US: Fed gives banks 20B, with a B

[Wagner]

Ok, not to be exceptionally naive or anything but...where the f--- does the FED get all this money? We can't subsidize gas prices, we can't get rid of homeless, we can't lower school costs, we can't lower medical expenses, we can't figure out new sources of energy, we can't lower taxes, we can't give states more assistance, we can't really raise minimum wage.....

BUT


we can drop another 70B on Iraq and 20B to the banks......glad we pull these funds out of our collective @sses.

Rant over.

http://money.cnn.com/2007/12/19/news...ex.htm?cnn=yes

[rh71]

Is that kinda like congress being able to decide to give themselves a raise?

[Eric5273]

Originally Posted by Wagner

...where the f--- does the FED get all this money? We can't subsidize gas prices, we can't get rid of homeless, we can't lower school costs, we can't lower medical expenses, we can't figure out new sources of energy, we can't lower taxes, we can't give states more assistance, we can't really raise minimum wage.....

Ummmm....in case you were unaware (most people are), the Federeal Reserve is not the government. The Federal Reserve is a group of private banks that by law (the Federal Reserve Act) have been given the right to make money and loan it to the US government and other banks, and charge interest. (yes, you read that right -- the US government has given the right to a private bank to make money and loan it back to the US government and charge them interest -- "them" being the taxpayers of course)

So if you are asking "where does the FED get all this money?", the answer is easy. They simply make more money when it is needed. Now you also know the answer to the question "why does the dollar keep droping in value?"

[AzNMpower32]

The Fed can influence the money supply. They can raise money or reduce the money supply by buying/selling bonds.

[rayxi]

The $20 billion in funds are interest bearing loans, not just a free cash infusion. It's not just the US. The European Central Bank is doing similar but for $500 billion. Bank of England did as well but I'm not sure how much.

Originally Posted by Eric5273

Now you also know the answer to the question "why does the dollar keep droping in value?"

So by that reasoning the Euro should be dropping relative to the greenback, which it isn't.

[Hallatauer]

Originally Posted by AzNMpower32

The Fed can influence the money supply. They can raise money or reduce the money supply by buying/selling bonds.

And they decide the interest rate you have to pay to borrow "their" money.

[motordavid]

Originally Posted by rayxi

The $20 billion in funds are interest bearing loans, not just a free cash infusion. It's not just the US. The European Central Bank is doing similar but for $500 billion. Bank of England did as well but I'm not sure how much.

...it is not simply or, even "printing more money".
It's a bunch of bonds "sold" and the sales proceeds are
put into the system as liquidity.

There is a piper to pay for doing so, however.

I stayed awake mostly, during Money & Banking class,

[Eric5273]

Originally Posted by rayxi

So by that reasoning the Euro should be dropping relative to the greenback, which it isn't.

Supply is only one side of the equation that determines how much something is worth.

And as far as the Fed goes, it is completely unnecessary. It is simply a handout of taxpayer dollars to the large bankers.

[rayxi]

Originally Posted by Eric5273

Supply is only one side of the equation that determines how much something is worth.

And as far as the Fed goes, it is completely unnecessary. It is simply a handout of taxpayer dollars to the large bankers.

You have to look a bit deeper that that. The loans are given to stabilize the financial markets. Everyone with investments (including you) benefits from stable markets. It's clear that the rippling effects of the sub-prime loan collapse reach across business sectors and national borders. It's not just about the US banks - it's also about you and me and anyone else with investments.

[Meiac09]

1) its a loan
2) it will be repaid... eventually
3) this 20b creates a lot more money in the money supply. there are so many different axes to this situation than meets the eye.

the fed is trying to keep our economy solvent, and avoid the "evil" word that starts with R and rhymes with secession. Imagine if they just left us, said "sorry, SOL" and the banks went bust. Aside from your $100K per insured account, you're fried. All the billions going to Iraq? Those will still flow, the government will just go further into debt, but the consumer will wind up almost broke and with no borrowing power. I have a great 11 letter word that explains this situation. Ask Jon Stewart what it is

On that note, its time for a big-time change. I understand that the Bush/Satan administration will try to spend as much dough as possible in the next 12.5 month for sh*ts and giggles, but, much to my dismay, its not all their fault. The government needs to start showing some responsibility, and no, they would not subsidize something (gasoline) they have an excise tax on. The excise on the cars we drive and the gas they drink are in place to discourage us from using them, thats never gonna happen. Healthcare and Education, that could happen if we get a government that cares about the average Joe, not their special interest trips to Vail. My biggest hope is that we don't wind up being foreclosed on as a country by China. The amount of money we owe them is sickening, and the fact that 8 years ago there was a SURPLUS is even worse!!! How do you blow THAT MUCH money in such a short time!?

One last thought: Everyone talks about lowering taxes. If you lower taxes, they will have less money to pump into things like education, infrastructure, healthcare, all that. I went to england with a family, and one of the things they commented on was how cheap the cost of living in the US was. $3/ a gallon for gas is pennies comared to them, everything is cheaper by about 50%, cars, clothes, electronics, everything... the taxes were lower, schools were cheaper (good schools, including public schools require a fee), not to mention real estate. A $600,000 cookie cutter in New England would go for millions over there. Just some food for thought.
sorry about the length...