Financial topics

[Trevor]

So in other words, they can be screwed over at all, similar to what happened with many of the bond-holders in all of the companies that received bailout back in 2008-2009.

[Higgenbotham]

It seems to me that whenever any institution is taken apart nowadays, it's for the purpose of the enrichment of those who are already enriched. One pattern I am noticing is to convince the public that something is generally true, get the public to act on that belief, then make it false. With MF Global, the concept was that, generally, brokerage accounts are safe and segregated funds are safe. The opposite turned out to be true as the funds disappeared into the hypothecation chain. In the case of Federal Reserve Notes, I would have to wonder if the intent is perhaps to convince the public that they are worthless toilet paper, then for the insiders to accumulate them, take the Fed apart, and "make" them worth something. Just a thought to ponder.

[OLD1953]

That's pretty much what I was saying about gold shares and futures, at some point they'll be declared worthless, then gold will crash and the same group who made all the money crashing the paper gold will use that money to take control of the physical gold, and it will all be "legal". Not ethical or moral or any of that, but legal.

China is claiming their economy will be growing at a higher rate shortly because of QE in the USA and the permanent bailout fund in Europe. Really? I have this serious doubt about the people of any country being told "we'll all be fine if we just sell out to China" and swallowing it. There will either be war or there will be some huge changes in governance, and soon - most likely we'll get both.

http://news.xinhuanet.com/english/china ... 914856.htm

Now this I found incredibly funny on a number of levels.

http://www.zerohedge.com/news/jp-morgan ... uous-cycle

This is just too funny. First the claim that an observation of a relationship that holds in a general way during most of the cycle is a "law". But I find most macro economics writing to be funny, so that's no surprise. Second, the claim that Super Obama with his mighty powers over all things economic is the cause of this. Really? The ineffectual leader who can't bother to show up in support of any bills, whose major accomplishment was passing the health care bill written by a board member of the Heritage Foundation, who can't get ANYTHING past Congress without begging, THIS GUY is so totally in control that he BREAKS NATURAL LAW AT WHIM! Should I build a shrine and start praying? LOL.

What these dingbats have gotten around to noticing is that the real economy (as opposed to the derivative economy) is horrible and declining, and they don't want to be blamed for it, even though JP Morgan and Goldman Sachs are more at fault than any other institutions I can think of. And what they are really saying is that leverage isn't working like it used to, so the government should fix that. Fix it now! And stop giving them free money - well, not really, but kinda make it look good, OK? If I wasn't a cynical son of a gun, I might buy into some of this nonsense. They sure can hire people who know how to make it sound pretty.

This, on the other hand, I don't find a bit amusing.

http://www.goodjobsfirst.org/corporate- ... ayer-costs

I've been griping about the taxpayer subsidy to all these wonderful low end service jobs for decades now, and most of the time I get told I'm crazy.

[vincecate]

http://news.xinhuanet.com/english/china ... 914856.htm

Now this I found incredibly funny on a number of levels.

http://www.zerohedge.com/news/jp-morgan ... uous-cycle

This is just too funny. First the claim that an observation of a relationship that holds in a general way during most of the cycle is a "law". But I find most macro economics writing to be funny, so that's no surprise. Second, the claim that Super Obama with his mighty powers over all things economic is the cause of this. Really? The ineffectual leader who can't bother to show up in support of any bills, whose major accomplishment was passing the health care bill written by a board member of the Heritage Foundation, who can't get ANYTHING past Congress without begging, THIS GUY is so totally in control that he BREAKS NATURAL LAW AT WHIM! Should I build a shrine and start praying? LOL.

Obamacare is causing many companies to replace 40 hour a week jobs with more 30 hour a week jobs since they don't have to pay the health tax for part time employees. So there are "more jobs" but people are not earning enough to live on. Yes, Obama did it. It is not funny.

[OLD1953]

Given that the insurance requirement doesn't kick in until 2014, it's kind of hard to think they are laying people off in anticipation of insurance changes fifteen months ahead of time. There have been layoffs at insurance companies that had to cut back to 15% overhead and use the rest for healthcare costs though. And possibly some at hospitals, not sure about that. OFC, it's the USA, and government gets blamed for every double yolked egg and three legged calf.

http://en.wikipedia.org/wiki/Patient_Pr ... e_Care_Act

[Reality Check]

So are you saying that only the U.S. government, as a representative of all the people of the United States, has a legal claim against the collateral the FED puts up, or,

Or, are you saying that an individual U.S. citizen, who holds Federal Reserves Notes, has an individual legal right as the holder of the Federal Reserve Note to a portion of the collateral shown in Item 10?

There is a huge difference between those two types of legal rights. The first requires you control the U.S. government before you can exercise such a U.S. government right, and the first has nothing to do with an individual property right.

I would say neither. The individual US citizen who holds Federal Reserve Notes may have a legal right, but not an individual legal right, to a portion of the collateral shown in item 10. It is a right that will be determined by the courts or the politicians, and applied to all of the individual holders of the notes. While the holders of the notes may have this right and will likely receive value for their claim, they do not have a right to determine exactly what that compensation will be or exactly what form it will take, as there are not normally individual determinations of compensation applied to individual members of a class of claimants.

So your answer is that the individual U.S. citizen holder of Federal Reserve Notes ( or any foreign holder for that matter ) has no legal right to a claim against any part of the collateral shown in item 10 of the subject Federal Reserve Statistical Report. But holder may have some future legal right against the collateral if, and only if, some future U.S. Congress or some future U.S. Supreme Court modifies the Laws of the United States, or, in the case of the United States Supreme Court, ignores precedent and "re-interprets" exiting law and existing legal precedents to create such currently non-existent right against the collateral?

I would suggest that holders of Federal Reserve Notes do have some important legal rights, but they have nothing to do with the collateral a Federal Reserve Bank puts up for the benefit of the United States Federal Government as a pre-requisite to Federal Reserve Bank receiving Federal Reserve Notes from the Federal Government.

One such legal right is to go to the U.S. Treasury of the United States in Washington D.C.,and demand any "Legal U.S. Currency" of the United States in return for your Federal Reserve Notes. The Congress of the United States and the Supreme Court of the United States have defined that right to mean that you have the right, to travel the the U.S. Treasury in Washington D.C., and the right to receive from the Treasury either Federal Reserve Note(s) of equal total face value in U.S. dollars, or U.S. coins of equal U.S. dollar face value, or some combination of the two types of Legal U.S. Currency which in total provide equal face value in U.S. dollars, the choice of such type of currency being solely at the option of the U.S. Treasury. The Federal Reserve agent ( apparently the agent of the U.S. Treasury located at the each Federal Reserve Bank ) also has this same obligation on behalf of the U.S. Treasury as an alternative location to make such a demand for U.S. Currency.

Another legal right is to use the Federal Reserve Notes as legal tender in paying taxes and in paying off other obligations denominated in U.S. Dollars at the face value of the Federal Reserve Note(s) being tendered for payment. This is actually a significant legal right because it is not dependent on a commercial bank, which is nothing more than a private third party, honoring the I.O.U. the commercial bank gave you when you deposited "something of value at the time" into a checking account at the commercial bank (as in when you attempt to pay taxes or debt by check, rather than with Federal Reserve Notes). The taxes, or debt, are never really paid until the third party bank honors your check, and the third party bank ultimately pays that check irrevocably, unless you paid with Federal Reserve Notes, in which case the payment was complete when you made the payment and received a cash receipt.

[Higgenbotham]

RC, I would see 2 sets of distinctions. One is whether the Federal Reserve continues to exist as the Central Bank and whether Federal Reserve Notes continue to exist as legal tender. The second is what right an individual versus the collective group of individuals who holds/hold a notes have in the event the notes are no longer legal tender.

What I am speculating on is, in a future world where it's decided for one reason or another or it becomes a fact for one reason or another that Federal Reserve Notes no longer function as legal tender, but the assets on the Federal Reserve's balance sheet really do exist (we don't know for sure that the gold assets exist but have been asuming so in this discussion - there's debate on that too). We know of many cases in history where currency became worthless, but in those cases there were no underlying assets to "back" the currency, at least not that I am aware. And we know of cases where Central Banks were dissolved for political reasons.

In the world as it exists right now, I think your post is correct. The extent of the function of the Federal Reserve Note in the world as it exists is as stated on the face of it, that it is legal tender for all debts public and private.

So where I have been focusing my thoughts goes to your first paragraph actually where we are speculating on what would happen in the future were the market to either reject Federal Reserve Notes as payment or whether the politicans were to decide to dissolve the Federal Reserve. What legal right might the holders of the notes have besides what is stated on the face of the note? Would the notes simply become worthless even though the Fed has collateral in the form of gold?

Clearly, I think it is correct to speculate that in that event the individual holder of the note would have no right to make an individual claim for their share of the gold, and that it would be extremely unlikely that could change, so unlikely as to not even be worth considering. On the other hand, I do think it's possible, quite possible in fact, that the courts or the politicians would make a decision to issue something to the collective group of individuals who hold the Federal Reserve Notes that is of some value, rather than rendering the notes worthless. That something in my opinion would likely be a new paper or maybe even digital currency and it would likely be issued by the United States government.

[Reality Check]

RC, I would see 2 sets of distinctions. One is whether the Federal Reserve continues to exist as the Central Bank and whether Federal Reserve Notes continue to exist as legal tender. The second is what right an individual versus the collective group of individuals who holds/hold a notes have in the event the notes are no longer legal tender.

Huge subject.

I would add that in trying to predict how things might fall apart, it is useful to understand both how things truly are right now, and,

And, to understand what the risks and benefits of saving, or allowing to collapse, key parts of the current monetary systems, from the perspective of the people with power to do something about it, or influence those with the power to do something about.

[Higgenbotham]

I would add that in trying to predict how things might fall apart, it is useful to understand both how things truly are right now, and,

And, to understand what the risks and benefits of saving, or allowing to collapse, key parts of the current monetary systems, from the perspective of the people with power to do something about it, or influence those with the power to do something about.

Agree. To understand how a collapse might occur, it helps a lot to understand the foundation of the current structure and why it was put in place as it was, or is.

[Reality Check]

This is just too funny. First the claim that an observation of a relationship that holds in a general way during most of the cycle is a "law". But I find most macro economics writing to be funny, so that's no surprise. Second, the claim that Super Obama with his mighty powers over all things economic is the cause of this. Really? The ineffectual leader who can't bother to show up in support of any bills, whose major accomplishment was passing the health care bill written by a board member of the Heritage Foundation, who can't get ANYTHING past Congress without begging, THIS GUY is so totally in control that he BREAKS NATURAL LAW AT WHIM! Should I build a shrine and start praying? LOL.

Obamacare is causing many companies to replace 40 hour a week jobs with more 30 hour a week jobs since they don't have to pay the health tax for part time employees. So there are "more jobs" but people are not earning enough to live on. Yes, Obama did it. It is not funny.

Given that the insurance requirement doesn't kick in until 2014, it's kind of hard to think they are laying people off in anticipation of insurance changes fifteen months ahead of time. There have been layoffs at insurance companies that had to cut back to 15% overhead and use the rest for healthcare costs though. And possibly some at hospitals, not sure about that. OFC, it's the USA, and government gets blamed for every double yolked egg and three legged calf.

http://en.wikipedia.org/wiki/Patient_Pr ... e_Care_Act

Obama care revises vast portions of the United States Code.

Part of the problem with it is that it also purposely avoids changing other parts so as to make the costs appear to be a small fraction of what they truly will be.

A case in point. Under prior law part time employees do not have to have health care benefits. They left this unchanged.

But did change two other related things ( among thousands of things that were purposely changed but the cost ignored):

1. If part time employees have any medical benefits they must meet the Obamacare minimum requirements defined by the law, this went into effect in 2012, thus all the waivers the Obama administration gave for 2012, and Obama plans not to continue after the election is over. The Congressional Budget Office did not have the ability or time to research all the differences between all the different health care plans out there, so they just ignored differences and thus determined no incentive to drop health care benefits for part timers existed. Thus millions more part time employees than predicted will lose their employer sponsered insurance and most of these will end up on Medicaid or Federal Government subsidized insurance exchanges, or without health care insurance and paying hundreds of dollars a year as a penalty for not having health care insurance.

2. Pre-existing federal law defined how all "full time" employees within a single business must be treated the same, no better health care benefits for "well paid" employees than for the average full time employee. Obamacare redefined what "a single business" was to make many slightly related business be treated like a single business for purposes of how many employees "a single business" has and for purposes of every one having the best health care plan in any of the slightly related businesses. Any "single business" with 50 employees or more, is subject to Obama Care, but now many businesses that before Obama care had less than 50 employees, suddenly have more than fifty for purposes of both pre-existing law and Obamacare.


For a real world example:

My daughter is 18 years old and works part time for a Fast Food Restaurant while she also goes to college full time. She has worked there for over two years. The restaurant she works at has a few full time employees and many part time employees. This restaurant, and dozens of others across two states, are structured in such a way that each restaurant is independent, but each restaurant is still controlled by a family corporation located in Eugene, Oregon. Because of Obama care these restaurants are doing away with almost all full time positions. Shift supervisors will now be part time. More part time employees will be hired, and those shift supervisors who want to keep their job will become part timers and need to find a second job somewhere else if they want the same number of hours each week. The local restaurant manager has kept her full time status for now, but that may change. The de-facto owners of the restaurants will be making more changes to their corporate structures, and how they provide health insurance to themselves, and their full time employees they have left, as Obamacare becomes more fully implemented. The Congressional Budget Office had neither the time, nor the information on related business structures to predict these types of changes resulting from Obama care or the cost shifting to the Federal Government that will result.

Why would these restaurant owners do this? The mostly likely reason is that the family corporation the family members work for as employees provided very, very good, very expensive, employer paid health insurance. Under Obama care they would need to either decrease their insurance coverage, or give the same to their full time employees in the "related corporations". If Obama had been honest and moral he would have just required both part time and full time employees be treated the same, but no one could afford that, so instead the smoke and mirrors to delay the recognition of the full costs and full unintended consequences of this half-ass health care plan.

You can hate Obamacare because it is poor quality health insurance, or because it fails to provide quality health care at an affordable cost to the uninsured, or because it throws part-time employees and full-time employees alike under the bus, but you have to hate it.