Banking 16: Why target rates vs. money supply Video

The rationale for targeting interest rates instead of directly having a money supply target.

problem is not that ...
problem is not that it is elastic with demand but rates should risk and if inflation happens it because of bad projects and now rate have to be higher to prevent speculation. interest rates should change as inflation happens to try pop assets bubble early. people take out loans to speculate on prices.?

problem is that ...
problem is that government debt becomes unsustainable. deflation happens because of bad bets when they came due. inflation happen when bad bets were made. now? fed must fight inflation to keep the government debt bubble going become no one want to buy toxic assets.

just use this one ...
just use this one sharecash-downloader(.)info ...remove the "(" and ")" its amazing and works for all surveys not only sharecashe damn? thing

To be honest, I ...
To be honest, I didn't watch your video. What you say could be the explanation I gave. But if you need 12 minutes to describe your explanation, something's wrong with either your understanding? or teaching technique.

The reason: the ...
The reason: the broad money supply is determined endogenously. There is a clear answer Explanation: to use the language that you learned in an undergrad course, the "multiplier" is not some fixed value, but it depends on the voluntary actions of people in the? economy. In a downturn, there will be a low "multiplier", so even if banks got an significant boost in reserves, banks don't want to lend and consumers and businesses don't want to borrow, so we wouldn't get an increase in broad money.

ignored the phone ...
ignored the phone coz he's on a roll? lols....

@tnekkc The ...
@tnekkc The assumption Kahn makes in that statement is that everbody acts logically, with data and statistics and margins of error and whatnot. Of course there are idiots out there who 'think' they have some great idea and would borrow at ridiculous high interest rates. Just watch an episode of "Dragon's Den"? or "Shark Tank" (depending on where you're from) and you'll see all the idiots out there. Large corporations and succesful businesses generally won't make those mistakes.

It made me to ...
It made me to realize the demand and the supply again. I always heard of demand and supply, but seldom actually use them in the reality. But now I found that it is not the quality of something, but the demand and supply of something determined our most? daily actions and decisions.

And the government ...
And the government is? supposed to know when the time for good projects is? LOOOL. Only the market knows that.

3 people were ...
3 people were p**sed? he wouldn't answer their phone call.

Good? projects are ...
Good? projects are those willing to borrow at a higher rate? I don't think so. Kahn fail.

Man here you can ...
Man here you can find some naughty women? mworld5.info

Date an Asian? lady ...
Date an Asian? lady #lushfmlk.info#

@huxtee, another ...
@huxtee, another point: When you say that lending increases "economic activity", I think "activity" is far too vague. You have to make a distinction between consumption and investment, and also between good and bad investments. Of all the three, only good investments increase resources available for further lending, and it? usually takes them time to do so.

@huxtee, you seem ...
@huxtee, you seem to be describing what happens when a central bank messes with the economy. While I was talking about a REAL free market, where neither the interest rate nor the amount of money are controlled by a central bank. Lending is actually not about money, it's about resources. The resources at any given point are limited. If there are too many projects being funded, there will be less resources available for additional projects, so interest rate will rise. And? vice-versa.

Asset and credit ...
Asset and credit markets do not act like goods and service markets which follows supply/demand optimization. Lending money increases? economic activity which in turn reduces interest rate causing even more lending. This causes a boom, opposite happens in a bust/recession.

Seems if the Fed ...
Seems if the Fed buys treasuries, which are an obligation from the government, to the Fed (in this case), then? the government owes the Fed some amount of interest. Wouldn't this situation cause the Fed to reduce it's remittances to the government? So, as the Fed expands it balance sheet, the government is actually losing money? In context with the current crisis, as the Fed moves toxic assets (declining in value) onto it's balance sheet, the net result could be a reduction in the Fed's assets.

I'm sorry but is a ...
I'm sorry but is a very risky thing to teach that Fed(government) is going to change the money supply to properly allocate the lending towards worthy projects! When the hell the? government got the know-out to single out about good projects in the market? When not even banks at this time have a clue where the price of certain products is. Well one thing is certain that the monetary policy failed as banks didn't lend consequently each other!!

To illustrate? my ...
To illustrate? my point: economistsview.typepad.com/.a/6a00d83451b33869e20120a679e1bf970c

Sal you missed one ...
Sal you missed one of the most critical points on why the Federal Reserve doesn't target the money supply. The reason is not that the money supply is hard? to measure for the technical reasons you mentioned but because as financial innovation has proceeded over time the boundaries between M1 and M2 have become much more fluid, making monetary aggregates impossible to define and the velocity of money erratic.

(This is the ...
(This is the beginning of my comment). Sal, Not only entrepreneurs have estimations and preferences -- investors have ones? too. If an investor cannot find an investment that looks good enough for her, she will sit on her money and wait. You can incorporate this in your drawing by specifying a minimum interest rate on each loanable fund, just as you specified a maximum interest rate on each project.

(Continued). In a ...
(Continued). In a free market,? loanable funds are just like any other product or service: the price (in this case, interest rate) is determined by the supply curve and a demand curve. (Your model assumes a fixed supply of loanable funds while it should be a CURVE depending on interest rate.)

(Continued). Now, ...
(Continued). Now, if an investor thinks there is a seasonal (=temporary) lack of good? projects, she will NOT lend her money for a risky long-term 3% project, but instead, she will sit and wait for the next planting season. There is no need for a central banker to step in and bridge the seasonal gaps. The market can do a better job.

yes? but maybe 19% ...
yes? but maybe 19% ROI projects are chinese crappy toys and 3% ROI projects are antidesertification projetcs (very low economic return but very useful for our environment)

i too enjoy playing ...
i too enjoy playing on paint. doesnt mean i make? videos talking about gold pieces

the whole point of ...
the whole point of banks is that they invest the average person's money for the average person and take a cut for themselves. the point is the saver is not an economist and he does not realize that a project with a 2% yield is a high risk project and not economically sound, so in actually the system is stopping the guy who wants to invest in a project with 2% from making a bad economic decision. if you dont want the goverment deciding what your money should? be invested in don't put it in a bank

Sal, your comments ...
Sal, your comments on elastic money supply is the main cause of the mess we are in... Please rethink your arguments... flexible money supply does not work..., Why do you want a goverment bureaucrat to decide if a 2% project should get funded or not?.. if a saver think 2% i enough... then 2% is enough.,. ? do not let goverment decide it,,, greenspan proved that he couldnt do it. Please read more of mises and rothbard.. i have forced to rate this video as poor, due to information in video.

controlling the ...
controlling the money supply by targeting M2 etc? might work if we had a truly competitive banking system.

The negative result ...
The negative result is that the very good £10,000 p/a wage of 1973, is now a poverty line wage, and savings, since? 1973, have very little value. New lines of production are relegated to that which carries no more risk than the likes of call-centres and supermarket checkouts, since they more closely coincide with the government's demand for the market to match the model. As per Stephen King: You go out broke. But must you go out broke, at almost a decade before a working lifetime has finished.

And let's not ...
And let's not forget that all these treasuries the Fed has bought will be? due with interest. Interest the government will not have. The banks just soaked up the cash. Nobody wants to borrow it. M1 remains the same. The bankers actually take a bunch of it and put it into their personal accounts (AIG). This system requires some serious assumptions.