Federal Reserve Trivia

[CuteOldGuy]

Here's some info, for those who care, about our Federal Reserve Bank. Be careful, it could give you nightmares.

http://www.moneytrendsresearch.com/1...deral-reserve/

We need a complete audit of the Fed, and then we need to close it down.

[Rakhir]

In a perfect world where I was President I would take a very Jacksonian attitude towards the Federal Reserve. And there is president! Andrew Jackson broke the Bank of the United States by moving all the money out to the state banks leaving the Bank of the United States to whither and die on the vine. Sure congress and continue to charter the bank but how do they operate without profits received on interest?

The Fed would be done in overnight and a system of 50 independently chartered state banks checking and rechecking each others math would seriously hamper federal misuses.

[IIFFOFRDB]

Thanks COG.

[waverunner234]

Interesting article although I don't agree with everything.
We need inflation period.
Deflation would halt the economy faster then you can imagine. No one would buy anything more than absolutely necessary because next month stuff might be cheaper. And maybe cheaper in 6 months.

I agree that Bernanke is a very incompetent idiot and should be replaced.

Fortunately the Fed is not ruling my life, the only thing they do for me is sending wires from my broker to my bank account.

[Texas Contrarian]

Here are a few snapshots of historical Federal Reserve asset levels over the decades -- shown in nice, colorful graphs that may help soothe the sick feeling you could get if you actually think about the numbers and long-term trendlines:

http://greshams-law.com/2012/02/13/c...-1915-to-2012/

Next year, Bernanke & Co. can trumpet a new motto:

"A Century of Bubble-Pumping."

[Fast Gunn]

According to those charts, it looks like things all went to hell in a hand basket on Sept 2008.

September and October always seem to be the dreaded months that bring economic disaster when it comes.

. . . Does anybody know why that is so?

[Texas Contrarian]

Originally Posted by Fast Gunn

According to those charts, it looks like things all went to hell in a hand basket on Sept 2008.

September and October always seem to be the dreaded months that bring economic disaster when it comes.

. . . Does anybody know why that is so?

People have pondered that question for years.

It's been said that one explanation could be wrapped up in the fact that a lot of big players come back from vacation in September and want to close out many positions before the end of the quarter.

Check this:

http://www.cbsnews.com/8301-505123_1...ruelest-month/

People have written Ph.D. dissertations and MBA theses on this topic, without coming to any clear consensus concerning whether the "theory" has any validity, as far as I can tell (although I've never looked into the issue very deeply).

In any event, traders are a rather mercurial and nervous lot. If some believe that there's a fairly significant "September effect", they may begin operating on something like a hair-trigger alert, jumping as soon as they see signs of unanticipated selling activity. Small moves can then quickly cascade. Also check this from 2010:

http://www.msnbc.msn.com/id/38937155...tember-effect/

And this from 2009:

http://online.wsj.com/article/SB1000...014399026.html

But then there's this:

http://www.insidermonkey.com/blog/20...anuary-effect/

Remember the question asked in a TV ad for audio tape about 40 years ago?

"Is it real, or is it Memorex?"

[Fast Gunn]

Thanks for those leads.

Looks like I am going to have to ponder on this one and do some research on the subject myself.

There are certain months when weather conditions all reach critical mass at the same time and we get hurricane season.

I wonder if there is some similar analogy to hurricane season by Wall Street and a time to batten down the hatches?

[CuteOldGuy]

You're kinda missing the point. The Fed needs to be shut down. Gawd, post something with pretty colors, and everyone gets distracted.

[waverunner234]

Originally Posted by Fast Gunn

According to those charts, it looks like things all went to hell in a hand basket on Sept 2008.

September and October always seem to be the dreaded months that bring economic disaster when it comes.

. . . Does anybody know why that is so?

Historically September is the worst month for trading stock.
But I don't know why.

[Fast Gunn]

9/11 also fell within that time bracket which really hurt the economy.

It does make one wonder why they chose that particular time?

. . . I suspect it was probably for maximum effect.

[I B Hankering]

“Economic crises occur when new technologies [e.g., sub-prime loans, CDOs, derivatives, etc.] are maximally exploited,” Joseph A. Schumpeter.

Why in the fall? Up through the Great Depression, an economic crisis could, in part, be associated with an agrarian crisis. Harvest season sometimes overtaxed the pre-Fed liquidity of banks.

[CuteOldGuy]

Ok, let me get this straight. You don't care about how the Fed squanders trillions of dollars with no accountability, but if stocks go down in the fall, that bothers you. Brother.

[Texas Contrarian]

Just a few excerpts from stuff I've written recently:

It should be remembered that a Rothbard-style ending of the Fed and simply a return to a 19th century-style banking system would be inappropriate for a large industrialized economy. Although it could certainly reduce the possiblity of endless replays of all the continous bubble-pumping cycles we've seen for so many years, it certainly wouldn't eliminate panics and depressions, plenty of which we had before the creation of the Fed. There have been a number of debates over what the architecture of such a non-Fed controlled banking systen should look like, but with nothing even remotely approaching a clear consensus.

That's just one of several reasons why I think there's not even the slightest chance that the Fed as we know it will be "ended." However, I am hopeful that it will be audited and reformed, but that will not happen until the next crisis sharpens discussion of the issue. And in order to precipitate serious reform, it will have to be a severe crisis. (And I think the inevitability of such a crisis is already baked into the pie.)

When people like Ron Paul and Bernie Sanders are in agreement on something, maybe it has a shot.

But perhaps the main reason the Fed will not be ended any time soon is that it's engaging in a continuing and massive bailout by way of allowing the big banks to play the carry trade, knowing full well that they'll be backstopped by Treasury and the Fed, especially since Dodd-Frank did essentially nothing about TBTF.

The Fed has promised to maintain ZIRP for an extended period of time, and has implicitly promised further iterations of Operation Twist, QE, or both. It means to make absolutely sure that the yield curve not only remains pancaked, but does so at a very low level across the curve. This is overt manipulation of interest rates; in other words, the "free market for money." I'm reminded of the Nixon administration's wage-price controls, which of course tried to prevent inflation in the early 1970s. The problem, of course, is that heavy-handed attempts to control market prices can only work in the short term. Market forces eventually must prevail, and when they do the lid blows off and all Hell breaks loose. You saw that happen with the inflation of the 1970s.

It's a pretty sweet deal to be able to borrow almost unlimited quantities of money at near 0% so that you can buy riskless longer-dated Treasuries and earn the spread effortlessly, especially if you're secure in the knowledge that you'll be bailed out once again if anything goes seriously wrong with markets for those notes and bonds.

The current yield on 10-year treasuries is slightly below 2%, which is well below the current rate of inflation. Of course, a lot of the reason for that is wrapped up in the continuing eurozone crises. But still, the fact that 10-year treasury yields are below the rate of inflation, and below the dividend yield on many big-cap S&P 500 stocks, makes it seem like we're living in an upside-down world.

Of course, it is an upside-down world when the Pope is German and the president of the European Central Bank is Italian!

[Whirlaway]

If I understand the article correctly the author's underlying assumption is that :

The political parties don't control the debt; the FR does. And the blame should be placed at the FR.

I don't see where the author proved his claim. He just makes the passing statement "the truth is that most of the blame should be placed at the feet of the Federal Reserve." and "As long as the Federal Reserve System exists, U.S. government debt will continue to go up and up and up."

If our political parties stopped deficit spending, and paid down debt, wouldn't that make the political parties in charge of the process.

I think this author is trying to set up a boogy man and avoid blaming American public for electing politicans who spend, spend, spend.

Stop the spending, pay down debt and the role of the FR will be diminished.