Posts Tagged ‘Fiscal Policy’

Alright. For whatever reason, many people have been expecting me to post about the newly signed bill about Health Care Reform (I’ve already written one, here: A Response. This past Tuesday, President Barack Obama signed a revolutionary health care bill into law. This bill would increase coverage to several million people and would force health care providers to adhere to various regulations as set by the 50 different markets that will be developed by this health care reform. Why we are walking backwards into a country that is no longer united, I do not know. Perhaps it is because the federal government is too terrified to make a solid decision on abortion (the Democratic party is united… united so long as no controversial topics come up). Perhaps it is because America is incapable of learning from past mistakes.

Other noteworthy comments about the bill:

  • No Republican voted for the bill (in either House or Congress)
  • The bill passed by 7 votes.
  • People who refuse Health Care or take health care that is not accepted will be fined.
  • Of all the bills that have been introduced to reform health care, this is the hardest one for me to find online. It took me 2 hours to simply find it. What the hell. The name (the actual name of the bill) has changed enough times that keeping track of it is nearly pointless.
  • Hopefully people who have been following the bill(s) now understands how a bill is passed. Perhaps the one good thing about this bill is that it encouraged people to understand how bills are passed into law (although I’m more convinced that people just gave up).

But what I really wanted to talk about was not the health care bill. Today, I want to talk about this ridiculous obsession about the health care reform bill. There are other bills out there that the Houses have to vote on and there is other news out there. Instead, we spent all our time concentrating on this one bill, which well all knew was going to pass whether we liked it or not because the Democrats have an obscene majority in the House and the Senate. Democrats who are touting it off as a new revolutionary bill that is the equivalent to the Social Security Act clearly have not seen how Social Security has been driving our financial standing into the ground and also clearly haven’t taken a serious look at the cost of the bill. (Either that, or they just simply believe every word that the Democratic Party says.) It’s also pretty ridiculous to claim that there have been immediate economic consequences (negative or positive) since it was signed into law on TUESDAY. Any change is simply a result of people’s reactions to the bill, not the bill itself.
Republicans who are too pigheaded to see that we need health care reform are equally ignorant. At least the Democratic party is making efforts to improve our health care situation. The Democratic Party at least made several attempts to include things that the Republican party wanted, while the Republican party has done nothing to try and create reform. The non-bipartisanship of this law is not the whole fault of the Democrats, who have made continual attempts to appease the Republicans.

And it’s this drama that keeps the Health Care Reform bill/law in the news. Rather than concentrating on things we can change and things that are equally important, we default back into Health Care Reform.

Below is a list of bills and laws that are equally important and are greatly ignored by mainstream America.

  • S.773 – Cybersecurity Act of 2009 – Creates a Cybersecurity Advisory Panel and allows the Department of Commerce to act as a Clearinghouse. There also a mention of a scholarship in there for students who are interested in going into cyber security, and ideas for competitions that students can enter.
  • H.R.2847 – Hiring Incentives to Restore Employment Act (HIRE) – Signed into law on March 18, 2010. Reallocates money into House of Commerce and Transportation agencies. Also creates new incentives for hiring unemployed workers.
  • H.R.4213 – American Workers, State, and Business Relief Act of 2010 – Passed both the House and amended by the Senate (must be re-passed with the new changes by the House). It extends the current deadline to file for certain unemployment benefits. In total, the bill will cost $140 billion dollars, with NO plan to make up the money in any other way (at least the Health Care Bill[s] had various plans, although weak, to make up the lost revenue over a long period of time). [Credits to jmflora for catching my mistake]
  • H.R.3221 – Student Aid and Fiscal Responsibility Act of 2009 – Reallocates money from the Stafford loans and from programs that allow for government subsidies to support private company loans to put into the Pell Grant program. Increases money to advertising science, math and technology fields to Hispanics and Blacks (aka: more scholarship money for them).
  • S.1733 – Clean Energy Jobs and American Power Act (what is it with candidates for President who lost putting out bills on energy reform?) – Introduced by Senator John Kerry. Creates a nation-wide cap-and-trade program that would promote decreased greenhouse gas emissions.
  • H.R.1207 – Federal Reserve Transparency Act of 2009 – Introduced by Ron Paul (the only Republican who supports this bill, mind you). Overhauls the current relationship between the Federal Reserve and the US Congress/US Treasury. Gives control to the Comptroller General, who will audit the Federal Reserve
  • H.R.226 – Broadcaster Freedom Act of 2009 – Stops the FCC from reintroducing the Fairness Doctrine, which required news broadcasters to present opposing views on controversial issues (the Fairness Doctrine was abolished in 1987).
  • H.R.231 – The Video Game Health Labeling Act of 2009 – Creates new labels warning parents about the dangers of certain video games. The warning would read such (for games with a rating of above T): “WARNING: Excessive exposure to violent video games and other violent media has been linked to aggressive behavior”
  • H.R.414 – Camera Phone Predator Alert Act – Requires that all phones with a camera make a sound (like a click-click camera sound) when taking a picture
  • .

I’m not asking for society to follow all the bills being passed in the US Government. Just please be aware that Health Care Reform is not the only be all end all of topics. It is certainly not the only one that is up for debate in the Houses.

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More writing!

On Thursday, Feb 18, the Federal Reserve announced that it intends to increase its Discount Rate. I found this to be interesting, because I spent the greater portion of my senior year working on the Fed Challenge, and we (as a group) determined we should increase interest rates (the Fed, however, ended up dropping them even more). However, I’m pretty sure most people don’t actually understand what this means for the economy, despite it actually having a lot of economic significance.

I noticed that a lot of people like to say they understand economic policy of the government, but have no idea about the uses of monetary policy, even though it makes up half of our economic policy. Dammit, most people don’t even know the relevance of the Federal Reserve.

And, yes, I am fully aware that I have talked about this before. If you want a real quick explanation, you can go back and read my previous blog posts about the Federal Reserve:
1)The Real Quick (and, now that I look back, poorly written) Blurb
2)A Post About Possibly Shifting More Power to Congress and Away from The Federal Reserve

But going back to the original topic, I think it’s fascinating that the Fed decided to increase the Discount Rate. It’s an action that I’ve been hoping they’d do for quite some time in an effort to move towards a normal economic system. Hopefully this is a sign that the Federal Reserve tends to put some value back into our dollar, instead of continually plummeting the interest rate to pump more money into the economy.

However, I am curious to see how soon it will be until the Federal Reserve decides to bump their Reserve Rate up. The Fed has stated that they want to keep their interest rates relatively low, so that banks can still borrow money (Congress, on the other hand, likes to pump money into the economy with no direction or goal of using it to put the economy back on track), but I’m not sure if this increase will be enough to encourage banks and investors that the economy is actually improving. I’ll be interested to see when the Federal Reserve decides to increase their Reserve Rate, because it’ll be a good gauge of how well they think our economy is coming out of the depression.

The situation is twice as interesting since Bernanke is up for reappointment by the president, and I wonder if this decision will help or hinder his reappointment. Despite him being an appointment made by Bush, Obama seems likely to reappoint Bernanke for a second term. I personally feel that Bernanke is far too fearful of making significant changes, and that the Federal Reserve dances around too much and allows the economy to grow too much (resulting in a bubble burst and a recession), but past Fed Chairmen (*cough* Alan Greenspan *cough*) have been equally terrible. Perhaps if they didn’t worry so much about being reappointed, they’d be capable of doing their job.

And yet we see the same problems in government politics. Elected (and appointed) officials are so damn terrified about not being reappointed that they do a poor job because they’re too afraid to do anything. And, as a result, the economy crumbles because politicians have to listen to American society, many of whom think that by simply making more money, we’ll be a richer country.

Perhaps if Americans could realize they’re not as smart in Economics and Policy Making as they claim to be, they’d be more willing to learn and understand, and politicians could actually do their job. It’s funny to think that politicians get voted in because they suck at policy making (as much as Americans suck at political science).

Post-writing apologizes: I realize that this has become more of a complaint about how American people don’t understand economics/political science rather than an analysis of what the Federal Reserve Discount Rate increase actually means. I’m glad the Federal Reserve Discount Rate has increased, because it’ll hopefully trick the economy into improving and jump start loaning again. But most people won’t see the relevance in it since most people, wrongly, think the government has complete control over the economy. Silly Americans.

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I know I don’t normally blog on… Sundays. But holy shit, I couldn’t pass this one up.

Heath Care Reform Bill Passes in House of Representatives

After a daylong clash with Republicans over what has been a Democratic goal for decades, lawmakers voted 220 to 215 to approve a plan that would cost $1.1 trillion over 10 years.

My soul, it cries for the destruction of all things good and right about social reform.

1.1 trillion dollars over 10 years. That’s nearly 1/13th of our US Economy (our TOTAL GDP). 1,100,000,000,000 dollars wasted on health care reform which will act more as a burden and a deficit to the US economy than any blessing. 1,100,000,000,000 dollars that will be spent on regulating private health care companies, fueling a wasteful public option and slowly depleting our choices as consumers to decide where our money should go.

During a time where economic stability is nearing the levels of the 1980 recession/stagflation, we really should be spending more of our resources and efforts into FIXING one problem instead of creating more problems with social reform.

And most of the money won’t even go to changing health care! It’ll be spent developing and creating a poorly designed public option (business). It’ll be spent funding and fining other corporations that don’t match the “standards” (it’s inconsequential that the public option will essentially NEVER be regulated, giving it an unfair advantage to any other private option). And how will this type of health care be fueled?

Taxing health care corporations (until they most likely go out of businesses, since they’re competing with a public option that the government wants to succeed). Taxing people who don’t want health care, taking away money from the economy to fuel the poor health care plan. Taxing all US citizens to fuel a health care reform system that is headed by the Health Choices Commissioner, who’s a government official with a natural inclination to the government-organized public option to health care.

Our last memorable social reform, if anyone cares to wonder, was Social Security in 1935 (fueled by a Democratic Congress and a Democratic President during an economically failing time). Now, 5 adults pay for every senior citizen on social security. By the time I get to collect social security, the system would have crashed in on itself, or the age I’ll have to be is something near 120.

I am not saying that health care reform is useless and terrible. I do support some social reform. Well planned, well organized, FISCALLY RESPONSIBLE and free-market-aware reform. Reform that doesn’t turn into disasters 60 years down the road. Reform that doesn’t need to be reformed again. Reform that can be easily understood by the US people, that isn’t riddled with ways for the government to take money (forcing people to pay a fine for not taking health care is ridiculous).

Social reform can be good. But frivolous spending of money we don’t have?

I hope the Senate has a better head on their shoulders than their moronic and idealistic House counterpart.

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Hello everyone! I’m sorry this post has been so delayed. College has been keeping me busy, so I am sticking to the tradition that my post will be as late as ever.

But never fear! I will try to write on Tuesdays as much as possible, and when I become more familiar with my schedule, I will be able to write at a more consistent time. For now, you will have to live with what you get.

This specific post is about the Health Care Reforms that are being enacted under a bill entitled “American’s Affordable Health Choices Act of 2009.” It is a 1014 page bill that covers health care reforms in America. It is currently being discussed in the Senate and has been the topic of many a debate in the media.

As a disclaimer, my opinion on the matter is that this bill should not be enacted. I am not a supporter of a public health care option (nor am I a supporter of other governmentally funded welfare projects such as social security).

So uh. Read. Enjoy. Hope you learn a little more.

Currently Listening To: Love Story (Taylor Swift)
Currently Drinking: Pepsi Cherry
Currently Eating: M&Ms
Currently Watching: Toradora
Currently Reading: My textbooks
Random Image of the Day

So. Health Care.

Yea. Health Care Bill.

Tonight, President Obama’s speech was all about addressing the concerns of Health Care reform and answering all the questions on the 1000 page bill that is passing through the House of Representatives (that’s right, it hasn’t even gotten to the Senate). It was a very long speech about how the health care reform would not impose itself upon the American public, and how there were many misconceptions (mostly on the Republican side) about how the health care system would be ruined.

So, to get it out of the way, let me explain the bill in a little detail.

It is NOT some Nazi program bent on destroying the world. There are no death panels, and not EVERYONE would HAVE to have public health care.

The bill has two purposes: creating a public health care option and fixing the problems with the current health care system (the exact quote is “enact strong insurance market reforms”). These reforms would include creating a maximum up front payment for the patient, forcing everyone to have health care and, as previously mentioned, creating a public health care option that would be available to all American citizens. This public health care plan would enter the market as a competitor to private companies, to encourage choice and competition.

Also, each health care plan would have to be reviewed by a Health Choice Commissioner, who would regulate which health care plans were legally available. To be available, the plans have to contain essential benefits and protections, and would (obviously) have to be affordable.

In total, the plan would cost 9 Billion (count those zeros with me: 9,000,000,000) dollars over the span of 10 years. Yes, this is cheaper than the Iraq war, but that doesn’t make it any less pricey.

President Obama says the intention of the bill is to reform the health care system by regulating private companies and creating a public option that will allow all citizens to have health care (regardless of health history) and will encourage private companies to keep their health plans low and available to everyone (all health care plans must guarantee availability and renew-ability to ALL citizens).

President Obama also claims that the health care plan is self-sustaining, with revenues being brought in by premiums, other insurance companies (who have to pay fees if their plan is too expensive) and by cutting down on money that is being spent frivolously. How he and the government intends on jump starting the program as a whole is still a mystery to me.

One of my biggest concerns when it comes to cost is that government plans have a habit of costing more than they’ve been predicted to cost. Take Social Security for example, which has been following the “this is going to be a self-sustaining program” concept since 1939. Five (5) adults currently pay for one (1) senior citizen who is on social security. This cannot be sustained for much longer, especially with the baby boomer generation coming into an age where they can start collecting their social security benefits.

Or take the welfare benefits that discourage people from finding jobs because they make more money on welfare than they would finding a job. Don’t forget we are also paying for the Medicaid system, which provides health care to poor and low-income families.

These were all programs that started off with wonderful intentions to provide happiness and comfortability to all the citizens and legal residents of the United States. But these are very expensive, very abused programs which are practically at the brink of failure.

The new Health Care bill is not much different. It is intended to be a program for the American Government to, once again, provide some sort of social welfare for the country. However, I find the bill to be too vague and too expensive. Nine billion dollars is a lot, but I’d venture to say that people will use it as an excuse to spend more money.

Which brings me to my next topic. I first heard this concern from 20/20 (which my mom had fallen asleep watching). In the show, they compare the need for health care with the need for groceries (not a perfect metaphor, but it serves its purpose). If an individual paid a “grocery insurance,” that person would put a certain amount of money down to get a certain amount of grocery products, just as health insurance allows you to obtain health care coverage.

Well, if a person had an option between the steak or the chicken (both of which would be covered by the grocery insurance), the person would obviously choose the steak.

This is true for health insurance, with many people choosing more expensive surgeries because it is “covered under the health insurance: “When we pay for health care with someone else’s money, it creates nasty incentives. It’s good to be covered in case of a medical catastrophe, like a heart attack or cancer, but when patients pay for almost everything from physicals to acupuncture using third-party money, they have no reason to care about cost. Because the buyers don’t care about cost, neither do the health-care providers.”

20/20 uses Lasik as an example. Because Lasik is not covered under any insurance policy, doctors have to compete to encourage patients to buy from them. This competition is what drives the price of Lasik down. Buyers have to “shop around” for prices, just as they do with other products.

This is the same type of competition that President Obama talks about in his Address to Congress about the Health Care Reforms. He claims that having a public option will drive down prices and create competition between health care because the public option will inherently be cheaper BECAUSE there is no behind-the-scenes-money-wasting.

Bullshit! For one, public health care may not always be the cheapest. For two, it is not competition if public health care has clear advantages in the market. While private companies will have to pay a fee for expensive health care plans and will have to go under the scrutiny of a Health Choice Commissioner (who is and will be federally paid), public health care will not go under the same lenses BECAUSE it is a government program. Also, the reforms REQUIRE that every person have health insurance. President Obama says this is because every person “has to do their part, or the system will not work.” However, I feel that it is a person’s choice to want or not want health care, just as it is a person’s right to not get a job, lie under oath and commit suicide. All of these actions have severe consequences (expensive hospital bills, no money, going to jail and death, respectively), but they are still “options,” even if they are not the ones you would chose (I would personally buy some good health care, get a job, not lie under oath, and live).

For example, if a small business owner does not want to provide health care (DOES NOT WANT is very different from cannot), it is his/her right to not provide said health care. Because it doesn’t provide health care while its competitors do, that small company (the one not providing health care) will suffer a labor shortage and will eventually go bankrupt/fade out. It’s a simple matter of “this is a poor business choice,” and I would rather a small business owner want to provide health care than HAVE TO provide health care.

I am all for the goals of reforming health care system (whether it has to do with drug companies, medical malpractice laws or insurance businesses). However, I feel that the plan leaves too many holes open for future abuse of the system, and will end up as a detriment to the US Economy (since it’s going to get ridiculously expensive one day). I’m glad that the Obama Administration is taking steps to improve the health care system in America, but I feel that there should be a separation between reforming the health care system and adding a public health care option. I also feel that Obama should be concentrating on other things, such as improving the economy. Were this bill to be enacted, none of the laws would go into action until 2013 (when President Obama will either be out of office or serving his second term) anyway. I feel there are more pressing matters at hand.

I feel the same way about this bill as I do many of the other government social welfare/insurance programs. Good intentions, bad implementations.

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I realized previously that I had not added the resources that I used to research the blog post, and that various people had been asking me about what articles I had read to either infuriate me or back up my claims. In the end, a lot of what I’m explaining comes from the textbooks I have been using in my introductory and intermediate micro / macro classes, as well as research from being part of the Fed team back in High School. This includes talking to the Head of the Federal Reserve in New York and a few other members of the Board of Directors. I also would have to thank my various economic teachers along the way for drilling it into my head (whether they be Democratic, Republican, Libertarian or otherwise, I’ve had a very interesting collection of Econ teachers). You can find a lot of this research on wikipedia or econ papers that can be found through jstor and other research databases. Also, if you have any questions or concerns about some economic terms or explanations that I may give, feel free to tell me so I can explain in in greater depth. I really do want to make sure people have a clear understanding of economics, so that the community, as a whole, can make an intelligent decision (this also goes for any elections… go out there and do your research! Just because your mom is a republican, doesn’t mean you are).

NY Times, “Stay The Course” (Paul Krugman)

The Economist, “The Other-Worldly Philosophers” – In discussion about the power of both Monetary Policy and Fiscal Policy, and the argument between Keynes and Classical theories (there’s an interesting tidbit about how the Fed “saved” the economy by crashing it during the stagflation era of the 1980s, as well an an interesting bit on “freshwater” economist)

NY Times, “Views Differ on Shape of Macroeconomics” (Paul Krugman) – A response to the previous article (Keynes mindset)

Political Lore, “The Inflation Lie” – An interesting piece on how deflation is good. Students in Macroeconomics will remember that deflation implies no economic growth, which is inherently a bad thing, and that limited inflation is natural for economic growth because it implies that multipliers are working as they should.

This is also interesting to note that, when I did the Fed Challenge a year ago, my group decided to increase the interest rate by .25 to show some sort of image that the country’s economic system is doing well, therefore to increase the happy people meter and encourage more investment. But then, the US Government decided to come out with a series of stimulus package reforms that would counteract our idea by overspending and giving out money, therefore rendering our idea useless. To this day, I don’t agree very much with the idea of continually increasing the interest rate, but I thought it was interesting that this article made the decision of “if inflation is bad, deflation must be GOOD.” Economics does not work this way.

“Fed Independance or Fed Secrecy” (ROn Paul) – Ron Paul is a big advocate of Fed Transparency. To some degree, I agree with him. However, his over-exaggeration here makes the article laughable. Beyond this, he does make a good point that Congress does have control of the Federal Reserve’s charter and how political the Fed actually is, but does not acknowledge that with all this junk, the Federal Reserve is still less political than Congress (or perhaps this is to obvious for him to mention, since Congress is the Federal Reserve).

I mean, there really are a large slew of blogs online (especially on Reddit) that claim the Fed is this angry beast. If a little research were done, people would find out that this is certainly not the case. The Fed may be powerful, but they are in no way any more or less powerful than the US Treasury.

And who is to blame? Well, we can blame the banks for splitting the chunks of morgages to try and spread the risk. We can blame the homeowners who bought houses they knew they could not afford. We can blame the economists that said this was a new wave of economy (as there seem to be a great majority of them in the world, as there always has been, during an economic boom). We can blame the Federal Reserve for not taking action to quell the boom before it got out of hand (I see Bernanke takes well after Greenspan). We can blame the United States Congress for overspending money that they simply do not have, then having to borrow from the Fed and other countries to continue overspending. Hell, if you really want to, you can blame the people who told you there was going to be a recession months before there actually was one, because those people essentially started the bull market. Really, it was more for my own satisfaction and so that people could read what I have (although, really, I would suggest you take an econ class or two when you can. It’s really a lot of fun).

I apologize. This post was far more of a tied-on rambling of my previous post that may or may not be more complex and may or may not be harder to understand/read.

PS: There were several other things that I had read or looked up, including a supposedly bi-partisan view on why the Fed should end (It was bi-partisan because Ron Paul was the only Republican even mentioned), and a stupid video with a policeman/woman (screw being politically correct) that had a conversation with the reporter. Again, it was a very humorous website, and I am saddened because I can no longer find it. Apologies.

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See? Updating more often, like I said I would. Actually, this is something I had intended on writing for a while but had been putting off due to work stuff, and just general disinterest and writer’s block. It’s a political/econ piece, so I apologize in advanced. If you have any questions or concerns about any of the opinions I have stated below, do not hesitate to contact me in however way you do.

Originally, I had intended on posting this (more apologies because I’m a moron like that):

It’s been so long since I’ve written that I think I’ve felt my brain literally melt into goodness knows what. So, I apologize for the poor writing beforehand. I really haven’t written much for a very long time, and that (combined with me not reading as much as I should) is really rotting whatever skills I had in good ranting and blogging.”

Currently Reading: Playboy (I read it for the articles)
Currently Playing: Final Fantasy Tactics Advanced 2
Currently Consuming: Nothing
Currently Working On: Nothing (but I’m going to start on my Saber Lily cosplay soon)
Currently Wearing: My awesome red yukata (which I look super duper sexy in. I think)
Awesome Incident of the Day: Bonnie’s Companion Cake making friends with my Companion Coconut

No matter where I go, I seem to be getting constant news about various people in politics. This is not a bad thing (especially since I should be getting them… through the rss feeds on my blackberry), but I’ve been getting more and more annoyed at the growing number of people not understanding what the Federal Reserve is… again.

Recently, there has been talk of Congress wanting to audit the Federal Reserve. Some advocates include Ron Paul and other democratic senators who are insistent upon pushing the fact that the Federal Reserve is a great big monster that eats our cash.

No. First off, the Federal Reserve does not make money on a whim. They increase or decrease the amount of money going into the economy to try and balance economic stability (which is now most commonly calculated by the ratio of unemployment to the ratio of inflation). Yes, they are powerful (they are the only people to control the inflation rate and such), but they are neither moronic nor out to “ruin the US economy.” In fact, every single person who works on one of several boards would only benefit if the economy is doing well. People act like this is some war between the banks and the people when, in fact, everyone is suffering in this situation.

So, back to that auditing idea. There has been a keen interest, mostly from the democratic side, to start regulating the Fed, thereby limiting the Federal Reserve’s power and forcing the Federal Reserve to fix the economy. To make a long story as short as it can be, “No, this does not work.” First of all, someone would have to take on the power if the Fed doesn’t (and we’re talking control of the money flow) and, chances are, Congress would do it (I suppose the Fed isn’t the only one with hidden agendas). This is Congress who is more than willing to spend trillions of dollar on an unsuccessful stimulus package. Most people in Congress barely know what a discount rate / reserve rate is, let alone understand the importance and complication of using their rates to, essentially, keep the country’s economy in check. The reason we even made the Federal Reserve was because no one wanted to trust a bunch of morons on Capitol Hill to control the US economy (some of whom have never passed an econ class themselves).

Beyond the fact that the US economy will be in the hands of people who don’t know about economics is the issue that these hands are already politically inclined. I don’t want senators pushing gun control bills under their to-be Federal Reserve actions. The point of creating the Federal Reserve was to keep it away from Congress/the President. That’s why there’s two ways to control economics: Fiscal and Monetary (Fiscal: Government run, like taxes and stimulus packages // Monetary: Federal Reserve and interest rates). To put all that economic power into ONE concentrated hand bothers me (and it’s not even the very good hand).

Besides, who would you have to regulate the Fed? Again, I am sure Congress would love to audit the Federal Reserve themselves. I’ve already discussed the general intelligence (or lack there of) when it comes to economics and Congress, but let’s not forget the main fact that the Federal Reserve is also the bank for Congress (meaning that for most government projects, Congress borrows money from the Fed). This would give Congress economic control to do what they want with how much money they can make. This may sound nice, but I worry about Congress over-generating money and shooting inflation sky high in an attempt to clean the US debt. In that attempt, the government will generate too much money, bringing the US Economy into a similar state as the German Super Inflation.

Okay, maybe that was an exaggeration. But in all seriousness, Congress knows little about how to increase or decrease the money flow, and I really would not like to see us hand Congress more power.

And as I’ve essentially stated before, Congress is just as power hungry as the Federal Reserve (perhaps more, and certainly more detrimental). When the Fed spends loads of money to cover their own banks, it eventually trickles down to help us anyway (Business cycle, people). Yes, the Federal Reserve has screwed up on several occasions (my first thought goes to Greenspan, who was the Fed chair during the dot com boom/bust, as well as others because of his inability to make decisions), but it’s far better than when the government touches economics (I’m thinking Great Depression times).

I agree with the idea that the Fed should be more “regulated” in some way. For example, the Fed chair is only required to make two reports to Congress. At the very least it should be 4 (every quarter) or 8 (Twice in a quarter). Also, the Fed shouldn’t be put out as this mysterious all knowing corporation. It’s not even a corporation, and the Fed building sticks out like a sore thumb (at least in NY, which is where it matters, in my head. That and that’s where all the gold lies). This is more the fault of the media and the public going “if I didn’t know about it before, it must be mysterious and inherently dangerous.” I suppose the idea came up with good intentions, but (once again) the nut houses on Capitol Hill had to bring it up a notch. I think we have more thinks to worry about (like saving the economy).

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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.

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