[Cog]

With oil at <$30/bl. vs. >$60/bl. A year ago and the USA consuming 19 million barrels a day you have over 200 billion per year of stimulus right there that doesn't have to be paid back. How much more stimulus or easy money do we need?
Sucks if you're an oil patch worker of course but those are a small minority compared to the rest of the economy.

Exactly.

I estimate I will save over $2000 in gasoline bills this year alone. Its a glorious thing that enables me to stimulate the economy of gun manufacturers, ammunition plants, optics makers, local gun dealers, UPS and FedEx drivers, and makes me happy. The ripple effect is huge.

If the government wants to stimulate me directly, they can send me a Barrett's 50 cal rifle. Cut out the middleman on government stimulus packages.

[MonteQuest]

The ripple effect is huge.

But will it defeat deflation? That's what the FED has been unable to do.

[Cog]

The ripple effect is huge.

But will it defeat deflation? That's what the FED has been unable to do.

I don't care about deflation. In fact, I very much want it. Ammo is way too expensive.

[PrestonSturges]

Of course there is deflation, because there is no cash. If we only used cash, I don't think this would be happening.

Deflation is too little money in circulation (money supply) relative to the goods and services available. Money is not just cash. In fact, cash is a small portion of the money supply. $1.34 trillion in cash vs $15 trillion money supply. Cash just allows you to carry part of your digital bank account in your pocket for transactions. I don't use cash, I use a debit card.

Isn't there over 1 Trillion $USD parked in offshore accounts? That money isn't circulating.

[MonteQuest]

Isn't there over 1 Trillion $USD parked in offshore accounts? That money isn't circulating.

It's still part of the money supply. Bad home mortgages that are worthless are part of the money supply. Some assets are more liquid than others. The velocity of money plays a part as well. Excess FED reserves in banks isn't circulating either except within the banks, but it's still part of the money supply.

[Pops]

Actually the Fed started paying interest on excess reserves for the first time ever as part of the bailout.

$2.5 trillion sitting there. Trillions that you the taxpayer gave to cover their bad bets.
And now are paying them to sit on instead of making more stupid bets.
Paying them interest to not make loans
at the lowest risk institution in the world

Guess who is watching that henhouse, lol

[MonteQuest]

Actually the Fed started paying interest on excess reserves for the first time ever as part of the bailout.

$2.5 trillion sitting there. Trillions that you the taxpayer gave to cover their bad bets.
And now are paying them to sit on instead of making more stupid bets.
Paying them interest to not make loans
at the lowest risk institution in the world

Guess who is watching that henhouse, lol

Oh, that is a BIG misconception.

That wasn't taxpayer money. That was the FED swapping reserves for bad MBS & GSE debt. A liquidity swap that didn't add to the debt nor to the money supply. The FED pays the interest, not taxpayers. This year the FED had an interest expense of $6.9 billion associated with the excess reserve balances held by the banks. Now, granted, those bad assets on the FED's books probably aren't producing the same returns to the US Treasury as performing assets, but since QE started, the FED's remittances has helped shrink the US deficit each year.

[jedrider]

I am NOT understanding too much of this exchange NOR the contents of this article. Are they related??

The Citadel is breached The Hyperinflation Myth

http://www.counterpunch.org/2016/01/18/the-citadel-is-breached-congress-taps-the-fed-for-infrastructure-funding/

[MonteQuest]

I am NOT understanding too much of this exchange NOR the contents of this article. Are they related??

Yes. The funds they are talking about tapping are the excess reserves the FED used to buy the bad mortgage debt that sits in the Federal Reserve Banks. Currently, those reserves are earning interest that is paid by the FED to hold them in their banks. Cutting the interest rate paid to the banks would increase the remittance the FED pays to the US Treasury--that I just posted about--shrinking the deficit. I don't follow the part about how cutting the FED's dividend payment to the banks would affect the highway trust fund, unless that increase in the remittance to the US Treasury would be earmarked for the Highway Trust Fund. But that guess does make sense. Tapping those funds would increase the money supply the same as if the banks loaned out the money, but with no interest attached.

Unlike QE, which was a liquidity swap and didn't increase the money supply, this temporary measure would, with debt-free or "helicopter money." How they would rein in this new money--should inflation rear it's ugly head--would probably be by selling bonds and removing that money from circulation.

[PrestonSturges]

Isn't there over 1 Trillion $USD parked in offshore accounts? That money isn't circulating.

It's still part of the money supply. Bad home mortgages that are worthless are part of the money supply. Some assets are more liquid than others. The velocity of money plays a part as well. Excess FED reserves in banks isn't circulating either except within the banks, but it's still part of the money supply.

You're touching on an important point without getting it quite right. It would be part of the money supply if it were in domestic banks that make loans in America. But those banks int the Cayman's are probably not making any car loans in the US, so those funds aren't part of the money supply.

[MonteQuest]

You're touching on an important point without getting it quite right. It would be part of the money supply if it were in domestic banks that make loans in America. But those banks int the Cayman's are probably not making any car loans in the US, so those funds aren't part of the money supply.

Those dollars in those Cayman Island banks were loaned into existence by a US domestic bank, so yes, they are part of the money supply or they wouldn't exist. However, they are not part of the domestic money supply. If that's what you mean.

Foreign Dollar Holdings and the U.S. Money Supply

[Smurfs1976]

The Australian government gave $900 to everyone

That was the event that lead me to understand how "helicopter money" could actually be implemented. Quite literally just deposit some into everyone's bank account.

"Rudd Money" quickly became the slang term for it at least around here, a reference to then Prime Minister Kevin Rudd.

[Shaved Monkey]

It worked
Everyone felt happy and went shopping
People kept their jobs because people spent money.
My wife and I put it towards solar panels.

The treasurer was named best treasure in the world

Swan named world's best treasurer

Australia survived the global financial crisis without suffering the recession that crippled most Western economies and has registered strong growth during the latest downturn which has hit other countries hard.

Mr Swan oversaw the cash handouts in 2008 and the schools building program that were widely credited with quarantining Australia from the economic woes of the GFC.

http://www.abc.net.au/news/2011-09-21/s ... er/2908654

[Pops]

The FED pays the interest, not taxpayers.

So money that would have been returned to the Treasury, but instead was paid as interest to banks, on reserves above the requirement is not taxpayer money.

got it
.

[MonteQuest]

The FED pays the interest, not taxpayers.

So money that would have been returned to the Treasury, but instead was paid as interest to banks, on reserves above the requirement is not taxpayer money.

got it.

Well, it's not as easy as that. You claimed the taxpayers shelled out $2.5 trillion to bail out the banks. They did not, as I explained. The FED does pay the interest .25% on excess reserves held by the banks via QE. Now, this new expense does reduce the amount of money remitted back to the US Treasury by $6.9 billion, but the interest on the bad debt purchased by the FED via QE increased the remittances back to the FED by a record $97.7 billion. Taxpayers had to forgo $6.9 billion dollars while getting $97.7 billion.

Now, if the FED had not done QE, the bad debt interest wouldn't be there, nor would the $.25 interest.

Considering that fact, taxpayers got a windfall of money from the FED that reduced the Treasury deficit.

If pocketing that "diminished" windfall constitutes using taxpayer's money to pay the interest, then ok, you are right. It probably does.

But then, what was the complaint, again?

[MonteQuest]

My guess was wrong. When I posted: Cutting the interest rate paid to the banks would increase the remittance the FED pays to the US Treasury--that I just posted about--shrinking the deficit.I don't follow the part about how cutting the FED's dividend payment to the banks would affect the highway trust fund, unless that increase in the remittance to the US Treasury would be earmarked for the Highway Trust Fund. But that guess does make sense.

That guess was in error. The "dividend" is a 6 percent annual the Federal Reserve automatically pays to banks who purchase stock in the Federal Reserve system—a kind of membership fee for using services like check-clearing and the discount window. By lowering this "dividend" money is freed up to be diverted to the highway bill. It wasn't the "interest" rate the FED pays banks for holding excess reserves under QE that was to be cut.

[Pops]

But then, what was the complaint, again?

Taxpayers, via the Fed, bailed out the banks, then paid them not to loan the money to Main St.

Currently the Federal Reserve pays banks 0.25% interest on excess reserves that banks hold at the Fed. The federal funds rate, the rate at which banks borrow and lend in the overnight market, is currently between 0.00 and 0.25%, with an effective rate of around 0.13% on any given day. This means that the trillions of new dollars that the Fed created over the past several years are essentially sterilized; rather than being loaned out by banks, they are sitting in excess reserve accounts at the Fed earning more interest than they would by being loaned out in the market. This is why, despite the monetary base being nearly five times what it was before the financial crisis, prices have not quintupled, or even increased anywhere near that amount. All that new money is tied up..

http://mengercenter.org/?p=2131

This one is a little longer and denser
http://dollarsandsense.org/archives/201 ... lfson.html

In other words, without paying interest on reserves, banks would have so many excess reserves that did not earn any interest, and be so eager to gain at least some return on them, that the Fed would be unable to prevent them from lending at rates below the Fed’s target for the federal funds rate (2% at that time). By paying interest on reserves, the Fed would eliminate banks’ incentive to lend at rates below those it was receiving from the Fed.

[MonteQuest]

Taxpayers, via the Fed, bailed out the banks, then paid them not to loan the money to Main St.

No, QE is a swap of one asset (bank reserves) for another (bonds); this has no direct effect on the national debt. Indeed, QE indirectly shrinks the national debt by reducing interest payments and by strengthening economic activity, which raises tax revenue.

Taxpayer's were paid $97.7 billion to pay $6.9 billion to the banks on their excess reserves. But we are not “paying banks" not to lend.

The central bank paid interest on reserves to prevent the increase in reserves from driving market interest rates below the level it deemed appropriate given macroeconomic conditions. In such a situation, the absence of a money-multiplier effect should be neither surprising nor troubling.--NY FED

Here's the low-down the excess reserves. Banks Don't Lend Out Reserves

Taxpayers did not get a bill for this, they got a refund.

Now, could this maneuver tank the economy and result in a loss of revenue, sure. Then the taxpayers might be on the hook with larger deficits. But then the FED can bail us out again.

[Revi]

Remember Bush's free money? We built an electric car with it. If they give me money I'm going to spend it instantly, to get ahead of everyone else who has the same idea.