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    •  Just wonderin'. (6+ / 0-)

           Why all of a sudden, and why the Stiglitz bashing ?

      The free market is not the solution, the free market is the problem.

      by Azazello on Fri Jun 27, 2014 at 05:39:37 PM PDT

      [ Parent ]

      •  Really? OK, I'll assume it's a good faith query (12+ / 0-)

        “Texas is a so-called red state, but you’ve got 10 million Democrats here in Texas. And …, there are a whole lot of people here in Texas who need us, and who need us to fight for them.” President Obama

        by Catte Nappe on Fri Jun 27, 2014 at 05:45:50 PM PDT

        [ Parent ]

        •  Ohhh ... I see. (14+ / 0-)

               It's not Stiglitz bashing, it's bobswern bashing. Thanks.

          The free market is not the solution, the free market is the problem.

          by Azazello on Fri Jun 27, 2014 at 05:51:25 PM PDT

          [ Parent ]

          •  Not at all that simple (12+ / 0-)

            As I believe (hope?) you are smart enough to know.

            “Texas is a so-called red state, but you’ve got 10 million Democrats here in Texas. And …, there are a whole lot of people here in Texas who need us, and who need us to fight for them.” President Obama

            by Catte Nappe on Fri Jun 27, 2014 at 05:56:48 PM PDT

            [ Parent ]

          •  Nooo I don't see how that can be it (12+ / 0-)

            because I like and respect bobswern and he has been very kind to me. I didn't think much of the Stiglitz piece but I refrained from commenting. Sometimes if I see things differently, I do comment. It's important to remember to remain courteous because I don't want to be misunderstood.

            There were a few things wrong with the Stiglitz piece and a couple were cut and dry. Near the end, he referred to "lower taxes on capital" and "lower inheritance taxes"  but the capital gains rate has been raised from 15% to 23.8% and the estate tax has been raised from zero to 40% on the amount over $5.3 million. Stiglitz must have forgotten how the Republicans in the House made these increases painful to accomplish.

            Stiglitz isn't above criticism. No one is. Obama can be criticized fairly. Blaming him for everything gives cover to the Republicans.

            Stiglitz mangled the description of lending operations between the Fed and banks to a degree that I doubted the article's authenticity and I stopped to double-check the authorship.

            The government, under the auspices of the Federal Reserve, lends money to the bank at a near-zero interest rate. The bank then lends it back to the government at 2 or 3 percent.
            What would the Fed and the Bank have on their balance sheets when they were done lending back and forth to each other as he described? Any idea? How many parties are involved? Two, or three? Is the government counted as a separate party from the Fed?

            In reality, the Bank is dealing with two separate entities. There are three parties involved.

            The Bank buys US Treasuries from the government, or more precisely, the Treasury Dept. The bank holds them on its balance sheet and receives 2.1% interest.

            The Fed is a unique entity separate from the Treasury. It has statutory responsibilities. It routinely lends reserves to its member banks at a very low rate, like 0.1%. These reserves aren't lent by the banks to the public but the banks can lend them to each other. Their purpose is to maintain liquidity throughout a vast payment system that moves money from one bank to another as transactions are done.

            The money lent to the Treasury and the reserves borrowed from the Fed are two totally different things but Stiglitz made it seem like a con game. He's not the first to mischaracterize the Fed's operations this way. Rightwingers have been trying to sell this tale for years. I question whether he really wrote that.

            I've seen some real poison pen propaganda lately. You can click my name and look through the recent diaries for an example or two.

            •  Wow (6+ / 0-)

              the most cogent insightful comment in this entire discussion. Thanks. This diary to me is confusing, but your comment helps, and would actually make for a better diary to explain the confusion and issues.

              KOS: "Mocking partisans focusing on elections? Even less reason to be on Daily Kos."

              by fcvaguy on Sat Jun 28, 2014 at 03:10:53 AM PDT

              [ Parent ]

              •  It is simple. (1+ / 0-)
                Recommended by:
                howarddream

                Stiglitz says banks have huge long term loans from the Fed.

                The Fed says there are no such loans.

                "The way to see by faith is to shut the eye of reason." - Thomas Paine

                by shrike on Sat Jun 28, 2014 at 08:29:01 AM PDT

                [ Parent ]

                •  Where does Stiglitz say "long term" loans from the (4+ / 0-)

                  Fed? I'm not seeing that in the quote - is that your assumption? My understanding is that the banks get the free or almost free loan from the FED, they buy the Treasury, they pay back the almost free loan and then make money on the "spread". It's my impression that the loan would be of a very short duration.

                  They also don't have to get the loan from the "discount window either" apparently there was a stigma about doing that so the Fed set up other methods. Kind of how like paying for food with actual food stamps might be embarrassing so now there are debit cards.

                  It is a low risk way of making money basically from air. Air that was provided by the Fed.

                  This in conjunction with buying the toxic assets off the books of the banks, was how the Feds (plural - both the Fed and the Treasury) solved the solvency problem of the banks and recapitalized them.

                  Of course, I do not have a degree in finance, so my understanding may be less sophisticated than yours.

                  “Human kindness has never weakened the stamina or softened the fiber of a free people. A nation does not have to be cruel to be tough.” FDR

                  by Phoebe Loosinhouse on Sat Jun 28, 2014 at 08:49:40 AM PDT

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                  •  Stiglitz says "2-3%" (1+ / 0-)
                    Recommended by:
                    howarddream

                    To gain a yield like that on a US Treasury you have to go to ten years.

                    "The way to see by faith is to shut the eye of reason." - Thomas Paine

                    by shrike on Sat Jun 28, 2014 at 09:31:14 AM PDT

                    [ Parent ]

                    •  But the loan to buy the Treasury doesn't have to (1+ / 0-)
                      Recommended by:
                      unfangus

                      match the term of the Treasury. It could have been much shorter - so short that it doesn't even show up as a loan anymore since it is paid off.  Isn't that a possibility?

                      “Human kindness has never weakened the stamina or softened the fiber of a free people. A nation does not have to be cruel to be tough.” FDR

                      by Phoebe Loosinhouse on Sat Jun 28, 2014 at 09:34:58 AM PDT

                      [ Parent ]

                •  Which only proves (8+ / 0-)

                  that you don't understand how QE, or the Fed in general works.
                     Really Shrike, for someone that has so many firm opinions about economics, you should have a much better idea of how it works.

                  "The oppressors most powerful weapon is the mind of the oppressed." - Stephen Biko

                  by gjohnsit on Sat Jun 28, 2014 at 09:52:07 AM PDT

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                  •  Shrike knows exactly how this works...how they... (6+ / 0-)

                    ...play the audience here, too (see farther down); with semantics and misdirection is another story, altogether. ALWAYS, ALWAYS fact check shrike! Every nuanced word of their bullshit...per the following inconvenient REALITIES here, many of which have gone completely unmentioned over the past 36 hours...

                    First off, the participating banks buy STOCK in their local Fed branches. It's roughly the equivalent of (proportionate to the overall percentage of) the amount of money they maintain in assets in relation to the other stockholders in their given branches' trading region. Due to that basic fact, the NY Fed pretty much DWARFS all of the other branches. Banks STILL receive 6% interest on this money (i.e.: "stock"). (I believe that benefit is baked into the Federal Reserves' Charter amendments, btw.)

                    Second, the superiority (in terms of privilege, access, etc.) of the PRIMARY DEALERS (there are roughly 20-21 of them I believe--banks come and go, the actual number varies--with TD Bank just joining the list over the past few months) puts them in the position of playing on an uneven playing field and with a huge advantage in relation to all other banks, in terms of the COST of their money.

                    Third, there's a basic effort going on here by shrike to trivialize the "small" interest rate being paid to the banks. (0.25% to 0.35%; the "average" has been calculated at approx. 0.31% in a recent study; this is not a static number, of course.) But, shrike, as they continually do, in their feeble efforts to SPIN all of this--and they get very deceptive about it, by the way, so you have to fully research their claims; and, I've found 100% of the time there's always misdirection/semantics/involved--deceives the audience on a CONTINUAL basis. We're talking about about $2.5- to $3.1-BILLION per year in tithes going to the big banks for every trillion dollars in reserves. $3 trillion in reserves? That's almost a $10 billion bonus, etc., etc., going primarily to our nation's largest banks each year.

                    Fourth, which is a continuation of "Third," immediately above, shrike sources the most recent weekly statement of accounts on the Fed to bogusly prove their point, and they go to great lengths to talk about "LOANS" on 10-year notes. That's BULLSHIT.

                    The first reason it's bullshit is because the market has been buying mostly 5's and 7's--10's haven't been performing well--in the month of June. (Shrike knows this, too.)

                    The second reason it's bullshit is because the Primary Dealers are playing the Repo and Reverse Repo markets with overnight loans that may be extended FAR beyond ONE NIGHT, at the Fed's discretion, with collateral which may often be (usually is) comprised of T-BILLS, for which the banks ARE receiving full interest! Hence, Stiglitz' claim of 2%-3%. Shrike knows all of this, as well.

                    Even though they KNOW this, they're deceiving YOU in this thread, too! Here's the yield on a 7-year T-bill THIS WEEK: 2.15% (Last I checked, that's between 2%-3%. Shrike's going all out to support their claim--even in THIS THREAD--stating this is only available in 10-year T-bills. THAT IS A LIE!)

                    So, shrike makes this claim about 10-year T-bills; then points to a line item OTHER than RESERVES, labelled "loans" to "prove" their bullshit, and that's how shrike ALWAYS rolls in their bullshit spinning in the comments in my posts for more than a few years now!

                    Fifth, back in 2008, and for at least a significant portion of 2009 (if not all of 2009--I'll have to check on this since it may have been through early 2010, not sure), the banks WERE receiving 2%-3% on their EXCESS RESERVES at the Fed which comprised MOST of the Feds' bank reserves funds at the time, as they do NOW, too. (Perhaps Stiglitz made a mistake and didn't mention date differentiations in his article? Of course, shrike calls this a "lie" throughout their post.)

                    Sixth, the Primary Dealers receive MANY benefits for being part of that prestigious group. Above and beyond interest benefits and the fact that they're playing on the winning end of that privileged game (all the other banks pay considerably more for their money than the PD's). They're also receiving TRANSACTION FEES for their efforts, too.

                    (Think of the book, "Bonfire of the Vanities," where the bond-trading Masters of the Universe receive their "crumbs.")

                    Seventh (and last), HERE’S ONE OF THE BETTER LINKS I’VE FOUND which CONCISELY describes much--not all but much--of what I'm discussing above in laymen’s terms; with direct reference to Fed doc’s to support their statements, too.  This link ALSO puts to rest another basic, bullshit meme that shrike likes to SPIN to make it appear as if the Treasury is making a real profit on all of these primary dealer/bank transactions. At the end of the day, not really. It’s ALL BULLSHIT. It's all just one big, massive digital CHURNING operation, designed to give the TBTFs/PRIMARY DEALERS a massive tithe. But, shrike highlights this profits with regard to their spin on the Fed all the time!

                    The Treasury Department's “profits,” much like SHRIKE’S spin, simply are NOT real--at LEAST in any sense of the word that MATTERS!

                    NOTE to Mark Lippman: I think you're awesome person, as well. I mean that sincerely!

                    But, PLEASE, fully fact-check EVERYTHING Kossack shrike states. Pay attention to the semantics (the qualifying words in their sentences, etc., etc.; I say this from extensive experience dealing with this person and their behavior in my posts over a very extended period of time in this community, too), above and beyond all else. In the multiple years this person has been trolling the comments in the threads of my posts, REITERATING, I have found in EVERY SINGLE INSTANCE--100% of the time--their spin/commentary has been little more than the most CLEVERLY deceptive effort of anyone in this community when it comes to their feeble attempts to support their talking points. There was a time when I used to call them out on this; and, either they'd stop commenting--on whatever bullshit claim it was they were trying to make--or they'd just ignore me.

                    This entire episode has been little more than just the same m.o., perhaps written a bit larger than most of their efforts, however.

                    This is my opinion, and I'm sticking to it; and I can fully support everything I'm stating about my observations of shrike's actions, over the past three years--on countless occasions in my posts, too.

                    More importantly, shrike knows full well what they're doing. And, it's too bad the audience has been taken for yet another ride! (POINT NUMBER ONE: STIGLITZ DID NOT LIE! He may not have filled-in all the blanks in a couple of his comments on this one, particular fact. But, they guy's speaking with a BROAD brush throughout his commentary over the past few days. And, it's the SHAMELESS defenders of the status quo on Wall Street and in the banking community that are feebly trying to make hay out of this that should be questioned on EVERY DAMN WORD of their bullshit. NOT the other way around.)

                    Then again, when you look at some of the over-the-top statements that Kossack is making about me, personally, in these very threads, in comments to their own post--and over the past 36 hours--that should give you a VERY CLEAR indication of what I'm referencing.

                    "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

                    by bobswern on Sun Jun 29, 2014 at 01:10:57 AM PDT

                    [ Parent ]

                    •  You saved me quite a bit of work... (4+ / 0-)
                      Recommended by:
                      gjohnsit, bobswern, BradyB, Sandino

                      I knew shrike was shading the truth but I didn't have the resources readily at hand for a sourced rebuttal, so I began slogging through the data. I'm new at DK so I don't know all the players or their agendas and that thought caused me to pause my efforts to see if a credible response had been posted.

                      In the article cited, Stiglitz is referring to TARP loans to banks during the crisis. Stiglitz begins the next paragraph (containing the quote posted by shrike) with "The repayment itself is, at least in part, the result of a game that would do any con man proud. ..." clearly referring to events in the past. In fact, two-thirds of the TARP loans to banks were repaid by April 2010. Back then (2008 - 2010) rates of 2% to 3% were not uncommon.

                      Rather that produce data from the period in question, shrike include figures from June 26, 2014. Almost 100% had been repaid by the end of 2012 so why is data from last week relevant?  

                      Alcohol preserves everything ... except secrets.

                      by august88 on Sun Jun 29, 2014 at 06:11:08 AM PDT

                      [ Parent ]

                    •  Thanks for providing the (1+ / 0-)
                      Recommended by:
                      bobswern

                      details about the various transactions and about the Fed reporting.

                      Shrike is definitely manipulative with the words he uses; if you question him, he just deflects with more bs.

                      The banks have a stranglehold on the political process. Mike Whitney

                      by dfarrah on Sun Jun 29, 2014 at 10:20:54 AM PDT

                      [ Parent ]

                    •  One very minor correction here... (1+ / 0-)
                      Recommended by:
                      Sandino

                      ...regarding Repos (by definition, I don't think it affects reverse repos): The Fed has capped interest on Repo transactions; but that doesn't address the fact that traditional T-bill interest from the Fed certainly continues to accrue on those T-bills "held" by the Fed on behald of the banks, which cancels out--MANY TIMES OVER/by multiple percentage points, usually--the interest charged by the Fed on those transactions.

                      "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

                      by bobswern on Sun Jun 29, 2014 at 11:51:06 AM PDT

                      [ Parent ]

            •  I am not enough of an economist (3+ / 0-)
              Recommended by:
              Phoebe Loosinhouse, duhban, unfangus

              to critique Stiglitz's work, few here are. I read his books to learn. This diary makes a different claim, a moral claim. Saying someone is mistaken is one thing, calling them a damn liar is another.

              The free market is not the solution, the free market is the problem.

              by Azazello on Sat Jun 28, 2014 at 06:54:46 AM PDT

              [ Parent ]

              •  I don't allow myself to fight and it makes writing (5+ / 0-)

                difficult when I know that anything I write may be seen by a reader as taking sides in their dispute. If I let that burden me, I'll stop writing.

                I wanted to focus on the content of the article and I didn't say that Stiglitz made any errors. I said that the part of about the Fed and the Bank lending money back and forth didn't sound true to Stiglitz. Now I see a comment below that said the writing was sloppy there. He noticed something wrong there too.

                I went back and reread the article and now I feel its worth making some inquiries. There's a gap in the continuity that interrupts the logic of the piece. The statement I blockquoted doesn't fit. It appears that text was either cut possibly for space considerations or, god forbid. Politico added the extraneous statement. It wouldn't be the strangest thing that has been published lately.

            •  If the mechanism of money creation seems nuts (2+ / 0-)
              Recommended by:
              Johnny Q, PrahaPartizan

              it's because it is.
                It's absolute insanity. In fact it is so insane that it seems reasonable to accuse anyone who descibes it to be lying.

              "The oppressors most powerful weapon is the mind of the oppressed." - Stephen Biko

              by gjohnsit on Sat Jun 28, 2014 at 09:49:57 AM PDT

              [ Parent ]

              •  I use age-old simple accounting rules if I have to (1+ / 0-)
                Recommended by:
                howarddream

                think about it or describe it. Every credit has to have an offsetting debit that nets to zero excepting interest paid.  The MMT'ers sometimes have too much theory, not enough realism. Banks really do balance.

                There's always a range of interest rates available for different types of credit. That's why the image of A borrowing from B at a low rate and B lending it back at a higher rate makes no sense. But that's what the Stiglitz article said. "The bank then lends it back." If you did the simple accounting for this business, as it was described, you'd see it's nonsense. That claim is the grift and I never thought of Stiglitz as a con. It's alarming.

                When a bank lends to the government, it's business as usual, buying some issue of a government or agency-backed security. Because those securities are backed by the full faith and credit of the USA which allows banks to assure customers that a dollar deposited will always be worth a dollar. The buck can't be broken when it comes to USG securities.

                Why tell a dirty story that sows fear, confusion, and doubt instead of educating people so they can learn how to fight for themselves?

          •  In other words, "reality-bashing." n/t (3+ / 0-)
            Recommended by:
            Azazello, Johnny Q, CenPhx

            My idea of the ideal GOP speech invariably involves negligent intoxication together with breathing helium for that special vocal nuance.

            by Superskepticalman on Sat Jun 28, 2014 at 06:23:34 AM PDT

            [ Parent ]

          •  Stiglitz must be "lying" (4+ / 0-)
            Recommended by:
            gjohnsit, Johnny Q, CenPhx, FishOutofWater

            or forced to submit "plans" for correcting what's wrong because it is highly inconvenient for regular people to know what's wrong. If you can't get Stiglitz to STFU, maybe you can convince people not to pay any attention to what he says about what's wrong.

            There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest of them have to pee on the electric fence for themselves. - Will Rogers

            by Joieau on Sat Jun 28, 2014 at 09:22:05 AM PDT

            [ Parent ]

        •  Catte Nappe, I hope you realize (5+ / 0-)

          I don't have a dog in this race (so to speak) but I've been following Stiglitz for about 8 years, and he's been ahead of most of them through it all. Krugman and Dr. Doom have also been ahead of the curve.

          So I don't understand the Stiglitz bashing all of a sudden.

          Hell, he's mostly been on OUR side!

          English usage is sometimes more than mere taste, judgment and education - sometimes it's sheer luck, like getting across the street. E. B. White

          by Youffraita on Sat Jun 28, 2014 at 01:22:19 AM PDT

          [ Parent ]

    •  CT - you got a link for that? (4+ / 0-)

      Lying is a pretty strong statement.   Does shrike think Stiglitz has got some cooked up dastardly plot to cover up with a lie?   That's ct.

      This isn't about Stiglitz; it is about bob.   Really pisses the right wingers and fans at dkos off anytime he gets eyes.  

      I will not vote for Hillary.

      by dkmich on Sat Jun 28, 2014 at 04:46:45 AM PDT

      [ Parent ]

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