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Location: Macroeconomics Unit III - The Financial Sector
Discussion: The Fed is the Banker's Bank - what about a banker's banker's bank?
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jacqueszhang |
20. RE: The Fed is the Banker's Bank - what about a banker's banker's bank
Mar 17 2008, 9:21 AM EDT
Having a banker's banker's banker's banker's banker's so on so forth would be unnecessarily complicated. Think of the already-complex process that the Fed and the commercial banks in the United States already face. Besides, the two-step system already works efficiently, so why bother getting more unnecessary complexity?
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TimChu |
21. RE: The Fed is the Banker's Bank - what about a banker's banker's bank
Mar 17 2008, 9:22 AM EDT
As cool as it may sound, a banker's banker's bank doesn't exist. The FED just takes new money printed directly from the treasury. I dont think there's much else to discuss... that's about it.
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nicolewong |
22. RE: The Fed is the Banker's Bank - what about a banker's banker's bank
Mar 17 2008, 9:49 AM EDT
Like Tim said, I don't think a banker's banker's bank exists. The Fed must be called the "central bank" for a reason. Money held at the Fed isn't considered M1 money (i.e. currency, checkable deposits) in the first place, so if the Fed is receiving money hot off the press and it is the one making dollars "legal tender", they wouldn't need a bank to provide money to them.
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kevinyeh |
23. RE: The Fed is the Banker's Bank - what about a banker's banker's bank
Mar 17 2008, 10:16 AM EDT
Yeah it's kinda like the Federal reserve holds huge stocks of money that are not actually considered to be in the money supply. The Fed doesn't need to borrow money because it actually holds a ton of money. That is why its actions can actually "create" and "destroy" money in the money market. Worst case if more liquid money is needed, the US Treasury can increase the printing of money which can be directly injected into the economy. However, the Fed does not do this because it wants to control inflation
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judy_chen |
24. RE: The Fed is the Banker's Bank - what about a banker's banker's bank?
Mar 17 2008, 11:24 AM EDT
Well, I don't think there's banker's banker's bank. Because since the Fed is in charge of issuing currency, so they are creating money to the world depends on the nation's economic situation. And the currency they owned is asset but liability, they couldn't use them to produce money.
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CalebLiao |
25. RE: The Fed is the Banker's Bank - what about a banker's banker's bank
Mar 18 2008, 4:09 AM EDT
Actually Jacques, there's already this system of a banker's banker's banker's etc's bank. When the federal reserve is in trouble, it goes to other countries. Thats why America has rediculous foreign debt, it relies on banks from foreign countries when its in deep doo doo.
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serenatu |
26. RE: The Fed is the Banker's Bank - what about a banker's banker's bank
Mar 18 2008, 6:37 AM EDT
I think it's a good thought to come up with this idea, but i think it's useless to have so many a banker's banker's bank. The Feds has the power to manipulate the money supply in circulation, they have the capability to make adjustments to fix the economic problems, such as recession and inflation. Therefore, there's really no need to have another bank to regulate the Feds.
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jinnykwon0314 |
27. RE: The Fed is the Banker's Bank - what about a banker's banker's bank?
Mar 18 2008, 8:09 AM EDT
So basically, the situation here is this: when the government spends more than it collects in tax revenues, where does it get the extra money? Well the answer is quite simple: the government borrows the money by selling US securities such as T-bills, T-notes, T-bonds, and US Savings Bonds. When there is a deficit, the government sells these securities in exchange for the same value of money in USD. And so, in one sense, it can be said that they get a loan. Also, when these deficits accumulate overtime, these become the national debt. One thing I am not so sure of is what happens when a nation exceeds the amount of US securities that can be sold? One possibility is that nations can borrow money from other nations' banks or from a world bank (that possibly exists). Like South Korea when it was undergoing IMF, I think that South Korea borrowed a lot of money from foreign sources rather than solve the financial crisis on its own.
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kevinhuang |
28. RE: The Fed is the Banker's Bank - what about a banker's banker's bank
Mar 18 2008, 9:04 AM EDT
The Federal Reserve gets its money from taxes and it is also able to produce money, well at least that's what I think. It is possible that the federal bank is depositing it's money into other banks, which creates a cycle of money, which is continually flowing and allowing banks to make more and more money.
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drewvenkatraman |
29. RE: The Fed is the Banker's Bank - what about a banker's banker's bank?
Mar 18 2008, 9:05 AM EDT
The Fed gets its money from the treasury, there is no need for it to have a bank. It is so large and daunting in size, it is its on independent entity that uses a T-chart in order to keep its checks and balances, so therefore it is impossible for it to need to borrow from someone. When the Fed runs out of money, essentially the governemtn is out of money, it needs to print more, or use one of its controls to bring the money back in, it can buy bonds, sell bonds etc, and that is how it has its flow of money.
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HowardJing |
30. RE: The Fed is the Banker's Bank - what about a banker's banker's bank
Mar 18 2008, 10:01 AM EDT
Since the Fed gets their money from the treasury, and the treasury gets their money from the people in the form of taxes, that would mean that YOU are the banker's banker's banker right? Well not YOU as an individual, YOU as the aggregate of all the tax paying citizens of a government. That and other governments whom the Federal Reserve borrows from.
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ChrisFishSeah |
31. RE: The Fed is the Banker's Bank - what about a banker's banker's bank
Mar 18 2008, 10:09 AM EDT
I didn't read much of the thread so I'll go ahead and try anyway. Examine the situation from the top: the Federal Reserve is the same as a central bank of many other nations; just divided into 12 Federal Reserve Banks. From what little I gleaned from Chapter 12 and 13, which are particularly dry, the FR can actually "create" money by giving out loans. These monies then disappear when any debts are repaid. One of the duties of the FR is also the issuance of currency, since the treasury falls under the fed. Perhaps they just print money when they need it, at the risk of inflation; though I'm inclined to think that they sell bonds instead to minimize the potential of this problem occurring while doing the opposite under different economic circumstances. The Fed IS a government entity as suggested by the word FEDERAL, contrary to what some other posters have mentioned.In any case, I'm very confused and have just confused myself even more. Do you find this valuable? |
ma.sheng.lun |
32. RE: The Fed is the Banker's Bank - what about a banker's banker's bank
Mar 18 2008, 10:11 AM EDT
Yea i agree with Howard that whoever supplies the money to the treasury is the banker's banker's banker. So that means essentially whoever pays taxes to the government is the treasury's banker. Also other governments that the Fed Reserve borrows from. Like in U.S.'s case China. They have borrowed a lot of money from China.
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J.Chiang |
33. RE: The Fed is the Banker's Bank - what about a banker's banker's bank?
Mar 18 2008, 6:49 PM EDT
The Fed has the power to issue currency, meaning that it can literally create money whenever it wants. However, they can't just print out millions of dollars, as that would lead to major inflation. An example of this would be in Germany when they burned money and used money as tissue, as it was worth so little. I highly doubt that the Fed creates money frequently. They most likely control the interest rates and the reserve rates.
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dayzrox |
34. RE: The Fed is the Banker's Bank - what about a banker's banker's bank?
Mar 20 2008, 5:28 AM EDT
A banker's banker's bank is unneeded, in short. The Federal Reserve Bank already performs all the actions of producing, regulating, and managing one country's money supply. If banker's banker's bank appears, there will be too many institutions that will attempt to regulate money, only to find that such institutions do not actually serve any purpose. Banker's banker's bank, like it sounds, will be ineffective and redundant.
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kl_0511 |
35. RE: The Fed is the Banker's Bank - what about a banker's banker's bank?
Mar 20 2008, 9:33 AM EDT
Indeed it would be pointless to have a banker's banker's bank because the Fed already regulates and has premission to produce the nation's currency.
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howardlin |
36. RE: The Fed is the Banker's Bank - what about a banker's banker's bank?
Mar 24 2008, 12:07 AM EDT
Yes i agree with everyone here that a Fed's bank is uneeded because fed is already not part of the economy/ cash flow, so there is no point.
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Kurtosis |
37. RE: The Fed is the Banker's Bank - what about a banker's banker's bank?
Apr 30 2008, 7:37 PM EDT
There is indeed a banker's banker's bank - the Bank for International Settlements:http://www.bis.org/about/index.htm <i>"The Bank for International Settlements (BIS) is an international organisation which fosters international monetary and financial cooperation and serves as a bank for central banks. The BIS fulfils this mandate by acting as: a forum to promote discussion and policy analysis among central banks and within the international financial community a centre for economic and monetary research a prime counterparty for central banks in their financial transactions agent or trustee in connection with international financial operations The head office is in Basel, Switzerland and there are two representative offices: in the Hong Kong Special Administrative Region of the People's Republic of China and in Mexico City. Established on 17 May 1930, the BIS is the world's oldest international financial organisation. As its customers are central banks and international organisations, the BIS does not accept deposits from, or provide financial services to, private individuals or corporate entities."</i> Do you find this valuable? |
