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solution checker

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  1. With FED I was referring to the FED. Very wise of you to close your eyes for information that's contradicting your beliefs, that explains so much. remember what you said about guessing
  2. I totally agree. The FED doesn't look like a private entity at all, and it looks much more like a government agency. But looks can be deceptive. The FED's smokescreen has been extremely successful in presenting a false image of a government agency. However, if you're not interested in what it looks like, but what it actually is, you must ask the Supreme Court, Wikipedia or the American Monetary Institute (whose views apparently are considered 'a masterful work' by former Stanford University Professor and Deputy Division Chief, Modeling Division, Research Department, International Monetary Fund (IMF) Michael Kumhof ) who all say that if fact it actually is a private organization. In short, simple terms, this is (one of the) things that happen: Department of defense: "Hey Federal Government (FG), can we have a few billion to fight our wars?" FG: "Sure, here you go, spend it all" Department of Education: "Hey FG, can we have a few billion to built our schools? " FG: "Sure, here you go, spend it all" FG: "Hey FED, do you also need some money to do your thing?" FED: "No thanks, we're fine, we have a money making machine, so we'll make up some money when we need some." FG: "Oh yea, that's right. By the way, we're a little short here, could you help us out?" FED: "No problem, what do you need?" FG: "A trillion would be wonderful." FED: "No problem at all, here you go, one trillion US dollar, just be sure you pay it back, with interest of course" FG: "Ehm, yea, we will....someday we will..." FED: "That's cool, no hurry!" Is this something you should be mad about? I say Yes. Because unlike the FED you have to work for all your money, and every time this happens, the money you make looses value, and you'll have to pay tax to someday pay back the loans the FG got from the FED's made-up money.
  3. No, I'm presenting the above as proof that it is distinct from other government regulatory agencies. Like I said, the FED themselves prefer to be very vague about their ownership. By the way, I just came across a partly similar discussion here.
  4. The Wright brothers guessed that making a flying machine (airplane) was possible. They had absolutely no way to know for sure, so yes, I think guessing and then checking is an essential part of innovation... my name is solution checker for a reason, I came here to have my solution checked to see what arguments in favor or against it would come up. It seems what you have been trying to say is: "It's too complex to predict the consequences, and often government involvement has a lot of unwanted side effects, so there's no use in having this discussion." So your message is clear enough. I welcome you to re-enter the discussion with arguments regarding the economic subjects sNerd and I are discussing, because I'm not here to discuss the meaning of the word 'guessing'. Hi sNerd, I remain curious about your sources. I've named the Supreme Court, Wikipedia and congressman Ron Paul to back up my idea that the FED is essentially a privately owned institution, together with the argument that a government cannot be in debt of itself. Yet you keep your opinion that it's not private, and even if it were, it wouldn't matter because still it would be the government calling the shots. Moreover, you say on a bureaucratic level it is indistinguishable for other government regulatory agencies. However, the FED themselve point out some clear differences on their website: "It is considered an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches 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." I would also welcome other readers to state their opinion on whether or not they think the FED should be considered a federal or a private institution. The answer 'It's part federal and part private' might be true, but it's not helpful without specifying what part is what. Thanks!
  5. That seems like the perfect outlook on life to kill all innovation, change and progress. That's too bad. This is what the Dutch page of Wikipedia says about the FED (translated). I hope someone on this forum is willing to make corrections, because if nobody does, I'll continue to believe that it's all true: The Federal Reserve System or the Federal Reserve (also known informally as The Fed) is the private, central bank of the United States of America, similar to the European Central Bank in Frankfurt. The Bank is governed by a Board which is appointed by the President. Although the Federal Reserve name suggests otherwise, the bank is not owned by the state: the shares are required by all participating banks ("members"). All banks with a federal banking license should be member / shareholder, banks with a license from a state may choose to do so if they meet certain conditions. The Bank is principally engaged in monetary policy. In addition, the bank is monitoring domestic payments. The current Fed Chairman is Ben Bernanke. He was appointed by President George W. Bush. His predecessor was Alan Greenspan. Although I'm Dutch, I prefer discussing US economics, because the Dutch are too boring (Our central bank is simply owned by the government, so we don't have interesting books like this (most helpful customer review: "It should be remembered that the Fed is a privately owned bank!!"))
  6. Hi sNerd, thanks, I also enjoy it. It's good to rub and polish your brain against that of others (Michel de Montaigne). That said, we apparently have a very different view on what the FED is. That is not my impression at all. You cannot be in debt of yourself, even if you would like it. That's true for you, but also for a government. The government owes more money to the FED (1.6 trillion and counting) than it does to China, so the FED is not the government. Rep. Ron Paul tried to cancel this debt, but failed. Also, the supreme court ruled the FED is a private institution. The big difference between governmental institutions and private institutions is that governmental institutions (should) have the intention to do what's best for the people, and private institutions do what's best for themselves. For the FED it was in their best interest to built up a huge smokescreen, trying to give people and politicians the impression they're federal (It's in the name, so it must be federal right? Or maybe not??? , like allowing the government to appoint the board of directors, transferring a lot of their profit to the Treasury, being a central bank and so on. But as soon a those government appointed managers are at work, their job is to do what's best for the FED, not what's best for the people. Another funny thing is that China had to work to earn the money they loaned to the US. So where did the FED come up with 1,6 trillion to loan out against interest to the government? Did they also sell billions of microwaves? Nope, just go a nice contract signed 2 days before Christmas 1913, while many members of Congress were home for Christmas, that gave them authority to make up as much money as they liked, without paying any taxes or control by e.g. IRS etc. And the governmental control is a joke, as can be witnessed https://www.youtube.com/watch?v=OhZFYGFbTPA. Anyway, I could continue, but probably you heard this story often enough and know just what's not true about it, so I'm curious what is untrue about what is said (and, if you feel like it, ). Thanks! B.
  7. Hi sNerd, thanks for your extensive reply. I have only one question. You make it sound like the FED is another example for government interference with the market that worked out pretty terribly. The way I see it, it's just the opposite, considering that the FED is not a government organization but a private bank, invented and initiated by private bankers. These bankers told the government: "You don't get the economy, so leave it to us, the market.": similar to your message. The government agreed to 'free the economy' by giving away a lot of power to the FED, and the consequences aren't too pretty, as you have pointed out. So if it were up to me, I'd give those powers back to the government. I did come up with a new, probably better solution that I'd like your opinion on. I call it Virtual Banks. It works like this: 1. Take the government out of the banks (I'm sure you like this part ). 2. When a bank goes bankrupt, it's clients loose their money (no more FDIC), so they can't pay for living, food, schooling etc. so their lives would be extremely disrupted. Here's where the virtual banks come in. 3. A virtual bank is an online service that you pay a small monthly fee for. You get an account, and you can put money on it or take money from it. However, this virtual bank doesn't keep your money, but distributes it over several banks of your own choice. Let's say you as a client choose 10 banks, and set them all at a 10% share. When one bank goes bankrupt, you loose 10% of your money, but you can still pay for your housing/food/schooling/etc. This way you have the best of both worlds, don't you agree?
  8. It wasn't smart of me to use the words Adam, Eve, God, because some might get the impression I believe in them while I don't, but the point I was trying to say that I don't think only the voters are responsible, because those are the ones that put the politicians in power. A more extreme example would be to say the parents of the voters are responsible, because they influenced the voters opinion, etc etc, all the way down the line to whatever you think that started this world. I do think both voters and politicians are responsible. Voters because they put politicians in power, politicians because they have power and are expected to understand the issues they have influence on. From 'agents' I would expect to ask their voters: "What do you want me to do, and I'll try to do it." In that case I would also hold the voters fully responsible. But I see politicians more as people with strong opinions based on knowledge and experience that they cannot fully explain to their voters, but nevertheless try to convince their voters that it's a good idea. The more they succeed, the more votes they get. But I think they don't loose responsibly on the effects of the execution of their ideas (see WW2). True, but the fact the banks have FDIC, and other companies don't, makes banks special. You say: then get rid of the FDIC, but I see a difference between lenders to GM and lenders to banks. Lenders to GM choose to take a risk, it's something they see as an investment, but people that deposit money on the bank usually just want their bank to hold on to their money so they don't have to keep everything at home under their pillow. They usually don't want to take any risks, and politicians thought they should have this possibility. That's why banks got an FDIC and other companies didn't. But like I said I do agree the FDIC's 100% reimbursement is a step too far, because it takes too much accountability out of the hands of the banks and their clients. I'm in favor of minimal control, but not no control at all. For example, I think the government should oblige companies not to lie to their customers or steal from them, and keep checking if they comply with this, but not much more then this (oh, and possibly my 'solution', depending on the arguments against it, which I designed to minimize the risks for tax payers while maximizing the freedom for banks).
  9. You could put the responsibility all the way down the line to Adam/Eve/God/Evolution whatever, but I disagree. I think during the voting process voters put both the power and the responsibility in the hands of the politicians, asking them to use it wisely and preferably in favor of the voters. I agree. But like I said, there's nothing wrong with bankruptcy with normal companies, just with banks, because innocent people have to suffer the consequences when a bank goes bankrupt. You guys seem pretty serious about not wanting any influence from the government into business. Personally, I'm happy that the government checks if the kitchen in clean, the food is fresh and the fridge is working in any restaurant I eat, so I don't have to, and that the products I buy in the supermarket are pretty safe to use or consume, and that financial products from banks are checked so that they don't just steal my money and lie about the risks. You and me might be smart enough to understand some financial products and the risks, but many other people aren't, so I'm in favor of some laws that cover the bare essentials of safety and honesty (too bad they fail too often, but that's another story). I'm fine though with special banks for people who consciously want to take a lot of extra risks with an absolute minimum of governmental control, but these should be exceptions, not the standard.
  10. I'll give a short background of the idea to clarify it. When a normal company goes bankrupt, it's clients go to a competitor. Therefore I think normal companies should be free in how they run their business (within the boundaries of the law and ethics). But when a bank goes bankrupt, it's clients or the FDIC / TAX payer loose a lot of money, and I don't think that's fair. This puts banks in a unique position. That's why I think there should be some kind of regulation, but as little as possible. Because I think bank employees are better at understanding risks then the government, I think it's best to leave this to the banks themselves. But to prevent a bank from going down and taking a lot of tax payers money with them, I suggested my solution. Another potential solution would be to force banks to pay for their own bankruptcy insurance, so it's no longer the taxpayers money that's at stake. However, surely this bank insurance organization will demand certain safety standards from the banks, similar to fire-insurance companies demanding safety standards, so they won't escape regulation with this solution either (I even presume the amount of regulation the insurance will demand will be a lot higher than in my proposed solution, that's why it's not my first choice). Other solutions in which it's not the taxpayers money that's at stake in case of a bankruptcy are welcome.
  11. Actually you didn't say this in your first post. But thanks for clarifying this. I think know enough about the history of the financial system to have some reasons to disagree with you, but I assume you don't mind I'm not getting into this. I was asking people for reasons why they think I guess wrong. I'm not forcing anyone to reply to my request, nor am I forcing people to participate in an 'experiment'.
  12. Hi sNerd, thank you too for your comments. You obviously know a lot about the banking system. However, I don't really follow your arguments. 1. First you state a few government-mandated solutions in history that were only partially successful. I do not attack or defend anything that happened in the past, and I don't think these measures say anything about the quality of my proposed solution, so why is MY solution wrong? 2. Your point about the FDIC. I have a simple solution for that as well. The FDIC should not pay 100% back, but only 95% in case of a bankruptcy. This will make clients search for a high-quality safe bank again, and not focus on interest rates alone. One last question, if you would be president, would you change anything in the banking system? P.S. "that the actors ought to be coming up with" says it all: They SHOULD, but they DON'T, that my argument for making a law.
  13. Hi Nicky, thanks for your comments. However, it would be helpful if you would not leave me guessing, by clarifying your opinion. Do you think it's a good solution? My impression is you don't (too simplistic) but you also say I'm on the right track. Could you explain why you think it is or is not a good solution? Could you propose your better / simpler solution? Thanks!
  14. Hey guys, I have this idea how to prevent a new banking crisis, and I'd appreciate your opinions on it. It's very simple. I think a flaw in the current banking system is that bankers get huge bonuses when they are doing well, and they loose nothing of their own when they are failing dramatically. As a result, they will take a lot of risks, similar to what you would do if you go to a casino with an unlimited amount of money, and you get to keep a part of the profits, but you don't have to pay for the losses. The opposite of a Bonus is a Malus. My suggestion is to make a law, that states the following: "The right to get a bonus for exceptional good financial results implies the duty to pay a malus for exceptionally bad financial results." With this law, naturally the bank management (and anyone else potentially entitled to a bonus) will put far more effort in checking that non of their employees is taking too much risk, and that a lot of checks and balances are in place. This would then result in a far more stable bank, focusing more on the long term stability and less on the short term profits. As a result banks won't go bankrupt as easily, and tax payers money won't be needed for saving banks that took too much risk. What do you guys think, would a law like that be able to help in preventing a new banking crisis? Thanks for your opinions!
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