Posted on 04/14/2008 1:18:51 PM PDT by BGHater
There has been a lot of talk in the news recently about the Federal Reserve and the actions it has taken over the past few months. Many media pundits have been bending over backwards to praise the Fed for supposedly restoring stability to the market. This interpretation of the Fed's actions couldn't be further from the truth.
The current market crisis began because of Federal Reserve monetary policy during the early 2000s in which the Fed lowered the interest rate to a below-market rate. The artificially low rates led to overinvestment in housing and other malinvestments. When the first indications of market trouble began back in August of 2007, instead of holding back and allowing bad decision-makers to suffer the consequences of their actions, the Federal Reserve took aggressive, inflationary action to ensure that large Wall Street firms would not lose money. It began by lowering the discount rates, the rates of interest charged to banks who borrow directly from the Fed, and lengthening the terms of such loans. This eliminated much of the stigma from discount window borrowing and enabled troubled banks to come to the Fed directly for funding, pay only a slightly higher interest rate but also secure these loans for a period longer than just overnight.
After the massive increase in discount window lending proved to be ineffective, the Fed became more and more creative with its funding arrangements. It has since created the Term Auction Facility (TAF), the Primary Dealer Credit Facility (PDCF), and the Term Securities Lending Facility (TSLF). The upshot of all of these new programs is that through auctions of securities or through deposits of collateral, the Fed is pushing hundreds of billions of dollars of funding into the financial system in a misguided attempt to shore up the stability of the system.
The PDCF in particular is a departure from the established pattern of Fed intervention because it targets the primary dealers, the largest investment banks who purchase government securities directly from the New York Fed. These banks have never before been allowed to borrow from the Fed, but thanks to the Fed Board of Governors, these investment banks can now receive loans from the Fed in exchange for securities which will in all likelihood soon lose much of their value.
The net effect of all this new funding has been to pump hundreds of billions of dollars into the financial system and bail out banks whose poor decision making should have caused them to go out of business. Instead of being forced to learn their lesson, these poor-performing banks are being rewarded for their financial mismanagement, and the ultimate cost of this bailout will fall on the American taxpayers. Already this new money flowing into the system is spurring talk of the next speculative bubble, possibly this time in commodities.
Worst of all, the Treasury Department has recently proposed that the Federal Reserve, which was responsible for the housing bubble and subprime crisis in the first place, be rewarded for all its intervention by being turned into a super-regulator. The Treasury foresees the Fed as the guarantor of market stability, with oversight over any financial institution that could pose a threat to the financial system. Rewarding poor performing financial institutions is bad enough, but rewarding the institution that enabled the current economic crisis is unconscionable.
How long before this thread is locked or pulled?
How long before the Paulbots come on and rant about being persecuted?
If RP stuck to conservative issues and stayed out of the kooky Libertarian issues, he would do a lot better. But like Obama, he just can't help running to the left.
Yeah, because as we all know, the Paul-haters are the soul of courtesy.
Thank you.
L
P.S. Please note the use of "please" and "thank you". Thank you.
Hey, look, the keyword vandals are already at it. Vandalism is so much easier than actually debating.
It’s been a few days and many pings since then. I’ll need to get back to you.
Oh, did you mean on this thread? A cursory read-through would indicate that on this thread, all I did was mention that Paul-haters are ever polite and decorous.
I don’t have strong personal feelings for or against Ron Paul. This explanation, however, appears to be much closer to the truth than most politicians, including this administrations supporters, appear to be able to muster.
Someone apparently believes that “please” and “thank you” are an adequate camouflage for sarcasm and rudeness.
“Paul-haters” insist on condemning every word from Paul’s mouth out of hand. Sure there are several topics that I disagree with Paul on, but he makes a ton of sense on a lot of others. I disagree with a few things our President has done and that Reagan did also - and I’m a great admirer of them both.
Ummm I disagree. Your Dad was working for $25 a week because politicians and big business colluded to make themselves richer. They did just that right up until the market crash of 1929. See also the railroad tycoons/government/stock market crash of the 1870’s. Yes, Ron should have mentioned that government helped create the necessary conditions for artificial rates. No, we should not throw money at bad bankers or give the Fed cover for bad actions in the past. Instead, innovate in energy, creating a competing market product for oil while securing our nation’s security over the long-haul. Then, over time we can be an exporter and give the global consumer what it wants while paying the trillions the old geezers in power are now demanding in benefits (which of course will be taxed out of my paycheck as it stands now).
“If RP stuck to conservative issues and stayed out of the kooky Libertarian issues, he would do a lot better. But like Obama, he just can’t help running to the left.”
I’m not a libertarian, but at this point libertarianism looks like a breath of fresh air compared to the national socialism of DC Republicans and the international socialism of the DC Democrats.
Who's hating RP? Pity maybe, but never hate. ;)
Now liberals in libertarian-leaning Republican clothes trying to hijack the Republican Party convention process; that kind of purposeful political sabotage should be dealt with swiftly.
In less genteel times, Texans used to know what to do with scoundrels like that. I think tar, feathers, a horse, a rope and a rail were involved. Sometimes just the rope. ;)
Welcome to FR. You might want to bone up on your political knowledge before you go casting such generalities about Parties.
To the casual observer, libertarianism seems like a great thing. The problem arises when you go from the theoretical to the practical.
But I’m sure communists think their ideas are great too.
Only when you consider all 3 critical elements of our governing process: rights, responsibilities and consequence to others; do you realize that many political theories are flawed beyond repair.
Conservative Republicans tend to grasp this intuitively, although you can find exceptions in the “big tent.”
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