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Originally Posted by Iriemon  Not quite that simple. What the government often calls a "deficit" is really the formula you use, but includes surplus SS taxes, and does not include "off budget" items like the cost of the Iraq war. With such gimmicks, the Bush administration bragged that the deficit was "only" about $160 billion last year when in reality the govt had to borrow $1/2 trillion to keep afloat. |
Wow, it's even more fraudulent than I thought. Thanks for pointing that out.
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Originally Posted by Iriemon The Fed owns about 1/10 of outstanding debt. It does use the process of buying Govt securities such as T-Bills and bonds to expand the money supply.
Yes, it is the Fed's function to control the money supply, and buying T-Bills (as well as lending thru the discount window to member banks and other means) is one way the Fed injects more money into the system. |
I really hate terms like that. They're a really fancy way of saying
invent money out of thin air. Quote:
Originally Posted by Iriemon It is true that banks take their deposits and lend it out. That is they way they operate and stay in business. |
Um, no. They operate and stay in business by loaning
previously non-existant funds out to people and collecting
interest on the repayment on those
previously non-existant funds.
Seeing as how the bank is limited to loaning out I believe 9X what their current holdings or assets, they wouldn't loan out their depositors funds. They'd loan out
"new" money, using the deposits as a "reserve" to back the "loans."
Also, fees are a huge portion of how banks make money. That's why they calculate withdrawals (like checks paid out) before adding deposits (like checks and cash coming in) -- it allows them to maximize the number of people whose accounts are overdrawn on a daily basis.
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Originally Posted by Iriemon If there was a run on a bank that broke its reserve (10% of deposits) it might not be able to pay you your money right away. However, if your deposit is with and FDIC insured bank, it is backed by the Govt and you will get your money. |
Really? Could you point me the fund of money that the FDIC has set aside for bailing out depositors? As far as I'm aware, the fees banks pay to the FDIC, which are presumably to put money into that fund,
are used to purchase bonds. So where, exactly, would the money come from?
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Originally Posted by Iriemon Please explain.
Few are saying that thing's are ducky now, because we can see from Govt statistics that real GDP growth is just barely positive and inflation is increasing. |
Simple enough.
It used to be that a recession was clearly defined as 2 consecutive quarters of decline in the GDP. These days, the official definition used is far more vague, and includes words like "significant decline" and "a period of time."
As far as it goes with inflation, it used to be that an increase in the cost of certain staples was used as a yardstick for measuring inflation. These days, if you're forced to purchase a cheaper alternative to a staple you were buying previously, it's said there's no net change in the buying power of the average American, since you're still eating, so inflation, what inflation?