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PostPosted: Thu Sep 21, 2017 8:51 am 
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From NPR: Fed's Unwinding Of Crisis Programs Expected To Push Up Interest Rates Very Gradually
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Fed's Unwinding Of Crisis Programs Expected To Push Up Interest Rates Very Gradually September 20, 2017 2:35 PM ET By John Ydstie

The Federal Reserve on Wednesday said it will hold short-term interest rates steady for the time being. But the central bank said that in October it will begin to unwind the extraordinary stimulus it used to battle the Great Recession.

Fed Chair Janet Yellen has said the process will be gradual. But over the long run, the plan will put upward pressure on consumer interest rates, including for car loans and mortgages.

The Fed has already signaled the economy is strong enough to absorb higher short-term rates. It has raised them four times since the end of 2016. Wednesday's move to unwind its massive bond holdings is yet another sign of the Fed's confidence in the economy.

In November 2008, in the midst of the financial crisis, former Fed Vice Chair Alan Blinder says, the central bank had already exhausted its main tool to fight recessions. "[Fed Chair] Ben Bernanke and company were then literally at a crossroads," he says.

The Fed had reduced its benchmark interest rate to near zero, Blinder says. It could decide to say that's all we can do and "give up and hope for the best," or start inventing new instruments, he says.

Fed officials chose the second alternative and came up with something called quantitative easing. It entailed buying huge amounts, ultimately $1.7 trillion, of mortgage-backed securities, the very financial instruments that helped trigger the crisis. That helped stabilize the market for those securities and revive the housing market.

Over a series of three quantitative easing programs, the Fed also bought close to $2 trillion in Treasury bonds. That helped put more downward pressure on interest rates that supported borrowing and helped boost the economy. The program pushed the Fed's balance sheet from just under $1 trillion to $4.5 trillion in bonds and other securities.

On Wednesday, the Fed said it will begin to unwind that stimulus very gradually. In October, it will begin allowing about $4 billion worth of mortgage-backed securities and $6 billion of Treasury bonds to mature without reinvesting the proceeds. That will reduce the Fed's holdings by $10 billion. The Fed said it will not sell bonds or securities in the marketplace to avoid flooding and destabilizing the financial markets.

The Fed will gradually increase the amount of bonds it allows to mature. However, it will take years for the Fed to reach the level it sees as appropriate for the size of its balance sheet.

Over the long haul, the unwinding will put upward pressure on interest rates. But Blinder says he doubts consumer interest rates will be affected at all in the short term.

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PostPosted: Thu Sep 21, 2017 9:48 am 
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7 years and 170 pages later, no global debt explosion. The world should worry more about this bomb

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PostPosted: Thu Sep 21, 2017 9:55 am 
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teotwaki wrote:
7 years and 170 pages later, no global debt explosion. The world should worry more about this bomb

Are you bummed? :clownshoes:

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PostPosted: Thu Sep 21, 2017 11:00 am 
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MPMalloy wrote:
teotwaki wrote:
7 years and 170 pages later, no global debt explosion. The world should worry more about this bomb

Are you bummed? :clownshoes:



No because the zombies are coming!! :clap:
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PostPosted: Thu Sep 21, 2017 11:01 am 
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MPMalloy wrote:
teotwaki wrote:
7 years and 170 pages later, no global debt explosion. The world should worry more about this bomb

Are you bummed? :clownshoes:


In many ways this is exactly why this thread has not been closed. It serves as a reminder that we often think TEOTWAKI is likely but that the odds are good the sun will rise tomorrow.

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Last edited by raptor on Thu Sep 21, 2017 8:23 pm, edited 1 time in total.

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PostPosted: Thu Sep 21, 2017 12:18 pm 
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As per the above post here is another article on the Fed's slow unwind of its balance sheet.

http://www.marketwatch.com/story/how-th ... yptr=yahoo


If you look at the chart on the right that shows BoE and the US Fed.

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PostPosted: Thu Sep 21, 2017 4:59 pm 
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Quote:
But over the long run, the plan will put upward pressure on consumer interest rates, including for car loans and mortgages.


Just bought a car a couple of months ago. Rates were 0.9%. That was on top of a rebate for car that was fairly inexpensive. I still talked them down a few dollars. Car rates will likely not change much for consumers with high credit ratings. Auto dealers have huge pull with the banks these days.

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PostPosted: Thu Sep 21, 2017 5:40 pm 
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raptor wrote:
It serves as a reminder that we often thing TEOTWAKI is likely but that the odds are good the sun will rise tomorrow.
Yup. I think that people look at how bad things would be & not at how probable something is.

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PostPosted: Mon Sep 25, 2017 7:54 am 
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Once again, stock markets appear to have reached bubble proportions.

http://www.marketwatch.com/story/warnin ... 2017-09-25

http://www.marketwatch.com/story/stocks ... 2017-09-22


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PostPosted: Mon Sep 25, 2017 1:19 pm 
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absinthe beginner wrote:


I am not opining upon whether or not there is a bubble. That said one thing to remember is that inflation has an impact on stock prices.

Here is an inflation adjusted index as of 8/2017. If you notice the market just recently caught up to the cumulative inflation impact.

This chart BTW is based upon the offical .gov rate that has been "dithered for accuracy". :wink:


https://www.inflationdata.com/Inflation ... _price.asp

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PostPosted: Mon Sep 25, 2017 3:34 pm 
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I'm getting tired of waiting.

Just sayin'.

:mrgreen:

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PostPosted: Mon Sep 25, 2017 3:39 pm 
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For those of you making fun of the thread, consider this:

For millions of people, the bomb did explode.

Americans lost houses, cars, and livelyhoods in the debt collapse in 2007-2008. Around here, very, very few people have had any meaningful recovery.

Argentina worsened again.

Venezuela is down the drain.

Greece is going through hell.

Here in Ohio, some energy companies are defaulting on rent and royalty payments to landowners in order to have liquidity to cover their debts. That's huge problem when most of that money is owed to people in the poorest parts of the state.


So those of you making fun of the thread really aren't doing anything more than gloating that the shrapnel didn't hit you.


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PostPosted: Mon Sep 25, 2017 3:43 pm 
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williaty wrote:
For those of you making fun of the thread, consider this:

For millions of people, the bomb did explode.

Americans lost houses, cars, and livelyhoods in the debt collapse in 2007-2008. Around here, very, very few people have had any meaningful recovery.

Argentina worsened again.

Venezuela is down the drain.

Greece is going through hell.

Here in Ohio, some energy companies are defaulting on rent and royalty payments to landowners in order to have liquidity to cover their debts. That's huge problem when most of that money is owed to people in the poorest parts of the state.


So those of you making fun of the thread really aren't doing anything more than gloating that the shrapnel didn't hit you.


Except for the Ohio thing, all those things have been covered in this thread. The basic premise of one of the article was never realized though.

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PostPosted: Mon Sep 25, 2017 3:44 pm 
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PostPosted: Mon Sep 25, 2017 4:12 pm 
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williaty wrote:
...snip---Americans lost houses, cars, and livelyhoods in the debt collapse in 2007-2008.---snip---



This thread was started in October, 2010.

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PostPosted: Mon Sep 25, 2017 4:27 pm 
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If it hasn't been posted already, the US Gov't has more than 20 Trillion in outstanding Treasuries now.

Just sayin'.

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PostPosted: Thu Oct 12, 2017 3:52 am 
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Hard core doom porn.

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PostPosted: Thu Oct 12, 2017 6:06 am 
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Each day, put a piece of paper in your pocket with the words "World War 3 starts today" and the day's date.

One day, you will be able to pull it out and show people you were right.

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PostPosted: Thu Oct 12, 2017 8:40 am 
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NamelessStain wrote:
Each day, put a piece of paper in your pocket with the words "World War 3 starts today" and the day's date.

One day, you will be able to pull it out and show people you were right.


Ah, the old James Randi psychic prediction trick.

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PostPosted: Thu Oct 12, 2017 9:15 am 
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Currency Manipulation actually works great to PREVENT financial collapses.

That is, until it doesn't. For fiat currency to work, the people have to trust that the (otherwise worthless) piece of paper actually represents value. Proponents of sound money (like myself) refer to this as the Tinkerbell Effect (from the musical adaptation of Peter Pan- there is a scene in which Tinkerbell is dying, and Peter tells the audience 'clap if you believe, if you believe she will be fine, clap, clap'). If enough people refuse to believe in the currency, it rapidly loses value. That is why economies with fiat currency are so intertwined with government- it is a text book example of codependence. As long as the central bank keeps printing money, the government can keep being irresponsible with it. And the private sector then gets contracts for government procurement, and borrows worthless paper to earn more worthless paper. They in turn pay their employees in worthless paper, who then borrow more worthless paper to buy crap they don't really need or want. And the irony of it all is everything and everyone in the private sector then pay their taxes back to the government and central banks in the same worthless paper.

It reminds me of those 'history lessons' we got in school about script and company stores.

And the true irony, to me, is that people like me who advocate for sound money can only make the problem worse by educating people on the fact that there is a problem. Again, fiat currency only works if a majority of the people believe it has value. But the only way to return to sound currency is if a majority of the people reject fiat currency.

It truly is a viscous cycle.

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PostPosted: Thu Oct 12, 2017 9:46 am 
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I assume by 'sound money' you mean you're a gold bug? Better clap if you believe in gold too. Otherwise, it's just a lump of metal with few industrial uses.

US dollars on the other hand, are backed by debt. Most of the USD money is produced by lending (fractional reserve, government debt, etc.). The vast majority (I think over 93%) of dollars are produced that way. Therefore, each dollar you have means someone somewhere, whether the government, a corporation, or an individual, has borrowed some money and promises to pay back. A dollar represents a favor owed. Doesn't mean the system is stable and will last forever, but we had plenty of financial crises under the gold standard as well.

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PostPosted: Thu Oct 12, 2017 11:22 am 
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absinthe beginner wrote:



Just a warning...

The near-pornographic picture style click-bait ads to the right of the article are not safe to view at work

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PostPosted: Thu Oct 12, 2017 11:55 am 
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Sun Yeti wrote:
I assume by 'sound money' you mean you're a gold bug?


Not really- I will admit that most advocates of sound money want a currency that is secured by gold and/or silver. But when I speak of sound money, I mean something backed by something of tangible, universal value. That could be oil, or grain stores, or some other form of food such as livestock. Hell, I even once wrote a short story where the culture's economy was backed by sexual favors. Frankly, I think food would be the best commodity to secure a currency with. But just about anything is better than debt. Debt is a poison.

And I will even admit that I used to be what you call a 'gold bug'. But my opinion has evolved over time and has changed due to personal experiences. Gather round, boys and girls, and hear Hiro's story about personal economic collapse.

I reached the age of majority in 2001. The culture that I was born and raised in was one of 'borrow and spend- you'll pay it back someday.' You want a house? Get a mortgage. Want a car? We have low interest rates loans for those. Want to take your friends out to dinner and a movie tonight? We have a credit card for that. Want to go to college? Let us introduce you to Sallie Mae. I had all of those types of debts. I even used credit cards to buy guns, bullets and bullion- thinking those were the only preps I needed when the shambling hordes of undead appeared in my neighborhood.

Then- 2006 came. And I was affected by what some have called 'The Great Recession'. (Please note- I was not a victim. The only thing that I was possibly victimized by was my own stupidity and short sightedness.) But I thought, 'hey, no big deal. Just time to tighten the belt a little and get a new job.' But the only thing I could find for about 5 years were little part time and/or seasonal jobs. I sold all my guns, bullion and bullets during this time period. I also sold three cars. Eventually I had to voluntarily repossess my fourth car car and short sold my house. And I (and by this time my wife and 3 kids) couch surfed for about a year. (Needless to say I defaulted on the credit cards.) I learned some very important lessons from this.

1) Debt is a trap.
2) If you borrow to buy something, it isn't actually yours until you pay back the loan. And if you stop paying, you lose the property.
3) You can't eat precious metals or guns, and you lose value to convert them into food.

Yes, as I eluded to in my post above- gold currency is volatile. History shows it as more volatile than fiat currency. But is an entire global economy built on debt more stable? Well, it's never been tried before- but given all the close calls that would have descended into total collapse if not for the manipulation of the markets by central banks- I don't think it is any safer.

Truthfully- I'd like to see a world where everyone owns their own land and raises their own food. And then barters the resources of their land with others on a voluntary basis. Much like the vision that Jefferson had for The United States. I am opposed to the current economic system that is built upon compulsory and usury. But I don't look to an elected official or violent group to bring about this 'utopla'. It is my responsibility, my right as a person to make this a reality for myself and my family. This is why I have homesteaded in the Appalachian Mountains and why I am currently participating in the economy to earn money for my new homestead in Alaska.

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Last edited by Hiroshima_Morphine on Thu Oct 12, 2017 12:03 pm, edited 1 time in total.

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