[quote][b]Posted by:[/b] A Good Troll [quote][b]Posted by:[/b] Mr Libertarian #2_ We borrow from the same banks that we loan to them at extremely low assets bought by the GoldmanSachs and ask for extremely high interest rates in bonds. (BTW, the person who authorizes this is the head chaiman of the New York branch of the federal reserve, he worked for Goldman Sachs). Then in return, we invest in bubbles or made bubbles that soon failed. [/quote] I'm sorry, but this is an incredibly big pet peeve of mine. The Federal Reserve effects two rates. The Federal Funds Rate set by the FOMC is used for overnight loans when banks drop below reserve requirements. The Discount Window issues loans to banks on a short-term basis when banks have liquidity problems. It is usually higher than the Federal Funds rate by a hundred or so basis points and is also short term and backed by collateral. The Discount Window is generally assumed to be a lender of last resort as they price their rates above what other banks are willing to lend for. Bank of America can not borrow from the Federal Reserve at 0-0.25% and turn around and give you a mortgage at 4%. Every time I hear this I want to kick little children.[/quote] First Off I would like to say I am a fan(ish) of reserve banking. (Only when It's private) The problem with the US open window policy is that for every dollar that the fed gives, then it has to keep it in as an asset. Countries such as Japan had this policy didn't work so well in 1990 (the biggest asset bust in history, #2 I believe is Argentina). When the Central banks allow "natural" rates to give out, it creates a low artificial give out since they are competing as a bank. The Discount Window has had a few members, but now they are retired sadly. They will not be a "last resort", it is a "hey guys, I -blam!- up again and I'm willing to pay as little as possible!"