End the Fed? Instead, End Bad Fiscal and Regulatory Policy

Toro

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Sep 29, 2005
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From a speech by Richard Fisher, head of the Dallas Fed.

But here is the essential fact I want to emphasize and have you think about today: The Fed could not monetize the debt if the debt were not being created by Congress in the first place.

The Fed does not create government debt; Congress does. Deficits and the unfunded liabilities of Medicare and Social Security are not created by the Federal Reserve; they are the legacy of Congress. The Fed does not earmark taxpayer money for pet projects in local communities that taxpayers themselves would never countenance; only the Congress does that. The Congress and administration play the dominant role in creating the regulatory environment that incentivizes or discourages job creation.

It seems to me that those lawmakers who advocate “Ending the Fed” might better turn their considerable talents toward ending the fiscal debacle that has for too long run amuck within their own house.

A look within the United States makes clear the overriding influence of fiscal and regulatory policy. Monetary policy is uniform across the 50 states; the base rate of interest paid on a business or consumer loan or a mortgage in Michigan, California, Ohio or New York is the same as that paid in Texas. Yet there is a reason that Michigan and California each lost more than 600,000 jobs over the past decade while Texas added more than 700,000 over the same period. There is a reason that the population of Ohio grew by only 183,000 residents over the past 10 years, while Texas grows by that number every five and a half months. There is a reason that with each passing census, the state of New York has been losing congressional seats and Texas has been adding them; a reason that, in the recent census, California failed to gain any while Texas gained four. There is a reason that, as documented in the Jan. 12 issue of the Wall Street Journal, college graduates—the best and brightest of the successor generation—are leaving New York and Cleveland and Detroit and moving to Austin, Texas.[6] There is a reason no state in the union houses more Fortune 500 headquarters than Texas. There is a reason for the disparate employment growth that has taken place in the 12 Federal Reserve districts over the past two decades, data that are documented in the graph at your place setting.

1102082chart.gif


That reason has nothing to do with monetary policy. It has everything to do with the taxation and fiscal and regulatory policies of the states. The cost of capital does not explain the different economic performances of the states; the cost of doing business has everything to do with those differences. However well-meaning tax and regulatory initiatives in the laggard states may have been when they were conceived and levied, they have had unintended consequences that have led to economic underperformance and job destruction.

Similarly, the key to correcting the underperformance of the American economy and American job creation does not presently rest with the Federal Reserve. It is in the hands of those who make fiscal and regulatory policy.

A Need for Innovative Fiscal Policy - Richard Fisher Speeches, 2-8-10 - News & Events - FRB Dallas
 
Would work, if only you could put computers and/or Vulcans in charge of the Fed.

But as long as you have imperfect and vulnerable humans as the "Monopoly bankers", so to speak, there will be chicanery in the system.

The only system that maintains the most practicable (not to be mistaken for perfect) level of honesty is specie as money.
 
I'm not naive enough to assume Congress doesn't already know the Fed will monetize the debt whenever they feel it's necessary.
 
Looks like the Fed is getting spooked. "Uh, it's not our fault we printed trillions and gave it to off shore banks. It's Congress' fault! Yeah that's the ticket!"

Audit the Fed. Don't renew the charter. Put responsibility for the money supply back in Congress' hands where it belongs.
 
Put responsibility for the money supply back in Congress' hands where it belongs.

Just where I would want responsibility for the money supply to be, in the hands of Nancy Pelosi, Harry Reid, Eric Cantor, and John Boehner. :eusa_eh:
 
Looks like the Fed is getting spooked. "Uh, it's not our fault we printed trillions and gave it to off shore banks. It's Congress' fault! Yeah that's the ticket!"

Audit the Fed. Don't renew the charter. Put responsibility for the money supply back in Congress' hands where it belongs.
I'm no fan of the fed, they consistently make the wrong calls on the economy. However, congress is driving the country deeper and deeper into a financial hole, not by mistake but intentionally. So when members of Congress call to abolish the fed, it's just a diversion from where the real problem lies.
 
Looks like the Fed is getting spooked. "Uh, it's not our fault we printed trillions and gave it to off shore banks. It's Congress' fault! Yeah that's the ticket!"

Audit the Fed. Don't renew the charter. Put responsibility for the money supply back in Congress' hands where it belongs.
I'm no fan of the fed, they consistently make the wrong calls on the economy. However, congress is driving the country deeper and deeper into a financial hole, not by mistake but intentionally. So when members of Congress call to abolish the fed, it's just a diversion from where the real problem lies.
The Fed prints trillions of dollars for banks (Quantative Easing) and puts the taxpayers on the hook for the money and the resulting inflation. We get screwed twice! No say in it, no lubrication, no "thank you" kiss. Just Bankers telling us it's none of our business.

At least when Congress handles it there will open and televised debate.
 
Looks like the Fed is getting spooked. "Uh, it's not our fault we printed trillions and gave it to off shore banks. It's Congress' fault! Yeah that's the ticket!"

Audit the Fed. Don't renew the charter. Put responsibility for the money supply back in Congress' hands where it belongs.
I'm no fan of the fed, they consistently make the wrong calls on the economy. However, congress is driving the country deeper and deeper into a financial hole, not by mistake but intentionally. So when members of Congress call to abolish the fed, it's just a diversion from where the real problem lies.
The Fed prints trillions of dollars for banks (Quantative Easing) and puts the taxpayers on the hook for the money and the resulting inflation. We get screwed twice! No say in it, no lubrication, no "thank you" kiss. Just Bankers telling us it's none of our business.

At least when Congress handles it there will open and televised debate.
The fed can stimulate a sluggish economy by increase the money supply. There are 3 ways of doing it and all are inflationary:
print more notes
increase lending
buy government securities.

The fed believes that inflation caused by buying government securities will be mostly offset by the deflationary forces due to the recession. Since the effects of the action of the fed may not be felt for a number of months after the action, it is very difficulty to determine the right amount stimulus without setting off an inflationary spiral or under-stimulating the economy. I think the fed is being over zealous with this action. It will increases the money supply by about 900 billion.
 
Most of the time you should not discredit a source simply based on who wrote it. This is NOT one of those times.
 
Looks like the Fed is getting spooked. "Uh, it's not our fault we printed trillions and gave it to off shore banks. It's Congress' fault! Yeah that's the ticket!"

Audit the Fed. Don't renew the charter. Put responsibility for the money supply back in Congress' hands where it belongs.

Yeah that's the ticket! Put the responsibility into the hands of ideologues who have proven themselves to be clueless about economics time and time again, even more so than the Fed. Egads!!!!!!!

It's getting pretty scary around here :eek:!
 
"The Fed could not monetize the debt if the debt were not being created by Congress in the first place."
"The Fed does not create government debt; Congress does. "

What a crock. Every time congress needs money, they take a loan from the FED. That loan comes with interest (debt) attached to it. So the FED DOES monetize the debt, they are the one's creating it.

There is no logical reason the US should be paying the FED anything.
They reserve the right to print and coin money. END the FED and jail Bernanke.
 
"The Fed could not monetize the debt if the debt were not being created by Congress in the first place."
"The Fed does not create government debt; Congress does. "

What a crock. Every time congress needs money, they take a loan from the FED. That loan comes with interest (debt) attached to it. So the FED DOES monetize the debt, they are the one's creating it.

There is no logical reason the US should be paying the FED anything.
They reserve the right to print and coin money. END the FED and jail Bernanke.

The Fed does not create government debt. The government creates the debt that the Fed buys, which thus far, has been entirely in the open market. Technically, that is not monetization, since monetization is when the Fed buys directly from the government, though I'd say that is effectively semantics since that is the end result anyways. But the Fed does not create debt.
 

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