Thread: Modern Economics

Originally Posted by Buddha C

You need to read up on some good ol' Austrians, their champion is von Mises and he has an institute entirely dedicated to him (founded by the late Austrian/Libertarian/Anarchist Murray Rothbard) and it provides many texts free. He, and his school, were adamantly against the use of models for anything other than conceptual use. EDIT: Ludwig von Mises Institute : The Austrian School Is Advancing Liberty

Just to note: The Mises Institute is a propanada mill built and maintained by the money of extreme hard-right titans such as the Koch brothers, Scaife's, and others. All told there are about 200 bought and paid for members of this so-called Austrian School. There are more than 20,000 members of the American Economic Association, the professional organization for actual economists. Mises-types stand not just against models, but against empirical testing or analysis of any sort, prefering simply to discover the axioms of economics through thinking really hard about them. The real reason for this disdain of testing is that putting Austrian ideas under any sort of real world microscope consistently shows them to be nothing but invented fluff.

Originally Posted by Stewart

Well seeing as I sound silly, why don't you actually tell us.

Oh, the Fed has a small arsenal of tools to achieve its aims. Just because the cash rate is referenced all the time, there are others. And the Fed Primary goal is maintaining inflation within its long run target. Unemployment isn't so important, Volker's fed showed us that.

Oh btw doesn't that mean all sciences are biased?

No, it has one tool.

Originally Posted by Matt Foley

No, it has one tool.

Facts suggest otherwise, but we'll take your word for it.

Originally Posted by Hare

Facts suggest otherwise, but we'll take your word for it.

What other powers does the Federal Reserve have, other than taxing one bank loan to another bank? Enumerate them.

Originally Posted by Matt Foley

What other powers does the Federal Reserve have, other than taxing one bank loan to another bank? Enumerate them.

Well, determining interest rates, setting bank minimum capital standards, monitoring/regulating the health and available credit line/resources of individual banks, the authority to intervene in acquisitions and mergers.. etc. etc.

http://www.federalreserve.gov/pf/pdf/pf_5.pdf

Originally Posted by Hare

Well, determining interest rates,

Which is what I said, when one bank loans another bank money.

setting bank minimum capital standards,

So you are for one bank loaning another bank money an infinite amount of money without having any assets to back up the loan? Great, that's what we need, a banking trust.

monitoring/regulating the health and available credit line/resources of individual banks

Monitoring isn't a power.

the authority to intervene in acquisitions and mergers..

Detail this "authority".

http://www.federalreserve.gov/pf/pdf/pf_5.pdf[/QUOTE]

No bank can lend more money than they have. I think if they did, it would be a criminal matter and should be refered to the police.

The Fed is the only bank that has an infinate amount of money.

Originally Posted by Matt Foley

Which is what I said, when one bank loans another bank money.

No.1 is open market operations.

So you are for one bank loaning another bank money an infinite amount of money without having any assets to back up the loan? Great, that's what we need, a banking trust.

Nope! Setting the reserve ratio for banks is tool no.2. (although this tool is now considered "last ditch").

No.3 is the ability to lend through the discount window.

But then it gets rather complicated. The Fed can create various lending facilities (with congressional approval).

Term auction lending facility (TALF) is no. 4. Essentially, the FRB NY would auction off funds to the highest bidder for a specified period of time. This was created to combat the stigma of what borrowing form the discount window entails.

Primary dealer credit facility (PDCF) is no. 5. Essentially, an overnight collatoral swap for primary dealers.

Term securities lending facility is no. 6. Essentially, the FRB of NY allows eligible institutions to swap collateral for 1 month.

Interest on excess reserves (for selected institutions!) is no. 7. Essentially, the FRB pays every eligible institution a set amount of interest on the amount of excess reserves (see reserve requirements) as a means to provide a floor to interest rates. Very complicated tool. The motivation for this is to set a "hard floor" to the fed funds overnight market.

There are probably another half dozen various lending facilities like the asset backed commercial paper and money market facility (although this program and others have expired as financial markets have been more healthy).

The more you know

Originally Posted by imagep

No bank can lend more money than they have. I think if they did, it would be a criminal matter and should be refered to the police.

The Fed is the only bank that has an infinate amount of money.

Of course they can. Do it every day.

Originally Posted by oldreliable67

Of course they can. Do it every day.

No they don't. If they did they would be commiting bank fraud, and their checks would bounce.