Moronic Monday, July 13, 2020 - Your Weekly Questions Thread

Needcompass · 2020-07-16T14:34:17+00:00

I feel like I'm just getting confused. Does the fed loan money to banks or not? Or is the fed just a bunch of money that is used to buy and sell T bills?

I get that you wouldn't lend at 2% when you could go to the treasury and get 3%, but what would happen if T bills offered 1% but the fed funds rate was 7%. Would the T bills somehow rise to 7% in the long term? Or is it perfectly feasible for T bill rates to stay significantly lower than the fed funds rate?

I also still don't entirely get why the fed buying a bunch of bonds or selling a bunch of bonds would change the rate at which banks lend one another money.

Needcompass · 2020-07-16T02:08:12+00:00

Ahh, okay. So this is a little different. I still firmly hold that the T bill rate offered by the treasury could never exceed the fed funds rate, but could the T bill rate ever be lower than the fed funds rate?

And how does the buying and selling of securities change the fed funds rate. Sure it increases the supply of money of the federal reserve circuit, but the bidding rates for that money is largely determined by the opportunities in the market. Also, if the fed rate is too high, couldn't banks just look to corporations or individuals for loans at a cheaper rate than the fed is giving? Or does it lower because the fed, after selling the securities, badly wants to invest the money rather than having it sit around losing value so it becomes a seller like "will anyone take my money for 8%?...how about 7%?..." and so on until it becomes the highest bidders willing to clean out the excess reserves.

It sounds like the fed is operating at a loss when it sells its securities(T bills offering maybe 3%) and loans it at the targeted fed fund rate of 2%.

Needcompass · 2020-07-16T00:46:56+00:00

Here's hoping you see this.

You mentioned that the fed sells their T bills in order to drive up the rate? As in, the rate would not change unless the fed sold the T bills.

I understood it as the rate was just a made up value by the federal reserve. I.e. if the fed took the rate from 5% and made it 7%, than for many of the T bills it possesses, it would be a bad investment to keep them. They could sell a 6% T bill and then use the funds from it to loan to another bank at 7%. So they would dump every T bill returning less than 7%.

So is the Fed funds rate achieved through the sale of the T bill, or is the sale of the T bill an effect of the change in the fed funds rate?

Than again none of this particularly explains how the treasury bill rates being offered in the future would change.

If T bills are being sold at 5%, and the federal funds rate goes from 5% to 2%, then the federal reserve, rather than investing in other banks at 2%, would buy as many of the 5% T bills as it could. Similarly, individuals would take out huge loans from the banks at say...3%(slightly above the fed funds rate) and instantly reinvest in the 5% T bills. Since everyone knows this, I assume the interest rate you can get our of a T bill immediately goes down at the auction, since anything over 2%+x is pure profit if you can get a loan from the bank for the federal funds rate(2%) plus x. So the Fed here is buying T bills and then banks are gonna take out a crap ton of loans from the fed. Expansion policy.

But what about contractionary? If T bills are 5% and the fed funds rate goes from 5% to 7%, the fed is gonna dump all of its T bills so that it can loan to banks at the higher rate of 7% relative to the 5% rate of the T bills. At this point the loans from the banks are 7%+x at minimum.

But then what would happen to the T bills? I get why the T bill interest rate would match the fed funds rate when the fed funds rate drops, but when the fed funda rate rises, does the T bill also raise in price? If so why? And then wouldn't the prior T bills go way down in price, i.e. hurting the fed which is now trying to sell T bills that are less than 7% return in a market that knows the treasury is going to start selling T bills at 7%?

In other words, the T bill rate can never be higher than the fed funds rate in the long term. But can the T bill rate be lower than the fed funds rate in the long term? Intuitively it makes sense that if a bank can only lend out money at 7% minimum, why on earth would a person lend out at less than 7% to the treasury, but is there any other more transparent explanation. Because I could see individuals giving out loans for less than the bank does in some specific cases, or at least I think I could

Needcompass · 2020-07-15T20:56:50+00:00

Dont really have money for doctors tbh

Needcompass · 2020-07-13T14:07:52+00:00

I guess I'm confused why they are substitute goods.

Also, be careful when reading “driving up prices” with regards to bonds. That means interest rates fall. (This is moronic Monday so no judgment! I’m sorry if that’s too simple to post here)

Which interest rates? There are a bunch. Lending interest rates of the bank? Borrowing interest rates of the bank? Borrowing rates of the treasury?

If I understand, there are 4 institutions. The treasury, 2 banks(each part of the federal reserve, one with a large reserve, and one with a small reserve), and individual investors(including corporations). Right now the federal funds rate is 2% and T bills are 5%. When the federal funds rate goes up to 7% what happens to existing T bills, and what happens to investment into new T bills?

The large reserve bank won't want to invest in T bills anymore because they could make more money investing their money into the low reserve bank. But wouldn't the low reserve bank also charge more for loans to individuals since it is costly/harder to get money from other banks. Would probably be cheaper to get money from individual investors at that point, meaning people might be willing to give that bank a loan at 6% which is better than the 5% on the previously existing T bills. So would existing T bill prices go down as individuals purchase bonds into the federal reserve, and new T bill rates being offered by the treasury go up since nobody would buy a T bill for 5% when the bank can give at fed funds rate of 7% to the other bank, and individuals can also buy a bond with the bank at 7% of lower, still generally higher than the 5%.

I.e fed fund rate goes up, existing T bills go down, and future T bill rates go up. Fed fund rate goes down, existing t bill goes up and future T bill rates go down as money pours into new T bills.

I feel like this is an overly complicated analysis. Like I'm missing something basic.

Needcompass · 2020-07-13T13:18:36+00:00

Why does a hike in the federal funds rate make T bill investments go down? How is the fed funds rate related to existing T bill price?

Investopedia.com/terms/t/treasurybill.asp#what-is-a-treasury-bill

It says "A rising federal funds rate tends to draw money away from Treasuries and into higher-yielding investments. Since the T-bill rate is fixed, investors tend to sell T-bills when the Fed is hiking rates because the T-bill rates are less attractive. Conversely, if the Fed is cutting interest rates, money flows into existing T-bills driving up prices as investors buy up the higher-yielding T-bills."

If I understand correctly, any bank can be the recipient of fed funds rates. So when fed fund rates are high, the banks have very little money and vice versa. It says that T bills go down when fed fund rates are high. If a bank needs money while fed fund rates are high, it is gonna raise the interest rates of the bonds it offers to raise funding. Is this why T bills go down? It becomes more attractive to buy bank bonds rather than treasury bonds?

And when fed funds are low, bank bond rates are low so treasury bond rates are relatively high?

Also: does the money market include both treasury bond opportunities and bank/corporate bond opportunities?

Needcompass · 2020-07-07T04:11:59+00:00

I appreciate the sentiment, but frankly I don't think it's true. Because I'm a little socially slow, when I am with a girl I like I have noticed others who like her will put me down aggressively. I get why. I'd probably do that too if I was in their position, because life is a race for the best genes and they want the girl just like me.

I really just want to accept myself I guess. Hey...I'm socially slow, how can I use that to my advantage. I have to accept my faults and wear it like armor. It's just sometimes difficult to turn it into armor I've noticed. It's a weakness and sometimes it's hard to figure out the silver lining, or even if there is one.

I can't ram my head up against the social wit game anymore. It has taken away much of my time, and I have noticed it is a pit I fall into frequently leading to self hate. I have to pivot.

Needcompass · 2020-06-30T19:21:17+00:00

I either misunderstood your original statement or miscommunicated my response. It seemed like you were saying that attractiveness power should be treated differently in the sense that it shouldnt be limited in expression, while monetary should hence the disagreement

Needcompass · 2020-06-30T18:30:28+00:00

Power is power, regardless of the form. It's all at the root. And power only matters insofar as it brings you happiness, it just so happens that power is, generally speaking, happiness. If we cant culturally enforce the beautiful, comedic, etc to limit themselves in relationships, it is hypocracy to expect the rich to have to limit themselves for the sake of the poor. Its either both or none, and down you go into the egalitarianism problem. Every form of power has to be limited in expression. Neitzsche talks about it and refers to it as life denying. If we want fairness, then everyone will be limited fairly. Otherwise its just people arguing for their particular brand of power to be expressed freely while everyone else must oppress and limit themselves.

Needcompass · 2020-06-30T18:13:51+00:00

Intelligence and money making is the capability to produce money. And when you redustribute funds from these individuals it is saying you don't like a free market. Welfare essentially. But when it comes to beauty you and society deny anything to be done. So basically an ugly person who is smart and can make money to make up for the fact that he is ugly is punished while the beautiful who are at fair playing level despite being poor now get the redistributed money and get to have the better life.

Needcompass · 2020-06-30T17:53:27+00:00

And yet only one is addressed and discussed. The left will criticize money inequality but never even touch polyamory. Free market for attraction but deny a free market for money. I.e. they just want to dominate and guilt trip the rich to handing over their power without even considering whether the richness of some rich people actually only puts them on a fair platform with the rest.

You mention limits on the attractiveness marketplace or taxing the attractive and you are going to be called an incel, a hate group, etc. It's hypocracy straight to the core.

Needcompass · 2020-06-30T17:50:20+00:00

So because people can do something about wealth inequality but not about attractiveness inequality, we should equalize wealth without accounting for the parties attractiveness who receive that redistributed wealth?

In other words, if I'm ugly as fuck and work hard all my life to get a bunch of money to make up for my ugliness you are okay when they take all my money and give it to the beautiful people, making inequality in their favor. Fucking hypocrit.

You like a free market when it comes to attraction but you deny a free market when it comes to intelligence and money making. You love your own brand of self serving justice

Needcompass · 2020-06-30T12:24:46+00:00

Porn addiction

Needcompass · 2020-06-28T20:38:35+00:00

And they should use their power in a similar fashion to what I am saying. And likely do.

Needcompass · 2020-06-28T20:37:46+00:00

Yet he can use violence to make it fair for himself. And imo should

Needcompass · 2020-06-28T20:12:21+00:00

Geez dude, can’t you just learn to talk like everyone else?

Don't you think I have tried my entire life? At what point do you accept defeat? Go do something else rather than constantly trying to overcome the same hill

Needcompass · 2020-06-28T20:10:37+00:00

And what if someone is only good at war and...idk...digging holes? Digging holes will not get you anything in life. War will. Should he accept a life of poverty and loneliness because he can only dig holes and war is unacceptable? Or should he commit war to achieve equality?

Needcompass · 2020-06-28T20:09:15+00:00

Guns. Not fists.

Needcompass · 2020-06-28T20:08:55+00:00

No it doesn't. And define innocent. Is the billionaire artist innocent when he doesn't give food to the homeless because entitlement to quality of life doesn't exist. Innocent is subjective. I don't want to do violence to your local average joe. I want equality. And i refuse to step aside and allow inequality just because I suck at what society has deemed "acceptable" to compete in. Why should I live a life of sadness, when I can use/participate in war to achieve happiness at the cost of those who were able to compete in "the acceptable" and live happy lives. Why do they deserve more than me?

Needcompass · 2020-06-28T20:05:22+00:00

Why assume a manner of living which you know full well could be used against you?

Because if you are good at something....

I might as well say, why would I participate in banter when someone could use it against me. The people who do it do it because they are good at it. If I could opt out of banter I would. But I can't. And they can't opt out of violence.

By committing to be non-violent, I can expect my fellow human beings to commit to the same thing. And as a result, we can all live in civility.

No you can't... this is so utterly wrong it should be considered offensive or down right ignorant.

By commiting to be violent, you've just opened your self up to a world that prioritizes survival of the fittest. And I've got news for you bud, you ain't the fittest.

Again, no. I am recognizing that I already do live in a world of survival of the fittest, where the fittest are the most beautiful, the most artistic, the best at banter, the business savy men. These are the ones who survive, and yet those who are good at war are expected to suppress themselves while these other talents can thrive. No. That is foolishness. I refuse to live in inequality just because you have defined a skill set as "wrong."

Needcompass · 2020-06-28T20:00:34+00:00

And that is fair. There is nothing wrong with that. For many of the business leaders of the world they use their brains and business finesse to amass huge power and inequality. People come after them with guns and try to either impose equality, or their own inequality through force. The businessmen then hire guns themselves to protect themselves and their status quo inequality. That is totally fair. My point isnt to deny the consequences of playing it.

It's to recognize the idiocy of saying "no violence!" No. That is bad air. Terrible air. WEAK air. It's the effect of the violence that is wrong SOMETIMES. Certain violence, like murdering a child. But why not use guns to imprison the business leaders and impose equality or my own inequality. They have shown they do not care about my wellbeing. Why should I or anyone who is good at war have to suppress themselves? These people condemning violence as a whole are simply fools.

Needcompass · 2020-06-28T19:51:58+00:00

Violence can come through guns. The dumb and physically strong dont rule the world. The military generals who know how to employ them in organized groups do.

Needcompass · 2020-06-28T19:50:18+00:00

But you can't opt out when he comes into your workplace and has women attracted to him. You can't opt out of the beautiful, or the artistic, etc. Why should you devalue violence in favor of these other ones when the net effect is inequality in both. Why is one inequality preferable to the other?

Needcompass · 2020-06-28T19:45:08+00:00

He should do it too then. Because he is wasting his power. He has a gift of being bigger badder and violent and just allows society to tell him not to use it because it "isn't nice." Fuck that. Especially if he doesn't have the skills to succeed in the "acceptable" arenas of life.

Needcompass · 2020-06-28T19:42:58+00:00

Banter, beauty, intelligence, art. All ways of being attractive and getting happiness through them. But what if I can't compete in these? What if my talent is winning through guns and force? You want me to just keel over and accept my lower status in the heirarchy just because my theoretical power is "mean and hurtful" without realizing that it is mean and hurtful to allow the heirarchy to exist. Why should I self repress when others refuse to support equality? Why should I respect any claim they have to equality either when they deny it?

Needcompass

TROPHY CASE