Reserves are a credit-control device.

Channels or Corridors remind me of the old FED FUNDS “BRACKET RACKET”.

Central Banks can’t manage the money supply using interest rates. New Zealand pioneered the approach and their interest rates went to 8%. Every country that employs this method of operation also reports M3. (M3 is currently mudpie in the U.S.)

But there is a problem with the Fed’s technical staff studies. They have concentrated on the number of zero-bound banks and not the volume of their earning assets.

From 1996 until 2006, the expansion coefficient “MM” rose at the fastest pace in the Fed’s history – 48% increase in 10 years (the period corresponding to Greenspan’s conundrum). During roughly this same time frame, housing prices climbed 83% in 5 years (Case-Schiller).

This is is prima facie evidence that the Fed has lost any current way of monitoring, or controlling, the legal reserves, of any of our money creating, or potentially money creating, depository institutions. I.e., reserves are no longer binding/constraining.

If there is a long-term solution it would be to apply uniform percentage requirements against the volume of deposits of all classes at all banks. Therein to raise the competitive position of member commercial banks, interest rate ceilings should be reinstated on only the money creating depository institutions and then gradually lowered until the banks are out of the savings business.

What would this do? The CBs would be more profitable if that is desirable. Why? because the source of all savings-investment accounts originates with the primary money supply, directly via currency or thru the bank’s undivided profits accounts. And why should they pay for something they already have, i.e., interest on their deposits.

If these securities can’t be sold at any price then shouldn’t we start questioning their value?

In a related move, the Republican Party has long adopted tax and other policies intended to insure ‘free’ markets through favoring the top 1%.

Just one of the many consequences of all this has to do with Waldman’s math regarding “$2500 per person”. Until there is regime change, it won’t work out that way.

The bottom 99% will bear a disproportionate share, the obligation of which will get paid through further indebtedness and consumption. As chunks of the bottom 99% reach the full limit of debt capacity to fund debt, they will be written off by the Fed, Treasury and the Republican Party.

Reagan began all this. He said, “Morning in America”.

What he meant – and others in crime family have continued to implement – is the permanent downsizing of America.

They’ve sold America down the river for personal wealth and power.

Their comeuppance is now beginning; and, when all the bottom 99% have been dumped overboard, the Europeans, Chinese and others will come for the 1% who are left.

While all the issues we face are complex, there is a rather simple (and not simplistic) approach to each and all of them: do the right thing.

The folks in power though have long forgotten what the ‘right thing’. They wouldn’t recognize it and, if described in clear, easy to understand language, they’d reject it because it runs afoul of ‘free markets’ and other elements of their orthodoxy.

Surely there is something amiss when institutions relying on the graciousness of the FED start ventures to compete with existing entities in the private sector.

The media simply never gets it right. They give an impression, highly colored by the inexperience, bias, and laziness of the reporter. Most of all, in national events, the reporting is based upon the reporter’s urgent need to magnify his or her own importance. This is only human, but it’s good to recognize it.

by Ben Stein