You have to consider the point that the result of a free market economy is free market capitalism, which is what we have right now. That is why even the one appointed by the President works for a consortium that operates independently of the government and works in favor of a consumer spending economy that wants low interest rates.
That should be the case, but what we have is not a free market economy but a free market capitalist economy. In the latter, capitalists call the shots.
Do you really consider 5% to be that high? It seems we lived 40 years and sustained steady growth through that period. Inflation got to be a serious problem after Nixon cut all gold ties and urged Burns to buy as many bonds as possible (thus lowering interest rates). Fortunately they were only the short-term variety which Volcker let expire, effectively raising the rates and stifling the price and wage inflation.
The latter state is an oxymoron.
What do you consider higher interest?
Again, I know this and have said thus.
How do they contradict each other?
If you want real savings, you need to encourage it. Low interest rates do not encourage real savings, they discourage it.
That fraction matters because it is not real savings.
I never claimed most of the money supply comes from the Fed.
Unless the bailouts come from taxpayers. If it comes from the Fed, that is paid for by inflation, which is a hidden tax on the public.
That’s not the money multiplier. The money multiplier is based on consumption. You can have a money multiplier without fractional reserve banking. But the point is moot, it is been shown that the money multiplier does not exist or is very small.
No, consumption depends on savings. One can only consume if someone else saves. it is called Say’s Law.
The financial elite only have power because of central banks.
Notice you used two different words here: “created” and “controlled”. Yes, most of the money supply is created by private banks but they do not control it, the Fed does.
How can banks loan out more money then they have in deposits?
Obviously so, because it has been done.
Again, two different words. Private banks create the money supply, the Fed controls it.
Yet you want the government to take over the Fed?
Me either. But if it was, it would be a good thing.
That data actually proves my point. It is all in the General Theory.. Maybe you should read it.
Central banks and governments foster environments, through Keynesian macroeconomic policies, that all these guys to play their game.
You can cut down on borrowing and spending without the disappearance of anything you mentioned. It’s simple, raise interest rates.
No, consumption depends on savings and investment. It’s called Say’s Law.
Yet, you want the government to take it over?
But they do not need to depend on it. You can gave middle class conveniences without the Fed.
No, it isn’t. But the point is moot seeing how it has been shown, empirically, that the money multiplier either doesn’t exist or is so small as to be insignificant.
How can M2 be ten times larger than reserve balances? Where are these banks getting all this money to loan out?
I have countered your argument. You just won’t admit defeat.
See, this makes me think you do not read my posts or can’t comprehend them. I never said the Fed controls private banks, I said that the Fed controls the money supply.
Do you have reading comprehension problems? This is the same stuff we have been over and over.
How were they able to manipulate interest rates?
Are you referring to the President of the Federal Reserve? Of course they favor a consumer spending economy and low interest rates, they are all Keynesian economists. That is what Keynesian economics is.
Which is an absurd notion because it is the government itself which intends to borrow at those low interest rates as well, thereby increasing the demand for credit and puts pressure to raise rates. Actually it’s not pressure at all; it’s simply reflected in the price of those bonds, which effectively raises (or lowers) rates with or without the Fed.
Except the Keynesians (“We are all Keynesians now”) have now gone one step better and learned how to manipulate CPI numbers as well so that they can be justified in continuing the QE long-term monetary expansion. And it’s simple things like if steak prices go up, count chicken prices instead. But don’t count (or put less weight on) the real things that take money from you like rising property taxes, insurance premiums, and such.
But I thought the Fed was a consortium of these private banks.
It depends on what one plans to do with borrowed money, especially for a consumer spending economy.
It’s free only in a sense that capitalists can compete with each other, which is what we see today in a global economy dominated by mega-corporations.
I can’t tell, but a study showing the effects of higher interest might help.
That is the money multiplier.
The second implies that the Fed creates money for any reason and then injects it into the system through various means. The first implies that someone has to borrow money from a private bank, with the Fed creating money to fulfill the loan request.
Keep in mind that in order to earn from savings, banks need to lend them to someone who has to pay back the loan plus interest. In order to pay interest, the borrower has to either deposit that money in another bank that offers higher interest or invest it in a business that will produce and sell. The pressure to produce and sell more obviously increases with higher interest rates.
The same goes for the rest of money supply, which increases because of fractional reserve banking.
That’s why the money multiplier exists. Recall that it refers to money supply increasing given an initial amount injected into the system by a central bank. That’s why M2 is a lot higher than the money base.
Businesses and banks want to avoid inflation as that leads to lower sales.
It’s the money multiplier:
Actually, it works both ways. That is, what you save is gained by selling to another who will consume what he bought. If he doesn’t buy, then you have nothing to save.
Unlikely, as financial elite existed long before central banks were formed.
I think Dylan Ratigan at one time called it corporate communism.
You seem to focus too much on some money supply figure no one can measure accurately so it’s basically all a theory. In fairness it’s just like the velocity factor outside the banking sector that actually makes an economy work; yet you ignore this.
I don’t think the Fed is in charge of refusing loans made from private banks.
It’s “endogenous money” and explained here:
That unregulated derivatives market exists not because of real savings. More details here: