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ggong
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Name: Gilbert
Country: United States
State: California
Birthday: 7/16/1976
Gender: Male
Interests: music, technology, becoming a better person
Occupation: i work with computers
Message: message me
Member Since:
3/18/2003
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| Tonight while doing some reading, I came up with an analogy for the role of the federal reserve. It's by no means a perfect analogy, but hopefully it's a lot more accessible to people, most of whom probably don't really understand the role of the federal reserve and what it does. Well, first off, the fed has a number of functions, and this analogy only describes one aspect of it's functions, but hey, it's a start, right? :)
So in this analogy, banks are like bakers, and money is like cookies. So yes, it's true that money can simply be "made" any time the banks decide to bake more cookies. The trick though is that only the federal reserve is allowed to make cookie dough, so any time a bank wants to bake more cookies, it needs to go to the federal reserve to get more dough. So this seems to give the fed pretty good control over how many cookies are out in the economy, because if there are too many cookies, it just gives out less cookie dough and eventually the number of cookies in the economy will be reduced as cookies are eaten (ok, the analogy breaks down here, but I'm still going with it). But the reverse is not necessarily possible. Let's say everyone has gotten sick of cookies, and doesn't want any more cookies, everyone has rotten teeth and stomach aches from eating too many cookies, and no one wants any more cookies. Well, now what can the fed do? I can make tons of cookie dough, but unless the bakers bake it, it's only dough - it's not actual cookies. And what incentive does the bank have to bake these cookies? No one wants cookies, so it has no reason to take the cookie dough from the fed and bake it into cookies. In fact, if no one wants cookies, the banks are probably trimming staff and reducing their cookie-making capacity.
You could ask - well, why doesn't the fed just bake cookies directly? Well, theoretically it could - right now that's just not how it works, and it'd probably be a huge change in the way the financial system works if it could bake cookies directly. But that actually doesn't solve the real problem. Even if the fed bakes cookies directly, and no one wants cookies anymore, then the number of cookies in the economy is still going down.
And you might also ask - well, why would people not want cookies (money)? Well, the answer is that of course, you aren't getting this money "free." When banks create new money, it's because they are giving out loans. So money is "created" when someone borrows money from the bank, and the bank increases the number in their computer corresponding to the borrowers bank account - magically money has been created. So even if the fed were to "bake cookies directly," what that would really mean is that you could go to the federal reserve and get a loan from them directly. And if you don't want a loan, then it doesn't matter who offers it to you, you still don't want it!
Anyways, that's my analogy to try to illustrate why - while the fed may be able to limit inflation, it isn't really able to stop deflation (if people get sick of cookies, eg being in debt). | | |
| If I had any idea that American Idol would give us Kelly Clarkson, I would have watched it eagerly during the first season. I love how on the radio sometimes they call her "our girl." And it's always fun to read stats like this:
"On January 28, 2009, it was announced that her latest single, "My Life Would Suck Without You", had advanced from No. 97 to No. 1 on the Hot 100 in its first week of release, breaking the record for the largest leap to the position in chart history. She is currently the only American Idol contestant to have reached number one in the UK. She claimed number one on March 1st 2009 when "My Life Would Suck Without You" debuted number one on downloads alone."
From http://en.wikipedia.org/wiki/Kelly_Clarkson | | |
| I seem to have lost interest in life.. Except, I get inexplicably excited about the idea of cooking and having people over to entertain them. Work seems "just tolerable," I don't seem much interested in trading or the economy recently.. I haven't done any reading for a while, stopped playing DDR.. I did get an Xbox recently, and have been playing Halo3 and some other things, but even that was just to "pass the time." But I keep thinking of new recipes I want to try, and get excited about organizing the kitchen better and buying new kitchen stuff. I just bought some glass prep bowls (like they have on those cooking shows) yesterday, and am very excited about them. And some ramekins with little wicker baskets. These in fact:
Ramekins from Sur La Table
So cute! | | |
| I know not everyone follows the stock market and the economy, so for those that don't, we're in the middle of a historic decline. In the future, people will write books about this time and what went wrong, what could have been done to prevent it, etc etc. I can't say how bad it will actually get, but so far the signs are it will be pretty bad. This next week, we may see the low for the year in the stock market, but that doesn't mean it's time to celebrate. An end of the year rally might still be followed by further decline in 2009 and/or 2010. The fact is, the stock market is a leading indicator of the economy. It tells us what people expect will happen in the future, and since the economy thrives or contracts on people's expectations (eg if they expect wage increases, they spend more - if they expect to lose their job, they stop buying), then it's an accurate predictor. The deep pessimism and losses in the market will be reflected in the economy, and by all accounts it won't be pretty. My advice is to stay safe physically, and remember compassion. We may not be able to prevent the economic downturn, but we can remember to be kind to our neighbor. | | |
| why am I so moody? I've been in a reasonably good mood most of this week. Today, while going grocery shopping it turned markedly down. nothing in particular happened either, I guess just the general flow of my own thoughts. thinking how inefficient it is to just cook for myself. and how much i'd enjoy having someone there to go shopping with me and enjoy whatever I'm going to cook. and before long I was just thinking, life just seems so pointless. so much effort and for what?
but perhaps that is the fundamental nature of life, ups and downs. maybe i should just enjoy it. maybe it means more nights of watching movies and playing video games. i haven't played any video games for a few weeks, just lost interest. maybe it's time for a new gaming phase.
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