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I am so confused. Need someone with some heavy duty banker knowledge

 
Anonymous Coward
User ID: 21926154
United States
11/14/2012 08:36 AM
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I am so confused. Need someone with some heavy duty banker knowledge
This is how I understand it...

On the news they say, the Fed 'lowered interest rates' to boost the economy.

So... I think they are talking about the interest rates that banks charge one another when they loan money to each other so that they meet reserve requirements.

But the Fed does not issue a decree.

No, the Fed INDIRECTLY manipulates the market to get the interest rates down.

They do this by buying bonds from banks. They create the money from thin air, and go on a wild spending spree, buying bonds on the 'open market' from these banks.

Then, theoretically, since all of the banks have so much money, they need to loan it...

...but since all the banks HAVE money almost no one needs to borrow money.

So to remain competitive, the interbank interest rates start to drop.

And this process repeats until interest rates hit the average interest rate hits the target the bank was looking for.


WTF? If I have this right, this is the most insane fucking thing I have ever heard.
Lemon

User ID: 5766356
United States
11/14/2012 08:43 AM

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Re: I am so confused. Need someone with some heavy duty banker knowledge
Yup, and it even gets worse.

The Feds loan money through the "Discount Window" to a few select of the largest banks.

They then sell bonds that pay a slightly higher rate to the same banks.
THREE LAWS OF TYRANNY
(Could be read as "Three Laws of Bullying" ? )

Tyranny Law #1:
"Any power that can be abused will be abused."

Tyranny Law #2:
"Abuse always expands to fill the limits of resistance to it."

Tyranny Law #3:
"If people don't resist the abuses of others, they will have no one to resist the abuses of themselves, and tyranny will prevail."
Anonymous Coward
User ID: 18371493
United States
11/14/2012 08:44 AM
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Re: I am so confused. Need someone with some heavy duty banker knowledge
Yes indeed.

Quantitative easing (QE)3
“I think the country should have panicked over what the Fed is saying that we have lost control and the only thing we have left is massively creating new money out of thin air, which has not worked before, and is not going to work this time,” Rep. Paul said.
[link to rt.com]
Anonymous Coward
User ID: 19879137
United States
11/14/2012 08:45 AM
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Re: I am so confused. Need someone with some heavy duty banker knowledge
The bank won't ever say anything publicly about thier business with each other.

When they say they are lowering interest rates to boost the economy the are referring to street loans to the public. They hope to increase borrowing by inticing the public in with lower interest rates. It is a sucker deal - don't do it. What they don't tell you is that they are also lowering the interest rates earned on CDs and other porfolio products to offset the balance sheet in thier favor.


EI: they lower the lending rate to you by 1.5% on a collateraized loan, but also reduce rates of return on collateralized deposits by 1.62%. So they are still making the .12% margin - or stealing it I should say, because people usually only do one transaction at a time they never notice the disparity.
Anonymous Coward (OP)
User ID: 21926154
United States
11/14/2012 08:50 AM
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Re: I am so confused. Need someone with some heavy duty banker knowledge
Yup, and it even gets worse.

The Feds loan money through the "Discount Window" to a few select of the largest banks.

They then sell bonds that pay a slightly higher rate to the same banks.
 Quoting: Lemon


omg. my head is going to explode. I thought I understood all this. And then someone asked me to explain it. And I stumbled halfway through and looked like an idiot.

Before I always thought that the Fed had two methods of regulating markets

One was by increasing or decreasing the money supply

And I thought the other was by like changing their OWN interest rate

Now I'm trying to understand that they what they are talking about is manipulating interest rates by increasing and decreasing money supply.

Nuts.
Anonymous Coward
User ID: 300884
Sweden
11/14/2012 08:52 AM
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Re: I am so confused. Need someone with some heavy duty banker knowledge
All you need to understand is this:

They stuff their pockets, and help their cronies stuff theirs. That's the essence of all the complicated schemes they're involved in.
No More Lies

User ID: 1707881
United States
11/14/2012 08:54 AM

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Re: I am so confused. Need someone with some heavy duty banker knowledge
Yup, and it even gets worse.

The Feds loan money through the "Discount Window" to a few select of the largest banks.

They then sell bonds that pay a slightly higher rate to the same banks.
 Quoting: Lemon


This...free money for banks, no risk.
Thanks to whomever upgraded my account!
:nml:
TheMacaroni

User ID: 24516758
11/14/2012 09:02 AM
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Re: I am so confused. Need someone with some heavy duty banker knowledge
Watch the news and listen closely.Are they not saying the president will bomb us after the generals betrays us because a fiscal cliff is coming January first.I swear you cannot make this crap up.banana2banana2banana25a
TheMacaroni

User ID: 24516758
11/14/2012 09:08 AM
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Re: I am so confused. Need someone with some heavy duty banker knowledge
Like someone else said we can have gays in the military yet an affair will shut down the CIA.This will all tie into the federal reserve charter that ends in 2013.burnit
Anonymous Coward
User ID: 27619458
Australia
11/14/2012 09:17 AM
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Re: I am so confused. Need someone with some heavy duty banker knowledge
Banks can only make money by increasing the money supply, most of it done electronically.

Banks need to issue as much debt to the public through loans because the value of the newly issued dollars lose purchasing power thanks to inflation. So by the time the money gets to the consumer, prices have risen and they pay the hidden inflation tax that no one talks about.

The consumer is none the wiser by that stage because they just got a loan and that's all they notice.