irln

Thanks a bunch for that reply and I too love discussing this material and I don't think we have much of a disagreement. What I am advocating is having answers to these basic questions like, "why have a reserve ratio?" So many times, even these basic questions haven't been thoroughly explored through debate so that people, new to the subject matter, don't have anywhere to go for context (except people shouting at each other).

With regard to your other reply I have some questions:

> I'm advocating a 100% reserve ratio on demand deposits only, duration matching of non-demand deposits and a citizens dividend for economic stimulus. Ain't no school gonna teach you that. :)

These would be demand deposits paying zero interest (not that they're paying much more than that today :) ?

"duration matching" sounds like those deposits are participants in the loan (e.g. share the risk)?

"citizens dividend for economic stimulus" not sure about this one?

It's really remarkable (in a good or bad way depending upon your perspective) that 12 people hold the fate of the world financial market in their decisions.

> Loans are then (strictly) duration matched with financial instruments offered to the public.

So loans are funded by the public?

> It's pretty straight forward when you just think in terms of contracts. Its a testament to how fucked up (or, perhaps, effective) our education system is that smart people like yourself can't see these problems straight away.

Why are folks like you so afraid of discussing issues that might challenge your worldview? I would argue that only by being able to articulate answers to these questions (some of which you claim have such obvious answers) can we obtain a better understanding. Maybe your schooling encouraged a blinders mentality, but I humbly suggest you be open yourself to provide answers and not insults.

There are so many smart people on HN, such as yourself (and not being sarcastic!), with wide ranging expertise. I think we can crowd source some improvements right here.

I believe the rate is determined by the bidders at the auction and not by the Treasury.

https://www.treasurydirect.gov/instit/auctfund/work/work.htm

As long as a loan is collateralized by an asset that a reasonable market would value at or above the amount of the loan, the only issue is liquidity...right? So whether the ratio is 10%, 2%, etc. is kind of irrelevant. If folks want their money all at once, no reserve requirement would be sufficient. But at least the idea here (not that it has been followed) is to keep things stable enough so no large group runs for the exits and so long as conditions are maintained that don't foster those runs, the system should work.

Why is having a lower reserve ratio far worse?

This is not an indictment of the Fed, but with respect the Federal Reserve == the banks.

I think the thing that people have the most trouble with is assessing the "objectivity" of the arbiter that controls the money supply ("the fed) and at least the "perception" that fed actions benefit those that haven't done anything to gain such preferential treatment.

I agree. Too often sweeping viewpoints are made without data. The crazy part is this is not some grand hidden conspiracy, the data is out there to explore and use to support arguments for and against the fed. [1][2]

[1] http://www.federalreserve.gov/ [2] https://research.stlouisfed.org/fred2/

One possible downside is that it undermines the "clearing" of a market. That is clearing the things that haven't worked.

Interesting point. Of the $2.46 Trillion of treasury holdings, $638 Billion have a duration of 10+ years [1]. Of the $1.7 Trillion of MBS, not surprisingly almost all are over 10 years.

[1]http://www.federalreserve.gov/releases/h41/Current/

The fractional reserve system on its own is not necessarily the issue so long as those making the loans fairly value the assets that collateralize the loan. Which also dictates that the loans be collateralized in the first place :)

Some have argued that the reserves no longer exist in practical terms. [1]

[1] http://www.ny.frb.org/research/epr/02v08n1/0205benn/0205benn... tl;dr "They attribute the diminished force of the requirements largely to the spread of "sweep" arrangements—a banking innovation that allows depository institutions to shift funds out of customer accounts subject to reserve requirements."

Not more capitalism :), just determining a better way to manage the money supply then a few folks on the board of central banks. If we could somehow connect an increase or decrease of the money supply to a classic market definition (e.g. people buying and selling) I think it would make a very positive impact to everyone.

You've identified one of the key defects in capitalism today...the disconnect of a "true" market where value is measured by folk's willingness to pay for things.

It depends upon whether capitalism == the current form of managing the money supply (e.g. fractional reserve loans, Federal Reserve's open market operations).

Education today puts way too much emphasis on the education as the end instead of it being a means to an end. Students are, understandably, so caught up in achieving a grade to "level up" instead of a) really learning the material and/or b) reflecting on whether the material is interesting enough to spend their life pursuing.

First, I didn't intend making a "statement". I made an innocent, if not necessarily crystal clear, comment which attempted to give one person's experience to those that have already chosen to have a child. NOT a comment about the merits of having a child or not.

Louis CK has pretty amazing insight...I'll check it out.

I didn't tell anyone to do anything because I'm older. I shared that if you do choose to have a family one person's experience is that you will cherish the moments you are serving your children.

And I share this as someone who has gone through it in the hope that sharing might in some small way assist those that have not gone through it yet.

This is NOT a sarcastic comment nor a defense of centrally planned economies: which country(s) has a free market economy post the 2008 financial crisis?

Nowhere in my comment did I say that everyone wants a kid nor that they are a failure at life if they don't have one. What I said was in response to the comment about family life being boring.

I'm not saying that everyone feels the meaning given by those tasks. IMHO, if you asked those same men "overworking to avoid going home" what they regret later in life, not being with their kids will rank very high.

Please don't take this the wrong way and this is just one man's opinion. When that 3 year old girl is older and naturally becomes independent and moves on from you to the next steps in her life, that pretend grocery store experience will be orders of magnitude more meaningful to you than solving ANY hard algorithm. Not judging, not preaching, just giving you thoughts based upon experience.

When you're young you might feel the tedium of taking care of a kiddo...drudgery of the daily regime. But as you get older you realize that the effort or lack thereof you put into those tasks can give life great meaning or be your biggest regret.

Given the fed's 4.5 Trillion dollar balance sheet[1] and paying 25 basis points for excess reserves [2] while getting 33 basis points on 1 year or more treasuries [3] I'm not sure I don't see any "US is forced to re balance spending, stifling growth and economic activity in order to keep debt in line."

[1] https://research.stlouisfed.org/fred2/series/WALCL

[2]http://www.federalreserve.gov/monetarypolicy/reqresbalances....

[3]http://www.treasury.gov/resource-center/data-chart-center/in...

I believe when they decided to devalue their currency it impacted their stock market and unfortunately all central banks are now beholden to their individual equity markets and therefore "had" to take action.

Was wondering about the impact of lifting US Oil exports and ran across some interesting research:

http://www.aspeninstitute.org/sites/default/files/content/up...

http://www.wsj.com/articles/u-s-approves-limited-crude-oil-t...

Constructive criticism. You don't mention in the video what a flexbox is :)

Granted, googling flexbox is easy but I'd add a quick blurb in 10-20 seconds telling those who don't know me<--- what they are first.

BTW: I will definitely check out the videos!