by You Know 101 Replies latest social current
hundreds of trillions of dollars worth of derivatives.
LOL!!!! Yeah, the entire GDP of the US is 7 trillion but yet hundreds of trillions are out there floating around! LOL!!!
When you mentioned that you were saving precious metals did you mean that you were saving pennies??? LOL!!!!!!!!!!
It is true that the Federal reserve is not a federal institution. A book entitiled the "Creature from Jekel Island" written about 20 years ago explained how private bankers secretly met on Jekel Island off the coast of Caolina back in 1912 in a conspiracy to launch the Federal Reserve in order to take money creation out of the hands of government
LOL!!! http://www.federalreserve.gov/ While it may not be a FEDERAL INSTITUTION, it is part of government. Note the GOV and not COM! YOU KNOW nothing, misrepresents the truth once again! Yes, its not a Federal Institution, but YOU KNOW nothing makes it sound like its some secret private enity that some magic smurfs control! Hello! Wake up YOU KNOW! It is part of government that Congress Regulates! WAKE UP DIPSHIT!!
What is the Federal Reserve System?
The Federal Reserve System, also known as the Fed, is the central bank of the United States. It was created by the Congress with the passage of the Federal Reserve Act in 1913. The Federal Reserve System is composed of a central, governmental agency--the Board of Governors--in Washington, D.C., and twelve regional Federal Reserve Banks located in major cities throughout the nation. Return to subject
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The Federal Reserve System was chartered in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its roles have evolved and expanded. Today, the Federal Reserve's duties include conducting the nations monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices; promoting the stability of the financial system; providing banking services to depository institutions and to the federal government; and ensuring that consumers receive adequate information and fair treatment in their interactions with the banking system. For a complete overview of the Federal Reserve, see The Federal Reserve System: Purposes & Functions. Return to subject
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The Federal Reserve System is not "owned" by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects.
As the nation's central bank, the Federal Reserve derives its authority from the U.S. Congress. It is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by the Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms. However, the Federal Reserve is subject to oversight by the Congress, which periodically reviews its activities and can alter its responsibilities by statute. Also, the Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government. Therefore, the Federal Reserve can be more accurately described as "independent within the government."
The twelve regional Federal Reserve Banks, which were established by the Congress as the operating arms of the nation's central banking system, are organized much like private corporations--possibly leading to some confusion about "ownership." For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold or traded or pledged as security for a loan; dividends are, by law, 6 percent per year.
The earnings of the Federal Reserve System come primarily from interest received on the Reserve Banks' holdings of U.S. government securities (which are used in the conduct of monetary policy) and from fees they charge depository institutions for providing services (such as processing and clearing checks). The expenses of the System are paid from these earnings. Any net earnings are paid yearly to the U.S. Treasury. For 2001, the payment was $27.14 billion. Return to subject
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The income of the Federal Reserve System is derived primarily from the interest on U.S. government securities that it has acquired through open market operations. Other sources of income are the interest on foreign currency investments held by the System; fees received for services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations; and interest on loans to depository institutions (the rate on which is the so-called discount rate).
After it pays its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury. About 95 percent of the Reserve Banks' net earnings have been paid into the Treasury since the Federal Reserve System began operations in 1914. (Income and expenses of the Federal Reserve Banks are included in the annual report of the Board of Governors.) Return to subject
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hundreds of trillions of dollars worth of derivatives.LOL!!!! Yeah, the entire GDP of the US is 7 trillion but yet hundreds of trillions are out there floating around! LOL!!!
While "hundreds" is not exactly correct, according to the Bank of International Settlements, which tracks this sort of thing, there are over one hundred trillion of dollars of notional derivatives outstanding. Some think though that the number is considerably higher. That would mean that the only thing that is at this point larger than the derivatives bubble is your own massive ignorance.
http://www.bis.org/press/p020515.htm
/ You Know
Crazy Drunk says:
While it may not be a FEDERAL INSTITUTION, it is part of government.
That is not true. The Federal Reserve is only nominally controlled by the federal government in that the governement appoints the govenors. That though is only window dressing because the Fed basically tells the government who they should appoint. The link you provided says that no one owns the fed. That is a lie. Besides, if it were a federal institution the American people would own it. It is absurd that the largest bank in the world isn't owned by anyone. The fact that the fed says that no one owns it is their backhanded way of saying that they are privately owned.
http://land.netonecom.net/tlp/ref/federal_reserve.shtml
By the way, GDP is about 10 trillion, not 7 trillion as you previously stated. / You Know
| GDP: | purchasing power parity - $9.963 trillion (2000 est.) |
http://www.cia.gov/cia/publications/factbook/geos/us.html
Whoa! So now its probably around 10.5T maybe 11?????? Well maybe with all the doom and gloom it will fall to 5T!! LOL!! Well at least you got the 10T right......
The Federal Reserve is only nominally controlled by the federal government in that the governement appoints the govenors.
Wrong!
"However, the Federal Reserve is subject to oversight by the Congress, which periodically reviews its activities and can alter its responsibilities by statute. Also, the Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government. Therefore, the Federal Reserve can be more accurately described as "independent within the government." "
Besides, if it were a federal institution the American people would own it.
Please define your definition of owning a federal institution.
About the United States Institute of Peace
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Please tell me how you own this institution???? Do you have stock?? Does it pay you dividends??
IF the DOW was to drop to 2,000, I would not become nervous or expect the end. The DOW, in my opinion, should be around 2,000 anyway. Watch the NASDAQ.
Mike
YOU KNOW,
When the world doesnt end (like it didnt in 1975) you are going to feel like a dumbass for selling all of your stuff! Since we are having such 'hyperinflation', you will never be able to buy another house!
IF the DOW was to drop to 2,000, I would not become nervous or expect the end. The DOW, in my opinion, should be around 2,000 anyway.
The DOW is just the most visible symbol of the global financial system, but it is a very important part nonetheless. The issue is not where the DOW should be, it is a question of how far and how fast it falls. A rapid drop to that level you suggest, or anywhere near that, would be catastrophic. One of the reasons is that much of the money invested in the stock market is highly leveraged, which means that big investors would not only lose their own money, but that they would wind up owing their creditors, who in domino fashion would quickly find themselve in a bind.
Look at the situation now with the case of World Com filing bankruptcy, first you had their stock cratering to 6 cents, now you have JP Morgan sheepishly coming forward and muttering something about holding 16 billion dollars worth of worthless World Com debt. That's a huge potential loss that could take them right down---all 26 trillion dollars worth of derivatives and all---(that's two and a-half times the U.S. GDP for Crazy Drunk.) The whole system is a giant pyramid of debt that cannot tolerate very much turbulence without crashing and cannot sustain itself without constantly piling on more and more debt. There has to come an end game of sorts. I suspect that the reason for the present sell off is that some of the big boys are already in trouble and they are frantically trying to unwind their stock positions and selling short in a desperate bid to save themselves.
Like I said, itis going to get real interesting, soon, very soon. In fact, I think it's positively fasicnating to watch the whole deal coming down. It has been compared to a slow motion train wreck. It's hard to turn away from the horror of crunching twisting metal and slowing flying debris. / You Know
And now a balanced view from people with qualifications:
Might stockmarkets still have a lot further to fall?
CHEER up: a point will come when share-price falls on both sides of the Atlantic are no longer warranted by the calculation of future returns from those shares. And, all can agree, that point is now closer. For over a week until July 16th, American markets fell almost every day, and Europe followed or fell even more.
America's S&P 500 index has now shed 20% this year and 40% of its value since its peak in March 2000 (see chart). London's FTSE 100 index is also down by 40% from its peak in December 1999, retracing six years of gains. The FTSE Eurotop 300 index of continental European shares has fallen by 45%. Connoisseurs of manias, panics and crashes talk of a stage of capitulation in every bubble's bursting, when investors abandon hope that share prices will ever find a floor. With hairdressers and out-of-work actors now losing sleepand calling their brokers in the morninghas the moment of capitulation come?
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Not yet. Put aside for now the effect on share prices of what the chairman of the Federal Reserve, Alan Greenspan, this week called the infectious greed of executives and shareholdersa greed that has done much to knock confidence in the system of capitalism itself. Even without those doubts, share prices in America, though much less so in Europe, are still out of line with what the economy is likely to deliver in the coming years.
How far out depends on your assumptions about future economic growth and hence corporate profits, but even more on what method you choose for valuing shares. A growing band of analysts who think the market is bottoming out points to a tried old method, called the Fed model. It looks at the gap between the earnings yield (earnings per share divided by the share price) of the S&P 500 and the yield on ten-year Treasury bonds. Buy, the model screams. Compared with bond yields, American shares are at their cheapest since 1987, or since 1980 if forward-looking earnings are used.
Not so fast. The Fed model may have been a good predictor of value during the bull market of the 1980s and 1990s, but today's environment is suddenly different. Powerful deflationary forces arise when stockmarket and high-technology bubbles burst, and when there are savage cuts in inventories and company investment. If bond yields are falling because a deflationary trend has taken hold, that is no longer good for equities. Just look at Japan since 1990 and the rest of Asia after its financial crisis of 1997-98.
Deflation helps to explain why, for the first time since the 1930s, share prices have not responded to aggressive easing by the Federal Reserve, even though interest rates are at a 40-year low. Bonds and equities, says Christopher Wood of CLSA , a securities house, have decoupled. Bonds, not equities, are the best asset class in times of deflationnotably euro bonds, if the currency continues to rise above the parity it breached against the dollar this week.
What are better measures of share valuation, then? In America, the price/earnings (p/e) ratioshare prices divided by earnings per sharestill assumes implausibly high growth in company earnings. The post-war average p/e for the S&P 500 is 15; now it is 40, implying a drop in share prices of three-fifths to return to the historical norm. Yes, but the ratio is high in part because earnings have been hit by all sorts of exceptional costs and write-offs. That is precisely the problem, retorts Martin Wolf in the Financial Times. These write-offs reflect earnings that companies exaggerated in the boom years. Who is to say that today's reported figures do not hide more nasty surprises, in the form of manipulated earnings, duff investments or outright fraud?
Investors, in other words, ought logically to demand a higher risk premium for holding equities, implying lower share prices. Dresdner Kleinwort Wasserstein does a back-of-the-envelope estimate. That firm supposes that investors now expect a very modest 7% annual return from American equities (four percentage points morethis is the equity-risk premiumthan the return on Treasury bonds indexed against inflation). Such a risk premium implies that the S&P 500 may still need to fall by another 40-50%.
Here's another quaint notion, one that would have been laughed out of hand not long ago: judge shares by the dividend cheques companies write. If investors can no longer count on capital gains from their equity holdings, a steady flow of income, namely dividends, might well prove welcome. Again, the idea bodes ill for current share prices in America. The dividend yield on American shares averages 1.7%, though add in share buybacks, which increase returns to shareholders, and the figure rises to 2.3%. Assume a trend rate of growth for the American economy of, say, 3%. Then, very roughly, the expected long-term return on equities should be the two figures added togetherthat is, 5.3%. Since the return from index-linked Treasuries is just 3%, this implies a very small premium for the risk of holding equities of just 2.3%. Lower share prices are the conclusion.
There was a time when Europe could afford not to be particularly bothered by what happened in American markets: no longer. Between 1976 and 1999, correlations between American and European markets were low, ranging from 0.24 for Italy (0.0 represents no correlation and 1.0 represents lock-step movement) to 0.5 for Britain. Since late 2000 correlations have been as high as 0.9. Some correlation is justified by growing trade and investment linkages between America and Europe. Some, too, is explained by a similar trajectory in Europe of an asset-driven boom and bust. Still, it is hard to argue that European excesses were greater than America's, and certainly stockmarkets did not rise as high. Yet they have fallen by more.
The outcome is that, by most measures of valuation, share values in Europe are more justifiable than they are in America. In Britain, for instance, the equity-risk premium is reckoned to be at around its historical average. Certainly, p/e ratios there are back to their average; they are below average on the continent. In a look at implied volatility in the options market, Lehman Brothers says that continental share valuations are showing signs of distress akin to the time of the Russian crisis of 1998 and last September's attacks. It bets on a rally before long.
If the new era of tightened correlation allows it. In this bear market, jittery investors seem to have sold indiscriminately in favour of bonds with a cast-iron return. That leads to a final concern. Just as stockmarkets overshot on the way up, so they will overshoot on the way down. No big deal, you might thinka chance, even, for bold investors to make a killing. The danger comes when plunging stockmarkets swamp an emerging economic recovery. That has not happened yet. Yet the risks have risen over these turbulent weeks.
The Economist July 18th, 2002
Please don't take up bandwidth with stuff that you can just post a link to. / You Know
