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To: stacytec
I think the Fed is a good thing. Keeping money supply stable is a national security issue and its one of those things I don't mind the government doing.

Actually, the government is not keeping the money supply stable. The Fed is constantly diluting the money supply by printing more money thus driving the value of US dollar down. This is the reason for inflation.

In other words, the money in your pocket shrinks. But the question is where does the value go? It cannot just evaporate. And the answer is it doesn't; it goes back to the Fed.

People think that the amount of money they pay in taxes is what the government takes from them. But actually the government takes much more than the taxes. The people are made poor, and the government is made rich by inflation. A paper currency allows the government to take the people's riches away from them without taxing them!

I wish we would have gold coins in America. In that case, we would not need the Fed. And we would not have inflation either!

I recommend that you read this book: What Has Government Done to Our Money? by Murray N. Rothbard.

33 posted on 08/03/2005 12:13:28 PM PDT by blueberry12
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To: blueberry12

The Fed controls the supply of money via reserve ratios, discount rates and notes in the open market. The currency isn't printed out on the whim of the fed, currency is supplied to depository institutions to meet their demand. The real money creation happens at individual banks when loans are made, most of the time people never see the green( especially these days with ACH and such). The Federal Reserve orders new currency from the Bureau of Engraving and Printing to replace dated notes or to fill the request of depository institutions for more cash. The Fed can't introduce more currency into the supply than banks can demand, so I have difficulty believing that the fed is just cranking out cash and flooding the system. In addition , both Keynsian and Supply Side models show that an economy with an increased supply of money (assuming the printing presses just cranking out) would cause demand-pull hyperinflation , something thats been blissfully lacking in my life. I'm a big fan of the fiat system as it currently exists, I was never a fan of standard-based currency as the value was determined by the market of the standard. As long as a fiat system can secure money supply, the value can be maintained. Heck I'm hoping for the day when cash becomes antiquated and no longer used. I hate having cash on me - feel like someone should just put a big "mug me" sign on my back.

But I'll check your book out anyway, I always like diffent perspetives on a topic.


34 posted on 08/03/2005 4:53:49 PM PDT by stacytec
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