Posted on 09/03/2009 4:39:19 PM PDT by all the best
Since H.R. 1207 was introduced by Dr. Ron Paul in Congress this February, there has been a growing movement questions whether the Fed should continue to operate without more oversight and some question whether or not the Federal Reserve should continue to operate at all.
Currenty, Paul’s “Audit the Fed” legislation has 282 co-sponsors and there are two similar pieces of legislation in the senate. If the legislation is passed, it will allow the Government Accountability Office (GAO) to review the Federal Reserve’s balance sheets and their policy deliberations and monetary transactions. Currently Federal Reserve Chairman, Ben Bernanke, opposes the plan, saying it would undermine the Fed’s independence.
The “Audit the Fed” act has a real chance in passing, but some supporters of the legislation, including Ron Paul, want to take it further than that by ending the Federal Reserve all together. Paul introduced a piece of follow-up legislation, entitled H.R. 833: The Federal Reserve Board Abolition Act which would wind down and eliminate the Federal Reserve over the course of the year. Currently, the act has no co-sponsors, but is gaining a lot of grass-roots support. Paul hopes that members of Congress will join his movement to end the Federal Reserve after they see the results of a full audit of the Federal Reserve. Paul also authored a book about his proposal to end the Federal Reserve, entitled “End the Fed.”
Although the movement is in its infancy and still gaining momentum, it’s not too crazy to think that the United States wouldn’t be better off without the Federal Reserve. Since the Federal Reserve System was brought into force into 1914, the United States economy has grown at a slower pace than it did before 1914, despite significantly improved productivity. The rate of inflation has been substantially worse since...
(Excerpt) Read more at americanbankingnews.com ...
The problem with this is that it completely ignores the fact that the forty years between the end of the Civil War and the formation of the Federal Reserve were mostly DEFLATIONARY and this is arguably WORSE than inflation.
There you go again.
You know we had fractional reserve banking before the Fed was created, don't you?
We even had it under the gold standard.
Strong words from an idiot noob.
your statement: There you go again.
What I was referring to above is the fact that the Fed is directly financing our deficit by buying treasuries which temporarily increases the demand and lowers the interest rate that the treasury has to pay. That makes it easier for the politicians to put us further into debt.
There you go again.
They're buying a small portion of the securities issued by the Treasury.
What don't you know about their activities?
SOME of the Founding Fathers (primarily from the south) opposed a central bank, SOME (primarily the Federalists) did not.
The reality is that the First Congress approved a central bank and George Washington signed it into law.
True. And there were bank failures and booms and busts too. I personally don't have a problem with banks employing fractional reserve banking in a free market banking system, though I doubt I'd use a bank that practiced fractional reserve banking given the choice.
I'd never argue with you that a free market banking system with a gold standard would be perfect. Just that it'd be an improvement on the centrally planned fiat money system we have today.
And the failures were much more serious and the busts were deeper and longer lasting.
though I doubt I'd use a bank that practiced fractional reserve banking given the choice.
How would your preferred bank work?
Just that it'd be an improvement on the centrally planned fiat money system we have today.
How would long term deflation be better than what we have now?
What a horrible thing. A man could save money and it'd actually buy a little more in the future. Couldn't have this, could we? Why this might actually encourage saving and lower interest rates. Invested capital might actually grow the economy. Nobody in their right mind would want something like this to happen, would they?
No, inflation is so much better... screw those nasty savers. After all, what economy needs savings when we can just borrow from the Asians and go further and further into debt.
Screw the future... live for today! Screw the kids!
The Fed’s effect is disproportionate. They are the ultimate greater fool that everyone expects to backstop their purchases. I honestly cannot think of any other explanation for 3.5% on 10 year notes and 4.3 on the 30 year. I can think of a lot of reasons that those rates are too low, like 50+ trillion in obligations in the next 30 years, or debt well beyond reasonable ability to pay with tax revenue in the next 10 years.
Horse hockey. There was only one GREAT depression, although we might be living another. Both were the result of the FED.
How would your preferred bank work?
The banker would act as broker between borrower and depositor. It would lend out time deposits. It would maintain 100% reserves on demand deposits.
How would long term deflation be better than what we have now?
Deflation is a result of improved productivity. There's nothing wrong with a free market deflation. As opposed to inflation, deflation encourages savings and investment. In a free market, there is a relationship between savings and interest rates. More savings - lower interest rates. Lower interest rates encourage business expansion. The economy grows. People are better off. The economy is sustainable because the savers have money to buy goods once they're produced... unlike today, where the government is trying to prod us into spending when we don't have the savings. Everything they're doing is making matters worse.
Keynesian demand pull economics is lunacy.
Money creation existed before Jesus.
So, why do we need the private/public, sort of the Fannie Mae/Freddie Mac of money, the Federal Reserve (company, totally no liability corporation ) What’s there function? Centanly not stability of money supply. Nor protection of the value of money. The last, near, hundred years belies that.
Thanks for the tip though.
Your opinion that deflation is somehow a good thing is typical of many who subscribe to the Utopian fantasy of the “Austrian school”.
And for the record, invested capital WOULD NOT grow because NOBODY would buy ANYTHING other than the bare essentials.
For the record I have NEVER said anything about inflation being good, but at a small level it is far better than long-term deflation.
And before you employ the Austrian norm of accusing me of being “Keynesian”, what I am saying is the same thing that Milton Friedman believed.
This is nothing more than an Austrian fairy tale.
Here is what actually happens:
1. People only buy those things they consider necessities. NOBODY is going to buy something they don't have to have right now when they believe that the cost will be 2 to 3 percent LESS EXPENSIVE next year.
2. As a result of this, business inventories skyrocket. Businesses respond by lowering prices more (which fuels deflation) AND cutting production which includes laying-off workers.
3. Because of inventories, businesses no longer have any need for investment in durable goods, so the producers of durable goods also cut production and lay-off more workers.
4. Those who do still have jobs become even more afraid and buy even less and the cycle keeps perpetuating itself.
You have been robbed of the value of the dollars that you own.
This is bad enough, but it gets worse. The new dollars created by the Federal Reserve do not go out to everyone who has dollars at the same time. Through the convoluted process, banks inject these new dollars into certain sectors of the economy. This favored sectors, most recently the housing market, in the past the tech industry, gain a false sense of their profitability, which then draws in additional investors and causes distortions in the interest rates and pricing. As the new money spreads through the economy, these distortions spread into the new sectors with misinformation and with price distortions.
The process of creating new money is called inflation. This inflation is the cause of the 'boom and bust' economic cycle. Our current recession is caused by the flooding of new money into the housing market. The US Government has done everything it could to keep the house market bubble inflated. This prevents the economic recovery, since the market needs to clear the crud out of the system.
So, what do you think of this explanation, love to have your comments.
How did that work during the Great Depression? Anyone with savings did benefit when prices dropped about 25% between 1929 and 1933. Unless their bank failed. Unless they lost their job.
Invested capital might actually grow the economy.
Why would anyone invest in new production? Would you build a new factory if you had to reduce your prices 2% every year? Would you buy a house if the price would fall 2% a year, every year? Would you be in a hurry to buy a new car?
Nobody in their right mind would want something like this to happen, would they?
No one who understands deflation and economics.
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