells Fargo, Chase, and SunTrust are also planning on charging accountholders a fee to use their debit cards.

And just like the Federal reserve note - an IOU to pay gold, it doesn't pay anything back.

A Federal Reserve Note is *not* "an IOU to pay gold". It's fiat money, and has no inherent value.

But, you don't have to believe me, you can read it for yourself on the Federal Reserve's web site: "And, at the base of the financial system, with the abandonment of gold convertibility in the 1930s, legal tender became backed--if that is the proper term--by the fiat of the state." - http://www.federalreserve.gov/boarddocs/speeches/2002/200201163/default.htm

The site used to have a FAQ page that explicitly addressed this, but it appears to have vanished. You can, however, search for "fiat money" on it, and find all kinds of interesting things.

I said wealth, not income. Don't try to confuse the terms.

As for citations, Here you go. And that's through 2004. Data through 2008 shows that the wealthiest 10% own an astonishing 84% of the wealth in the US. Add in the next decile, and they own well over 90% of the wealth in the US.

And they're accumulating more of the nation's wealth as we speak.

In the one-in-a-billion chance that 20 years from now the entire world's economy is being transacted in bitcoins, you'll be a multibillionaire.

I know that "billionaire" part is just a figure of speech, but let's find out how large the bitcoin jackpot really is, for curiosity's sake.

Suppose miraculously bitcoin manage to completely replace both the USD and the Euro tomorrow. There are currently:
980 billion USD in circulation
863 billion Euros in circulation (~1.2 trillion USD)
7.2 million bitcoins in circulation
Thus each bitcoin would be worth approximately 300k USD. Hardly makes you a millionaire, let alone a billionaire.

Disclaimer: I have never taken an economics course in my life and I have been repeatedly characterized as "terminally retarded" in Internet discussions. The above calculations might not land in the right sport, let alone the right ballpark.

Current US M1 money supply is $1947bn (source) and M0 (notes and coins) about $1tn. Printing money causes more money to be created in the banking system, so expect M1 to go up by more than you increase M0 - probably in the same ratio, so by about double. (Double seems a very low ratio to me...a quick look at some statistics suggests it's unusually low internationally). So printing $15tn might increase the M1 money supply by $30tn, to fifteen times its current level. At current rates of increase, 13%pa, that wouldn't happen for a little over 20 years.

Although it wouldn't increase the current rate by a lot at the moment, from 13% to 18%, the current rate is unusually high and there's no getting away from it being huge additional increase in money supply beyond what's necessary to account for other changes in the economy over 20 years. If it all went in to inflation, so that US dollars fell in value by 30 times over 20 years, the inflation rate would be 14.5% higher. It'd have a large effect on the economy, even spread over many years. Plus, of course, other things would happen. The interest rate on new debt - public and private - would rocket as soon as anyone got wind of the idea. You wouldn't be able to just issue new bonds to pay for ones maturing in the wrong years because the US government would have to pay 16%+ on them. The same applies to any new borrowing due to new recessions, etc....so it's all too easy to end up printing even more new money to pay for that.

You'd think that, but bear in mind the major "buyers" of bonds are banks, who buy them to increase their reserves. From the point of view of a bank, each $1,000 treasury bond bought, and subsequently deposited at the Fed, translates to at least $10,000 in "money" it can now lend out (I believe, looking at this table that the current reserve requirements are between 3 and 10% depending on how much money is involved.)

That means that it's not as simple as "$1,000 of assets needs to be transfered to the treasury, never to be used by anyone else."

This is a very good point. The Federal Reserve currently holds about $1.6 trillion in U.S. Treasury securities. So it would be possible to sell those securities (which pulls the money that others use to buy them out of the economy) so that the the coin hack had no net effect on the money supply until the Federal government spent more than $1.6 trillion.

I would argue that we need the additional fiscal stimulus given the weakness in the economy, and that stimulus would not be inflationary. For the people worried about inflation, though, having the Federal Reserve sell Treasury securities would delay any theoretically possible inflationary impact of the coin hack for about a year.

I am the OP. As several people have posted, this approach is exactly equivalent to printing money. The reason it needs to be platinum coins rather than paper bills is that there is a law that limits the total value of paper bills that can be printed, but there appears to be no limit on the value of platinum coins that can be minted.

Of course, if you were to print a large enough amount of money, it would lead to inflation (or asset price bubbles, which actually seem to occur first in the current economy). The mechanism by which excess money supply causes inflation is by increasing demand to the point where bottlenecks appear in the economy. For example, people want cars, have money to buy them, but there aren't enough factories right now to supply demand - so the price of the limited pool of available cars is bid up. If labor markets are tight, employers looking for people to work to fill the demand created by the extra money will need to bid up wages to attract workers.

The key point is that all those mechanisms only work if an economy, or significant parts of it, are operating near peak capacity. This is the complete opposite of the situation we are in right now. Industrial capacity utilization was at 76.7% in June, several percentage points below the 1972-2010 average (80.4%) an well below the 85.1% peak in the 1990's. Unemployment is also high compared to historical averages.

In the current environment, it is vastly more likely that increasing the money supply will improve economic conditions without triggering inflation. Even at its pre-financial crisis recent peak (when unemployment was much lower than it is now), annual inflation (CPI-U, Dec 2006 to Dec 2007) was only 4.1%. Also keep in mind that the entire amount created ($5 trillion in my example in the OP) will not hit the economy at once. Initially it will be in an account at the Federal Reserve, and only as the government spends the money would it reach the economy.

no people were harmed in this crime.. banks are on the hook for fraudulent charges (for electronic transactions).

http://www.federalreserve.gov/bankinforeg/regecg.htm

Section 205.6 Liability of consumer for unauthorized transfers
Limits a consumer's liability for unauthorized electronic fund transfers, such as those arising from loss or theft of an access device, to $50; if the consumer fails to notify the depository institution in a timely fashion, the amount may be $500 or unlimited.

my bank called me for a suspicious charge for $700. I said I didn't make that purchase, it never even hit my account. All I had to do was sign an affadavit saying it wasn't me.

don't forget, when you use a credit card, you are using the banks money, not yours. they really hate it when people steal from them - that's why they monitor credit accounts for suspicios transactions... MUCH harder to deal with a fraudulent transaction on your ATM card. don't use your ATM to buy anything.

but you don't understand how the Fed works. It doesn't really print money -

- thank you, I know that the Fed is not actually printing money, they are marking up their accounts that the member banks are holding, and then the banks actually issue credit from those accounts.

It's the same thing as printing money.

Regulating FRL is the Fed's purpose and that is where the evil comes in.

- no it's not. Fed's mandate was 'price stability' and for some reason now it also became 'maximum employment', but in actual reality their actual powers are in inflation generation, which is now their actual mandate, as stated by Bernanke. Of-course the Fed is an abysmal failure in both: price stability and maximum employment.

They physically cannot fail in the mandate of generating inflation, because that's easy. That's money printing (and I don't mean physical printing with paper and colors, etc., spare me.)

Here in so many words by Bernanke himself

The Objectives of Monetary Policy ...
Recognizing the interactions between the two parts of our mandate, the FOMC has found it useful to frame our dual mandate in terms of the longer-run sustainable rate of unemployment and the mandate-consistent inflation rate . ...
The longer-run inflation projections in the SEP indicate that FOMC participants generally judge the mandate-consistent inflation rate to be about 2 percent or a bit below. In contrast, as I noted earlier, recent readings on underlying inflation have been approximately 1 percent. Thus, in effect, inflation is running at rates that are too low relative to the levels that the Committee judges to be most consistent with the Federal Reserve's dual mandate in the longer run. ...

s for deflation, no, it is not "great". I'll tell you what would be great: steady predictable growth, just like population. No bubbles, no crashes.

- a fools errand. You can't have economy that is stable and non-dynamic, in a non-dynamic economy you'll only have worsening economy. There are no benefits to preventing the market solutions at work to the bubbles. The busts are solutions, not problems. Bubbles are the problem, and bubbles will always form since people are not perfect in decision making even when the government is not interfering. In absence of government interference, any bubbles are quickly busted and the resources are reabsorbed by the economy, fixing the problem quickly - the companies go bust, people get fired, money gets freed, new companies form, people get hired, new products are created. This is good stuff, this is dynamic stability, not this artificial staleness that you want economy to be.

Read my sig. Economics, like relativety, was all figured out around the begginning of the 20th century, only unlike relativety, with economics the truth has been surpressed.

- nobody needs to suppress garbage. Real economics that is actually suppressed is Austrian economics, and it's suppressed for a reason - governments hate reduction of their power, and that's the logical outcome of following actual sound money.

Here is a little something on monopoly power created by the government. - at least this is an interesting read.

How is it the most uninformative posts in this whole discussion are (Score:5, Informative)? mybecq is Spewing random bullshit. Fuck that PR crap on the friendly pages, dig down to the real info and you find that every Federal Reserve is a corporation and its shares are owned by member banks. Who do you think they are scared of, the special interest bought and paid for Congress or the shareholders? Here, right out of the act, is how to buy shares of a Federal Reserve Bank:

Section 5. Stock Issues; Increase and Decrease of Capital

1. Amount of Shares; Increase and Decrease of Capital; Surrender and Cancellation of Stock

The capital stock of each Federal reserve bank shall be divided into shares of $100 each. The outstanding capital stock shall be increased from time to time as member banks increase their capital stock and surplus or as additional banks become members, and may be decreased as member banks reduce their capital stock or surplus or cease to be members. Shares of the capital stock of Federal reserve banks owned by member banks shall not be transferred or hypothecated. When a member bank increases its capital stock or surplus, it shall thereupon subscribe for an additional amount of capital stock of the Federal reserve bank of its district equal to 6 per centum of the said increase, one-half of said subscription to be paid in the manner hereinbefore provided for original subscription, and one-half subject to call of the Board of Governors of the Federal Reserve System. A bank applying for stock in a Federal reserve bank at any time after the organization thereof must subscribe for an amount of the capital stock of the Federal reserve bank equal to 6 per centum of the paid-up capital stock and surplus of said applicant bank, paying therefor its par value plus one-half of 1 per centum a month from the period of the last dividend. When a member bank reduces its capital stock or surplus it shall surrender a proportionate amount of its holdings in the capital stock of said Federal Reserve bank. Any member bank which holds capital stock of a Federal Reserve bank in excess of the amount required on the basis of 6 per centum of its paid-up capital stock and surplus shall surrender such excess stock. When a member bank voluntarily liquidates it shall surrender all of its holdings of the capital stock of said Federal Reserve bank and be released from its stock subscription not previously called. In any such case the shares surrendered shall be canceled and the member bank shall receive in payment therefor, under regulations to be prescribed by the Board of Governors of the Federal Reserve System, a sum equal to its cash-paid subscriptions on the shares surrendered and one-half of 1 per centum a month from the period of the last dividend, not to exceed the book value thereof, less any liability of such member bank to the Federal Reserve bank.

[12 USC 287. As amended by act of Aug. 23, 1935 (49 Stat. 713).]

Since when is the Federal Reserve an agency of the United States government?

Since December 23, 1913:

The Federal Reserve, like many other central banks, is an independent government agency

Since when is the Federal Reserve an agency of the United States government?

Since December 23, 1913:

The Federal Reserve, like many other central banks, is an independent government agency

Bilderburgers laugh derisively at your attempts to undermine the World Bank, IMF, ECB, and the 'Almighty Dollar' with your pathetic 'currency'. However...Bernie Madoff is intrigued by your ideas and wishes to subscribe to your newsletter.

um. your bank is on the hook for any fraudulent charges why the fuck do you think they work so hard to detect fraud? - banks don't care about customers. they do care very much about THEIR money. I normally spend less than $200 bucks per purchase on my credit card.. one day, I bought a TV.. there was a call from my bank on my answering machine BEFORE I GOT HOME. they had suspended my card until I could call to verify the charges. same thing happend when i went on a shopping spree and ran up a half dozen charges in a couple hours. to their credit, they also notified me of charges I didn't make - all they did was send me a form that I had to sign saying i was telling the truth.. the bogus charge never hit my balance.

how is the store supposed to know a card # is stolen. they call the bank.. bank says ok, store says thank you, come again.

here's the law which protects you.

http://www.federalreserve.gov/bankinforeg/regecg.htm

Regulation E provides a basic framework that establishes the rights, liabilities, and responsibilities of participants in electronic fund transfer systems such as automated teller machine transfers, telephone bill-payment services, point-of-sale (POS) terminal transfers in stores, and preauthorized transfers from or to a consumer's account (such as direct deposit and social security payments). The term "electronic fund transfer" (EFT) generally refers to a transaction initiated through an electronic terminal, telephone, computer, or magnetic tape that instructs a financial institution either to credit or to debit a consumer's asset account.

banks are generally on your side when it comes to a credit card because they make a shit ton of money on the interest you pay. that said, dont use your ATM card to buy anything - the bank cares waaaay less about your money than theirs.

Do you know why the Fed exists and has actual power? Because last time things were allowed to work on their own we got the Great Depression.

Actually the Fed screwed up during the lead up to the Great Depression. As documented in Milton Friedman & Anna Schwartz's history of the Great Depression, the Fed forced a rapid deflation that may have turned a slight bubble pop into a horrific series of years known as the "Great Contraction" from 1929-1933 (the worst losses ended after FDR devalued the dollar in 1933).

Ben Bernanke, Chairman of the Fed, said about the Federal Reserve: "Regarding the Great Depression. You're right, we did it. We're very sorry."

Why the economy did not recover well during 1933-1941 ("The Long Stagnation") is a matter of more dispute.

While we all like to bag on lawyers and financial types, if their jobs were truly worthless they wouldn't exist. High-powered lawyers are the corporate equivalent of a country's nuclear weapons: you have them so you don't have to use them. Saying that they don't create anything is like saying fire alarms don't create anything. It's true right up until a fire starts. It's harder for me to defend financiers, because it looks to me like they've created an ecosystem for themselves, carving profit out of cash flow, but there's lots of competition for that money so it's hard to justify the claim that they're not creating anything.

Interesting and fair point, but don't we need nuclear weapons because the other guy has them? If we didn't have lawyers, would you need one? I don't think the fire alarm analogy is apt, but the nuclear weapons one is. I wish I could find the article again, but there are several lawyers campaigning for lawyer-less law reform. The idea being that if people dealt directly with each other instead of through lawyers, we'd have better outcomes: socially and financially. So I don't buy the idea we need as much lawyers as we have, and that they are properly compensated. They seem to make themselves necessary, not because the need really existed. I can see your point of view, but I can't agree with it.

For finance, as we discovered with the recent pop, a lot of that wealth was on paper and didn't have even currency behind it. For example, the claim X had $2 billion in assets turned out to be worthless because the value was based on the future cash flow, which was never going to materialize. But at the moment the deal was struck, the finance guy got a bonus based on the percentage. So there was a lot of money being siphoned off, but it wasn't because we were making a lot of things. It turned out that money was coming from the global savings glut flooding into America, and most of that cash went into the financiers pockets while the investors got little to nothing in return. Thus my argument for parasitism.

But overall, I think you made excellent points. It doesn't change my opinion, but I want to make a point to thank commenters who make intelligent points, like yourself, as opposed to the knee-jerk rebuttals I usually get. :-)

Wow, that's scary. Too bad it's not true.

http://www.federalreserve.gov/generalinfo/faq/faqfrs.htm#5

Oh, please.

Madoff didn't set up the biggest ponzi scheme in history.

THIS is the biggest ponzi scheme in history, followed by this.

Both are government creations, btw.

As to having those crises described as 'planned'. Well, yeah. Every failure can be described as planned if you use the word 'planned' in a peculiar manner and add a fresh doze conspiracy theories to it, mix it up with the complacency and stupidity... your ideology is not-non-similar to that of a creationist.

Let me make those links clickable:

http://www.federalreserve.gov/releases/h3/current/h3.htm

which shows that banks have over $1 trillion in excess of fractional reserve requirements; that's money that has effectively been taken out of the economy.

http://www.federalreserve.gov/releases/h3/20081030/

During the crisis, the banks had far less in reserve, and the non-borrowed figure was negative.

Let me make those links clickable:

http://www.federalreserve.gov/releases/h3/current/h3.htm

which shows that banks have over $1 trillion in excess of fractional reserve requirements; that's money that has effectively been taken out of the economy.

http://www.federalreserve.gov/releases/h3/20081030/

During the crisis, the banks had far less in reserve, and the non-borrowed figure was negative.

A strong argument in favor of my contention that wealth did not trickle down:
https://www.federalreserve.gov/pubs/oss/oss2/2004/Chartbook.xls

I didn't say that I had an easy solution to this problem, just that trickle-down economics has not been in any way remotely demonstrated to work as advertised.

is this "privately owned banking cartel" capable of hacking root dns servers? they sound magically powerful.

the USA government is itself a privately owned banking cartel owned by the USA citizens. OF THE PEOPLE, FOR THE PEOPLE.

The Federal Reserve System was founded by Congress in 1913

you're an idiot.

Who was giving you a locked in 8% ten years ago?

corperations, B rated bonds were going for 8.4% AAA rated 7.62%, federal bonds rate for 20 year bonds was at 6.23%
so you didn't have to go to risky to get locked in around that range.

The entire banking fiasco of the last few years is what happens when the financial industry has as close to a free market as they can get.

You do realize that the banking industry is probably still the most heavily regulated industry in America... right? Health Care is a very close second, if not first now.

Here is a small list of banking regulations to start with:
http://www.federalreserve.gov/bankinforeg/reglisting.htm

If by the "real world" you mean the countries that have survived collapse (such as Germany), where Keynsian economics has avoided virtually all trace of recession, then we already have the data. Mind you, countries that have chosen NOT to apply such methods (such as Greece at one extreme, the US and the UK at the other extreme), have suffered disastrously so we have the data for those as well.

Uh......do you even know what Keynesian economics is? Are you aware how much US government spending has increased in the last year, based on the ideas of Keynes (and others before and after him)? It's not entirely clear to me why you think Germany has followed Keynesian economics, and the US hasn't. It is pretty clear to me you don't understand economics.

Incidentally, faith and belief are synonyms.

Here's an economic fact for you: on average (especially for the dollar; countries experiencing hyper-inflation act differently), it takes two years for an increase in the money supply to show up as inflation. From July 2008 until May 2010 the US money supply has increased 19% (my math could be off, go ahead and check for yourself if you like). If history is any guide, we will start to see the effects of this increase shortly.

the Federal Reserve is not part of the government

Well, that turns out to be wrong. But don't let my post stop you from repeating this nonsense!

I mean, founded by an act of Congress, run by Presidential appointees confirmed by the Senate...

The Federal Reserve is a private banking institution which is run by government appointees. It is not now nor has it ever been a part of the federal government. They just happen to be the ones that are authorized to represent the Federal Government in that respect.

You can say that all you want, but to quote the Fed itself:

The Federal Reserve must
work within the framework of the overall objectives of economic and
financial policy established by the government; therefore, the description
of the System as "independent within the government" is more accurate.

Congress designed the structure of the Federal Reserve System to give it
a broad perspective on the economy and on economic activity in all parts
of the nation. It is a federal system, composed of a central, governmental
agency--the Board of Governors--in Washington, D.C., and twelve re-
gional Federal Reserve Banks.

It is part of the government, but independent of the three branches.

The Fed tracks various measures of industrial production and capacity. There's a wealth of raw data here to dig through. http://www.federalreserve.gov/releases/g17/download.htm

It's insane, they print free money, give it to the banks and banks buy from the Gov't long term money at about 4% - T-Bills. What are the profits are you talking about, it's a negative effect all around.

Borrowing from the Fed is 0.75%, while 4 week Treasury bills are 0.15% (1 year are 0.4%).

The Fed manipulates interbank interest rates (the Fed Funds Rate) by buying Treasury securities itself. It owns a lot of them, actually. So when the Treasury (that is, the U.S. taxpayer) has to pay interest on those Treasury securities, that money ends up right back at the Treasury.

But the basic premise is yes, the Fed creates money. But who effectively "gets" that money is not banks but the U.S. taxpayer (because at least most of the time direct borrowing from the Fed is quite low, and the Fed mostly buys and sells U.S. Treasuries).

I work as a network admin for a small community bank, so I have a passing knowledge of these matters. First, fully investigate your rights under Reg E if you are in the US.

http://www.federalreserve.gov/bankinforeg/regecg.htm

There are rules that govern reporting unauthorized transactions and the providing of "provisional credit" by the financial institution. Make sure you read and understand your rights. Hold your institution's feet to the fire, and make sure they act within this framework.

Second, understand that it is difficult to protect your debit card information. It can be stored (and stolen) from so many places. Any online purchase may result in your card info being stored on a server somewhere. Once that server's back end database is compromised, your data is exposed. Or you shop at a store with a POS system that is not well secured. Or your server at the restaurant last night cloned the mag stripe on the card. Ad infinitum.

Now, it's easy to say "make the financial institution liable for all fraud". But keep in mind the sheer volume of ACH payments processed by some of these banks. There's no way in hell that a bank can know for sure, 100%, that you did or did not initiate a particular transaction. However, please know that most banks' core providers have heuristic/behavioral analysis that does in fact look for behaviors that don't match yours. Companies like Fidelity National Information Services (FNIS), for example, actively send out "fraud alerts" that monitor ACH and debit activity on their networks. For example, if your card is used to purchase a product from a country or a domestic location that doesn't match your activity history, your bank can be alerted and the card can be "hot carded". I know it seems like we, as banks, drop the ball a lot, but keep in mind there is a lot going on that customers are not even aware of.

One piece of advice I would give is to just keep enough in the DDA account to which the card is tied to not go into an overdrawn status. Keep the bulk of your funds in a NOW or savings account with nothing electronic tied to it. No debit card, no automatic bill pay, etc.

Here's a link to the Federal Reserve report: http://www.federalreserve.gov/Releases/g17/Current/table9.htm.

In determining the true value of manufacturing operations to various national economies, information like that contained in this report are problematic. The statistic reported is gross value of manufactured goods. My company mfgs network security products. A Taiwanese firm, with facilities in China, manufactures our circuit boards. Our power supplies are manufactured by a Chinese firm. And so on. The total value of our finished product includes the value of our 'input materials', which are rather complex bits of manufactured product in their own right. In other words, the manufacturing value of my company's output *counts again* portions of the manufacturing value of those companies supplying input materials to us. For this reason, the total gross value of a nation's manufacturing output cannot by extension be assumed to correlate meaningfully to the value of that nation's economy.

I think a more reasonable way to judge the manufacturing value to a national economy would be to look at it from a supply chain perspective and only count that portion of a finished good's value attributable to process operations performed within that nation. The same strategy could be applied on a per-company basis as well. The problem, of course, is that this information would be difficult and expensive to collect, so it is not used as a metric.

Manufacturing less now than in the past is not the equivalent of manufacturing nothing at all!

That's the myth though. The US is NOT manufacturing less. US manufacturing output has grown in the last 10 years. It's down in 2009 because of the crappy economy but that's true everywhere, not just in the US.

The ONLY thing that is changing is that the US is losing labor-intensive manufacturing to places with cheaper labor. The capital-intensive production continues to grow as productivity increases.

If you are concerned about the loss domestic manufacturing of jobs and and industrial capacity (as I am) the source of a product should always be part of the consideration of whether or not to purchase it.

The number of manufacturing jobs is GOING to shrink as long as cheaper labor is available elsewhere. Trying to fight this is like trying to prevent the tides from coming in. It's not just futile, it is wasteful. The good news is that this does NOT mean US manufacturing is going to shrink. Very much like farming, US manufacturing is simply going to have more produced by a smaller percentage of the population. It also means that the products produced in the US will change. In the long run that is not a bad thing.

OK, I'm talking about the point at which AIG was insolvent and the government stepped in. Chairman Bernanke said the were no "resolution procedures in place for systematically important non-bank firms". Couldn't Paulson/Bernanke have played a little hardball on behalf of the taxpayers and given a "haircut" by talking directly to CDS creditors? fed link