Posted on 07/26/2009 5:03:16 PM PDT by Halfmanhalfamazing
Ron Paul’s bill to audit the Federal Reserve (HR 1207) now has 271 co-sponsors, and the numbers keep growing! At the same time, HR 1207’s companion bill in the Senate, S 604, has already attracted 13 co-sponsors!
This is history in the making, and victory is within reach. Imagine what will happen if HR 1207, The Federal Reserve Transparency Act, comes up for vote in Congress! With more than 55% of the House of Representatives already co-sponsoring this bill, it has real potential to pass — BUT only if we educate and rally the people to support it and get our Congresspeople to put it to vote and pass it.
(Excerpt) Read more at ronpaul.com ...
...Well, we’re just going to get enough support to override that veto...
Your criticism is fair. I do disagree to the point of finding the topic uninteresting. In dynamical systems, for instance, a controller acting instantaneously would bring INstability rather than the desired performance. In addition, consider a car driver that receives constant "feedback" from observers --- would (s)he not end up in a ditch? Consider also what would happen if I were to demand that, any time you THINK about something, you report it verbatim to me. You'd never be able to come up with any decision.
In sum, the idea that transparency is a universal good is simply false. Most posters essentially state so' that's how we live now, as opposed to 1300, someone said. This is silly, and I am delighted that those flying the space shuttle are not subject to "transparency" of this kind.
The second point is, that Fed is a controller of a dynamical system (the economy). One can argue, of course, about a better design of a controller, but one has to (i) understand what it is and (ii) know something about the subject matter (no, finance will not do by itself).
The harsh tone was caused by precisely that. Every time you listen to the news, you observe not only the dismantling of the country --- but for absolutely false reasons and by ignorant people. "Capitalism is bad, markets are bad, hedge funds --- not enough transparency, CEOs make too much money, etc." Most do not even know what these words mean.
So I turn to my fellow "conservatives," and what happens? The same rants, and with equal ignorance, speaking of complex issues as if they were self-evident. No, sir/madam, if you choose to DISMANTLE something that worked and continues to work, the onus is on YOU to provide justifications, not me. Hence the harsh tone: what am I supposed to feel when I see "conservatives" acting in the same way and in the same directions and the socialists that are now in power. Nor there anything new here: great many people on this board are "conservative" in everything but economics, which they do not understand. Witness the criticism of Bush in 2002 that HE does not provide jobs, the rants about CEO pay in the last few years, and one even proudly signing of as "right-winger except for economics" (as if such thing existed).
My country is so ignorant and so much to the left that even those who fancy themselves conservative work in the same direction. What tone am I supposed to adopt against what amounts to defamation?
I accept, however, that the conversation did not start along constructive lines. Perhaps, we'll meet under better circumstances.
Thank you for your reply.
Stupid people in power worry me. Especially now, when Obama exploits the mood of the American people. RP does the same --- sneaks in his own grievances into law only because the "climate is right." This is unbecoming to say the least: there is absolutely no urgency with this issue. None. Zilch. RP merely exploits our mood for whatever purposes he may have.
Yes, I am familiar with that history.
I do not argue with conspiracy theorist, however. I hope you will really like the country if and when the Fed is dismantled.
LOL! They only turn over their earnings to the Treasury each year and publish their balance sheet once a week.
The Fed is shoveling out Trillions without revealing details. Congress is responsible for overseeing the Fed and Ron Paul wants to know who is getting Fed money. What is wrong with that?
Really, trillions? With no details?
Congress is responsible for overseeing the Fed
Yes they are. For instance, Congress passed those exceptions to Fed audits.
Ron Paul wants to know who is getting Fed money.
No he doesn't. Bernanke said he'd be happy to share more info on who is "getting Fed money". Ron Paul said he didn't care. Ron Paul said the only thing that mattered was Fed policy.
What is wrong with that?
What's wrong with "conservatives" falling for Ron Paul's lies and acting all stupid and liberal? Nothing, I guess. Lots of stupid people out there.
Grow up. The Fed/IRS system, established in 1913, is not beyond reproach. This country is long overdue for a national debate on monetary policy.
We have experienced 95 years of increasing, never-repaid debt and spiraling tax-funded interest. Within the Fed/IRS system, paying down the debt with taxed Fed-money is not feasible for any elected government because it would result in long-term money contraction and deep depression.
Concerns over the Ponzi-like nature of the Fed/IRS system go beyond liberal/conservative divide. If you are bothered that "ignorant" people are finally listening to Ron Paul's cry in the wilderness, why not offer your own enlightened plan to facilitate liquidity without requiring massive debt. Recognize legitimate concerns about the Fed and present your case with an attitude of humility.
I would like to see a 21st-century implementation of the highly successful Colonial Script system whose suppression led to the American Revolution.
If you really want to believe that the Fed is honorable and not seeking power, then I cannot help you. They are as power hungry as our government that pretends they are not. How else do you explain all the run away spending. I have even liberal friends that can't figure it out.
Right now they want to destroy the US Dollar (with all the spending) along with our Borders, language and our culture. They want a single currency and the UN to rule the world.You do understand that at the current level of spending. It will be impossible to sustain. Why else do you think China and other foreign buyers no longer want to give us loans? What do you have to officially hear it from Rush Limbaugh or your local news to believe what is going on around us?
Do you really believe that the government along with the Fed would tell people this in the open if they really wanted it, or would they make slow moves to change it.
This is by far the best article that puts together what happened with the economy from a source I normally do not view. The source is Rolling Stone Magazine. It is 5 pages that include a different video on each page that you should look at too. All I have to say is that this guy really did his home work. Please read and watch it. Then get back to me. If you truly are objective, then you will do it.
http://www.rollingstone.com/politics/story/28816321/the_great_american_bubble_machine
Where do you send the interest?
Kells: "Grow up."
And the connection between what I said and the alleged immaturity is... what exactly?
You appear to have some difficulties with both logic and principles:
"We have experienced 95 years of increasing, never-repaid debt..."
True, of course. But what does the Fed have to do with that? Are you aware that the budgets are promulgated by Congress?
"and spiraling tax-funded interest."
What do these words even mean. Tax-funded debt?
"Within the Fed/IRS system, paying down the debt with taxed Fed-money is not feasible for any elected government because it would result in long-term money contraction and deep depression."
Now you come close to making sense. It is an intrinsic tug-of-war: contraction of money supply kills inflation but also growth. It is a fine balancing act played by the Fed --- very successfully by any measure (specifically, ever since we began to appoint to the Fed chair people familiar with economics, i.e., starting with Volker). You probably don't know but control of inflation and growth was only recently assigned to the Fed as its main job. Even in 1960s, EMPLOYMENT and growth were considered its main tasks.
Now, this has nothing to do with a government's ability to repay debts. Whether we can or cannot depends on Congress. The Dems, starting with FDR, controlled the Congress for most of the post-war period, and it is they who created the runaway spending.
Your anger is misdirected.
"Concerns over the Ponzi-like nature of the Fed/IRS system go beyond liberal/conservative divide."
Again, the ponzi-like scheme you refer to is that of Congress, not the Fed.
"If you are bothered that "ignorant" people are finally listening to Ron Paul's cry in the wilderness."
It's actually Ron Paul's ignorance, not that of the "people," that bothers me most.
"why not offer your own enlightened plan to facilitate liquidity without requiring massive debt."
Liquidity is facilitated by the Fed by printing money and open market operations. Too much of it --- you get inflation that makes people poor; too little of it -- you choke growth.
How much of it is proper at any given time is not exactly known. To create the best approximation one needs to know hundreds of statistical time series. To have an opinion about such an approximation one must therefore work for the Fed. To have it otherwise is plain silly (and yet that is what most people do --- judge management of companies without having any clue about the specifics of context in which those decisions have been made).
More importantly, however, is that liquidity has NOTHING to do with debt. You worry about our National debt? Vote for fiscal conservatives. I do.
"Recognize legitimate concerns about the Fed..."
Gladly. The problem is I did not see any legitimate concerns about the Fed on this thread.
"... and present your case with an attitude of humility."
Here you misapply principles and standards. One can and should be humble before G-d, and I do my best to be such a person. As a scholar, I am absolutely humble before the truth. Nowhere does it say, however --- not in the Judeo-Christian system of values, nor in the standards of scholarship --- that one has to be humble before arrogant ignorance.
"I would like to see a 21st-century implementation of the highly successful Colonial Script system whose suppression led to the American Revolution."
I understand the sentiment, but history never repeats itself identically. My personal take is that our problems lie outside the sphere of the government, which is only a reflection of those problems. The American dream used to be freedom, and now (since 1940s) it is... buying a house. Even Republican presidents staunchly defend that "American dream." Small people get small governments and small economies. I am consequently less optimistic than you appear to be: unless there is a spiritual reawakening, I do not see we shall return to our former greatness.
America is great because of the basic goodness of its people. And will cease to be great if its people cease to be good --- de Tocqueville.
You disagree because you appear to misunderstand the concept of money (which is basically any IOU; it can be agreed upon by two parties to an exchange; groups of people, as in the earlier U.S., where banks printed their own money; or the nation, as we have now). Gold, silver and other goods played that role because they were desired across the civilized world --- thus agreed upon the value of those metals. Ermine skins and fox skins served as money for hundreds of years in Europe and Russia: one unblemished skin of a black fox could be exchanged for a farm --- a house with furnishings, the land, and cattle. The reason for that was the same: the enduring demand (from Western Europe), as in the case of gold, for this commodity. The constancy of demand made furs convenient (known, agreed-upon) store of value.
There is nothing intrinsic whatever in gold and silver as money.
Sorry to disagree, but I found the article far worse than you have described it. Firstly, its premise is so old that it is boring. Substitute "Goldman Sachs" with "Jews" and you will get an EXACT copy of newspaper and "research" articles from 1930s Nazi Germany. Just look around (see no need for facts, research, logic): Jews are everywhere. They must be acting therefore in cahoots. They suck blood of good, but naive, German Christians. All miseries have come from them: the Plague, defeat in WW I, the inflation of 1920s... The author is far from original, therefore, when he begins thus:
"The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." Yeh, those blood-sucking Jews...
Well, I see that oil is everywhere; whole world was and is talking about oil all the time. It must be, therefore, that the whole crisis started by Saudi Arabia. Stupid? Of course. And yet that's what this "author" says --- only about GS, not Arabia or Kuwait. And, even more precisely. Where is JP Morgan, Credit Swiss, Societe General, etc. and the might of all other banks? Ah, those must be the good but naive "Germans" swindled by the sneaky Jews, I mean, Goldman Sacks.
[ Incidentally, you should stop reading and discard ANY article that appeals from the start to your emotions rather than mind, as this one does. In terms of using this method of propaganda, this article is NY Times on steroids.]
Here is the "proof" of the author's position: "Any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything."
Just look at Jews in the prominent positions. About a quarter of Nobel laureates are Jews -- surely they have hijacked the Nobel committee, the entire physics, chemistry and medicine. The world better wake up before it's too late. Goering would be proud of this writer.
The truth is, and I wrote to this effect earlier, GS is known on Wall Street as (i) hiring the best talent and (ii) letting that talent blossom. It is therefore unsurprising that, whenever you want the best in the area, you often find them in GS. It's quite simple, really (but does cause a great deal of envy among the rest of the Wall Street banks).
Goldman proved it in this crisis, too. They were the only bank that called the turn of the market correctly. And you know how? It was a lowly analysis or trader (I don't remember now) who sounded an alarm. Unlike in other banks, that alarm was given a voice all the way to the top. In April-May of last year, the top honchos had a meeting, at which it was decided to reverse the course, i.e., reduce exposure to mortgages and buy insurance against the market decline. They still suffered, but less than others. That is the reason for their quick turnaround. But, having started badly, he gets worse:
"They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble [what does this even mean -- to position itself in a bubble?], selling investments they know are crap."
There you go. The rest of the humanity, which manages about $30 trillion are simple, Naive "Germans" swindled by the tiny in comparison but shrewd and dishonest Jews, I mean Goldman Sachs.
Do you not see the complete idiocy of this statement? Just look at the size of the California pension fund --- do you think it is managed by idiots, who simply did not know that the securities were "crap?" Just look at the $32 Billion endowment fund of Harvard --- do you think Harvard, despite having Nobel laureates in economics, hires idiots to manage that fund?
To see that his is not only an idiot but lacks basic honesty, consider this quote (from http://www.smirkingchimp.com/thread/22587). First, he quotes a criticism he received --- criticism that states very well the same point I made earlier:
“If my pension fund is buying [crap mortgages] from Goldman, and my pension fund loses lots of value, that’s not Goldman’s fault,” wrote one reader. “No one is forcing anyone to buy anything. The only thing Goldman is guilty of is making profits.”
His response?
"I’m not even going to go there — the psychology [how about addressing the substance of the issue rather than playing Freud?] of a human being who would take the time to actually write in a complaint like that is so bizarre that it would take more time than I have today to even begin discussing it."
Of course he will not discuss it: he has nothing to say. The man cannot reveals no knowledge of basic economics and cannot think well. He can appeal only to emotions. And take a typical pro-"people" and anti-capitalist position:
"there was an amusingly large number of people writing in impassioned defense of their right, under our American system [capitalism?] to be ripped off by large impersonal [greedy, anti-people] financial companies."
But let us continue with the description of the "Goldman scheme":
"Then they [GS] hoover up vast sums [what does that mean, to hoover up? this is a typical language of a person who know nothing about how the world operates; he knows nothing about the "American system" except that it is bad] from the middle and lower floors of society [garbage: the vast majority, if not all, of the now-problematic securities were both by financial institutions] with the aid of a crippled and corrupt state [were was the state between Cal Pension fund, say, buying a security issues by Alcoa, which GS only helped Alcoa to create? Total nonsense] that allows it to rewrite the rules in exchange [which rules of exchange were rewritten?] for the relative pennies the bank throws at political patronage."
The idiocy is simply breathtaking.
"Finally, when it all goes bust, leaving millions of ordinary citizens broke [he must have missed billions lost by billionaires; the guy who writes and cares for the "folks" assumes, of course, that only the "poor" go broke] and starving [starving?], they begin the entire process over again [are we in the midst of another bubble? If so, he should publics such important findings in a scholarly journal and consult the government], riding in to rescue us all by lending us back our own money at interest [lending? Goldman Sacks has never lent money; he simply has no clue about what GS does], selling themselves as men above greed [a lie: no commercial company pretends to be completely altruistic; they are philanthropic, but not altruistic; if he took a single course on management, he would learn that management is hired by owners of the company to make a profit], just a bunch of really smart guys keeping the wheels greased."
As I expected, his shallowness had to use this old canard:
"And what caused the huge spike in oil prices? Take a wild guess. Obviously [only to him, of course] Goldman had help — there were other players in the physical-commodities market [see, I am sophisticated; I am not going to tell who they are --- 'cause I don't know] — but the root cause had almost everything to do [as evidenced by what?] with the behavior of a few powerful actors [must by them sneaky Joos, I mean, Goldman Sachs] determined to turn the once-solid market [once solid? Just look at the graph of oil prices? What does he mean by "solid"?] into a speculative casino. Goldman did it by persuading pension funds [those good but naive "Germans" again] and other large institutional investors to invest in oil futures [unlike a relatively small Goldman, those institutions are managed by outright idiots that could simply be persuaded at lunch] — agreeing to buy oil at a certain price on a fixed date [yes, this is called exchange; I go on a certain date and but a dozen eggs at a specified price. Or, does the grocer trick me into doing so?] . The push transformed oil from a physical commodity [oil is no longer physical? it is a subliminal spirit?], rigidly subject to supply and demand [wrong: oil is not subject to market forces --- the PRICE of oil is], into something to bet on [is it different from buying anything else? If I hope to buy eggs tomorrow at half the price, I would certainly wait for a day; we speculate every time we buy something], like a stock. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed."
As for the ending, observe first that this aggregate statistics has nothing to do with GS. Investment banks do not persuade you to buy what already exists (secondary market). They structure and underwrite new securities (primary market). It is certainly not in business of trading futures.
Secondly, the trade in futures did indeed increase. But this is largely because NONfinancial companies tried to offset risk associated with oil rising. And not only oil. A cereal maker (Nabisco) routinely buys futures to ensure the stability of its cost of wheat (a futures contract allows you to buy three months from now, say, a bushel of wheat at a specified price). This is insurance, just like house insurance (with insurance, YOUR value of a $200,000 house is still $200,000 after it burns down, because the insurance company will pay that money to you). Understanding of futures as insurance is relatively new (20 or so years), and, as more financial officers of companies like Alcoa, Nabisco, GM became aware of it, more and more companies engaged in buying them. And not only oil.
Most importantly --- and you hear this nonsense all the time from conspiracy theorist --- there is no speculator that has sufficient capital to drive the price of oil from $11 to %150 in a decade. It takes the demand of China and India combined to do that.
I simply have to stop here. I have written this much out of respect to your request: the article does not deserve to be read beyond the first two paragraphs.
You can see now why I disagree with your assessment. Personally, I would not accept such an essay from an undergraduate. I would gladly overlook an occasional laps of logic. But not the lack of integrity: this man does not even attempt to justify what he says with facts. There is not a single fact about GS, and every fact he mentions concerns the economy as a whole, not the company. One can try and fail to provide a justification in a difficult matter. But not to try is preposterous.
You will be well advised to glance through his autobiography on Wikipedia. You will learn that he is a charlatan who never did anything continually for more than a year or two. You will learn that he does not have a Master's degree, leading me to believe that he took at most one introductory course on economics. His "writing" certainly does not reveal more than familiarity with the terms, which he still manages to misrepresent and misuse. As for his moral standard, this quote I find revealing:
"[He] then joined Mark Ames in 1997 to co-edit the controversial English-language Moscow-based, bi-weekly free newspaper, The eXile. Taibbi said about that experience, "We were out of the reach of American libel law, and we had a situation where we weren’t really accountable to our advertisers. We had total freedom."[1]
Tell me, would you enjoy being freed from libel law? Would you behave any differently if there was no libel law? Probably not: a moral person does not need such law to refrain from libel.
But that's all he has done in life. Consider his "hilarious" piece "The 52 Funniest Things About The Upcoming Death of The Pope." Let's smear the Pope. Let's smear the "American system." Let's smear Goldmand Sachs.
What else can a poor, ignorant and spoiled brat to do in this world?
I’ve read opposing views on auditing the workings of the Open Market Committee and, to be honest, I’m torn about that. It appears to me that both sides of auditing the workings of the Committee are trying to make the issue more complicated than it should be. I have to read more before taking a position on that part of the bill.
The question I have, what problem are your suggestions designed to fix?
"at a minimum the Comptroller General should have the power to audit member banks without written permission in advance from the Fed."
What conspiracy has been uncovered that this would prevent? I know of none. At the same time, I know of dangers of "audits" by the government: they begin on paper and end with night visits by secret police (yes, laugh all you want). The Reserve banks are a coalition. You don't want to be a part of it --- stay out, whether you are a government or a private citizen. And here lies the crux of the matter: with all the suspicions you and I may have about coalitions (and vigilant we must be), there has never been a better system in the history of the world. Small private citizens lack sufficient capital. The alternative is the Government itself. And that has always been the problem: as Hayek well pointed out, once the economic freedom goes, the rest of the freedoms follow.
"I also think the Comptroller General should probably audit discount window operations, the reserves of member banks and interest on their deposits."
All this is public knowledge. The Fed publishes its balance sheets periodically. If there were some kind of anti-social activity, it could exist for no longer than one period. What is the benefit of speeding this up? Questionable, if any; but the dangers are numerous.
I understand your position much better now; thank you.
Friedman and Schwartz disagree with you on that. Before the Federal Reserve Act financial panics in the US were mitigated by the actions of private commercial bank clearinghouses. The Fed took over the role of the clearinghouse associations particularly the lender-of-last-resort role, did less to mitigate the panic of 1929 than the private associations had done in earlier panics like 1907 and 1893. Their point being that the economy would have been better off if the Fed had not been created. Without the Fed the Great Depression would have been just another panic and recession.
I know people like Paul Krugman disagree. I also know that there have been and will be books written taking one side or the other, so you and I are not going to resolve the question of who is right.
I do appreciate your thoughtful responses and thank you for sharing you knowledge on the subject. I’m going to have to study more on this
Now, at this level of specifics please do not read too much confidence into my words -- I read only parts of Friedman and Schwartz, long time ago and, most unfortunately, before I was able to appreciate that work fully --- but my understanding of their criticism differs from yours.
I believe that monetarists, starting with and based largely on the FS work, actually fault the (then young) Fed for doing little or nothing when the time was precious. I do not remember the data now but seem to recall that they actually decreased the money supply when should've increased it. [ The reasons were manifold but some had to do with the strength of the pound, outflow of gold, and... the fact that representatives of the member banks were unsure of what their role actually was ]
I always thought that the upshot of FS was that the monetary intervention would have clearly saved the day. If so, this is an argument for, not against, the Fed. The recession became a Depression because of (i) the Fed's inactivity and (ii) the New Deal, i.e., a Keynesian intervention. It is for that reason that there is still an argument, as you pointed out, about the reasons for Depression. As far as I know, not a single person has shown anything problematic with the FS analysis; they tend to pretend that this work is simply nonexistent -- a typical posture by those that cannot refute what you say and yet refuse to accept the conclusion of your argument.
It is not surprising, therefore, that Krugman "disagrees." It is the same Krugman that a couple of weeks ago published an article, "Reagan Did It," in which he attributed the current crisis to Reagan policies. I KNOW that he would not accept such nonsense from a student. The more provocative the thesis, the more thorough the argumentation should be. He offered vitriol instead. I am not surprised, therefore, that Krugman "disagrees" with FS without telling us why.
Like you, I continue to educate myself on the subject (not specializing in macro economics, I have only a limited time for doing so --- unfortunately, given how important this issue is nowadays). May I suggest a book "FDR's Folly: New Deal or Raw Deal?" if you have not read it already? The author talks, in particular, about how the work of RS is met by the present-day economists. It's NOT an economics book, but, personally, I could not detect any immediate errors in the author's use of it either.
I thank you too for sharing your knowledge and look forward to reading your future posts.
That's true but they clearly say that the private private clearinghouse associations did a much better job in 1907 and 1893 than the Fed did in 1929,
In his book Capitalism and Freedom, He writes on page 44:
"It is instructive to compare experience as a whole before and after (the Fed's) establishment--say from just after the Civil War to 1914 and from 1914 to date,to take two periods of roughly equal length.
"The second period was clearly the more unstable economically, whether instability is measured by the fluctuations in the stock of money, in prices, or in outputs...(E)ven if the war and immediate postwar years are omitted, and we consider only the peacetime years from, say, 1920 through 1939 and 1947 to date, the result is the same. The stock of money, prices and output was decidedly more unstable after the establishment of the Reserve System than before...
"...the crude comparison should at least give the reader pause before he takes for granted, as is so often done, that an agency as long established, as powerful, as pervasive as the Federal Reserve System is performing a necessary and desirable fundtion and is contributing to the attainment of the objective for which it was established."
He also said we should get rid of the Fed but I can't remember where or when.
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