Finance is a cartel

I just wanted to trot this out again. I really miss the estate tax of 20 years ago, or in the Eisenhower era.

Forgive me, but I seem to remember that a founding principle of this country was an end to aristocracy. As such, the prospect of land, money, property maintained by a single family in perpetuity seems a lot like aristocracy minus the title.

It encouraged wills to include a lot of posthumous giving-art to museums, monies to build schools, libraries, roads. Our government was funded, and the debt was being chipped away at, year by year. But in the last 10-15 years it seems that it got into our heads that rich families keeping more of their money to themselves would end up bolstering the economy. So helping Paris Hilton would help the rest of us.

How many budgetary issues would be solved by a return to 98% past the first million of an estate, per se? Unless we really want to fight for children and grandchildren to benefit greatly from the hard work of fathers and mothers.

This also allows room to lower taxes on the LIVING so that maybe they could start buying houses, goods and paying taxes to the cash strapped states.

KingGorilla wrote:

How many budgetary issues would be solved by a return to 98% past the first million of an estate, per se?

Considering how about 85% of wealth in America is controlled by the top 20%, I imagine it would be a major boost.

Here is what LIBOR is.... It is so stupid that money is actually tied to this bogus system....

http://www.cnbc.com//id/48100292

The setting of Libor begins each morning between 11:00am and 11:10am (London time) when someone in one of the designated Libor panel banks enters a number into a piece of Thomson Reuters software that asks the question: “At what rate could you borrow funds, were you to do so by asking for and then accepting inter-bank offers in a reasonable market size just prior to 11am?”

It is all hypothetical, not real. No wonder Barclay's could manipulate it.

KingGorilla wrote:
How many budgetary issues would be solved by a return to 98% past the first million of an estate, per se? Unless we really want to fight for children and grandchildren to benefit greatly from the hard work of fathers and mothers.

This also allows room to lower taxes on the LIVING so that maybe they could start buying houses, goods and paying taxes to the cash strapped states.

I'd support this idea if I had any faith that our "leaders" would spend the money appropriately. Somehow, I just don't see that happening.

Bear wrote:
I'd support this idea if I had any faith that our "leaders" would spend the money appropriately. Somehow, I just don't see that happening.

Then make sure the law is written so the funds have to go towards economically productive things (such as non-military R&D or public works projects) or that it has to go towards paying down the national debt.

OG_slinger wrote:
Bear wrote:
I'd support this idea if I had any faith that our "leaders" would spend the money appropriately. Somehow, I just don't see that happening.

Then make sure the law is written so the funds have to go towards economically productive things (such as non-military R&D or public works projects) or that it has to go towards paying down the national debt.

But then they would just take some money that was going to paying down the debt and instead spend it elsewhere.

Tkyl wrote:
But then they would just take some money that was going to paying down the debt and instead spend it elsewhere.

Last year we spent $475 billion paying the interest on our debt while the estate tax generated barely $35 billion. Your concern isn't going to be a real problem.

Much of that consumption can be greatly curtailed without causing a dip in quality of life.

Only if you could somehow magically mind control everyone at once.

What will actually happen is a huge deflationary crash or hyperinflationary runaway. Most of the currency units in the world that people THINK they have will disappear, because they're almost all promises to pay, and not actual dollars. We've gotten ourselves deeply, deeply confused about the difference between promises and money, and we've absolutely, utterly disconnected money from wealth. It wasn't a very good representation even when it was backed by gold, but it's completely broken with no backing at all.

There is simply no way that the global economy can pay down the debt load that's being carried by the First World countries. It just can't happen. There's not enough real wealth generation to service those debts; they've stacked up to the proverbial moon without limit, primarily due to constant intervention by the Federal Reserve. Each time those debts have tried to go bad, have tried to reveal the rot in the system, the Fed has stepped up with morphine to shush everyone down and keep them happy.

It's mostly the bankers that have been stacking up these debts, selling them to everyone and their grandmothers and pocketing a percentage, and many of them know that the whole thing is a scam. They just don't care. But they would have imploded long ago without Easy Al and Helicopter Ben at the controls of the Federal Reserve.

So, once the economy starts to figure out that it can't pay the debts, you'll start to see strong deflation, as those debts are repudiated. This will, in turn, cause more debt repudiation, and more, and more. If left unchecked, the global economy will crash. So what will happen is that the central banks will step in and start seriously printing money, and it will get more and more serious with each passing year. At any given time, the pain of allowing deflation to happen will always look worse than just printing more money, so that's what they'll do.

If the market doesn't figure out what's going on in time, we'll have a hyperinflationary runaway, because even printing all those dollars/euros/whatever, the economy still can't pay its debts. Loans may be denominated in currency units, but lenders expect repayment in VALUE, not DOLLARS. So if we print money to pay off our debts, this means we're cheating them, and the consequences will be even more severe than the simple honesty of admitting that the debts can't be paid.

It could go either way. The central banks will try very hard for inflation, with the endgame looking a lot like Zimbabwe, eventually. The market will be trying to deflate, trying to purge itself of bad debt, even as the bankers jam more bad debt down its throat with shovels.

Who will win? I dunno, but I can tell you damn sure that this is going to be f*cking miserable, and that just allowing the deflation would result in the least amount of total pain and the sole path to recovery. The core of the economy will survive a deflation, and we'll be able to rebuild fairly quickly (a generation or two), but a hyperinflation wreaks total destruction. It's like the difference between the London Blitz, and Hiroshima.

Central Banks don't print money. They control interest rates. And only the Federal Funds rate to be exact.

This is basically all monetary policy is. The Federal Reserve has other purposes like a clearinghouse for inter bank transactions. They also print Reserve Notes but only up to the amount wanted by the member banks.

Only fiscal policy can make hyperinflation.

Malor -- your predictions could be right. But I doubt it. But not for the reasons you cite.

OG_slinger wrote:
Bear wrote:
I'd support this idea if I had any faith that our "leaders" would spend the money appropriately. Somehow, I just don't see that happening.

Then make sure the law is written so the funds have to go towards economically productive things (such as non-military R&D or public works projects) or that it has to go towards paying down the national debt.

Well it is like any other general tax. But my other point is that a higher estate tax encourages giving. That is why you see all of these university libraries, science buildings, etc named after all of these people from the 50's and 60's. Have a lasting legacy via gift, or uncle sam gets it.

Further, increasing the floor and lowering the rate has led to our budgetary problems today.

Central Banks don't print money. They control interest rates.

By printing money. If they lend more of it, interest rates go down.

How the hell do you even say sh*t like that?

(more exactly, they LEND money, which is even worse, because that money has to be repaid, so all central bank interventions make the underlying Ponzi problem worse, not better. When your system is trying to deflate, adding to its debt burden is not ultimately helping, no matter how good it feels in the short term.)

Oh, you're off on that ludicrous push theory again, noticing that money supply appears to increase, and then the Fed fills in the backstop.

That would stop within a month or two if the Fed slowed or stopped lending additional money. Ultimately, all money in circulation is under the control of the Federal Reserve. If the Fed stops printing, then banks might continue to create money for a little while, but it wouldn't last for long.

Fundamentally, that argument is just so stupid. By that way of thinking, nobody is in control of the money supply. Money is just something that, you know, happens from time to time.

Bullsh*t. It's absolute bullsh*t. It's a mental framework designed to strip you of your wealth and enrich the people promoting it.

Malor wrote:
Central Banks don't print money. They control interest rates.

By printing money. If they lend more of it, interest rates go down.

How the hell do you even say sh*t like that?

(more exactly, they LEND money, which is even worse, because that money has to be repaid, so all central bank interventions make the underlying Ponzi problem worse, not better. When your system is trying to deflate, adding to its debt burden is not ultimately helping, no matter how good it feels in the short term.)


They don't lend money to make interest rates go down. They buy and sell Treasuries at that price they are trying to hit in the open market.

The money supply is mostly endogenous. Meaning it comes from within the banks and financial sector itself and not from so-called lending from the Central Bank. So in a way nobody is in control ... we all are in control. There was a money supply before the Federal Reserve.

Now the Federal Reserve can do QE... which instead trying to hit a price (interest rate)... they try to buy a certain quantity of Treasuries to force lending.

Since as I said the money supply is mostly endogenous, this didn't work for normal day to day lending.

"Money is created by debt—either private or public debt—and to the extent that the banking system creates deposits through the purchase of Government securities or through the lending of money, either way, it is a process of monetization. You monetize private debt, but there can be no objection to that so long as the debt that is created is increasing production and employment. There may be such a thing as private debt that is purely speculative, such as the stock market, or real estate or other operations which are creating no employment and creating no production. It certainly is not a very desirable situation to have money created through that form of debt.” - Marriner Eccles.... the Federal Reserve building is named after him.

They don't lend money to make interest rates go down. They buy and sell Treasuries at that price they are trying to hit in the open market.

They buy and sell anything they damn well like. Treasuries is one thing they buy. But the great majority of the money they create is by lending directly to banks.

The money supply is mostly endogenous. Meaning it comes from within the banks and financial sector itself and not from so-called lending from the Central Bank. So in a way nobody is in control

This is just, flat, wrong. If the Federal Reserve stopped lending today, all money creation would dry up within a few weeks.

Now the Federal Reserve can do QE... which instead trying to hit a price (interest rate)... they try to buy a certain quantity of Treasuries to force lending.

In other words... they can print money, if they do the exact same thing they normally do, only more of it.

Do you even think your way through this stuff?

They do so much more than just buy Treasuries, dude.

1.---They can't buy and sell anything. There are bylaws they must adhere to. They can buy and sell financial assets though. But all financial assets were not created by them but by the financial sector.

2.----The lending only happened during the financial crises. This is because liquidity dried up. However before the crisis there was no lending by the Fed. All money was created endogenously. Even most of this lending didn't make it to the real economy. It all stayed in the banks. This is part of the LIBOR scandal too. Since liquidity is linked to LIBOR rates.

3---About QE - no money was created by the Fed... The issuing of Treasuries is the creating money part. That is done by the Treasury. The swapping of reserves for Treasuries is an asset swap. It was called creating money because people like Sarah Palin are ignorant of the operations.

1.---They can't buy and sell anything.

No, but they can make trillion dollar loans in exchange for an IOU scrawled on a napkin, which is pretty much what happened. And those dollars exist in the economy, dude.

Oh, I remember, you've got this f*cking moronic idea that if the Fed lends a trillion dollars into circulation, the fact that that trillion dollars has to be paid back someday means that no money is created.

This is just insane. It has no correlation with the real world whatsoever.

What's ACTUALLY happening is a strong inflationary impulse, followed by a deflationary impulse over time. There's a huge supply of dollars for a time, which gradually dries up. That's why lending more money to cure a debt problem doesn't actually cure the debt problem. It's just adding to the debt, not subtracting from it. Only paying the debt down does that. Or defaulting. Or cheating your creditors by printing money, but if it's lent money, that's just a Ponzi scheme, and if it's printed money, it's outright theft.

I'll go with your terminology then..

The Fed creates "money" when it loans/swaps reserves for crappy financial assets.

I guess reserves are "money" and CDOs are not "money"

Now you are right.. The Fed is creating money!

This did not create inflation at all. Making those crappy financial assets probably did. But not that much.... It was mainly asset inflation/bubble, not inflation.

Malor wrote:

...Oh, I remember, you've got this f*cking moronic idea...

I tend to think you are right about a lot of things on this board, but comments like this are making my hesitate to admit it.

It's not just the banks. Because they could be dealt with, if you had a government that actually protects its own people. And that goes for most countries. Not just the US.

The Fed exists to create and manage the money supply. That is the purpose for which it was brought into being. Saying that it's not doing the central thing that it does is entirely disconnected from reality. They can stop new money creation within a few weeks, by just ceasing to lend. Voila, no new money. Done.

Your sources are just so, so bad. You're being told that gravity doesn't actually exist, and that you can fly if you just jump off this bridge, by people who will get all your stuff when you die. And you're coming over here and encouraging everyone else to jump off the same bridge. You're being lied to, being taken advantage of, by people who benefit from you believing this nonsense, and then you're misleading others in turn.

So here's a thought experiment for you to run through: what happens if the Fed stops new lending?

Kier wrote:
Malor wrote:

...Oh, I remember, you've got this f*cking moronic idea...

I tend to think you are right about a lot of things on this board, but comments like this are making my hesitate to admit it.

seriously. . .goman's ideas are new to me, but given he's the only one *not* screaming at the obelisk to break without a weirding module, I find myself warming to those ideas.

I humor myself by imagining Malor and goman are actually one person.

Malor's analogies are terrible and have nothing to do with what we are talking about except to try to discredit me and my viewpoints. This is a logical fallacy.

I said most money is made by the banks themselves, this is called endogenous money.
He is saying all money is made by the Fed, this is called exogenous money.

I proved to him that there was money before the Fed therefore I am mostly right.

I don't disagree that there is exogenous money made by the Fed but it is mostly irrelevant since it doesn't get to the real market except prop up financial institutions. There was and will be financial institutions without a central bank.

The crappy financial assets would be there with or without the Fed lending.

Can I think goman is wrong, and Malor's predictions of fire falling from the skies of doom are also wrong? Because that's more or less where I fall.

(Banks basically launder the money out from the Fed. Now, considering the Fed's job is to loan money out for things to multiply via the wonders of borrowing, this isn't all bad. Be nice if they could do that through organizations that _aren't_ corrupt as f*ck, though.)

Kannon wrote:
Can I think goman is wrong, and Malor's predictions of fire falling from the skies of doom are also wrong? Because that's more or less where I fall.

(Banks basically launder the money out from the Fed. Now, considering the Fed's job is to loan money out for things to multiply via the wonders of borrowing, this isn't all bad. Be nice if they could do that through organizations that _aren't_ corrupt as f*ck, though.)


Yeah you are wrong too because the banks don't need Fed loans to make loans themselves. All they need is capital and a credit worthy consumer.

I can make you a loan too.

goman wrote:
Kannon wrote:
Can I think goman is wrong, and Malor's predictions of fire falling from the skies of doom are also wrong? Because that's more or less where I fall.

(Banks basically launder the money out from the Fed. Now, considering the Fed's job is to loan money out for things to multiply via the wonders of borrowing, this isn't all bad. Be nice if they could do that through organizations that _aren't_ corrupt as f*ck, though.)


Yeah you are wrong too because the banks don't need Fed loans to make loans themselves. All they need is capital and a credit worthy consumer.

I can make you a loan too.

Oh, I never said they needed it. But, well, if my line of work is selling PCs, and I've got someone willing to give me hardware for less than cost, it'll mean I probably won't bother looking for another supplier anytime soon.

Couple notes:

I've asked Malor to take a temporary P&C break. Not in any "or banned" sort of way, but all the yelling seems unhealthy at this point. I think his perspective is vital, but I'm exhausted by the technique.

I've banned Stephen_Clark because I find people who PM me to complain about behavior in others that they themselves are equally indulging in to be incredibly aggravating. A lack of self-awareness is a bad quality in a new forum poster. This isn't the first time, so we're done.

Carry on.