[GJM] [GJM An excellent programme (Rodney Shakespeare)

[Steve Consilvio]

Rodney,

The answer would go something like this:

"What's happening is that a number of these banks who would normally  
borrow short-term against their holdings of mortgage-backed  
securities are finding it difficult to get anyone to accept these  
MBS's as collateral. So they're having a hard time getting short-term  
funds. The fed is auctioning off funds, with these MBS's (and other  
securities), as collateral, at an auction-determined interested rate.  
Today's rate was 4.65%, which is 40 basis points above the federal  
funds rate. The value that the Fed imputes to the MBS's as collateral  
is discounted from face value according to discount window practice  
and the discretion of the discount officer. Going discounts these  
days are about 70-80 cents on the dollar. The Fed will only lend up  
to about 50% of the assessed value of the collateral securities, so  
our risk exposure is very low. In fact, we have never lost money on a  
bank loan of this sort."

Even if the money is created out of "thin air," as you claim, it is  
still paid back in full, with interest.  It seems to me that this is  
the specific power that the central bank is given under the  
Constitution of every country.  It is a bit of a stretch to argue  
that they are abusing their power, since they are exercising the  
SPECIFIC power they were given!

If you want to argue that this power cannot possibly accomplish what  
it is intended to do (as I do,) then you need to stop beating this  
dead horse.  All money and profit is created out of "thin air," not  
just the central bank's money.  They are not doing anything different  
than anyone else, and therein lies the problem.

peace,
steve consilvio
www.behappyandfree.com


On MondayJan 14, 2008, at 2:00 PM, discussion- 
request at globaljusticemovement.net wrote:

> 2. On the subject of money being created out of thin air,  at least  
> two letters have been sent to the Governor of the Bank of England  
> asking where the money came from to  lend to Northern Rock.   
> Replies are awaited.

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