About this user
I work within the Financial Industry of Lower Manhattan. I can think of no better place to work.
Certain events as of late prompted me to delete 90 percent of what I had filled out here to address issues. Issues that have been addressed numerous occasions in the past few years, without any response outside the Financial Industry. There's a lot of misguided anger directed at Wall Street, and the Financial Industry in general, and things need to be stated. I don't need to do this, because everybody knows nothing will come from any of these demonstrations, however I am sympathetic to some of the cause, although opposed to the resolve of the movement and the inappropriate behavior carried out by many members of the movement has made it hard to express any sympathy outright. Let's get into some of this.
1. The Federal Reserve. The Federal Reserve System has been established since 1913. It's the same monetary system used for a century, with the exception of fixed exchange policy. I've seen some rhetoric on the internet discussing feelings of resentment towards the Fed, and calling the Fed an illegal banking cartel. It is not. The U.S. Congress and the U.S. Congress alone has the power to delegate monetary authority in this country, and they did just that with the Fed. It's completely within bounds. They also delegated regulatory authority to the SEC, CFTC, who in turn registered associations such as the NFA and NASD to share responsibilities. The Financial Industry is private in this country, and it's going to stay that way. Nothing about this is illegal, and it's been like this for a long time. The fact that certain people have seemed to wake up to this and voice disdain for it now is irrelevant, nothing is different. The Federal Reserve has never attempted to hide the fact that it is not part of the federal gov. as some of you seem to think. Everybody in finance knows this is ridiculous, for the whole banking system did not think a ghost was filling up bank reserves, setting target rates, setting borrowing rates for securities, distributing economic data, and providing banking services to the U.S. Treasury. They're not called "the federal" as an attempt to pose as a gov. agency. They're called the Federal Reserve because they're the bank of the U.S. Treasury, and it is the U.S. Treasury that sells securities to the Fed to credit bank reserves, and it is the Fed who hosts their tax and loan accounts. The only people that did not know the Federal Reserve was a private bank are apparently some of you. Let's move on to the next point.
2. Let's talk about inflation. I don't get paid enough to spend all my free time on youtube debating libertarians on inflation policy, which really just ends up with me giving them a lesson on what inflation actually is. So I'm just going to put it on here to save myself the trouble. Don't get me wrong, I can talk about this all day and night, it's just not fun when it's frustrating. Most people on here seem to think inflation is some evil plot on the economy. It's not. Inflation is a general concept, and it means the economy is growing. The problem most people on here seem to be confused about is, they don't know different types of inflation. Inflation is a good thing, unless it rises faster than wages. That's the key. Most countries aim to maintain a 2-3% increase in annual inflation. One type of inflation is "demand-pull" inflation. Demand-pull is what happens when demand outweighs supply, and usually occurs in a growing economy. Another type is "cost-push" inflation. Cost-push is when companies raise prices due to an increase in expenses for a variety of different reasons, but for the sake of space, it's aimed at protecting profit margins. Stagflation is another type, and occurs when unemployment levels are high, and commodity prices rise. Stagflation occurred in the 70s, when we hit double-digit inflation levels due to increases in unemployment and OPEC raising oil prices. Finally, hyper-inflation occurs when business cycles experience unusually high inflation. The worst case of hyper-inflation occurred in Germany in the 1920s, and second most notable I'd have to say would be France during the French Revolution. Here's what it all comes down to with inflation-Economists can debate 24/7 the causes of inflation, but it's pointless. It doesn't matter if inflation occurs, unless it's unanticipated. When inflation is anticipated, banks can adjust interest rates, and workers can enter labor contracts that result in automatic wage increases to balance rising prices. It's unexpected inflation that causes damage, in a variety of ways. One example would be lenders getting hurt if unexpected inflation occurs, whereas borrowers can benefit similar to interest free loans. A lot of workers get hurt as well, but then again exporters do very well with high inflation, because foreign markets get more competitive. Continued in interests, no space.
Age
30
Hometown
New York City.
Country
United States
Occupation
Finance-risk management through derivatives and speculative investing.
Interests
There's numerous examples of inflation that resulted in long term economic stimulation, and sometimes no inflation or deflation is worse than high inflation. Deflation, like libertarian theory, look great on paper, but the cold harsh truth of modern economics isn't so black and white. Libertarians have extremely outdated thinking. I'm sure deflation sounds good to most of you, when you read things like, " the dollar obtains more purchase power" or "it encourages people to save money." Sounds like good things huh? Well it's not. Libertarians won't even admit the existence of deflationary spirals, that's because they know it defeats their entire school of thought. Think about financing a house, fixed debt, and depreciation of assets. Doesn't sound so good anymore does it? If you were a farmer, or any other type of debtor, you'd despise deflation. It is practically UNANIMOUS among modern economists that prolonged deflation is bad. It leads to recessions, and if GDP continues to drop by 10% per year or more, there's a depression. If people know prices will continue to decline, they're going to hoard money. All those "savers" which sound like they're such innocent angels, are hoarders. It does not promote borrowing money, which causes a liquidity trap. Central banks have never charged negative interest, so even at zero percent on a loan and 5% annual deflation, you're still paying down a loan with money that's worth more the following year. Anybody mature enough to know what life is, knows why deflation is often worse than high inflation. Modern economies are based on credit. If prices continue to decline, and interest rates rise(velocity can be very interest rate sensitive ) there's less spending on gross private domestic investments, and aggregate demand declines. Deflationary spirals continue to make it more and more costly to finance production, and at low prices, producers end up paying more to produce than what they make.. Sound like a good thing to you? Go ask a libertarian why he/she doubts the existence of deflationary spirals. It's common sense. The leverage ability the central banking structure needs to balance these extremes, does not exist with fixed exchanges like the gold standard, which is another thing libertarians are obsessed with. The gold standard period saw common "boom and bust" business cycles, because fixed exchanges just push negative conditions. For example, periods of growth gets pushed to overheating the economy, and deflationary conditions are pushed to recessions, or at worst, a depression. This is why we abandoned the gold standard. Libertarians are at least 100 years behind in the evolution of money systems. Earlier I mentioned inflation, and the effects it may have on certain people based on their economic position. I'd like to get into different values of money, but first let's talk about the effects of inflation on the cost of money. I mentioned the effects of unexpected inflation on lenders, and the benefits inflation brings to borrowers. The credit system is a much better friend when you know the true value of your financial positions. We're going to briefly discuss the nominal and real rates of interest. When you borrow money you're subjected to a certain rate of interest on the funds. This is the nominal rate of interest. As simple as can be, you're borrowing $20,000 at 10%, 10% is the nominal rate of interest. Now what if inflation rates rise 5%? When this occurs, your nominal rate of interest is reduced. The real rate of interest on your debt is now 5%, simply 10%-5%. Conversely, the lender faces the opposite problem, and his position is now worth less. Inflation benefits debtors, especially when the cost to finance production reduces, as prices rise. Unexpected inflation hurts creditors. After periods of growth, the Federal Reserve can contract the money supply in order to restrict credit and the economy can disinflate. This in turn results in a general decline in price levels (inflation is measured through the CPI index), as seen recently during the holiday seasons, where retailers reported record high sales. The navigation of the economy is no simple task, and can often get turbulent, yet monetary and fiscal policy aims to smooth out economic cycles as best as possible to target prosperity and healthy growth. I'll expand on this soon with capitalization and discount values of money, and future values of investments...
WallStwizkid
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