think about this

[imported_Jackson Mcgraves]

There's a plausible argument that the United States has been legally in a state of emergency for over 65 years. On March 9, 1933, in 12 USC 93(b), the 73rd Congress rubber-stamped FDR's Proclamation 2039 (which criminalized private gold possession, forcing all Americans to turn in their gold bullion and gold coins), accepting Roosevelt's claim that a "national emergency" existed because of the ongoing Depression, and conferring emergency powers on the Presidency (such as the ability to suspend the Constitution, organize citizens into work details, confiscate property, ration energy & food, seize power plants & highways, relocate the population as needed, etc.).

That law (now Act 50 U.S.C. 1622) has never been repealed, nor has it expired.

[Sene Unty]

For a second I was scared that Bush would take advantage of his emergancy powers, then I realized his IQ was a 2 and breathed a sigh of relief.

Pretty intereseting fact though. :D

[ReaperFett]

Technically, Turkey is at war with Greece too :)

[Dasquian Belargic]

Isn't there a small town in England at war with somewhere...

[Sanis Prent]

The emergency (moving our nation to a credit standard, establishing NASD and FDIC, and empowering the Federal Reserve to use a proactive Keynesian monetary policy) has long since passed. Essentially, our economy needed plenty of reform, and the prior views that the "invisible hand" could control all aspects really wasn't working to the nation's liking.

[Sene Unty]

That wasn't funny. Bad form! :D

[Jackie Dennegin]

I'm suddenly reminded of Dustin Hoffman in 'Hook' :|

[Taylor Millard]

No it was the appropriate response. :)

Gee if the Wall Street Journal can do that to Charley...I wonder what it can do to me. :lol

*bought an issue today. :)

[ReaperFett]

George Lucas kissed Carrie Fisher in that :)

[Sene Unty]

I loved Hook.

[Sanis Prent]

Actually...I didn't get any of that from the journal. Thats just common knowledge economics.

EDIT - Well, the bit about NASD, I did get from an article blurb. I wasn't aware that it was set up at the same time.

[Vampyre Dalamar]

Well I have a question for you. Why do we wait with baited breath for that elderyly gentleman Allen Greenspan to give us the current interest rate here in America. Why does the Federal Reserve set the interest rate for us. Did you know that there is nothing Federal about it. Its just in there name. Its not under the control of our goverment. So what the heck where did they get there authority.

Second our debt is in the Trillions. Who do we owe this money too?

[Diego Van Derveld]

Alright...I can answer all this, just may take a while.

The Federal Reserve is actually the third nationally-chartered bank of the United States. The first two were set up on 20 year charters in the early 1800's, but were not renewed by congress when their charter expired. The Federal Reserve (Fed) is about 90 years old, I believe, and acts as the centralized bank of the United States, an intermediary between private and state banks. So, the term Federal Reserve simply means that the bank is chartered by the Federal government, not run by it.

Now, as for the interest rates. This is a complicated matter, involving several theories. One is the theory of pure expectations, which I will talk about now:

Every person or business that decides to take their income or retained earnings and invest it becomes a supplier of funds in our economy. Conversely, every person or business that adds a liability to finance (such as a loan) in turn demands a supply of financing. Money doesn't grow on trees, thus...the law of supply and demand takes effect.

Supply side wants the money they invest to be as liquid as possible (able to access it whenever they wish). They also want short terms to maturity...or in essence, want their money to maximize interest in the shortest amount of time. They also want due compensation for letting people borrow money. This is what an interest rate essentially boils down to. Its seen in almost every aspect in the economy, but in simplified terms, its just how much your savings account might grow each quarter. Banks don't keep your savings locked up. They use your supplied funds to finance those seeking loans...but they do pay you for your trouble...thus, interest.

Demand side wants to be able to hang on to the loaned money for as long as they can, so they can use it as they see fit, and pay later. They also want to guarantee that it will be there. To these ends, they are willing to pay a higher interest rate on loans that are better fitting to these needs.

There is more math involved, where the relation of demand and supply in terms of quantity supplied and interest rate price is a graph of two intersecting curves. Where the curves of supply and demand meet is an equilibrium quantity of securities (loans, bonds, etc) for the term, and in turn, the rate of interest.

Now...pure expectations theory is really only about saying that investors and those who use financing are masters of their own destinies. Say if you invest in a 2 year bond at 7%, and the rate on a 6% 4 year bond is expected to increase by 2% soon. Well, you won't invest in the 4 year bond immediately, because you'll be locked into a low rate. What you'll do is invest in the 2 year bond, and when that reaches maturity, then you'll invest in a 4 year bond that is "magically" at 8 percent interest. Why is it at 8%? Because you made it that way. If investors shift primarily to short term bonds, it causes a decrease in the supply of long term bonds. Those who want long term bonds are willing to pay higher interest to get them. Thus, rate goes up. No magic at all. The movement of investors caused it.

Now, this explains most shifts in interest rates. The Fed does monitor these, but in addition, they reserve the right to take a proactive stance in our nation's economy. It's called the Keynesian monetary policy, which I won't go into too much detail...all you need to know is that the Fed simply either issues bonds from its reserves, or buys its own bonds back from investors. These are called benchmark bonds...and they're about the lowest risk security you can buy. I can't remember the exact procedure, but I have an outline chart somewhere. The Fed, by issuing or buying back bonds, can affect these rates, which can either stimulate a bear market (low economy), or cool down a bull market (high economy).

As for the nation's debt...its a combination of liabilities to the Federal Reserve, to contracted business sectors, and to private investors, who might own a government bond. Having a debt is not a bad thing. You can use leverage on your liabilities and it can actually help lots of things (ie...keep Uncle Sam from taxing you into extinction). It cycles through, and is paid out in turn. It isn't just massing up and becoming delinquent. Old liabilities are paid down to zero, and new liabilities are added. Its just like in businesses, except that the government is a non-profit organization, and has no retained earnings to post to equity or to split into dividends to its investors.

Hope that helps :) My hands are tired.

[Lilaena De'Ville]

*hed = spinz*

I liked the first post, but then it got all serious.

;)

[Vampyre Dalamar]

That helps a little but doesn't answer the root question. Who is Allen Greenspan that he has this authority in America to set interest rate's for the nation. No one elected him or gave him this power so why does he dictate the rate? Answer that question baby:smokin

Just likes to make Sanis type.

[Diego Van Derveld]

Because he's appointed by the President as Governor of the Federal Reserve, and serves a 14 year term in said office.