How does the fed withdraw excess liquidity? They increase interest rates in an economy with hyper-inflation,high unemployment,and low productivity.It is a recipe for disaster.

What are you and the Fed afraid of Pericles?Just have the audit and we shall see where all the debt money that the US tax payer is indentured to pay is going.The tax payer has the right to know this in a democracy.

Kevin Rudd has just canned the Choice Magazine's version of "Grocery Watch" before it was even trialled.I think that it looked like being too effective and the likes of Wollies and West Farmers have had a word in Kevin's ear.

The power of the corporates is enormous and the US Federal Reserve is the most powerful private institution on the planet.It is time they were made accountable.Watch the 4th July celebrations in the US and you will see a revolution in the minds of the US people taking root.

Geez, Louise.

You simply don't listen, do you Arjay?

>>What are you and the Fed afraid of Pericles?<<

How many times do I have to repeat...

"I have never objected to the audit, except on grounds of the waste of money it represents."

And Bernanke is only concerned that it is turned into a political circus, as opposed to a factual analysis of the financial ins-and-outs.

So kindly stop pretending that I am "afraid" of an audit.

And it is about time you stopped pretending that you have the slightest understanding of what you are talking about.

>>How does the fed withdraw excess liquidity? They increase interest rates in an economy with hyper-inflation,high unemployment,and low productivity.It is a recipe for disaster.<<

Actually, what the Fed does in order to reduce liquidity is to sell Treasury securities. This replaces the money that the Banks have sloshing around the system, with IOUs.

It is the precise opposite of boosting liquidity, where they buy the securities in exchange for putting money in the Banks' vaults.

Which, incidentally, is what you were complaining about before, when you were moaning about the trillions of new money that the Fed had "created".

I hope you are following, because here comes the interesting bit.

When you put extra liquidity into the economy, you run the risk of - guess what?

Inflation.

That's right. With more money chasing the same amount of goods, inflation occurs.

So what is the danger from soaking up that liquidity?

No, it's not inflation, but the opposite. When there is too little money chasing the same amount of goods, prices... fall.

Incidentally, the US economy does not have "hyper-inflation,high unemployment,and low productivity".

So having got practically every fact wrong in your assertion, what, Arjay, is your point?

I did not say it presently does have hyper-inflation.It will if the Fed continues to create cyber money.They have doubled the amount of money in the US economy in 12mnths.Real unemployment is probably over 14%.When the Fed issues securities,who buys them and how can they possibly issue enough marketable securities to soak up excess liquidity?

The US has lost a lot of their manufacturing industry and in reality like us,don't have real productivity to fall back on.Service industries dependant upon discretionary spending does not reflect needs, hence their existence as a viable economy is tenuous at best.They have a pop 15 times ours without all the resources or the energy.Perhaps Alaska has vast hidden oil reserves,but I doubt it.

If you agree with an audit,then this is a change of heart which is good.The US people need to get back to te basic of their constitution and the ideals of a free people and free market place.Presently under Obama we have the exact opposite.The Patriot Act should have been the first of Bush's debacles to,go but not so under Obama.

If the US devolves into a totalitarian state,then we too will not be far behind.Germany 85 yrs ago had a democracy but one person soon changed that.Do not assume that modern technology gives us automatic immunity,since it can be used very easily against individual freedoms,as well a tool for it's promulgation.Study carefully the Ron Paul message.He does not exhibit the fanfare of Obama's delivery but his beliefs are backed by the wisdom of those who formulated the US Constitution.

I hope you have an efficient rear-view mirror, Arjay, with all that back-pedalling.

>>I did not say it presently does have hyper-inflation.It will if the Fed continues to create cyber money<<

This is what you wrote:

>>How does the fed withdraw excess liquidity? They increase interest rates in an economy with hyper-inflation,high unemployment,and low productivity.<<

You are actually closer than you realise to understanding this whole shemozzle, Arjay. One more step, and you could be there.

The Fed - along with the US Government - is treading a tightrope here, and they are well aware of it. Too much additional liquidity, and the spectre of inflation looms. Too little - or a premature mop-up of the dollars sloshing around - and stagnation/deflation awaits.

And that ain't pleasant.

Just ask the Japanese.

>>They have doubled the amount of money in the US economy in 12mnths.<<

Not sure you have the figures correct here. It would help if you provided sources. Here are the actual numbers.

http://www.federalreserve.gov/releases/h41/Current/

>>When the Fed issues securities,who buys them and how can they possibly issue enough marketable securities to soak up excess liquidity?<<

That's a very good question. You are really getting the hang of this, aren't you?

The answer is that the Banks buy them (i.e. give money to the Fed in exchange for securities that earn interest) as opposed to lending the same money to us folks. The idea being that the risk/reward of Treasuries is better than your taking out a mortgage.

So instead of the money staying in the economy and buying you a house, it gets stashed away. In reality, of course, it is merely extinguishing the debt that was incurred when they pushed the money out the door in the first place.

It's all quite logical, orderly, and not at all scary.

>>If you agree with an audit,then this is a change of heart which is good<<

Come now, that was a cheap shot, and you know it. I have never been against it, just annoyed at the scare tactics around it.

Which worked.

As you, Arjay, have amply demonstrated.

*The US has lost a lot of their manufacturing industry and in reality like us,don't have real productivity to fall back on*

Not really Arjay, the nature of US industry has changed. 20 years ago, Silicon Valley hardly existed. Now every time a computer is
sold, Microsoft take your money. When you do a search Google take
your money, in an indirect fashion, but it is billions, through
charging advertisers. And so on.

Yes, making toasters and polluting industries have moved to China,
but that means that China is now also a customer, for our raw materials or for US technology. They buy Boeings for their airlines,
etc.

The Fed only needs to send an email to all banks, that they are going
to increase the level of reserves that banks need to hold and
instantly money will be pulled from the lending market and banked
with the Fed, so limiting inflation. The Fed and other reserve
banks have the power to do that.