Posted on 07/21/2008 2:57:42 AM PDT by TigerLikesRooster
Concern is growing over the present instability of financial markets among senior officials at the Bank of England and the US Federal Reserve.
The Bank of England
Ping!
” ‘’The system is fundamentally sound’’ “
Translation:
“Pay no attention to that man behind the curtain!!”
I keep hearing from the left that this current situation proves that the capitalist system is unsound.
Actually, the former crowd is unwittingly providing the ammunition for the red/pinko crowd. The former crowd should be spanked.
” Actually, the former crowd is unwittingly providing the ammunition for the red/pinko crowd. “
Which brings rise to my perennial question:
Which is worse — recognizing a problem and offering/potentially applying exactly the wrong ‘solution’, or refusing to recognize the problem out of fear that it might appear to give one’s opponents some political advantage?
” /heavy taxes. “
There’s the point of separation — one side wants to tax our way out of it, while the other just prints more money to inflate our way out of it....
Either way, it leaves us ‘great unwashed’ holding the bag.....
My mattress is more fundamentally sound!
It took me some time (and the additional “evidence” that more time sometimes provides) for me to agree with our members that have been running to Gold. They were right.
Inflation is what it is today because the Fed under Greenspan and Berneke have abandoned the Fed’s role of maintaining a sound currency and given to themselves the role of attempting to manage “the economy”. They can’t.
The economy - as a set of things that can be improved or harmed by government policy - is more than (more things than) the value of the currency. It is tax policy, spending policies, regulatory policies as well as millions of independent decisions by individuals and corporations alike, as well as decisions, trends and cycles in the world’s markets as well.
Thus, the Fed in its inflated sense of itself can only gin “the economy” against all those internal and external forces, beyond the value of the currency, and only do so by disrespecting the value of the currency and in that disrespect manufacture the conditions (inflation caused not by high interest rates) that require the very termination of their feeble attempts if the currency is to have any value left in it.
The Fed has been told by others outside of itself that it needs to raise interest rates. Banks now give 2.5% on CDs and with inflation running at more than 4% it is no mystery that they are running out of depositors and capital (interest earned by depositors is actually negative when adjusted for inflation).
The Fed’s chairman claims to be worried that higher interest rates will be too “recessionary” while at this very time it is the Fed’s world-inflationary inducing policies (weak dollar) that have created the housing market bubble, housing market bust, credit crunch, and now skyrocketing commodity prices that have already created the “recessionary” conditions he says he wants to avoid.
The truth is that the only thing that will start the correction for the conditions he helped create is the one policy he keeps avoiding - raise the interest rates. Continuation of his easy money policies can at this time neither prevent the inflation he has helped cause or prevent a recession. They can only increase the chances and the length of both. Berneke is a fool.
Which is worse — recognizing a problem and offering/potentially applying exactly the wrong ‘solution’, or refusing to recognize the problem out of fear that it might appear to give one’s opponents some political advantage?"
Is your question locked into only those two possible answers?
I prefer fixing the problem, but our elected officials will never do that.
This is fundamentally flawed reasoning on your part.
Here is where you went wrong:
"..the Fed’s role of maintaining a sound currency.."
First; get the Fed's role properly defined, then everything else will be easy.
Nice summary by Volcker. The system is most definitely not sound. It’s completely broken. I just don’t know how bad the suffering will be.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.