Thoughts on the "Fair Tax"

[PetFlora]

How could that possibly be true? As of just a few days ago, the Fed only had $3.5 trillion in assets. Your tax would amount to just $1 billion.

You don't seem to realize that the Fed is already "taxed" at a rate of 100%: all the profits of the reserve banks are paid to the treasury every single year. This amounted to about $90 billion in 2012 and $77 billion in 2011, all of which was paid into the treasury, reducing the deficit.

You want to eliminate debt? The Fed has nothing to do with that. Put the blame where it actually belongs, on congress, which has borrowed and spent so much money and continues to do so.

The Fed is NOT taxed. It is a private corporation, started back in 1913, made up of international banksters Perhaps you are confusing it with the IRS

http://www.orwelltoday.com/jekyllislandbook.shtml

 

[tokeprep]

Geese that lay golden eggs don't care about profit either. They can just "create " it.

The fed wouldn't care about profit. If it wants some currency units, it can just create as much as it wants.

The Fed works in the interest of the BANKS. Banks are the ones making the profits, and they are FANTASTIC.

This is the argument worth having. "The Fed" as the creator of currency is the Board of Governors, which is a government agency that does not work in the interest of banks; they have no ties to and no financial interests in the banks. Indeed, the Board of Governors is composed mostly of lifetime academics and civil servants, so the idea that they're in the pockets of the banks doesn't even make sense.

Healthy bank profits--ideally, of course--mean a healthy economy. There's nothing damning about bank profits because banks can only make money when their loans are repaid. If loans are being repaid, goods and services are being produced and traded, which means things are good.

I stuck "ideally" in because there are anomalies, such as the financial crisis, where healthy bank profits were not symbolic of a healthy economy. I don't just blame the greedy banks for that, though. I also blame the federal government for creating Fannie Mae and Freddie Mac, backing them with the full faith and credit of the United States government, and mandating by law that they buy up and securitize mortgages, in addition to writing insurance on others, to the extent that the federal government was literally on the hook, either directly or through insurance, for more than half of the mortgages in this country.

When the Fed buys Treasuries from the primary dealers (Banks), what premium do they pay for the privilege?

The only thing i could find was their method of accounting for the premium and its amortization schedule. Nothing to indicate how much "Profit" they give the banks in order to buy treasuries.

Banks have $7 trillion in business loans and $2 trillion in government securities. The latter is certainly generating very little profit for the banks compared to the former. The idea that it's a free money handout bonanza is ridiculous for exactly that reason.

The Fed is buying treasuries off of banks in an effort to encourage business lending, and I'm sure it has had some positive effect. The fact that more than $400 billion in excess reserves are sitting at the Fed, though--earning literally almost nothing--only further dispels this profit orgy idea.

 

[tokeprep]

The Fed is NOT taxed. It is a private corporation, started back in 1913, made up of international banksters Perhaps you are confusing it with the IRS

http://www.orwelltoday.com/jekyllislandbook.shtml

It's not literally taxed, which is why I put the word in quotations. By law, the reserve banks are required to turn over 100% of their profits to the treasury, and this is effectively a 100% tax. The fact that the reserve banks are legally private corporations does not dispense with their obligation to follow the law that established them.

Of course, only the reserve banks are private corporations. "The Fed" includes the reserve banks and the Board of Governors, which is a government agency, its members appointed by the president, confirmed by the senate, and subject to congressional oversight. The Board of Governors is the body actually charged with making monetary policy.

 

[NoDrama]

The Fed is buying treasuries off of banks in an effort to encourage business lending, and I'm sure it has had some positive effect. The fact that more than $400 billion in excess reserves are sitting at the Fed, though--earning literally almost nothing--only further dispels this profit orgy idea.

The Fed can't buy Government securities any other way, THEY HAVE TO BUY THEM FROM THE PRIMARY DEALERS. Its the law.

If it were to encourage business lending, then why aren't the banks lending? whyare they just putting all excess reserves back into an account at the fed? The Fed is paying interest to the banks on these "Extra" funds.

How does that help the economy?

$7 trillion in loans? please do provide some citation.

More like $80 trillion. Which is about half of what it was in 2000. http://research.stlouisfed.org/fred2/series/EVANQ

Shit is getting worse, not better. Stop watching CNBC for your news.

 

[NoDrama]

The Board of Governors is the body actually charged with making monetary policy.

You ever notice that of the 7 people on the board of governors, only 3 have actually ever done any banking? the rest are all academics.

And here I thought you had reserved a certain amount of disdain for academia running things.

 

[sunni]

You are asking people who have built these relationships over YEARS of time to just all of a sudden change the way they act?

C'Mon Sunni, this is the politics section, if you can't stand the heat stay out of the kitchen.

I have never taken anything anyone has ever said here personally.
I argue with Buck all the time, but he is probably my favorite person on my friends list. What to do?
I argue with my youngest brother almost daily.
Its all just a part of knowing who that other person is, getting a few jabs in and having fun.
Some people here LIKE TO ARGUE, why limit them?

sorry its one thing to argue and banter back in forth but when theyre constantly just in threads, not even arguing about the topic and just literally having an all out war on eachohter thats when its a bit different c'mon nodrama no one wants to read their constant bullshit back and forth

 

[UncleBuck]

You are asking people who have built these relationships over YEARS of time to just all of a sudden change the way they act?

C'Mon Sunni, this is the politics section, if you can't stand the heat stay out of the kitchen.

I have never taken anything anyone has ever said here personally.
I argue with Buck all the time, but he is probably my favorite person on my friends list. What to do?
I argue with my youngest brother almost daily.
Its all just a part of knowing who that other person is, getting a few jabs in and having fun.
Some people here LIKE TO ARGUE, why limit them?

sorry its one thing to argue and banter back in forth but when theyre constantly just in threads, not even arguing about the topic and just literally having an all out war on eachohter thats when its a bit different c'mon nodrama no one wants to read their constant bullshit back and forth

i agree more with ND than sunni, but sunni is the new FDD, what she says goes and i'll be playing by her rules now because her job is tough enough and i don't want to make it any tougher.

i honestly doubt that she'll have the endurance for it with people like echelon around, but we'll see. nothing personal sunni, but old habits die hard and there will be a lot of cleaning up to do.

 

[joe macclennan]

same people, same shit,different thread, every day. its just boring, we get it ya'll aint jiving with each other but seriously you're all contributing to the ruining of the politics forum and its getting annoying,

it's not just in politics it's all over this place anymore. Just in politics there is an all out hatred exhibited by many. Disgusting really we're all here because we like growing......i think

It's why the other place is much nicer. ppl who pull shit like this day in and day out are just gone. period. forever.

If riu adopted a policy like this it would be a much more interesting place. Ppl act like it is their right to be a member here. It's not. It's a privilege. I think some should be made aware of this.

Don't get me wrong, I like to argue at times as well, but the constant bickering of the same old shit day in and day out is getting old. Constant name calling of rat this and rat that just shouldn't be tolerated in an environment like this. Politics or not. If I were king for a day I would give them all one warning and thats it. After that permaban. Yes, they may come back under a diff. name and ban em again. Eventually they will go away to icm or somewhere else.

If other sites can keep their members cleaned up, ours can too. Not tryin to tell you how to do your job sunni. I think you do a great job and are fair in your decisions. I also know you are limited by rollies edicts. I do not envy your position.

my .02cents

 

[tokeprep]

The Fed can't buy Government securities any other way, THEY HAVE TO BUY THEM FROM THE PRIMARY DEALERS. Its the law.

If it were to encourage business lending, then why aren't the banks lending? whyare they just putting all excess reserves back into an account at the fed? The Fed is paying interest to the banks on these "Extra" funds.

How does that help the economy?

My excess reserve number was grossly inaccurate because I just looked and it's closer to $2 trillion these days (it has bounced a lot in the past few years). The interest rate on excess reserves is only 0.25%, though. 0.25% of even $2 trillion--split between all commercial banks--doesn't amount to very much. Consider that JP Morgan and Wells Fargo will net about $40 billion in profit just this year.

Of course, I would point out that paying interest on reserve balances was not the unilateral decision of the Fed. Congress passed a law authorizing it.

$7 trillion in loans? please do provide some citation.

More like $80 trillion. Which is about half of what it was in 2000. http://research.stlouisfed.org/fred2/series/EVANQ

Shit is getting worse, not better. Stop watching CNBC for your news.

This is where I got $7 trillion: http://www.bloomberg.com/news/2012-08-20/banks-use-1-77-trillion-to-double-treasury-purchases.html. $80 trillion would just make my point stronger--treasuries are not bank profit centers, since they hold around $2 billion in treasuries yielding very low rates.

 

[tokeprep]

You ever notice that of the 7 people on the board of governors, only 3 have actually ever done any banking? the rest are all academics.

And here I thought you had reserved a certain amount of disdain for academia running things.

Who are you counting in your 3?

It's true that I have great disdain for academics, but I'm not stupid enough to trust the bankers to run themselves. I'd much rather have a group of smart nerds experimenting with monetary policy than trust the bankers or the congress. The result is not perfect, but I do think it is best.

 

[NoDrama]

Who are you counting in your 3?

Duke, Yellen, Raskin. Yellen was a professor before working at the San Fran fed, but I gave her a pass.

Were you not aware that you could find out who the people on the board were?

 

[NoDrama]

My excess reserve number was grossly inaccurate

Of course, I would point out that paying interest on reserve balances was not the unilateral decision of the Fed. Congress passed a law authorizing it.

Congress did? What citation can you provide to back this claim up?

This is where I got $7 trillion: http://www.bloomberg.com/news/2012-08-20/banks-use-1-77-trillion-to-double-treasury-purchases.html. $80 trillion would just make my point stronger--treasuries are not bank profit centers, since they hold around $2 billion in treasuries yielding very low rates.

If there is 80 Trillion in loans, which is HALF that 10 years ago, how exactly does that strengthen your argument that the everyday man is seeing money at his level improving?

It actually says that the Banks, instead of loaning out that $2 trillion, would rather just hold onto it knowing that the fed isn't going to default.

.25% of 2 trillion isn't very much? its $5 billion a year that is sucked from the economy going to the banks coffers.

Now I realize that for someone like you who has $100 Quadrillion in your banking account, its not much, but for us who make less than $10 million per year, its a lot of money.

I mean $2 trillion isn't even a drop in the bucket is it? What could you possibly do with such a small amount of money? Buy a soda? Perhaps if its on sale. Im sure that if the banks lent that $2 trillion out to businesses and regular people, it would have no effect on the economy whatsoever. The same effect that 2 years of QE has on the USA, which is nothing.

Chump change, the amount a homosexual man probably spends getting their ass hairs waxed off at the local salon.

 

[tokeprep]

Duke, Yellen, Raskin. Yellen was a professor before working at the San Fran fed, but I gave her a pass.

Were you not aware that you could find out who the people on the board were?

Duke was just the only one I counted, because she's the only one who actually had a career as a banker. Raskin worked as an economist and a lawyer (Promontory Financial Group is a regulatory consulting firm, not a bank), and Yellen spent her entire career as an economist. The fact that she was CEO of a reserve bank doesn't make her a "banker" unless you think the CEO of a reserve bank does work comparable to that of a counterpart at a commercial bank, which is certainly not the case. Why would they hire a lifelong academic economist otherwise and not a real banker from a real bank...?

Edit: Did you not mean to say Yellen in your list?

 

[NoDrama]

Duke was just the only one I counted, because she's the only one who actually had a career as a banker. Raskin worked as an economist and a lawyer (Promontory Financial Group is a regulatory consulting firm, not a bank), and Yellen spent her entire career as an economist. The fact that she was CEO of a reserve bank doesn't make her a "banker" unless you think the CEO of a reserve bank does work comparable to that of a counterpart at a commercial bank, which is certainly not the case. Why would they hire a lifelong academic economist otherwise and not a real banker from a real bank...?

So, you totally agree with me that perhaps letting school teachers run the economy may not always be the best thing. Good to know.

 

[tokeprep]

Congress did? What citation can you provide to back this claim up?

See 12 USC 461: "(A) In general.— Balances maintained at a Federal Reserve bank by or on behalf of a depository institution may receive earnings to be paid by the Federal Reserve bank at least once each calendar quarter, at a rate or rates not to exceed the general level of short-term interest rates." Congress actually did this in 2006, with 5 years before it was supposed to be implemented, and then they sped up the effective date after the financial crisis.

This is an example of why suggestions that congress has no power over the Fed are ridiculous. They've meddled with the Federal Reserve Act all the time and they can change it as they please.

If there is 80 Trillion in loans, which is HALF that 10 years ago, how exactly does that strengthen your argument that the everyday man is seeing money at his level improving?

It actually says that the Banks, instead of loaning out that $2 trillion, would rather just hold onto it knowing that the fed isn't going to default.

.25% of 2 trillion isn't very much? its $5 billion a year that is sucked from the economy going to the banks coffers.

Now I realize that for someone like you who has $100 Quadrillion in your banking account, its not much, but for us who make less than $10 million per year, its a lot of money.

I mean $2 trillion isn't even a drop in the bucket is it? What could you possibly do with such a small amount of money? Buy a soda? Perhaps if its on sale. Im sure that if the banks lent that $2 trillion out to businesses and regular people, it would have no effect on the economy whatsoever. The same effect that 2 years of QE has on the USA, which is nothing.

Chump change, the amount a homosexual man probably spends getting their ass hairs waxed off at the local salon.

The American banking industry as a whole is going to make something like $150 billion in profit this year. $5 / $150 = 3.33%. Since 2008, when congress granted the Fed the power, it has only paid out $13 billion in excess reserve interest. What was total bank profit in that time period? The fact that it's not chump change between us doesn't mean that it isn't chump change to the megabanks.

In reality, this is a change that had been planned for some time. Not actually being an economist, I'm not the one to walk through their jargon-filled explanation of why paying interest on excess reserves makes economic sense. But since the people who made the decision aren't in the pockets of the banks, it makes no sense to call it a giveaway.

I actually agree with you that QE might not be havingany real effect whatsoever, taken alone. Compare the Fed's QE bill to the excess reserve level and the effect probably does look miniscule, or the effort looks like a failure. Perhaps the real goal of QE, though, is just to restore confidence and to make people feel like something is being done and like things are getting better. That's all an economy really is--confidence. If you don't believe you can sell what you produce, you aren't going to produce as much; if you feel like the economy is terrible and getting worse, you might delay consumption. This just makes conditions even worse (which is why the economy was in recession almost half the time in the pre-Fed days, without someone to manipulate and manage expectations).

 

[tokeprep]

So, you totally agree with me that perhaps letting school teachers run the economy may not always be the best thing. Good to know.

I just said it is the best thing, compared to letting bankers or politicians do it. Who else are you going to appoint?

Of course, these people certainly were not "school teachers." Professors--especially economists--don't teach very much, which is one of the reasons I dislike them. Especially at prestigious schools where research and publishing are everything (which is the world most of these people come out of).

 

[NoDrama]

See 12 USC 461: "(A) In general.— Balances maintained at a Federal Reserve bank by or on behalf of a depository institution may receive earnings to be paid by the Federal Reserve bank at least once each calendar quarter, at a rate or rates not to exceed the general level of short-term interest rates." Congress actually did this in 2006, with 5 years before it was supposed to be implemented, and then they sped up the effective date after the financial crisis.

This doesn't say anything about CONGRESS passing a law. It does in fact say that THE BOARD is responsible for setting the reserve requirements, any payment of interest etc etc. What was the bills name and number when it came up for congress to pass?

The fact that it's not chump change between us doesn't mean that it isn't chump change to the megabanks.

$5 billion is not chump change to a bank, they will engage in serious fraud, deception and outright thievery to get an extra $5 billion. Don't kid yourself. Which MEGABANK was just caught in the aluminum scandal?

5 billion = an extra $500,000 in profit for each and every single bank in the USA (approx). Your argument that banks wouldn't care about that is somewhat lacking.

 

[NoDrama]

I just said it is the best thing, compared to letting bankers or politicians do it. Who else are you going to appoint?

Ever think that maybe having a central bank isn't such a good thing? Ever think that perhaps we could get by perfectly fine without them?
The fed's only tool is the printing press. Even Keynes said that what we are doing is WRONG.

Yeah professors don't teach, they research and talk alot and get paid very well to do it.

 

[Rob Roy]

I agree with you that it is not theft, we have legally defined theft, and we have passed laws that make this income tax legal, but it does, as I suppose any tax does, share certain characteristics with theft. My pointing out how the tax started goes to imply more about how government isn't to be trusted. With anything. I think though, that it is an example of how democracy is two wolves and a sheep deciding what is for supper. It may be legal, but it might not be ethical ; the tyranny of the majority and all that. I think it is very telling that the courts over nearly a century kept finding an income tax so abhorrently against the constitution. Simply passing an amendment might make it legal, but it is still forcefully depriving every citizen of huge chunks of their life.

Agreed. Laws can be passed to make all kinds of asshole behavior "legal". Sort of like how people were once legally defined as property.

 

[UncleBuck]

Agreed. Laws can be passed to make all kinds of asshole behavior "legal". Sort of like how people were once legally defined as property.

to compare any law we have on the books right now to slavery is just insane.