Haha, so happy post-April Fool’s Day everyone. For anyone who was still/is still confused, the April Fool’s Post was cyphered from ro13. You can find a translator here. Thank you everyone who was frantically trying to decipher it. I had a lot of fun watching you guys struggle.
What’s been going on… what’s been going on. Well, most of you know that I was the 2008-2009 Lieutenant Governor of the Central Lakes Division in NYCKI (Circle K), and that I am the 2009-2010 LtG. That’s been pretty much keeping me busy. For those who do not know, Circle K is an international community service organization, the largest for college students. We do all sorts of charity work, ranging from working with homeless to fund raising for wells in Africa.
If you don’t have a Circle K in your college (yes you college students, I’m looking at you), I encourage you all to consider starting one up. I know, I’m just advertising a club I’m part of, but it’s really a great community to be a part of. You meet a lot of new people, get to go to a lot of new places, and it’s an experience you’ll never forget.
For any of you Geneseo students, JOIN. You already have a club made, NO EXCUSES.
Besides that, the weather is getting be be rather nice now. I’m really glad too, because it means I get to wear skirts again (I used to be all hating on skirts, but I really like the air between my legs *hur hur*. Well it’s kinda true, I don’t feel as restrictive in skirts. PLUS, I’m a girl. I can wear both skirts and pants, so I may as well make use of that freedom, right?
For anime-related news, Tora-con is quickly coming up, and that’s a 1-day anime convention hosted by the Rochester Institute of Technology Anime Club. I WILL be cosplaying (hurrah). I’ve been really worried about what I want to cosplay just because I wanted something simple and easy to do, yet easily recognizable. I do have a couple back ups, if the weather gets cold, but I decided on cosplaying Rinoa. I’ve cosplayed her before (Otakon 2007), but this is an altered fan-art Rinoa (picture). I’m currently working on the wig, so I’ll be posting pictures later. :]
This post comes a little delayed. I wrote this a couple days back, so I apologize if some of it is not relevant now. At least I’m keeping up?
Currently Listening: Gothic Sanctuary (Nightwish)
Currently Watching: Dollhouse
Currently Drinking: Pepsi Cherry
Currently Reading: Nothing… please suggest something!
Current Mood: Sunny
Recently (all of a sudden, even), there has been discussion on Bernanke’s role in the crisis and questions about the Federal Reserve’s power and what Bernanke is doing to solve the crisis. He is the first (or one of the first) Fed Chairmen to accept an interview, and has been playing a more public and prominent role in the media as of the late.
Personally, I feel this is a terrible thing to do, to shower the media with falsified facts about the Federal Reserve. For one, people are unable to understand what the Fed actually does. It’s all good and fine to say that the Fed increases interest rates. And by controlling the interest rates, the Fed controls the money flow in the economy. But does America really know what the Fed does?
Most of them can’t even distinguish between monetary and fiscal economic policies.
To take a step back, let’s explain what the Fed does.
The Fed is a decentralized central bank. It loans money out to the government (most of our public debt is actually due to ourselves. Yes, we owe ourselves money), it acts as the lender of last resort to banks (this is to help banks stay afloat during times of need), it manages the flow of money (through the use of interest rates) and it attempts to control inflation.
Now, what is the difference between what the Fed does and what the government does?
The problem with government policy is that whenever something needs to be passed, it takes a long time to go through the system. There is a lot of debating about anything and everything. Because of this, all the stimulus packages and economic plans will take a long time to get through the senate. The Federal Reserve, on the other hand, can act immediately, calling its own emergency meetings and doing things like decreasing interests rates as it pleases.
To do things, the Senate must borrow money from the Federal Reserve, and the Fed is the banking system of the Senate. The Senate uses this money to do things with it, including stimulating the economy. The Fed does not stimulate the economy by literally giving people money. Instead, the Federal Reserve increases and decreases interest rates.
What are these interest rates people speak of?
The interest rates that the Federal Reserve speaks of are one of two rates (The Federal Funds Rate and the Discount Rate). Both rates allow banks to reach the Reserve Requirement, which is the amount of money a bank should have by the end of the day. If a bank cannot reach that requirement, it can do one of two things: borrow from other banks (with interest) or borrow from the Fed (with higher interest). The Federal Funds Rate is the suggested rate for banks to loan out money to each other overnight. The discount rate is the interest rate that the Fed uses to loan out money to banks. Usually the Discount Rate is higher than the Federal Funds Rate.
Yes, I am aware that the Federal Funds Rate is used by banks and that the Discount Rate is higher than the FFR. There is a whole historical background to the names of the rates and I don’t want to get into it.
Anyway, the Fed usually uses the Federal Funds Rate to control the money flow. When they say they are increasing the Federal Funds Rate, they are changing the suggested price. When the Board of Directors (headed by Bernanke) does this, they’re not just changing the rate by demanding it. Bernanke calls his secretary, who calls New York City’s Fed HQ (The two big Fed branches are in NYC and Washinton DC, and the Fed meets up in DC while all the real work is done in NYC) to start buying or selling bonds (this happens on the 9th floor… please don’t ask how I know this). If the Fed buys bonds, the Fed is trying to pump money into the economy. If the Fed sells bonds, it takes money away from the economy.
And what does this have to do with the rate? The point of selling and buying security bonds is to pump money into banks, making it easier for them to match up to the federal reserve requirement.
THAT is what the Fed does. The Fed is not a magical system that magically creates money for no reason and should just continually pump dolla dolla billz into our economy.
Since this is getting pretty long, I’m going to stop here and let my next post be about the second job of the Fed: Taking care of inflation.
… Yo, haven’t I read this for like the 23rd time? Enough of this. =P