Businesses and individuals whose transactions are all conducted in U.S. dollars simply try to earn revenue and spend less than they earn. They don’t have gains/losses from currency exchange rates. So a falling U.S. dollar does not produce currency gains/losses for them. They borrow from banks and they deposit money into banks. That’s the genius of having each sovereign nation have it’s own currency. The relative value between currencies does not crush the poorer country with the lower valued currency in transactions inside it’s borders. As long as they can make their own food, clothing and shelter, they can live relatively comfortably even if their currency is dried kidney beans.
If I have a bank loan, I pay it back, the bank charges according to the loan and nothing more.
If I deposit money in my bank account, the bank does not steal one penny, it is all accounted for.
I can shop for interest rates on loans and deposits. I can avoid debt altogether, I don’t have to borrow if I don’t want to.
So... the bank in terms of my operations is not keeping me from succeeding. If I’m crying because I can’t get a loan, what I’m really saying is that I have cash flow problems and I’m trying to borrow my way out of them. Over time, if I had any brains, I’d build up a buffer of cash or near-cash items (perhaps gold these days ? duh ?) to enable me to handle recurring cash flow issues. Then I don’t give a rat’s patooty about whether the bank will loan me money. The banker used to be part of the entrepreneur’s “A-team”, but has not been for a long time. If I can’t build up a buffer of cash, that means I should be in a different business.
Increasing the money supply too fast will cause inflation. High inflation hurts businesses and individuals. But the Fed government - the Treasury - would be increasing the money supply if the Fed was abolished. Same difference. The money supply must be adjusted to accomodate the transactions made in the economy. If we tried to operate the U.S. economy today with the amount of money as of 1/1/1790, we’d have a little difficulty. It has to be changed as the national wealth changes, since people and businesses all keep a percentage of their net worth in cash and we get more people over time and more value.
We don’t need to see the detail of the books of the Fed to know that it’s working with the Treasury to increase the money supply too fast at this point; there is Fed data publicly available, it’s just not fully detailed.
The Fed is owned banks - that’s exactly who should own it. The banks which own shares do not want to see the Fed go belly up. Fantastic, as long as taxpayers aren’t asked to bail out the Fed, which so far they have not been.
If the Fed makes extra “profit”, that’s a good thing. It actually returns it to the Treasury.
Bailout money is another story. TARP loans went from taxpayer to Treasury to bank. Even though banks were bailed out, that is not only a Fed issue, it’s a Congress and President issue. It’s only a Fed issue to the extent they support bailouts.
Are there any Fed tinhatters who realize that banks need to have standards and procedures (i.e., software, data files, etc.) for clearing checks ? Also, that the idea that the “banking system” which makes all that possible should be owned collectively by banks ? Also, that it would be a bad idea to have politicians run the banking system, and they would if this bank-owned Fed was not doing it, because someone has to run the banking system ?
/concur