a few days ago a started a thread to the effect of "what would be market interest rates if the Fed didn't manipulate them?". it got poor responses. probably because few people understand central banking, including most central bankers.
well, i'm back with my attempt at answering the question, for anyone that cares. the answer is: the question has no answer. it's like asking "what would a number divided by zero be if it weren't undefined?"
why do i say this? people are under the impression that the Fed manipulates interest rates via the federal funds rate, and by performing open market operations. this is *not true*. it was at one point, but it hasn't been true since 2008.
in 2008, the Fed began paying interest on excess reserves held at the Fed. it had planned to do so in 2011, but the financial crisis accelerated the plan. paying interest on reserves is now the primary means for setting the federal funds rate. and this involves no open market operations. it is purely by fiat, as the Fed can print whatever amount of interest it wants to pay.
as for why the question is nonsensical: interest on excess reserves is the key driver determining the size of total bank credit. the money multiplier is a fiction they tell kids in school. the notion that reserves inhibit the size of total bank credit is another such fiction. the only real limit is the confluence of market forces (whether a bank can lend profitably and conforming to its regulatory requirements) versus the amount of profit the bank would make from earning interest on its reserves when parked at the Fed.
therefore, as interest on excess reserves is completely fundamental to the formation of the total amount of bank credit, asking what interest rates would be were they not manipulated is impossible to answer. it would imply an entirely different monetary order than the one we have right now. it is simply not possible for the Fed to take its thumb off the scale so that we hypothetically could perform a measure.
self motivated layperson. i studied econ at the undergraduate level. took a job in finance out of school. never took a banking course in school or made much of an effort to understand how it worked. but recently i got interested in the subject and found the work of richard werner, which was quite enlightening. as well as this document from BoE, which spells it out plain as day.
Isaiah Green
thanks for this i feel like my IQ a lot ever since i found out about crypto, literally finished my studies and have been a neet for almost 2 years with no job trying to make it from magic meme internet money, life sucks
Jace Anderson
They would be very high, close to about 20%.
Most people would realize modern centralized tech is bullshit and would be saving instead
Joshua Hall
hey faggot, you speak like those economists who make something too complex to understand by using big words, my iq is 140 and I didn't understand shit about what you say. We're all redpilled about the fed and how credit works, every politician will kick the ball further down the line so the big crash doesn't happen in their time and our children's children will pay taxes to repay our debts, no need to larp as if it's rocket science
Dominic Cooper
brainlet
Zachary Roberts
The historical rate of interest was something akin to 20%. We'll revert to that at some point during our lifetimes.
David Moore
Bump
Kayden Scott
No we won't. There's an overabundance of productive capital. The only things that are in scarcity are human labor (being replaced everywhere where possible) and land. Everybody has a smartphone.
Jayden Clark
holy shit this a legit interesting thought experiment i still say we burn them down
Jayden Butler
So with a lower or even negative FED rate the bank has to take more chances and lend money out to more people This creates an illusion that the market is doing well because houses and stocks and everything keep going up in dollar value but this abundance of money being pushed into the economy just creates inflation (the silent tax)
In my opinion it's hard to judge the real rate of return on investments priced in dollars but it doesn't make sense why the rates are so low if you can buy a house and its value increases faster than interest you're making money unless the economy has a recession you come out on top
Lets say I have 100 bitcoin why shouldn't I buy a nice house and take out a huge loan and slowly pay it off versus cashing out the total amount and paying it off with cash
Eli Torres
>this abundance of money being pushed into the economy just creates inflation (the silent tax) when people talk about "inflation", they typically are talking about consumer prices, which is relatively low in the US.
when credit expands, there are three places that the money can go. it can go to fuel consumption, which causes consumer price inflation. in can go to fund investment in capital equipment. this is good because it makes the economy more productive, creates jobs, etc. or it can be used in financial transactions. this is what causes asset bubbles.
the "inflation" that we're really seeing is of asset prices. equities, bonds, homes, you name it (crypto ;). this favors those who are older and wealthier at the expense of those that are poorer and younger. in addition to causing asset bubbles, the Fed also is causing a retirement crisis due to interest rates being so low for so long. as you get older you need to gradually allocate more of your retirement savings from equities to bonds as a matter of safety. but when yields are so low, retirees who are counting on those coupon payments get fucked.
Kayden Harris
Bump
Liam Watson
>i have an econ degree >its an ee degree Jow Forums
What set market rates before the fed/central banking? Genuinely curious
Owen Collins
The market
Bentley Butler
Which market? That sounds pretty vague
Aaron Lopez
JEWS control it all.
Austin Reyes
based
Zachary Flores
good thread. IOER is one of the biggest scams. Occasionally congressman will point this out in hearings and the jews from the fed will do a bunch of hand waving about it. I’m opted out of the Jew system but I think the jews create artificial credit cycles to consolidate wealth over time
Ryder Sullivan
Availability of precious metals and demand for loans.
Adrian Kelly
Paying interest on excess reserves is a sensible way of controlling the money supply in normal situations. However open market operations are still needed when there's too little money in the economy.
What does IOER stand for?
Jose Foster
shock it's the best deflationary crypto going forward the real answer is always BTC
Juan Diaz
all markets, it wasn't like internet all over from india to new york.
Logan Cooper
>Whats the point in discussing something if you don’t conclude it with an action plan?
Your first post was pretty nonsensical but you made up for it with these posts
You're exactly right that there's an asset bubble but you're wrong in that it doesn't include homes and crypto. Think about it, how many people actually own homes and crypto vs their ever-increasing demand?
On the other hand, how many people own index funds that include stocks which can easily go to $0 within a decade?
Just some things to think about if you really want to make it, OPie.
Colton Foster
>well, i'm back with my attempt at answering the question, for anyone that cares. the answer is: the question has no answer.
Welp looks like that’s it boys, pack it up cmon let’s leave
It's what brainlets do. They make posts that seem intelligent but are too stupid to actually say anything of worth within those posts. He basically said muh central bank make Jew lend money to make money. Lot of money bad cos big price of building. Big building price mean many young grug no own building. Essentially what anyone with a brain already knew for the last decade.
the fed will still use OMO do perform QE and for supplying liquidity to the fed funds market when acting as lender of last resort. that's about it, afaict
>Your first post was pretty nonsensical but you made up for it with these posts no it's literally how things work. read the BoE doc and then reread what i wrote.
some of us are more concerned with understanding the world than trying to make a buck. good luck on your meme money.
Colton Rogers
The fed is out of control and the US dollar will be devalued by eom
Liam Moore
Additionally, paying interest on excess reserves begs the question of why banks are entitled to interest of 2.1%, while your savings account likely pays closer to a tenth of that. Further, it also raises the topic of "narrow banking" and the Fed's opposition to it. (Narrow banking being a banking whose only function is to operate as lightweight as possible and save money at the Fed, passing the savings along to its depositors.)
Camden Perez
Regulatory capture is a thing. Banks (including privately held) central banks have a mandate of generating profit for their stakeholders. If that’s done at the expense of tax payers and the general public, all the better.
youtube.com/watch?v=Q7uJIjSO-a4 economists, central bankers, the IMF, World Bank, etc. are coolies for the current regime. and they know it. their job is to sell the system to the public and to keep it going by any means necessary.
Carson Ramirez
Hmm, an actually good thread.
Nolan Stewart
>no it's literally how things work. read the BoE doc and then reread what i wrote. Wasn't saying that's not how it works. You re-read what I wrote.
Regardless, it's clear you're underage and not as smart as you think you are calling crypto meme money and concluding what we've known about central banks for years:
