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Federal Reserve Money Out of Nothing - 4.30.12 (Part 1) Real Estate 360 Live With Louis Cammarosano

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Published on May 11, 2012

Louis and Ryan discuss Ben Bernanke's recent comments relating to keeping interest rates low for an extended period of time. Ryan notes that interest rates are kept low out of necessity to keep the US interest payment obligations from being too expensive.

Louis adds that low interest rates also help keep the banks solvent. Louis notes that the policy statements don't refer to these two points but rather state that low interest rates are in place to help the economy and consumers.

Louis notes that low interest rates are not good for consumers as they create an environment that does not encourage savings, so people are almost forced to put their savings into the stock market. Low interest rates also encourage consumers to take on more debt which is good for banks and not necessarily good for consumers.

Ryan notes that loans are not available to small businesses that want to take advantage of the low interest rates. Louis notes that the Fed policy of keeping interest rates low is market manipulation as interest rates are not driven by the market. Louis notes that if one can take advantage of these artificially low interest rate and lock in a long term mortgage you can hedge your future shelter costs against future increases.

Louis notes that food and energy are stripped out of the official inflation rate. Louis notes that the only reason the Federal Government can continue to run up deficits is because the Federal Reserve purchases the debt and that the Federal Reserve purchases 61% of all US Treasury issuance.

Louis notes the Fed buys the debt with money that they print out of thin air which devalues the dollar. Louis notes that Paul Krugman believes that the government should be borrowing more money, and the Fed should be printing more money to pay for the borrowing to help the economy, rather than encouraging savings and production.

Louis notes that if printing money was the solution to economic woes, all countries would just print more and all economic problems would be solved. Louis notes that wealth is not created from the production and spending of money but rather from the savings and investing of money and production.

Ryan notes Ron Paul's views on monetary policy. Louis notes that gold and silver hold their value. Louis notes that Congress ceded their authority on money to the Federal Reserve, a private bank and also notes Congress has also ceded to the President certain war powers.

Louis notes that Ron Paul's position is not to run the economy or regulate people's lives but rather to let people and the economy sort themselves out. Louis notes that most politicians make promises to get elected and that its difficult to get elected without a scheme.

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