When you organize a banking/currency cartel, in secrecy so you won’t be exposed as the greedy thieves and rakes that you are – whatever your family names are- when you organize and rig economies and power structures across the world welding abstract, phantom, artificial, ponzi schemes of thievery and investment and then using this stolen wealth- created by honest work and creativity- to destroy healthy, organic, communal, symbiotic and humane communities in order to dominate, weld power and try to give yourselves a sense of security and a feeling of power. But you are insecure because your parents loved money not you. So, you worship the zeros behind the numbers and the power you feel you need because you are actually powerless. One world currency, one world government and one world manipulation of the population will never give you security or LOVE.

Rhodes had the money and the ambition to immortalize the English speaking world But you all are vain , impotent and insecure.

If only the answer was so easy to find! In order to consider the problem I refer to, you first have to appreciate its existence…..checkout NBER WP 7420.

Rebel Economist, you could do worse than start here: http://en.wikipedia.org/wiki/Federal_funds_rate

Clever argument, but I think that this effect should be fairly minor. There is also the point that there will be a risk premium on the risk compensation itself, which will probably vary with the risk free rate. But I don’t think this explains how central banks get away with what they do either. I have been thinking about this question for a while, and had a long discussion with jkh about it on a previous post. Ben Friedman’s NBER working paper 7420 shows that even the experts are puzzled.

As I say, how central banks manage to set interest rates (at least without taking a substantial amount of one side of the market) remains a mystery to me, but I just wonder whether it is one explanation for disintermediation from banks – ie the market finds a way of detaching itself from the unrealistic rate set by the central bank.
Written by RebelEconomist on 2007-09-20 05:06:26 ”

Your second sentence is worthy of an award of some sort.

Of course, the other obvious argument is that lower interest rates per se tend to reduce expected losses and credit risk at the macroeconomic level in a very general sense – and therefore tend to reduce risk premiums when the fed funds rate declines.

Also, think of the difference between the fed funds rate and the risk free rate as the ‘senior tier’ of risk in the financial markets. Treasury bill rates plummeted prior to the fed funds decrease. The fed move narrowed that spread – paving the way for the proportionate narrowing in more junior ‘tranche’ spreads above fed funds.

Clever argument, but I think that this effect should be fairly minor. There is also the point that there will be a risk premium on the risk compensation itself, which will probably vary with the risk free rate. But I don’t think this explains how central banks get away with what they do either. I have been thinking about this question for a while, and had a long discussion with jkh about it on a previous post. Ben Friedman’s NBER working paper 7420 shows that even the experts are puzzled.

As I say, how central banks manage to set interest rates (at least without taking a substantial amount of one side of the market) remains a mystery to me, but I just wonder whether it is one explanation for disintermediation from banks – ie the market finds a way of detaching itself from the unrealistic rate set by the central bank.

This question is not so straightforward after all!

Written by RebelEconomist on 2007-09-19 15:39:29 ”

Good point.

I suspect there’s a counter, but I can’t summon it here.

Cheers.

That all fine in theory but what happens if the patient insists on bingeing again and again and has to be brought to the ER more and more often, each time with a bigger problem and more expensive procedures? At what point do you lock the patient up in a rehab facility and keep him under adult supervision?

Twofish: The first thing to do in a crisis is to stabilize the situation so that you have time to think. The scary thing about financial crises is that they often happen so quickly that you don’t have time to think.

Big words. The problem is someone forgot to tell Alan Greenspan to do the thinking part after the situation got stabilized in 2003-04. Why should we expect things to be different this time?

You know moldbug, reading your description above you might as well be describing the Canadian Dollar. Call it a fiat-commodity monetary supply. As long as the Government of Canada remains dificit adverse (12 year trend to date) you are good to go. Commodity cycle and fiscal conservatism explains the 48% appreciation in 5 years.
The only flaw I see is the over exposure to the American Market. If Canada sold 80% of its exports to the rest of the world, then I would say the Loonie is the next reserve currency. LOL.

Maybe Aussie dollar is better.

If the spread over the risk free rate is compensation for expected loss, there is no reason why it should be related to the risk free rate itself.

This question is not so straightforward after all!