If money rules the world, who rules money? (2008) [pdf]
web.archive.org
web.archive.org
real interest rate = inflation + nominal interest rate
Do to others as you would have them do unto you
Do not do to others as you would not have them do to you
He who has the gold makes the rules
He who makes the rules takes the gold
variation: alchemy / cryptocurrency (which are actually the same premises sitting atop different stages of technology substrate): he who makes the gold makes the rules
The Federal Reserve System is not "owned" by anyone. The Federal Reserve was created in 1913 by the Federal Reserve Act to serve as the nation's central bank. The Board of Governors in Washington, D.C., is an agency of the federal government and reports to and is directly accountable to the Congress.
...
Some observers mistakenly consider the Federal Reserve to be a private entity because the Reserve Banks are organized similarly to private corporations. For instance, each of the 12 Reserve Banks operates within its own particular geographic area, or District, of the United States, and each is separately incorporated and has its own board of directors. Commercial banks that are members of the Federal Reserve System hold stock in their District's Reserve Bank. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. In fact, the Reserve Banks are required by law to transfer net earnings to the U.S. Treasury, after providing for all necessary expenses of the Reserve Banks, legally required dividend payments, and maintaining a limited balance in a surplus fund.
<https://www.federalreserve.gov/faqs/about_14986.htm>
Note the mention of "legally required dividend payments" in the 2nd 'graph above. Those are in fact accrued to the member banks, and amount to 6% of the stock price (itself, if I'm reading correctly, 6% of the total asset value) of each regional Federal Reserve Bank.
Strictly speaking this is not profit, though the dividends are only paid when the Fed itself has positive operating returns (which is almost always). But it is, yes, a benefit which accrues to member banks.
The operating profits however are paid to the U.S. Treasury.
More on Fed Dividends:
<https://bipartisanpolicy.org/blog/federal-reserve-dividends-...>
<https://newrepublic.com/article/116913/federal-reserve-divid...>
<https://www.federalreserve.gov/aboutthefed/appendix-b-divide...>
It is akin to forest fires. If small, natural fires are suppressed, eventually there will build up so much kindling an inferno becomes guaranteed. Our economy is like a town built in that forest.
The Federal Reserve (which, despite its name, is not a part of the US Government) is the de facto institution that controls money in the United States. All US Dollars are created by the Federal Reserve.
It was created "for central control of the monetary system in order to alleviate financial crises".
It is owned by member banks - "A member bank is a private institution and owns stock in its regional Federal Reserve Bank. All nationally chartered banks hold stock in one of the Federal Reserve Banks... The amount of stock a member bank must own is equal to 3% of its combined capital and surplus"
https://www.institutionalinvestor.com/article/2bsx0wq4jdzo82... -
"Now, thanks to a Freedom of Information Act request filed late last year by Institutional Investor, we know the truth.
II asked the New York Fed for the capital stock holdings of its members as of year-end 2018, as well as for each year going back to 2007. The bank responded with copies of what it calls its Capital Stock Master Report, a compendium of shareholdings of member banks, for each of those years.
The big reveal for year-end 2018: Citibank, the No. 1 institution on the roster, held 87.9 million New York Federal Reserve Bank shares – or 42.8 percent of the total.
The No. 2 holder stockholder was JPMorgan Chase Bank, with 60.6 million shares, equal to 29.5 percent of the total. In other words, the two banks together control nearly three-quarters of the regional bank’s capital shares."
The Federal Reserve banks pay 6% dividend to member banks holding shares.
The big banks effectively own the Federal Reserve.
The Fed chair and board is appointed by the President and approved by Congress. It hasn't been tested in court whether the President can fire them.
Owners of money are those that actually own it in the bank. Then there are those who own it in the form of assets which also helps divert control of value away from the Fed.
In fact almost all rich people don't own money, they own some form of asset which has intrinsic value.
Therefore in a non-technical sense, rich people are the owners of "money" or "value" which is what we're really getting at here.
But there's another viewpoint of this. Corporations. Corporations own a lot of "value". But who owns the corporations? Rich people and also all of us. Generally upper middle class people and Rich people own most of the value and money.
What?
the US Mint in the US Department of Treasury creates money (which it then banks in its account at the federal reserve), though perhaps the ebb and tide of money into and out of the economy is more like what you describe?
The primary way money is made is through loans, though the Fed buying treasuries also creates large amounts of money. When you deposit at a bank, they're only required to create a fraction of that deposit available. Hence - fractional reserve banking. [1] You deposit at a bank, they take that deposit and lend it out to somebody who now spends that money which eventually ends up getting deposited at a bank again, and the process iterates. If at some point everybody demands their money, a run on the bank, which the bank could not afford as they've lent out deposits to other people, then the Fed bails them out.
The exact process is slightly more subtle, but not fundamentally different. There's a lot of great videos on a search for 'how money is created' at any video site. Because it's a question few know the answer to, everybody wants to know the answer to, and the answer itself is somewhat unsettling.
[1] - https://en.wikipedia.org/wiki/Fractional-reserve_banking
"The actual process of money creation takes place primarily in banks." [0]
[0] https://en.wikisource.org/wiki/Modern_Money_Mechanics/Introd...
Here's where money is physically created, somewhat of a curious point since so much of transacted 'money' is digital, and perhaps why the article above misleadingly says "creates".
https://m.youtube.com/watch?v=8NBSwDEf8a8
But essentially, the red shield aka rothschilds
When you have banks that are incentivized to raise interest rates enough to make a ton of money but not enough to crash the economy, you keep the dollar as the strongest currency in the world. That's a good thing - the last thing I would want is for less free countries to expand their influence.
Got these anyway. ZIRP priced the middle class out of equity ownership. That historic bull run is from goosing the numbers, not record productivity. The S&P was ~750 in 1990. Things are not 6x better.
We should let treasury auctions decide the yield curve, not a committee of 12 people.
Material root cause, spiritual root cause.
the ones who rules the money, are the same ones that ruled it 100, 200 or 500 years ago. more or less.
Then, if you manage to somehow to preserve the value and actually give each person 1 billion, they would have large families and a lifestyle with a higher carbon footprint.
You're making the same mistake most people discussing these questions, by focusing on money.
Money is a convenient medium of exchange, and monetary policy is one of the many inputs into the economy. But at the end of the day, people don't care about money. You can't eat t-bills. Greenbacks won't put a roof and four walls around you, and you don't burn them to keep the lights on. What really matters, and what people really care about is wealth. Material wealth.
Wealth is only produced when people work. Whenever we talk about society as a whole 'not having the money' to afford something (Social security, social services, pensions, etc), money isn't the limiting factor. Our society's wealth is. And that wealth is measured in labour that goes towards producing useful goods and services - not in how fast money can be siphoned up by rent-seekers, or in how fast labour hours can be pissed away on make-work ditch-digging-and-ditch-filling.
Unlike money, you can't just magic up widgets into existence, by pretending to work.
On the one hand, labour participation is up. Productivity is higher than it has ever been in human history. But so is waste, active parasitism, and passive inefficiencies[1], due to the high upkeep requirements of modern societies.
[1] Car ownership is a great example of this. A mind-boggling amount of labour is poured into providing everyone with cars, and keeping them, and the infrastructure that they need running. And there's no practical way to opt out of it in most of North America. So much of the wealth we generate goes right back into maintaining the systems that we inflicted on ourselves.
This is a little simplistic.
Say a farmer can grow 20 bushels of wheat in a year. A farmer with a tractor can grow 200 bushels.
Does the guy who invented the tractor work as hard as the farmer? Probably not. But they (arguably) created much more wealth.
What about the banker who provided financing for the tractor? Let's assume it's a totally fair financial service, no need to stipulate anything predatory. The banker didn't work very much compared to the farmer at all, just wrote down some ledger entries. Yet without him, farmer is tractorless.
Any full view of the economy has to account for services and invention (and many more things, these are just illustrative examples.)
Work is a requirement for producing wealth, but is not a sole and sufficient requirement. Useful work is.
There are, however, plenty of ways to produce money without doing any useful work.
2. Having invented Humans, God then assigned to Them their own powers of creation. […]
3. Having projected thought onto a non-divinity and invented entity, Gods then subordinate themselves to it. Endowing their own creation with a specious authority, they take themselves to be lesser than it.
4. People make capital. Everything that counts as capital is a human creation. […]
5. Having created capital, people then assign to it the powers of creation. […]
6. Once the creative powers of work get misassigned to capital, actual workers are made subordinate to it. A created thing that lacks the powers to create is taken to be the all-creative thing and so allowed to lord it over the real creators.
Doesn't change much sadly except maybe ramming home we were made in a divinity's image.
2. Having invented God, humans then assigned to Him their own powers of creation. […]
3. Having projected thought onto a non-human and invented entity, humans then subordinate themselves to it. Endowing their own creation with a specious authority, they take themselves to be lesser than it.
4. People make capital. Everything that counts as capital is a human creation. […]
5. Having created capital, people then assign to it the powers of creation. […]
6. Once the creative powers of work get misassigned to capital, actual workers are made subordinate to it. A created thing that lacks the powers to create is taken to be the all-creative thing and so allowed to lord it over the real creators.
Let's stipulate that, like a lot of unoriginal "knowledge work" that AI is/becomes better at capital allocation than humans. If that turns out to be true, why then keep capital allocation in the hands of private organizations?
Capitalist countries were only able to edge out socialist economies by banking on their extant head-start and behaving socialistically (copying socialism in a light way—redistribution, worker advocacy, etc.).
As soon as they were able to claw it all back in the direction of pure capitalism all hell was set loose.
Socialism remains the way forward.
I'm talking about markets with low barriers to entry, little or no regulatory capture, that are discretionary purchases. A government bicycle factory, for example, makes no sense and would fail. Whereas, say, postal banking, which would be pilloried as capital-C Communism in the US would work fine because banks hate their small retail customers and it shows.
However unsatisfactorily stated, my question comes down to: Does it make sense for capital allocation to remain in private hands in a possibly immanent age of AI outperforming humans in capital allocation?
Having created a $BETTER_ALTERNATIVE, people then assign to it the powers of creation
Once the creative powers of $WHATEVER get misassigned to $BETTER_ALTERNATIVE, other people are made subordinate to it. A created $WHATEVER that lacks the powers to create is taken to be the all-creative thing and so allowed to lord it over the real creators.
The real issue is that anything that is given power, will ultimately use that power to amass more power and prevent others from gaining power. This is natural - as it powers the evolutionary process on our planet
To break the cycle, we must break from our chains of mortal humanity. What price are we willing to pay to do so?
Or another question - is it really a bad thing? Some version of $BETTER_ALTERNATIVE will balance out the problems created by $PREVIOUS_BETTER_ALTERNATIVE, but will create new unforseen problems. Like capitalism for instance. We cannot predict the future
(Some benefit from this more than others.)
It sucks that communism and pretty much anything related to it is almost impossible to discuss in earnest
I doubted even clicking on that link for a while, dismissing it just because you mentioned it was “the communist answer”
Our economic system is dysfunctional and getting worse, but I don't think it's about capital so much as it is about endless interest requiring (and assuming) endless growth, as the article hits on. Another perverting issue is governments going infinitely into debt, the US in particular, really distorts economies, and consequently societies. Here [1] are a series of graphs across a practically endless series of data. It focuses on the inflection point of 1971, which is when the USD became a completely free floating currency, enabling infinite 'money printing.' It's not hard to see that things haven't really gone so well with that ability unlocked.
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As one interesting aside, as I was typing 'wtfhapp..' into Brave Search to grab the URL, I found it telling that one of the autocompletes (likely due to large numbers of searches for it) was 'wtf happened in 1971 debunked.' The inflections following 1971 are so extreme people clearly just can't even believe it. But there's no trickery there. One can read more about the Bretton Woods System (which is what we pulled out of in 1971), here. [2]